What changed in this filing

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Item 1. Financial Statements

2020-12-15 compared with 2020-09-21 · 342 added, 270 removed, 292 unchanged (68% of the section changed)

Financial Statements.

VALUESETTERS,

VALUESETTERS, INC.

Condensed Consolidated

Balance Sheets

July 31, 2020

April 30, 2020

and cash equivalents

current assets

Cash and cash equivalents

Accounts receivable

income tax asset

prepaid expenses

Total current assets

Deferred income tax asset

Non-current prepaid expenses

Investments at cost

Liabilities and Stockholders’

Current liabilities:

Accounts payable

Related party

Accrued expenses

Deferred revenue

Notes payable –

and Stockholders’

payable –

related parties

Secured noted payable to related party

Interest payable –

noted payable to related party

payable –

related parties

Current portion of long-term debt

Loan payable –

Demand notes payable

Total current liabilities

Small Business Administration loans payable

Total liabilities

Commitments and Contingencies

portion of long-term debt

payable –

notes payable

current liabilities

Business Administration loans payable, net of current portion

and Contingencies

Stockholders’

Common stock, $.001 par value;

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

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

stock, $.001 par value;

900,000,000 shares authorized, 419,455 and 417,059 shares issued and outstanding at Oct.

and April 30, 2020, respectively

in excess of par value

stockholders’

liabilities and stockholders’

See Accompanying

Notes to the Consolidated Financial Statements

VALUESETTERS,

VALUESETTERS, INC.

Consolidated Statements of Operations

For the Three Months Ended

July 31, 2020

July 31, 2019

Cost of revenues

Six Months Ended

Three Months Ended

Costs and expenses:

Stock-based compensation

Wage expenses

Consulting fees

Wages and payroll

general and administrative

Total costs and expenses

Income from operations

costs and expenses

from operations

Other income (expense):

Interest expense

Total other income (expense)

Net income before taxes

other income (expense)

Net income before

Basic earnings per share

2 unchanged sentences

See Accompanying

Notes to the Consolidated Financial Statements

VALUESETTERS,

Notes to the Financial Statements

VALUESETTERS, INC.

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

the Six Months Ended October 31, 2020 and the Years Ended April 30, 2020, and 2019

April 30, 2018

$ (3,650,013 )

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Net loss, July

Q1 stock-based compensation

Q1 stock issued for purchase

Balance, July 31, 2018

stock-based compensation

stock issued for purchase

July 31, 2018

Net loss, October

Q2 stock-based compensation

Q2 sale of common stock

Balance, October 31, 2018

Net income, January 31, 2019

Q3 stock-based compensation

Balance, January 31, 2019

stock-based compensation

sale of common stock

October 31, 2018

income, January 31, 2019

stock-based compensation

January 31, 2019

Net income, April

Q4 stock-based compensation

Balance, April 30, 2019

stock-based compensation

April 30, 2019

Net income, July

Q1 stock-based compensation

stock-based compensation

Balance, July 31,

Net income, October

Q2 stock-based compensation

stock-based compensation

Balance, October

Net income, January

Q3 stock-based compensation

stock-based compensation

Balance, January

Q4 stock-based compensation

Net loss, April 30, 2020

stock-based compensation

loss, April 30, 2020

Balance, April

Net income July

Q1 stock-based compensation

Balance, July 31, 2020

stock-based compensation

July 31, 2020

Net income October

stock-based compensation

October 31, 2020

$ (2,401,389 )

See Accompanying Notes to the

Consolidated Financial Statements

VALUESETTERS,

Accompanying Notes to the Consolidated Financial Statements

VALUESETTERS, INC.

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 –

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

in deferred tax assets

revenue from receipt of equity

in non-cash working capital balances

payable –

related party

Deferred revenue

Cash used in operating activities

payable –

related party

provided by (used in) operating activities

from SBA loans

on related party note

provided by (used in) financing activities

in cash and cash equivalents during the period

and cash equivalents, beginning of the period

and cash equivalents, end of the period

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:

stock issued as prepaid compensation

See Accompanying

Notes to the Consolidated Financial Statements

VALUESETTERS,

VALUESETTERS, INC.

To Condensed Consolidated Financial Statements (Unaudited)

Note 1– Basis of Presentation

(“we,” “our,” or the “Company”) is a provider of consulting services, subscription services,

advertising and digital goods using technology distribution platforms like the Internet and mobile devices in the media and entertainment

The accompanying

unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim

financial information and in accordance with the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”)

for quarterly reports on Form 10-Q.

Accordingly, they do not include all of the information and footnotes required by generally

accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of

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

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.

unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles

for interim financial information and in accordance with the rules and regulations of the U.S.

