What changed in this filing

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Item 1. Financial Statements

2020-09-21 compared with 2020-03-16 · 322 added, 300 removed, 240 unchanged (72% of the section changed)

Financial Statements.

VALUESETTERS, INC.

Condensed Consolidated Balance Sheets

VALUESETTERS,

Condensed Consolidated

Balance Sheets

July 31, 2020

April 30, 2020

Current assets:

1 unchanged sentence

Accounts receivable

Contract assets

Prepaid expenses

Total current assets

Deferred income tax asset

Non-current prepaid expenses

1 unchanged sentence

Liabilities and Stockholders’

Equity (Deficit)

Current liabilities:

3 unchanged sentences

Deferred revenue

Current portion of long-term secured related party note

Notes payable –

related parties

Secured noted payable to related party

Interest payable –

related parties

Current portion of long-term debt

Loan payable –

1 unchanged sentence

Total current liabilities

Long-term secured note payable to related party

Small Business Administration loans payable

Total liabilities

1 unchanged sentence

Stockholders’

equity (deficit):

Common stock, $.001 par value;

900,000,000 shares authorized,

830,956,712 and 752,519,212 shares issued and outstanding at

January 31, 2020 and April 30, 2019, respectively

900,000,000 shares authorized, 831,581,712 and 831,269,212 shares issued and outstanding at July 31, 2020 and April 30, 2020, respectively

Capital in excess of par value

1 unchanged sentence

Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

See Accompanying

Notes to the Financial Statements

Notes to the Consolidated Financial Statements

VALUESETTERS,

Condensed Consolidated

Statements of Operations

For the Nine Months Ended

Consolidated Statements of Operations

For the Three Months Ended

July 31, 2020

July 31, 2019

Cost of revenues

1 unchanged sentence

Stock-based compensation

Wage expenses

Consulting fees

Selling, general and administrative

General and administrative

Total costs and expenses

Income (loss) from operations

Income from operations

Other income (expense):

1 unchanged sentence

Total other income (expense)

Net income (loss) before taxes

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share)

Net income before taxes

Basic earnings per share

Diluted earnings per share

Weighted average number of common shares outstanding:

See Accompanying

Notes to the Financial Statements

Notes to the Consolidated Financial Statements

VALUESETTERS,

Condensed Consolidated

Statements of Stockholders' Equity (Deficit)

Months Ended January 31, 2020 and the Year Ended April 30, 2019

Equity (Deficit)

Consolidated Statements of Stockholders' Equity

the Three Months Ended July 31, 2020 and the Years Ended April 30, 2020, and 2019

Balance, April 30, 2018

$ (3,650,013 )

$ (1,483,991 )

Net loss, July 31, 2018

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Balance, January 31, 2020

See Accompanying

Notes to the Financial Statements

Q4 stock-based compensation

Net loss, April 30, 2020

Balance, April 30, 2020

Net income July 31, 2020

Q1 stock-based compensation

Balance, July 31, 2020

$ (2,431,411 )

See Accompanying Notes to the

Consolidated Financial Statements

VALUESETTERS,

Condensed Consolidated Statements of Cash Flows

income (loss)

to reconcile net loss to net cash used in operating activities:

in non-cash working capital balances

from services

payable –

Consolidated Statements of Cash Flows

Operating activities

Adjustments to reconcile net income to net cash used in operating

Stock-based compensation

Changes in deferred tax assets

Non-cash revenue from receipt of equity

Changes in non-cash working capital balances

Accounts receivable

Contracts receivable

Prepaid expense

Accrued expenses

Interest payable –

related party

provided by (used in) operating activities

on related party note

on demand note

from sale of common stock

used in financing activities

(decrease) in cash and cash equivalents during the period

and cash equivalents, beginning of the period

and cash equivalents, end of the period

non-cash disclosures

stock issued as prepaid compensation

Deferred revenue

Cash used in operating activities

Financing activities

Proceeds from SBA loans

Payment on related party note

Cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents during the period

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

Cash paid for:

See Accompanying

Notes to the Financial Statements

Notes to the Consolidated Financial Statements

VALUESETTERS,

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normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the nine-and

three-month periods ended January 31, 2020, are not necessarily indicative of the results that may be expected for the fiscal

year ended April 30, 2020.

For further information, refer to the audited financial statements and footnotes thereto in our Annual

Report on Form 10-K for the year ended April 30, 2019.

