What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-09-21 compared with 2020-03-16 · 132 added, 96 removed, 60 unchanged (79% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This quarterly

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and notes thereto appearing elsewhere in this report.

We are a boutique

advisory firm, based in Boston, Massachusetts.

Our team of experts, including entrepreneurs, angel investors, industry specialists

and digital marketing professionals work with companies at all stages to provide assistance with capital raising, strategy, technology

consulting and marketing.

are a boutique advisory firm, based in Boston, Massachusetts.

Our team of experts, including entrepreneurs, angel investors, industry

specialists and digital marketing professionals work with companies at all stages to provide assistance with capital raising,

strategy, technology consulting, digital marketing, economic development and logistics technology.

specialize in Regulation Crowdfunding (“Reg CF”), under the provisions of Title III of the JOBS Act of 2012.

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broadcast mechanisms that once belonged only to traditional media.

CF is one of three securities exemptions that enable online capital formation.

Reg D 506(c) allows an unlimited amount of money

to be crowdfunded from accredited investors.

Reg A+ enables an issuer to raise up to $50 million online from anyone.

smallest of the crowdfunding exemptions, allows issuers to raise up to $1.07 million from non- accredited investors every 12 months.

lists select clients, which include Braidy Industries that raised $2,493,054, Phoenix PharmaLabs that raised $1,102,553, Court

Innovations that raised $499,000 and ORPC that raised $623,678.

This information is available at https://valuesetters.com/track-record.

We sometimes take equity stakes

in promising technology start-ups.

We play an active role in growing these companies.

Reg CF is one of three securities exemptions that enable

online capital formation.

Reg D 506(c) allows an unlimited amount of money to be raised from accredited investors.

Reg A+ enables

an issuer to raise up to $50 million online from anyone.

Reg CF, the smallest of the crowdfunding exemptions, allows issuers to

raise up to $1.07 million from non-accredited investors every 12 months.

March 2020, the Securities and Exchange Commission (the "SEC") proposed meaningful changes to multiple securities exemptions

in an effort to provide critical capital needed for emerging companies, from early-stage start-ups seeking seed capital, to companies

that are pursuing a course to become a public reporting company.

The new proposal intends to create a more rational framework

to enhance an entrepreneur's access to capital while preserving important investor protections.

new regulations, which we anticipate will be implemented before the end of the year, are designed to:

in one broadly applicable rule, the ability of issuers to move from one exemption to

another, and ultimately to a registered offering, providing more certainty to issuers

raising capital;

the offering limits for Regulation A, Regulation CF, and Rule 504 offerings, and revise

certain individual investment limits based on the SEC’s experience with the rules,

marketplace practices, capital raising trends, and comments received;

greater certainty to issuers and protection to investors by setting clear and consistent

rules governing offering communications between investors and issuers, including permitting

certain “demo day” activity without running afoul of the prohibition on general

solicitation;

certain disclosure and eligibility requirements and bad actor disqualification provisions

to reduce differences between exemptions, while preserving or enhancing investor protections.

SEC proposed revisions to the offering and investment limits, which we believe will have a positive impact on our business.

Reg CF, the new rules include:

the offering limit in Reg CF from $1.07 million to $5 million;

the investment limits for investors in Reg CF offerings by:

applying any investment limits to accredited investors;

the calculation method for investment limits for non-accredited investors to allow them

to rely on the greater of their annual income or net worth when calculating the limit

on how much they can invest.

CF will also benefit from “Testing the Waters” a rule currently utilized under Reg A+, that enables issuers to measure

investor demand before spending tens of thousands of dollars on an actual offering.

Special Purpose Vehicles (or SPVs) may now

be included in Reg CF offers and this inclusion is designed to improve the viability of the exemption while providing greater

investor protection.

believe these actions by the SEC will enhance the value of funding portals and strengthen the online capital raising process in

private equity.

Consequently, we have negotiated a transaction that will consolidate the operations of a Reg CF funding portal,

Netcapital.com (“Netcapital”), with our financial results.

Netcapital operates a Title III JOBS Act funding portal,

and as of today is one of only a few dozen FINRA approved Reg CF portals.

Although we have a written agreement that we filed as

an exhibit to a Current Report on Form 8-K on August 26, 2020, the agreement is subject to certain events and it is possible that

the transaction will not be finalized.

Increasing our ownership in online businesses with private equity platforms is a

significant component of our business strategy.

the past three years we have provided consulting services to Netcapital.

In addition to the services we provided to Netcapital,

we provide consulting services to some of our clients that utilize the Netcapital website to raise money from non-accredited and

accredited investors.

We believe we have been successful in providing advice and digital marketing services to our clients, who

are allowed to advertise their fundraising, in conjunction with advertising provisions contained in the JOBS Act.

During the past

three years, many high-tech firms have become our clients, including Kingscrowd LLC, Deuce Drone LLC and ChipBrain LLC.

companies have contributed to our growth and we own minority positions in them.

operating history and the uncertain nature of our future operations and the markets we address or intend to address make prediction

of our future results of operations difficult.