Securities and Exchange Commission

(“SEC”) for quarterly reports on Form 10-Q.

Accordingly, they do not include all of the information and footnotes

required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments

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

Operating results for

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

the fiscal year ended April 30, 2021.

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,

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of liabilities in the ordinary course of business.

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

deficit of $2,431,411.

However, the Company has negative working capital of $1,867,687 and short-term

debt of more than $2,300,000.

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.

believes that its existing cash resources may not be sufficient to fund its debt payments and working capital requirements.

Company anticipates a majority of its debt payments will be forgiven under the provisions of an SBA loan program, and such forgiveness

will alleviate the uncertainty of being able to fund its debt service requirements.

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

Failure to generate

sufficient revenues, achieve certain other business plan objectives or raise additional funds could have a material adverse effect

on the Company’s results of operations, cash flows and financial position, including its ability to continue as a going

concern, and may require it to significantly reduce, reorganize, discontinue or shut down its operations.

sufficient revenues, obtain loan forgiveness, achieve certain other business plan objectives or raise additional funds could have

a material adverse effect on the Company’s results of operations, cash flows and financial position, including its ability

to continue as a going concern, and may require it to significantly reduce, reorganize, discontinue or shut down its operations.

the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance

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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.

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:

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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

and believes that the combination of some of those entities with the Company 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.

the payment terms of an SBA loan.

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

sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above.

Accordingly, the management

of the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern

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.

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.

has determined, based on the debt balances it is carrying, that without debt forgiveness it is not probable that management’s

plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above.

the management of the Company has concluded that there is substantial doubt about the Company’s ability to continue as a

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

– Revenue Recognition

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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.

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

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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.

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

October 31, 2020 and 2019 are considered contract revenues.

Contract revenue as of October 31, 2020 and April 30, 2020, which

has not yet been recognized, amounted to $5,507 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 –

Effect of dilutive securities

Weighted average common shares outstanding –

Earnings per common share –

For the three-month

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

Months Ended October 31, 2020

Months Ended October 31, 2019

Months Ended October 31, 2020

Months Ended October 31, 2019

income attributable to common stockholders –

to net income

income attributable to common stockholders –

Weighted average

common shares outstanding –

of dilutive securities

average common shares outstanding –

per common share –

and three-month periods ended October 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 –

The following

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

lender (affiliate)

payable –

related parties

Demand notes payable

Loan payable –

notes payable

payable –

As of October

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

agreement (“Loan”) dated April 28, 2011, that was amended on July 26, 2014 and again on October 31, 2017.

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 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,

and reduce the default interest rate from 15% to 8% per annum (the “Amendments”).

In conjunction with the Amendments,

the Lender also agreed to reduce the total debt and accrued interest payable by $453,031 to $1,000,000, in exchange for the Company

issuing to the Lender 44,198,246 shares of its common stock.

Consequently, upon issuance of the 44,198,246 shares, the Company

recorded an increase of $44,198 in common stock and $408,833 in capital in excess of par value.

was also the largest shareholder of the Company, owning 135,676 shares of common stock, or 32.3% of the 419,455 shares issued

and outstanding, as of October 31, 2020.

The Loan was 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, and reduce the default interest rate from 15% to 8% per annum.

not paid when it matured on October 31, 2020.

The Loan maturity date has been extended to January 31, 2021 and the annual interest

rate has been raised to 8% per annum effective November 1, 2020.

In connection

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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.

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 October

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.

There is one note, payable

on demand, with a zero percent interest rate.

The Company also owes $34,324 as of October 31, 2020 and April 30, 2020 to Chase

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

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Accrued interest payable on the May

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

Loan amounted to $9,197 as of October 31, 2020.

The June Loan

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$4,185 of the June Loan is recorded as a current liability and the remaining $495,815 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.

Accrued interest payable on the June Loan amounted to $6,935 as of October 31, 2020.

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

These notes have an interest rate of 0%.

– Income Taxes

As of October

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

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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.

Given that management believes it is more likely than not that the

company will utilize the deferred tax asset, there is no valuation allowance as of October 31, 2020 and April 30, 2020.

of October 31, 2020, the deferred tax asset has been reduced to $157,602 by the tax provision of $22,398 for the six months ended

October 31, 2020.

Due to the availability of

a tax loss carryforward to offset any potential income tax in the six- and three-month periods ended October 31, 2019, the Company

recorded no income tax expense in those periods.

– Related Party Transactions

The Company’s

largest shareholder is also its principal lender.

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 32.6% 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

principal lender was its largest shareholder as of October 31, 2020 and until November 5, 2020.