Note 2 – Going Concern

Matters and Realization of Assets

Operating results for the three-month

period ended July 31, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ended April

For further information, refer to the audited financial statements and footnotes thereto in our Annual Report on Form

10-K for the year ended April 30, 2020.

In June 2016,

the FASB issued ASU No.

2016-13 Financial Instruments-Credit Losses .

The new guidance provides better representation

about expected credit losses on financial instruments.

This update requires the use of a methodology that reflects expected losses

and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates.

This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted.

is studying the impact of adopting the ASU in fiscal year 2023, and what effect it could have.

The Company believes the accounting

change would not have a material effect on the financial statements.

In June 2018,

the FASB issued ASU 2018-07, Improvement to Nonemployee Share-based Payment Accounting, which simplifies the accounting for share-based

The company elected early adoption of this ASU, using the modified retrospective approach, so that all stock compensation

to employees and nonemployees is treated under the same guidance as in ASC 718.

December 2019, the FASB issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.

This guidance had no

impact on our consolidated financial statements.

does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the

accompanying financial statements.

As new accounting pronouncements are issued, we will adopt those that are applicable under

the circumstances.

– Going Concern Matters and Realization of Assets

The accompanying

1 unchanged sentence

of liabilities in the ordinary course of business.

However, in prior years, the Company sustained losses from its continuing operations

and as of January 31, 2020, had negative working capital of $1,095,254 and an accumulated deficit of $1,905,033.

the Company may not be able to meet its obligations as they become due and sustain its operations.

The Company believes that its

existing cash resources are not sufficient to fund its debt payments and working capital requirements.

However, the Company has negative working capital of $1,219,028 and an accumulated

deficit of $2,431,411.

In addition, the Company may be unable to meet all of its obligations as they become due.

The Company believes

that its existing cash resources are not sufficient to fund its lease and debt payments and working capital requirements.

may not be able to raise sufficient additional debt, equity or other cash on acceptable terms, if at all.

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The financial statements do not include

any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities

that might be necessary should the Company be unable to continue in its existence.

Management’s plans include:

to raise debt or equity for working capital purposes and to pay off existing debt balances.

With sufficient additional cash available to the Company, it can begin to make marketing

expenditures and hire people to generate more revenues to pay down its debt obligations.

to look for software niches and other digital products that can be sold via an Internet-based

Various acquisition opportunities may help us generate the additional revenues

to provide advisory services to companies seeking to raise capital and assist them with

capital raises.

any adjustments relating to the recoverability and classification of recorded

asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in

its existence.

plans include:

to merge its business operations with some of the revenue-generating early-stage companies

that it has incubated.

The Company already owns a portion of more than a dozen companies

and believes that the combination of some of those entities with ValueSetters will provide

an efficient use of fixed overhead and create additional cash flow from operations.

the payment terms of the $1,000,000 secured related party note payable that matures on

October 31, 2020.

to provide consulting services and continue to charge both a cash fee and an equity-based

fee, when possible, in exchange for these services.

has determined, based on its recent history and its liquidity issues, that it is not probable that management’s plan will

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within one year after the issuance date of these financial statements.

be no assurance that the Company will be able to achieve its business plan objectives or be able to achieve or maintain cash-flow-positive

operating results.

If the Company is unable to generate adequate funds from operations or raise sufficient additional funds, the

Company may not be able to repay its existing debt, continue to operate its business network, respond to competitive pressures

or fund its operations.

As a result, the Company may be required to significantly reduce, reorganize, discontinue or shut down

its operations.

The financial statements do not include any adjustments that might result from this uncertainty.

Note 3 – Revenue Recognition

be no assurance that the Company will be able to achieve its business plan objectives.

If the Company is unable to generate adequate

funds from operations or raise sufficient additional funds, the Company may not be able to repay its existing debt, continue to

operate its business network, respond to competitive pressures or fund its operations.

As a result, the Company may be required

to significantly reduce, reorganize, discontinue or shut down its operations.

The financial statements do not include any adjustments

that might result from this uncertainty.

– Revenue Recognition

Revenue Recognition under

The Company recognizes service

revenue from its consulting contracts and its game website using the five-step model as prescribed by

recognizes service revenue from its consulting contracts and its game website using the five-step model as prescribed by ASC 606:

• Identification

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of the contract.

Judgments and Estimates

and Estimates

The estimation

1 unchanged sentence

The Company enters

into contracts with customers that regularly include promises to transfer multiple services, such as digital marketing, web-based

videos, offering statements, and professional services.