Results of Operations

For the Nine Months Ended January

31, 2020 Compared to the Nine Months Ended January 31, 2019

for the nine months ended January 31, 2020 increased by $1,311,135, or 465%, to $1,593,130 as compared to $281,995 reported for

the nine months ended January 31, 2019.

The increase in revenues is attributable to an increase in consulting services, and specifically

to two new customers that accounted for 78% of our revenues, or $1,240,000 in the nine months ended January 31, 2020.

limited staff we believe our sales efforts are best focused on a handful of large customers, rather than several small customers.

compensation expense increased by $183,717, or 377%, to $232,461 for the nine months ended January 31, 2020, as compared to $48,744

reported for the nine months ended January 31, 2019.

The increase in expense is due to our decision to compensate our executives

primarily with shares of stock, so we can preserve our cash resources.

fees decreased by $31,600, or 27%, to $87,400 for the nine months ended January 31, 2020, from $119,000 for the nine months ended

January 31, 2019.

The decrease is primarily attributed to the increase in stock-based compensation, as we have asked our consultants

and officers to accept the bulk of their compensation in stock and not in cash.

Selling, general

and administrative expenses increased by $2,052, or 5%, to $40,941 for the nine months ended January 31, 2020, from $38,889 for

the nine months ended January 31, 2019.

The increase is primarily attributed to increased levels of customer service and sales

expense of $14,303 remained approximately the same for the nine-month period ended January 31, 2020, as compared to $14,814 for

the nine months ended January 31, 2019.

Our debt balances were slightly lower at January 31, 2020 and compared to January 31,

For the Three Months Ended January

31, 2020 Compared to the Three Months Ended January 31, 2019

for the three-months ended January 31, 2020 increased by $636,050, or 524%, to $757,405 as compared to $121,355 reported for the

three months ended January 31, 2019.

The increase in revenues is attributable to an increase in consulting services, and specifically

to a new customer that accounted for 92% of our revenues, or $700,000 in the three months ended January 31, 2020.

compensation increased by $111,733, to $123,930 for the three-months ended January 31, 2020 from $12,197 reported in the three-months

ended January 31, 2017.

The increase in expense is primarily due to the increased number of shares and the higher price per share

of our common stock when shares were issued as stock-based compensation in fiscal 2020, as compared to fiscal 2019.

fees decreased by $44,500 to $7,200 for the three-months ended January 31, 2020 from $51,700 reported in the three-months ended

January 31, 2019.

The decrease occurred because we made no cash payments to our officers in the three months ended January 31,

Selling, general

and administrative expenses of $7,658 remained approximately the same for the three-month period ended January 31, 2020, as compared

expenses of $9,096 for the three months ended January 31, 2019.

of Operations

Three Months Ended July 31, 2020 Compared to the Three Months Ended July 31, 2019

for the three-months ended July 31, 2020 increased by $1,643,590, or 1,384%, to $1,762,322 as compared to $118,732 reported for

the three months ended July 31, 2019.

The increase in revenues is attributable to new consulting services.

Part of our strategy

this year is to provide cash resources to accelerate the growth of companies that we take an equity position in so that the investments

we make are able to quickly bring their product to market.

For example, the consulting and cash resources that we provided to Watch Party LLC in the quarter ended July 31, 2020, allowed

them to complete their iPhone app, which can now be downloaded from the App Store.

Costs of revenues

increased by $428,653 to $431,019 for the three-months ended July 31, 2020 from $2,366 reported in the three-months ended July

The increase is primarily attributable to our increased revenues and the change in our strategy of how we accelerate

the product development for the companies we invest in.

fees decreased by $37,209, or 95%, to $1,991 for the three months ended July 31, 2020, as compared to $39,200 reported for the

three months ended July 31, 2019.

The decrease is attributable to our efforts to hire people as employees, not consultants, and

consequently, wages and payroll related expenses in the three months ended July 31, 2020 amounted to $1,096,120 as compared to

$0 in the three months ended July 31, 2019.

expense increased by $562, or 16%, to $4,101 for the three months ended July 31, 2020, as compared to $3,539 reported for the

three months ended July 31, 2019.

The increase in expense is due to additional marketing outlets that we utilized in the three

months ended July 31, 2020.

increased by $1,550, or 12%, to $14,079 for the three months ended July 31, 2020, as compared to $12,529 reported for the three

months ended July 31, 2019.

The increase in expense is a result of fewer discounts available to us in the three-month period ended

July 31, 2020.

administrative expenses increased by $37,759, or 1,117%, to $41,139 for the three months ended July 31, 2020, from $3,380 for

the three months ended July 31, 2019.

The increase is primarily attributed to $30,000 in legal fees for work to help us

secure two loans from the U.S.

Small Business Administration.

compensation increased by $92,868, to 121,378 for the three-months ended July 31, 2020 from $28,510 reported in the three-months

ended July 31, 2019.