As of October 31,

2020 and April 30, 2020, the Company owed its principal lender, 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 January 31,

This shareholder owned 135,687 shares of common stock, or 32.3% of the 419,455 shares issued and outstanding as of October

Accrued interest payable on this secured loan as of October 31, 2020 and April 30, 2020 amounted to $37,536 and $31,235,

respectively.

to officers in the six- and three-month periods ended October 31, 2020 and 2019 consisted of common stock valued at $164,885 and

$82,263 respectively, and cash wages of $138,462 and $72,000, respectively.

to a related party consultant in the six-and three-month periods ended October 31, 2020 and 2019 consisted of common stock valued

at $38,757 and $19,378, respectively, and cash payments of $46,154 and $24,000, respectively.

This consultant is also the controlling

shareholder of Zelgor Inc.

and the Company’s earned revenues from Zelgor Inc.

of $1,400,000 and $350,000 in the six- and

three-month periods ended October 31, 2020.

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

in a non-interest-bearing note payable.

Also included in related-party accounts payable is $34,490 due to a company controlled

by a different director.

– Stockholders’ Equity

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.

As of October 31, 2020 and April 30, 2020, 419,455

and 417,059 shares were outstanding, respectively.

2020, the board of directors authorized a reverse split of the common stock on a 1-for-2,000 basis, whereby the Company issued

to each of its stockholders one share of Common Stock for every 2,000 shares of common stock held by such stockholder.

split was effective on November 5, 2020.

The financial statements as of and for the six- and three-month periods ended October

31, 2020 and 2019 have been adjusted to give effect to the reverse split.

The effect of this adjustment was to reduce the common

stock balance sheet account and increase the balance sheet account for capital in excess of par value by $835,642 as of October

As of April 30, 2020, the balance sheet accounts for capital in excess of par value and for common stock were increased

and decreased by $830,852, respectively.

quarter of fiscal 2021, the Company issued an aggregate of 156 shares of restricted stock to its Chief Marketing Officer as compensation.

The shares were valued at the market price on the date of issuance for a total of $1,406.

In the second

quarter of fiscal 2021, the Company issued an aggregate of 156 shares of restricted stock to its Chief Marketing Officer and 2,084

shares to its Director of Business Development as compensation.

The shares were valued at the market price on the date of

issuance for a total of $18,557.

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 the market price on the date

of issuance for a total of $19,688.

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

Company issued 12,500 shares of its common stock in conjunction with this agreement.

The shares were valued at the market

price on the date of issuance for a total of $305,000.

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

Company issued 12,500 shares of its common stock in conjunction with this agreement.

The shares were valued at the market

price on the date of issuance for a total of $305,000.

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

Company issued 6,250 shares of its common stock to each consultant in conjunction with these agreements.

The shares were

valued at the market price on the date of issuance for a total of $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 156 shares of common stock to its Chief Marketing Officer.

The shares were valued at

the market price on the date of issuance for a total of $2,344 and recorded as an expense in the quarter ended October 31, 2019.

The Fair Value

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guidance of the Financial Accounting Standards Board.

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

For the six- and three-month periods ended October 31, 2020, the Company

recorded $259,909 and $138,531, respectively, in stock-based compensation expense.

For the six- and three-month periods ended

October 31, 2019, the Company recorded $108,531 and $80,021, respectively, in stock-based compensation expense.

As of October

31, 2020, there was $369,064 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

Chief Financial Officer

Chief Marketing Officer

Marketing consultant

Related party consultant

Business consultant

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

Chief Financial Officer

Related party consultant

Business consultant

Marketing consultant

As of October

31, 2020, an aggregate of 938 and 10,417 shares of common stock can be earned by the Company’s Chief Marketing Officer and

Director of Business Development, respectively, from unvested stock grants.

For the Chief Marketing Officer, shares vest at a

rate of 156 shares per quarter, over the next six quarters.

For the Director of Business Development, shares vest at a rate

of 260 shares per month, over the next forty months.

The components

of the stock-based compensation expense are presented in the following table:

Stock-based compensation

Months Ended October 31, 2020

Months Ended October 31, 2019

Months Ended October 31, 2020

Months Ended October 31, 2019

Executive Officer

Financial Officer

Marketing Officer

party consultant

of Business Development

stock-based compensation expense

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

Executive Officer

Financial Officer

party consultant

11 – Deposits and Commitments

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12 – Concentrations

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.

and three-month periods ended October 31, 2020, the Company had one customer that constituted 56% and 48% of its revenues, respectively,

and a second customer that constituted 26% and 27% of its revenues, respectively.

For the six- and three-month periods ended October

31, 2019, the Company had one customer that constituted 65% and 75% of its revenues, respectively;

a second customer that constituted

18% and 8% of its revenues, respectively;

and a third customer that constituted 11% and 13% of its revenues, respectively.