For arrangements with multiple services, the Company evaluates whether

the individual services qualify as distinct performance obligations.

In its assessment of whether a service is a distinct performance

obligation, the Company determines whether the customer can benefit from the service on its own or with other readily available

resources, and whether the service is separately identifiable from other services in the contract.

This evaluation requires the

Company to assess the nature of each individual service offering and how the services are provided in the context of the contract,

including whether the services are significantly integrated, highly interrelated, or significantly modify each other, which may

require judgment based on the facts and circumstances of the contract.

contracts with customers that regularly include promises to transfer multiple services, such as digital marketing, web-based videos,

offering statements, and professional services.

For arrangements with multiple services, the Company evaluates whether the individual

services qualify as distinct performance obligations.

In its assessment of whether a service is a distinct performance obligation,

the Company determines whether the customer can benefit from the service on its own or with other readily available resources,

and whether the service is separately

identifiable from other services in the contract.

This evaluation requires the Company to assess the nature of each individual

service offering and how the services are provided in the context of the contract, including whether the services are significantly

integrated, highly interrelated, or significantly modify each other, which may require judgment based on the facts and circumstances

of the contract.

When agreements

8 unchanged sentences

Service revenue

from subscriptions to the Company's game website is recognized over time on a ratable basis over the contractual subscription

3 unchanged sentences

Professional services revenue is recognized over time as the services are rendered.

accepts cash payments and equity payments from its customers for professional service revenue.

In instances in which a customer

pays all or part of its fee with equity, the company values the equity component at the most current trading price of the equity

In the nine months ended January 31, 2020, two customers, Deuce Drones LLC and Kingscrowd LLC traded on netcapital.com

at $0.35 per unit and $1.80 per unit, respectively.

A third customer, Netcapital Systems LLC, is valued based on an arms-length

private sale of its units.

In the nine-months ended January 31, 2019 there were no instances in which professional services revenues

were recorded in exchange for equity.

If a customer pays for professional services with equity, and the Company is unable to document

a market price for the equity received, no revenue is recorded, and the value of the equity received is recorded at zero dollars.

When a contract

4 unchanged sentences

Contract assets

are recorded for those parts of the contract consideration not yet invoiced but for which the performance obligations are completed.

2 unchanged sentences

in the consolidated balance sheets, depending on if their reduction will be recognized during the succeeding twelve-month period

Deferred Revenue

Deferred revenues

represent billings or payments received in advance of revenue recognition and is recognized upon transfer of control.

represent billings or payments received in advance of revenue recognition and are recognized upon transfer of control.

consist primarily of annual plan subscription services and professional and training services not yet provided as of the balance

2 unchanged sentences

balance sheets.

Costs to Obtain a Customer

to Obtain a Customer Contract

Sales commissions

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of operations.

Remaining Performance Obligations

Company's subscription terms are typically less than one year.

All of the Company’s revenues in the nine-month periods

ended January 31, 2020 and 2019, which amounted to $1,593,130 and $281,995, respectively, and all of the Company’s

revenues in the three-month periods ended January 31, 2020 and 2019, which amounted to $757,405 and $121,355, respectively,

are considered contract revenues.

Contract revenue as of January 31, 2020 and April 30, 2019, which has not yet been

recognized, amounted to $625 and $15,711, respectively, and is recorded on the balance sheet as deferred revenue.

expects to recognize revenue on all of its remaining performance obligations over the next 12 months.

Note 4 – Earnings (Loss) Per Common Share

Earnings (loss) per common share data was computed as follows:

Ended January

Net income (loss) attributable to common stockholders –

Adjustments to net income (loss)

Net income (loss) attributable to common stockholders –

Performance Obligations

The Company's

subscription terms are typically less than one year.

All of the Company’s revenues in the three-month periods ended July

31, 2020 and 2019, which amounted to $1,762,322 and $118,732, respectively, are considered contract revenues.

Contract revenue

as of July 31, 2020 and April 30, 2020, which has not yet been recognized, amounted to $35,572 and $656, respectively, and is

recorded on the balance sheet as deferred revenue.

The Company expects to recognize revenue on all of its remaining performance

obligations over the next 12 months.

– Earnings Per Common Share

common share data was computed as follows:

Three Months Ended

July 31, 2020

Three Months Ended

July 31, 2020

Net income attributable to common stockholders –

Adjustments to net income

Net income attributable to common stockholders –

Weighted average common shares outstanding –

1 unchanged sentence

Weighted average common shares outstanding –

Earnings (loss) per common share –

For the nine-

and three-month periods ended January 31, 2020, the Company had no outstanding securities that were convertible into common stock.