The increase in expense is primarily due to the higher price per share of our common stock when shares

Interest expense

of $4,689 was slightly lower for the three-month period ended January 31, 2020, as compared to $5,157 for the three months ended

January 31, 2019 due to slightly lower debt levels.

Liquidity and Capital Resources

increased by $5,550 to $10,283 for the three-months ended July 31, 2020, as compared to $4,733 for the three months ended July

The decrease in interest expense is attributable to reduced debt amounts.

and Capital Resources

2020, we had cash and cash equivalents of $874,016 and negative working capital of $1,219,028 as compared to cash and cash equivalents

of $11,206 and negative working capital of $877,581 at April 30, 2020.

The deterioration in our working capital was primarily

the result of our $1,000,000 secured related-party note, which matures on October 31, 2020, being classified as a current liability

at January 31, 2019.

Net cash used

in operating activities amounted to $10,880 in the nine-months ended January 31, 2020, as compared to net cash provided by operating

activities of $49,887 in the nine-months ended January 31, 2019.

The principal sources of cash from operating activities in the

nine-months ended January 31, 2020 was net income of $1,162,100 and stock-based compensation of $232,461, but these sources were

offset by an increase in investments of $1,410,796.

The principal use of cash from operating activities in the nine-months ended

January 31, 2019 was the net loss of $15,171, but it was offset by a non-cash item, stock-based compensation of $48,744.

There was no investing activity

in the nine-months ended January 31, 2020 and 2019.

months ended January 31, 2020, net cash used in financing activities amounted to $4,300, which consisted of principal payments

of outstanding related-party debt.

For the nine months ended January 31, 2019, net cash used in financing activities amounted

to $5,743, which consisted of $10,743 in principal payments of outstanding loans, offset by proceeds from the sale of common stock

months ended January 31, 2020 and 2019, there were no expenditures for capital assets.

in operating activities amounted to $1,522,990 and $17,620 in the three-months ended July 31, 2020 and 2019, respectively.

principal source of cash from operating activities in the three-months ended July 31, 2020 was net income of $30,781 and a non-cash

item, stock-based compensation of $121,738.

However, these items were offset by changes in non-cash revenue from the receipt of

equity of $1,754,046.

The principal source of cash from operating activities in the three-months ended July 31, 2019 was net income

of $24,475 and a non-cash item, stock-based compensation of $28,510.

However, changes in non-cash working capital balances used

cash totaling $70,605

no investing activity in the three-months ended July 31, 2020 and 2019.

For the three

months ended July 31, 2020, net cash provided by financing activities amounted to $2,385,800, which consisted of two loans from

Small Business Administration.

For the three months ended July 31, 2019, net cash used in financing activities amounted

to $1,300, which consisted of a payment to a related-party lender.

In the three-months

ended July 31, 2020 and 2019, there were no expenditures for capital assets.

We do not anticipate any capital expenditures

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However, we have very limited liquidity.

Management anticipates that we will be dependent,

for the near future, on additional capital to fund our operating expenses, debt service requirements and anticipated growth, which

we intend to achieve through consulting services and the further development of our digital marketing applications.

are choosing methods of growth that potentially minimize the use of cash, and we were successful in generating net income for

five consecutive quarters, we cannot be assured that we will be able to continue our success until we have secured customers that

will provide us with repeat business.

Furthermore, the most recent report of our independent registered public accounting firm

expresses doubt about our ability to continue as a going concern.

Although we have not had to borrow from a related party in fiscal

2020 or in fiscal 2019, in the past, our operating losses have been funded primarily through borrowings from related-party lenders.

paid $4,300 in principal and we have not paid interest on any related party debt;

the interest accrues each month.

our related party creditors will not demand payment of our current liabilities to them, in the near future, although each lender

may have a change in circumstances and demand payment.

Any demand for payment from a related party will have an adverse impact

on our ability to achieve our longer-term business objectives, and will adversely affect our ability to continue operating as

a going concern.

we have short-term financing available from our largest shareholder to fund a monthly cash-flow deficit, if needed.

Management anticipates that we will be dependent, for the near future, on additional capital to fund our operating expenses and

anticipated growth, which we intend to achieve through consulting services and the further development of a private equity platform

for raising capital and trading securities.

In the quarter ended July 31, 2020, we borrowed $2,385,800 to accelerate our growth

and the growth of early-stage companies that we invested in.

However, we now have to plan for new future payments to service our

Furthermore, the most recent report of our independent registered public accounting firm expresses doubt about our ability

to continue as a going concern.

We owe a related

party $1,000,000 under a secured term loan that matures on October 31, 2020.

We believe we can renegotiate the payment terms of

Any demand for payment from a related party will have an adverse impact on our ability to achieve our longer-term business

objectives and will adversely affect our ability to continue operating as a going concern.

While we continually

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going concern.

Quantitative and Qualitative

Disclosures about Market Risk.

Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller

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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 2. Management’s Discussion and Analysis