What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-12-15 compared with 2020-09-21 · 105 added, 82 removed, 110 unchanged (63% of the section changed)

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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:

new regulations were approved on November 2, 2020 and will be effective 60 days after publication in the Federal Register.

many small- and medium-sized businesses, this exempt offering framework is the only viable channel for raising capital.

regulations are designed to:

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

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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.

Consequently, we negotiated a transaction that consolidates the operations of a Reg CF funding portal, Netcapital.com

(“Funding Portal”), with our financial results.

Funding Portal operates a Title III JOBS Act funding portal, and as

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

new issuer launched on Funding Portal on November 26, 2020, and raised $1,070,000, the maximum amount allowed, within three hours.

We anticipate this issuer will come back to Funding Portal to raise additional money once the $5 million ceiling is instituted.

We believe the increase of the maximum offering limit to $5 million will be beneficial to many issuers and to our company, as

many issuers need more than $1.07 million in private capital and are capable of raising up to $5 million.

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.

we provide consulting services to some of our clients that utilize the Funding Portal 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.

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.

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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.

Six Months Ended October 31, 2020 Compared to the Six Months Ended October 31, 2019

for the six months ended October 31, 2020 increased by $1,657,761, or 198%, to $2,493,486 as compared to $835,725 reported for

the six months ended October 31, 2019.

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

specifically to two customers that accounted for an aggregate of 82% of our revenues, or $2,060,486 in the six months ended October

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

increased by $709,376 to $714,224 for the six-months ended October 31, 2020 from $4,848 reported in the six-months ended October

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

compensation expense increased by $151,378, or 139%, to $259,909 for the six months ended October 31, 2020, as compared to $108,531

reported for the six months ended October 31, 2019.

The increase in expense is due to a higher price per share of our stock at

the time when stock grants were issued for stock-based compensation earned in fiscal 2021 as compared for fiscal 2020.

expense decreased by $75,115, or 94%, to $5,085 for the six months ended October 31, 2020, from $80,200 for the six months ended

October 31, 2019.

The decrease is attributed to our increase in wages during the six-month period ended October 31, 2020.

Wages totaled

$1,296,333 for the six months ended October 31, 2020, compared to wages of $0 for the six months ended October 31, 2019.

increase is due to our efforts to pay regular cash compensation to our executives, instead of only stock-based compensation, to

hire personnel to provide additional services to our clients and to allow us to segregate duties and enhance internal controls

over financial reporting.

Selling, general

and administrative expenses increased by $42,217, or 127%, to $75,500 for the six months ended October 31, 2020, from $33,283

for the six months ended October 31, 2019.

The increase is primarily attributed to increased levels of customer service

and sales activity.

Interest expense

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.

increased by $13,950, or 145%, to $23,564 for the six-month period ended October 31, 2020, as compared to $9,614 for the six months

ended October 31, 2019.

Our debt balances were higher at October 31, 2020 as compared to October 31, 2019 due to two new

loans totaling $2,385,800 in fiscal 2021.

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

for the three-months ended October 31, 2020 increased by $14,171, or 2%, to $731,164 as compared to $716,993 reported for the

three months ended October 31, 2019.

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

specifically to two customers that accounted for a total of 75% of our revenues, or $545,486 in the three months ended October

Costs of revenues

increased by $280,723 to $283,205 for the three-months ended October 31, 2020 from $2,482 reported in the three-months ended October

The increase is primarily attributable to the change in our strategy of how we spend money to help accelerate

the product development for the companies we invest in.

compensation increased by $58,510, or 73%, to $138,531 for the three-months ended October 31, 2020 from $80,021 reported in the

three-months ended October 31, 2019.

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

at the time when stock grants were issued for stock-based compensation earned in fiscal 2021 as compared for fiscal 2020.

expense decreased by $37,906, or 92%, to $3,094 for the three months ended October 31, 2020, from $41,000 for the three months

ended October 31, 2019.

The decrease is attributed to our increase in wages during the six-month period ended October 31,

Wages totaled

$200,213 for the three months ended October 31, 2020, compared to wages of $0 for the three months ended October 31, 2019.

increase is due to our efforts to pay regular cash compensation to our executives, instead of only stock-based compensation, to

hire personnel to provide additional services to our clients and to allow us to segregate duties and enhance internal controls

over financial reporting.

Selling, general

and administrative expenses increased by $4,458, or 15%, to $34,361 for the three-months ended October 31, 2020 from $29,903 reported

in the three-months ended October 31, 2019.

The increase is primarily attributable to increased levels of customer service

and sales activity.

Interest expense

increased by $8,400, or 172%, to $13,281 for the three-month period ended October 31, 2020, as compared to $4,881 for the three

months ended October 31, 2019.

Our debt balances were higher as of October 31, 2020 as compared to October 31, 2019 due

to two new loans totally $2,385,800 in fiscal 2021.

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.

31, 2020, we had cash and cash equivalents of $455,994 and negative working capital of $1,867,687 as compared to cash and cash

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

Net cash used

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

in operating activities amounted to $1,941,012 in the six-months ended October 31, 2020 as compared to net cash provided by operating

activities of $16,432 in the six months ended October 31, 2019.

The principal source of cash from operating activities in the

six-months ended October 31, 2020 was net income of $60,893 and a non-cash item, stock-based compensation of $259,909.

these items were offset by changes in non-cash revenue from the receipt of equity of $2,314,532.

The principal source of cash

from operating activities in the six-months ended October 31, 2019 was net income of $566,926 and a non-cash item, stock-based

compensation of $108,531.

However, these items were offset by changes in non-cash revenue from the receipt of equity of $653,864

and changes in non-cash working capital balances, which used cash totaling $5,161.

no investing activity in the six-months ended October 31, 2020 and 2019.

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

from the U.S.

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.

For the six months ended October 31, 2019, net cash used in financing activities

amounted to $4,300, which consisted of principal payments of outstanding related-party debt.

In the six-months

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

We do not anticipate any capital expenditures

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of our company as a going concern.

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 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.

However, 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.

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 debt.

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.

party $1,000,000 under a secured term loan that matures on January 31, 2021.

We believe we can renegotiate the payment terms of

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going concern.

We have no off-balance sheet

arrangements.

Quantitative and Qualitative Disclosures about Market Risk.

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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