For the nine- and three-month periods ended January 31, 2019, the Company excluded 18,000,000 shares of common stock, issuable

upon the exercise of outstanding stock options from the calculation of net loss per share because the effect would be anti-dilutive.

Note 5 – Principal Financing

The following table summarizes

components of debt as of January 31, 2020 and April 30, 2019:

Earnings per common share –

For the three-month

periods ended July 31, 2020 and 2019, the Company had no convertible or dilutive securities.

– Principal Financing Arrangements

following table summarizes components debt as of July 31, 2020 and April 30, 2020:

April 30, 2020

Interest Rate

Secured lender (affiliate)

Notes payable –

related parties

Demand notes payable

payable – bank

As of January

Loan payable –

31, 2020 and April 30, 2020, the Company owed its principal lender (“Lender”) $1,000,000 under a loan and security

1 unchanged sentence

is also the largest shareholder of the Company, owning 271,371,454 shares of common stock, or 32.6% of the 831,581,712 shares

issued and outstanding, as of January 31, 2020.

issued and outstanding, as of July 31, 2020.

amended on October 31, 2017 to change the maturity date to October 31, 2020, reduce the interest rate from 8% to 1.25% per annum,

10 unchanged sentences

any indebtedness except as defined in the agreement, create or allow a lien on any of its assets or collateral that has been pledged

to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business,

or make any material capital expenditures.

To secure the payment of all obligations to the Lender, the Company granted to the

Lender a continuing security interest and first lien on all of the assets of the Company.

As of January

31, 2020 and April 30, 2019, the Company’s related-party unsecured notes payable totaled $71,800 and $76,100, respectively.

The Company also owes $34,324 as of January 31, 2020 and April 30, 2019 to Chase Bank.

Currently, the Company pays no monthly

principal payments on the outstanding balance.

The Company pays a variable monthly interest expense, which is calculated at a

rate of 7.0% per annum at January 31, 2020.

Chase Bank was personally guaranteed by a former Chief Executive Officer and Chairman of the Board (the “Former CEO”).

The Former CEO sold shares of the Company to a third-party, and in addition to payments to the Former CEO, the contract of sale

required the third-party make monthly payments to Chase Bank to pay down the money owed to Chase Bank.

Total payments received

from the third-party in the nine and three months ended January 31, 2019 amounted to $4,600 and $0, respectively.

These payments

were recorded as other income.

No such payments were made in fiscal 2020.

Demand notes payable totaled $7,860

at January 31, 2020 and April 30, 2019, and do not bear interest.

Note 6 – Income Taxes

January 31, 2020 and April 30, 2019, the Company had net operating loss carryforwards for Federal income tax purposes of approximately

to the Lender, make any loans to any person, except for prepaid items or deposits

incurred in the ordinary course of business, or make any material capital expenditures.

To secure the payment of all obligations

to the Lender, the Company granted to the Lender a continuing security interest and first lien on all of the assets of the Company.

31, 2020 and April 30, 2020, the Company’s related-party unsecured notes payable totaled $15,000.

The Company also owes

$34,324 as of July 31, 2020 and April 30, 2020 to Chase Bank.

The Company pays interest expense to Chase Bank, which is calculated

at a rate of 5.5% per annum.

2020 the Company borrowed $1,885,800 (the “May Loan”) and on June 17, 2020 the Company borrowed $500,000 (the “June

Loan”) from a U.S.

Small Business Administration (the "SBA") loan program.

The May Loan has an initial term of

two years and an interest rate of 1% per annum.

Principal payments are delayed until the Company negotiates with the lender as

to the amount of principal that is subject to repayment.

If repayment of the May Loan is required, payments begin after a six-month

deferral period, in which interest accrues, and payments are to be made in equal installments of approximately $106,125 over an

18-month period.

Of the $1,885,800 balance, $955,125 is considered a short-term liability.

Accrued interest payable on the May

Loan amounted to $4,443 as of July 31, 2020.

The June Loan

requires installment payments of $2,437 monthly, beginning on June 17, 2021 over a term of thirty years.

Interest accrues at a

rate of 3.75% per annum.

The Company agreed to grant a continuing security interest in its assets to secure payment and performance

of all debts, liabilities, and obligations to the SBA.

The June Loan was personally guaranteed by the Company’s Chief Financial

$1,666 of the June Loan is recorded as a current liability and the remaining $498,334 is classified as a long-term liability.