– Investments

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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 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 $235,400 and $208,650 for the six- and three-months

ended October 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 Chip 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 $660,486 and $195,486 for the six- and

three-months ended October 31, 2020.

the Company entered a consulting contract with Zelgor Inc.

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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.

ended July 31, 2020 and 350,000 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 $1,400,000 and $1,050,000 for

the six- and three-months ended October 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

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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

As of October 31, 2020, the Company owns 528 Netcapital

units, at a value of $48,128.

2020 the Company entered a consulting agreement with Vymedic, Inc.

which gives the Company a $50,000 fee over a 5-month period.

Half the fee is payable in stock and half is payable in cash.

As of October 31, 2020, the Company had earned $15,000 worth of

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

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

Watch Party LLC

ChipBrain LLC

Vymedic, Inc.

Deuce Drone LLC

Kingscrowd LLC

Total Investments at cost

Investments at cost

investments do not have a readily determinable fair value, as identified in ASC 321-10-35-2, and all investments are measured

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– 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.

to the reverse split on November 5, 2020 (see Note 8), the Company changed its name to Netcapital Inc.

On August 23, 2020, the

Company entered into an Agreement and Plan of Merger (“Agreement”) whereby NetCapital Systems LLC (“Systems”)

would become an 80% owner of the Company.

Pursuant to the requirements of this agreement, the Company filed a definitive information

statement on September 21, 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 2,000 shares of the Company’s common stock would be exchanged for

one new share of common stock.

In conjunction with the merger agreement, the Company issued 1,666,360 to Systems on November 5,

The Agreement

calls for a tax-free merger of Netcapital Funding Portal Inc.

(“NFPI”), a wholly owned subsidiary of Systems, with

Netcapital Acquisition Vehicle Inc., an indirect wholly owned subsidiary of the Company, wherein NFPI is the surviving corporation.

This transaction is designed to enhance the Company’s revenues and ability to provide services to democratize the private

capital markets while helping companies at all stages to build, grow and fund their businesses with a full range of services from

strategic advice to raising capital.

As a result of the transaction, the company is expected to be a leading provider of private

capital transactions for entrepreneurs seeking to raise money under the exemption provided by section 4(a)(6) of the Securities

ASC 805-10-25-4

requires the identification of one of the combining entities in each business combination as the acquirer.

Upon evaluation of

the components of the business combination, including the relative voting rights in the combined entity, the composition of the

governing body and senior management of the combined entity, the relative size of each entity and the terms of the exchange of

equity interests, the Company intends to record the transaction in the third quarter of fiscal 2021 as a purchase.

The following

table summarizes the value of the consideration for NFPI and the amounts of the assets acquired and liabilities assumed in conjunction

with the Agreement.

Consideration:

1,666,360 shares of common stock of the Company

Recognized amounts

of identifiable assets acquired and liabilities assumed:

Prepaid expenses

Receivable from

Netcapital Systems

Accounts payable

Platform users

Platform investors

Platform issuers

identifiable net assets

The fair value

of the common shares issued as the consideration for NFPI was determined on the basis of the closing market price of the Company’s

common shares on the date the shares were issued.

The fair value of the assets and the liabilities of NFPI equaled their book

Four identifiable intangible assets were valued;

platform users, platform investors, platform issuers and unpatented technology

(collectively the “Intangible Assets”).

The estimated market value of the Intangible assets is approximately $27,800,000.

These values are derived from comparing the NFPI Intangible Assets to the values recorded by funding portal offerings of NFPI’s

competitors in public filings via Regulations CF and Regulation A.

The Agreement was not completed in the current reporting quarter,

and therefore the Company has not finished its evaluation of the Intangible Assets.

The fair value of the acquired Intangible

Assets is provisional pending receipt of the final valuations for those assets.

of purchase price over the total identifiable tangible net assets is estimated to be $628,435, which leaves an aggregate value

of $10,702,813 to be assigned to the Intangible Assets.

The estimated value of the $27,800,000 of Intangible Assets is allocated

on a percentage basis in the above table to equal $10,702,813.

None of NFPI’s

revenues and earnings are included in the Company’s consolidated income statements for the six months ended October 31,

2020 and 2019.

If the entities had been combined for these two reporting periods, the supplemental pro forma revenues and earnings

are as follows:

pro forma for 4/1/20 –

Supplemental pro

forma for 4/1/19 –

the supplemental pro forma information above is revenue earned by the Company from Netcapital Systems LLC of $18,646 and $152,864

in the six-month periods ended October 31, 2020 and 2019, respectively.

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

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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 1. Financial Statements