Accrued interest payable on the June Loan amounted to $2,209 as of July 31, 2020.

payable totaled $7,860 as of July 31, 2020 and April 30, 2020.

These notes have an interest rate of 0%.

– Income Taxes

31, 2020 and April 30, 2020, the Company had net operating loss carryforwards for Federal income tax purposes of approximately

$700,000 expiring in the years of 2021 through 2035.

Utilization of the net operating losses may be subject to annual limitations

provided by Section 382 of the Internal Revenue Code and similar State provisions.

and Jobs Act ("Tax Act") was enacted on December 22, 2017.

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future, which is generally 21%.

availability of a tax loss carryforward to offset any potential tax, for the nine-and three-month periods ended January 31, 2020,

and for the three-month period ended January 31, 2019, the Company recorded no income tax expense in either of these periods.

Due to the loss for the nine-month period ended January 31, 2019, the Company has recorded no income tax expense in such period.

The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ended

April 30, 2017 through 2019.

Note 7 – Related Party

30, 2020, the Company had net deferred tax assets calculated at an expected rate of 21%, or approximately $180,000.

30, 2020, the Company recognized the net deferred asset to the extent of the impact on current book earnings, as the Company’s

management believed that historical, current and expected earnings are sufficient to meet the more likely than not standard to

enable the Company to recognize the net deferred tax asset.

As allowable under accounting standards, the Company elected to fully

remove the valuation allowance as of April 30, 2020.

of July 31, 2020, the deferred tax asset has been reduced to $168,659 by the tax provision of $11,341 for the three months ended

July 31, 2020.

Due to the nominal income for

the three-month period ended July 31, 2019, and the availability of a tax loss carryforward to offset any potential tax, the Company

recorded no income tax expense for the three months ended July 31, 2019.

– Related Party Transactions

The Company’s

largest shareholder is also its principal lender.

As of January 31, 2020 and April 30, 2019, the Company owed its largest shareholder,

As of July 31, 2020 and April 30, 2020, the Company owed its largest shareholder,

under a secured lending agreement, $1,000,000 .

Under the existing loan agreement, as amended, the maximum amount of the loan is

$1,250,000, and the loan matures on October 31, 2020.

The largest shareholder of the Company owns 271,371,454 shares of common

stock, or 32.7% of the 830,956,712 shares issued and outstanding.

to officers in the nine-month periods ended January 31, 2020 and 2019 consisted of common stock valued at $145,684 and $77,750,

respectively, and cash payments of $62,000 and $90,000, respectively.

Compensation to officers in the three-month periods ended

January 31, 2020 and 2019 consisted of common stock valued at $77,750 and $3,375 respectively, and cash payments of $0 and $30,000,

respectively.

In the nine-month

periods ended January 31, 2020 and 2019 the Company remitted cash payments to a related party consultant of $21,000 and $2,200,

respectively, and cash payments of $4,800 and $1,200 for the three-month periods ended January 31, 2020 and 2019, respectively.

Stock-based compensation to this consultant was recorded at $30,539 and $19,063 for the nine-and three-month period ended January

31, 2020 and $0 for the nine-and three-month periods ended January 31, 2019.

owes related party debt of $71,800 and $76,100 as of January 31, 2020 and April 30, 2019, respectively.

The related party debt

consists of notes, with annual interest rates of 8%, payable to a company controlled by one of our directors, in the amounts of

$56,800 and $61,100 as of January 31, 2020 and April 30, 2019, respectively, and a non-interest bearing note payable to a second

director of $15,000 as of January 31, 2020 and April 30, 2019.

The Company also owes the second director $16,680 as of January

31, 2020 and April 30, 2019, which is recorded as accounts payable.

Accrued interest payable on related

party debt amounted to $36,285 and $24,102 at January 31, 2019 and April 30, 2019, respectively.

Note 8 – Stockholders’

Company is authorized to issue 900,000,000 shares of its common stock, par value $0.001.

830,956,712 and 752,519,212 shares were

outstanding as of January 31, 2020 and April 30, 2019, respectively.

the quarter ended July 31, 2019, the Company issued an aggregate of 2,812,500 shares of restricted stock to its Chief Executive

Officer, Chief Financial Officer and chief marketing officer as compensation.

The shares were valued at $19,688.

9, 2019, the Company signed a stock-based compensation agreement, ending on July 31, 2021, with its Chief Executive Officer.

Company issued 25 million shares of its common stock in conjunction with this agreement.

Under the existing loan agreement, as amended,

the maximum amount of the loan is $1,250,000, and the loan matures on October 31, 2020.

The largest shareholder of the Company

owns 271,371,454 shares of common stock, or 32.6% of the 831,581,712 shares issued and outstanding as of July 31, 2020.

interest payable on this secured loan as of July 31, 2020 and April 30, 2020 amounted to $34,386 and $31,235, respectively.

to officers in the three-month periods ended July 31, 2020 and 2019 consisted of common stock valued at $82,622 and $19,688 respectively,

and cash payments of $66,462 and $30,000, respectively.

to a related party consultant in the three-month periods ended July 31, 2020 and 2019 consisted of common stock valued at $19,378

and $0 respectively, and cash payments of $22,154 and $7,200, respectively.

This consultant is also the controlling shareholder

of Zelgor Inc.

and $1,050,000 of the Company’s revenues in the quarter ended July 31, 2020 were from Zelgor Inc.

Company owes a director $16,680 as of July 31, 2020 and April 30, 2020, which is recorded as accounts payable, plus $15,000 in

a non-interest-bearing note payable.

– Stockholders’ Deficit

is authorized to issue 900,000,000 shares of its common stock, par value $0.001.

831,581,712 and 831,269,212 shares were outstanding

as of July 31, 2020 and April 30, 2020, respectively.

quarter of fiscal 2021, the Company issued an aggregate of 312,500 shares of restricted stock to its Chief Marketing Officer as

compensation.

The shares were valued at $1,406.

9, 2019, the Company signed a stock-based compensation agreement with its Chief Financial Officer, ending on July 31, 2021.

Company issued 25 million shares of its common stock in conjunction with this agreement.

quarter of fiscal 2020, the Company issued an aggregate of 2,812,500 shares of restricted stock to its Chief Executive Officer,

Chief Financial Officer and Chief Marketing Officer as compensation.

The shares were valued at $19,688.

9, 2019, the Company signed stock-based compensation agreements with two consultants, ending on July 31, 2021.

The Company issued

12,500,000 shares of its common stock to each consultant in conjunction with these agreements.

The total number of shares issued

was valued at $305,000.

One of the consultants is considered a related party and provides marketing and business development services

to the Company.

The second consultant provides business services to public companies.

31, 2019, the Company recorded the issuance of 312,500 shares of common stock to its Chief Marketing Officer.

The shares were

valued at $2,343 and recorded as an expense in the quarter ended October 31, 2019.

31, 2020, the Company recorded the issuance of 312,500 shares of common stock to its Chief Marketing Officer.

The shares were

valued at $1,500 and recorded as an expense in the quarter ended January 31, 2020.

In the quarter

ended July 31, 2018, the Company issued 200,000 restricted shares of stock in conjunction with the purchase of a virtual reality

game known as SpaceoutVR.

The Company also issued 3,937,501 restricted shares of common stock as part of stock-based compensation

Shares issues for compensation amounted to 3,625,000 shares to Company officers, and 312,501 to a consultant.

In the quarter

that ended on October 31, 2018, the Company sold $5,000 of restricted common stock in a private placement and issued 2,800,000

shares of restricted stock.

The Company also issued 8,262,501 restricted shares of common stock as part of stock-based compensation

Shares issued for compensation amounted to 2,750,000 shares to Company officers, and 5,512,501 to three consultants.

Note 9 – Fair Value

The Fair Value

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Additionally, there may be inherent weaknesses in any calculation technique, and changes

in the underlying assumptions used, including discount rates and estimates of future cash flows that could significantly affect

the results of current or future value.

Note 10 – Stock-Based

Compensation Plans

entered various consulting agreements to issue common stock and options to purchase common stock and recorded the applicable non-cash

expense in accordance with the authoritative guidance of the Financial Accounting Standards Board.

and three-month periods ended January 31, 2020, the Company recorded $232,461 and $123,930 respectively, in stock-based compensation

the nine and three-month periods ended January 31, 2019, the Company recorded $48,744 and $12,197 respectively, in stock-based

compensation expense.

The components of the stock-based

compensation expense are presented in the following table:

Ended January

Stock-based compensation expense

in the underlying assumptions used.

10 – Stock-Based Compensation Plans

entered consulting agreements to issue common stock and recorded the applicable non-cash expense in accordance with the authoritative

guidance of the Financial Accounting Standards Board.

For the three-month periods ended July 31, 2020 and 2019, the Company

recorded $121,378 and $28,510, respectively, in stock-based compensation expense.

31, 2020, there was $489,038 of prepaid stock-based compensation expense for services that end on August 31, 2021.

31, 2020, an aggregate of 2,187,500 shares of common stock can be earned by the Company’s Chief Marketing Officer from unvested

stock grants.

312,500 shares vested on July 31, 2020 and were recorded as stock-based compensation of $1,406.

These shares vest

at a rate of 312,500 shares per quarter, over the next seven quarters.

below presents the components of stock-based compensation expense for the three-month periods ended July 31, 2020 and 2019.

July 31, 2020

July 31, 2019

Chief Executive Officer

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Chief Marketing Officer

Related party consultant

Sales consultants

Marketing consultant

Related party consultant

Business consultant

Total stock-based compensation expense

At January 31, 2020, the total prepaid stock compensation amounted to $731,769, as follows:

Prepaid stock-based compensation

January 31, 2020

table below presents the prepaid compensation expense as of July 31, 2020 and April 30, 2020:

July 31, 2020

April 30, 2020

Chief Executive Officer

2 unchanged sentences

Business consultant

Total prepaid stock-based compensation expense

of January 31, 2020, there was $465,555 of current prepaid stock-based compensation expense and $266,214 in non-current prepaid

stock compensation expense for services that end on July 31, 2021.

For each of the four compensation contracts, compensation expense

is recognized on a straight-line basis over the life of the agreement, which is two years.

In the event of a termination without

cause, the remainder of the prepaid compensation would be expensed immediately.

Note 11 – Deposits and

utilizes office space in Boston, Massachusetts, under a month-to-month lease agreement that allows the company to end its lease

Marketing consultant

11 – Deposits and Commitments

utilizes office space in Boston, Massachusetts, under a month-to-month lease agreement that allows to company to end its lease

by providing 30-day written notice.

The lease agreement includes a deposit of $6,300.

Effective May

1, 2019, the Company adopted ASU No.

2016-02 (“ASU 2016-02”), Leases using the modified retrospective transition

approach utilizing the effective date as the date of initial application.

The adoption of the ASU had no impact on the

Company’s financial statements due to the short-term nature of the lease agreement.

12 – Concentrations

the Nine- and three-month periods ended January 31, 2020, the Company had one customer that constituted 44% and 92% of its revenues,

respectively;

a second customer that constituted 34% and 0% of its revenues, respectively;

and a third customer that constituted

13% and 8% of its revenues, respectively.

the nine- and three-month periods ended January 31, 2019, the Company had one customer that constituted 74% and 70% of its revenues,

respectively.

For the three-month

period ended July 31, 2020, the Company had one customer that constituted 60% of its revenues, a second customer that constituted

26% of its revenues and a third customer that constituted 12% of its revenues.

For the three-month period ended July 31, 2019,

the Company had one customer that constituted 81% of its revenues.

– Investments

the Company entered a consulting contract with Watch Party LLC (“WP”), which allowed the Company to receive up to

110,000 membership interest units of WP in return for consulting services.

The Company earned 97,500 membership interest units

in the quarter ended July 31, 2020.

The WP units are valued at $2.14 per unit based on a sales price of $2.14 per unit on an online

funding portal, resulting in revenues of $208,650 for the three-months ended July 31, 2020 and deferred revenue of $26,750 as

of July 31, 2020.

the Company entered a consulting contract with ChipBrain LLC (“Chip”), which allowed the Company to receive up to

710,200 membership interest units of Chip in return for consulting services.

The Company earned 500,000 membership interest units

in the quarter ended July 31, 2020 and anticipates earning the remaining units in the quarter ending October 31, 2020.

units are valued at $0.93 per unit based on a sales price of $0.93 per unit on an online funding portal, resulting in revenues

of $465,000 for the three-months ended July 31, 2020.

the Company entered a consulting contract with Zelgor Inc.

(“Zelgor”), which allowed the Company to receive up to

1,400,000 shares of common stock of Zelgor in return for consulting services.

The Company earned 1,050,000 shares in the quarter

ended July 31, 2020 and anticipates earning the remaining shares in the quarter ending October 31, 2020.

The Zelgor shares are

valued at $1.00 per share based on a sales price of $1.00 per share on an online funding portal, resulting in revenues of $1,050,000

for the three-months ended July 31, 2020.

The $1.00 per share valuation was derived based on a combination of multiple transactions

on a secondary trading platform in which shares were purchased at $1.00 per share, and two private offerings of shares, one at

a selling price of $0.50 per share and the other at $2.00 per share.

2, 2020, the Company entered a consulting contract with Deuce Drone LLC (“Drone”), which allowed the Company to receive

up to 2,350,000 membership interest units of Drone in return for consulting services.

The Company earned all 2,350,000 membership

interest units in fiscal 2020.

The Drone units are valued at $0.35 per unit based on a sales price of $0.35 per unit when the

units were earned, or $822,500.

Drone is currently selling Drone units for $1.00 per unit on an online funding portal.

2019, the Company entered a consulting contract with Kingscrowd LLC (“Kingscrowd”), which allowed the Company to receive

300,000 membership interest units of Kingscrowd in return for consulting services.

The Kingscrowd units are valued at $1.80 per

unit based on a sales price of $1.80 per unit when the units were earned, or $540,000.

Kingscrowd units currently trade at a price

of $1.80 per unit on a secondary trading platform.

During fiscal

2019, the Company entered into a consulting contract with NetCapital Systems LLC (“Netcapital”), which allows the

Company to receive up to 1,000 membership interest units of NetCapital in return for consulting services.

As of April 30, 2019,

the Company had earned 709 membership interest units, and the remaining 291 units can be earned on a straight-line basis over

the 14-month period ended June 30, 2020.

At January 31, 2020, the Company had earned a total of 877 of the 1,000 units and owns

7.1% of Netcapital.

2, 2020, the Company entered into a consulting contract with Deuce Drones LLC (“Drones”), which allows the Company

to receive up to 2,350,000 membership interest units of Drones in return for consulting services.

As of January 31, 2020, the

Company had earned 2,000,000 membership interest units, and the remaining 350,000 units can be earned in exchange for marketing

services over an anticipated period of three months.

The Company owns approximately 17% of Drones at January 31, 2020.

2019 the Company entered into a consulting contract with Kingscrowd LLC (“Kingscrowd”), which allowed the Company

to receive up to 540,000 membership interest units of Kingscrowd in return for consulting services.

All units have been earned.

The Company owns approximately 18% of Kingscrowd at January 31, 2020.

The following table summarizes

the components of investments as of January 31, 2020 and April 30, 2019:

January 31, 2020

2019, the Company entered a consulting contract with NetCapital Systems LLC (“NetCapital”), which allowed the Company

to receive up to 1,000 membership interest units of NetCapital in return for consulting services.

The Company earned 40 units

in the quarter ended July 31, 2020, at a value of $91.15 per unit, or $3,646.

The Company earned all 1,000 Netcapital units but

sold a portion of the units in fiscal 2020 at a sales price of $91.15 per unit.

As of July 31, 2020 the Company owns 528 Netcapital

units, at a value of $48,128.

The following

table summarizes the components of investments as of July 31, 2020 and April 30, 2020:

July 31, 2020

April 30, 2020

Netcapital Systems LLC

Watch Party LLC

ChipBrain LLC

Deuce Drone LLC

Kingscrowd LLC

Total Investments at cost

2 unchanged sentences

The Company monitors the investments for any changes in observable prices from orderly transactions.

For the nine and three-month periods ended January 31, 2020 and 2019, the Company has not recorded any unrealized gains or losses

for the above investments.

– Subsequent Events

23, 2020, the Company entered into an Agreement and Plan of Merger whereby NetCapital Systems LLC would become an 80% owner of

In conjunction with this agreement, the Company filed a preliminary information statement on September 8, 2020 to

change the Company’s c orporate name from ValueSetters, Inc.

to NetCapital Inc and to a mend

the Company’s Articles of Incorporation to effect a stock combination, or reverse stock split, pursuant to which up to 2,000

shares of the Company’s common stock would be exchanged for one new share of common stock.

agreement is contingent upon certain closing conditions and is not yet finalized.

The reverse split is currently pending and FINRA

has not been notified of an effective date for the reverse split to occur.

Consequently, the financial statements of the merger

candidate are not retrospectively presented, given that the effective date of the proposed merger has not been determined.

evaluated subsequent events through the date these financial statements were available to be issued.

Effective March 10, 2020,

the Company hired a Director of Business Development and as part of her compensation package, she received a grant of 25,000,000

shares of common stock that vest on a monthly basis over a four-year period ending on February 29, 2024.

the standards of ASC 855-10-20, there were no other material subsequent events that required recognition or additional disclosure

in these financial statements.

There were no other material

subsequent events that required recognition or additional disclosure in these financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements