What changed in this filing

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Item 1. Financial Statements

2021-03-22 compared with 2020-12-15 · 367 added, 293 removed, 341 unchanged (66% of the section changed)

Financial Statements.

VALUESETTERS, INC.

Condensed Consolidated

Balance Sheets

and cash equivalents

January 31, 2021

Current assets:

income tax asset

Cash and cash equivalents

Accounts receivable, net of allowance of $29,000

Prepaid expenses

and Stockholders’

payable –

Total current assets

Deferred income tax asset

Non-current prepaid expenses

Purchased technology and customers

Investments at cost

Liabilities and Stockholders’

Current liabilities:

Accounts payable

Related party

Accrued expenses

Deferred revenue

Notes payable –

related parties

noted payable to related party

payable –

Secured noted payable

Interest payable –

related parties

portion of long-term debt

payable –

notes payable

current liabilities

Business Administration loans payable, net of current portion

and Contingencies

Current portion of long-term debt

Loan payable –

Demand notes payable

Total current liabilities

Small Business Administration loans payable

Total liabilities

Commitments and Contingencies

Stockholders’

stock, $.001 par value;

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

Common stock, $.001 par value;

900,000,000 shares authorized, 2,081,752 and 417,059 shares issued and outstanding at Jan.

31, 2021 and April 30, 2020, respectively

in excess of par value

stockholders’

liabilities and stockholders’

Capital in excess of par value

Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

See Accompanying

Notes to the Consolidated Financial Statements

VALUESETTERS, INC.

Consolidated Statements of Operations

Six Months Ended

Three Months Ended

For the Nine Months Ended

For the Three Months Ended

Cost of revenues

Costs and expenses:

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Consulting fees

Wages and payroll

general and administrative

costs and expenses

from operations

Wages and payroll expense

Selling, general and administrative

Total costs and expenses

Income from operations

Other income (expense):

Interest expense

other income (expense)

Net income before

Total other income (expense)

Net income before taxes

Basic earnings per share

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Notes to the Financial Statements

VALUESETTERS, INC.

Consolidated Statements of Stockholders' Equity

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

April 30, 2018

the Nine Months Ended January 31, 2021 and the Years Ended April 30, 2020, and 2019

Balance, April 30, 2018

$ (3,650,013 )

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Net loss, July 31, 2018

stock-based compensation

stock issued for purchase

July 31, 2018

Q1 stock-based compensation

Q1 stock issued for purchase

Balance, July 31, 2018

Net loss, October 31, 2018

stock-based compensation

sale of common stock

October 31, 2018

income, January 31, 2019

stock-based compensation

January 31, 2019

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

Net income, April 30, 2019

stock-based compensation

April 30, 2019

Q4 stock-based compensation

Balance, April 30, 2019

Net income, July 31, 2019

stock-based compensation

Q1 stock-based compensation

Balance, July 31, 2019

Net income, October 31, 2019

stock-based compensation

Q2 stock-based compensation

Balance, October 31, 2019

Net income, January 31, 2020

stock-based compensation

Q3 stock-based compensation

Balance, January 31, 2020

stock-based compensation

loss, April 30, 2020

Q4 stock-based compensation

Net loss, April 30, 2020

Balance, April 30, 2020

Net income July 31, 2020

stock-based compensation

July 31, 2020

Q1 stock-based compensation

Balance July 31, 2020

Net income October 31, 2020

stock-based compensation

October 31, 2020

Q2 stock-based compensation

Balance, October 31, 2020

Shares issued to acquire funding portal

Net income January 31, 2021

Return of common stock

Q3 stock-based compensation

Balance, January 31, 2021

$ (2,358,747 )

Accompanying Notes to the Consolidated Financial Statements

VALUESETTERS, INC.

Consolidated Statements of Cash Flows

Operating activities

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 –

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

Stock-based compensation

Non-cash revenue from receipt of equity

Provision for bad debts

Changes in deferred tax assets

Changes in non-cash working capital balances

Accounts receivable

Contracts receivable

Prepaid expense

Accrued expenses

Accounts payable –

related party

payable –

Interest 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

Deferred revenue

Cash provided by (used in) operating activities

Investing activities

Proceeds from purchase of funding portal

Cash provided by investing activities

Financing activities

stock issued as prepaid compensation

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:

Non-cash financing activities

Common stock issued as prepaid compensation

See Accompanying

Notes to the Consolidated Financial Statements

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

(“we,” “our,” or the “Company”) is a fintech company dedicated to democratizing private

capital markets.

We help companies at all stages to build, grow and fund their businesses with a full range of services from strategic

advice to raising capital.

One of our subsidiaries, Netcapital Funding Portal Inc., which we purchased effective November 5, 2020,

allows companies to close capital digitally and provides investors access to pre-IPO investment opportunities.

A second subsidiary,

Netcapital Advisors Inc., which we incorporated in Delaware on August 25, 2020, provides professional advice to entrepreneurs

and assists companies with digital marketing, business planning and raising capital.

The consolidated financial statements include

the accounts of the Company and its wholly owned subsidiaries after elimination of significant intercompany balances and transactions.

The Company has an April 30 fiscal year end.

The accompanying

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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 nine- and three-month periods ended January 31, 2021, are not necessarily indicative of the results that may be expected for

the fiscal year ended April 30, 2021.

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of liabilities in the ordinary course of business.

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

debt of more than $2,300,000.

However, the Company has negative working capital and short-term debt of more

than $2,500,000.

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

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.

The Company believes

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

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.

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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 the Company will provide

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

the rapid month-to-month growth of its recently acquired subsidiary, Netcapital Funding

Portal Inc (“FP”).

FP’s revenues have grown every month since October

2020 and FP receives a 4.9% fee on all investments made on Netcapital.com.

the payment terms of an SBA loan.

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fee, when possible, in exchange for these services.

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.

has determined, based on the debt balances it is carrying, that without debt forgiveness on its SBA loans, it is not probable

that management’s plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events

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.

– Revenue Recognition

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of revenue when or as, the Company satisfies a performance obligation.

identifies performance obligations in contracts with customers, which primarily are professional services and subscription services.

The transaction price is determined based on the amount the Company expects to be entitled to receive in exchange for transferring

the promised services to the customer.

The transaction price in the contract is allocated to each distinct performance obligation

in an amount that represents the relative amount of consideration expected to be received in exchange for satisfying each performance

Revenue is recognized when performance obligations are satisfied.

The Company usually bills its customers before it

provides any services and begins performing services after the first payment is received.

Contracts are typically one year or

For larger contracts, in addition to the initial payment, the Company may allow for progress payments throughout the term

of the contract.

identifies performance obligations in contracts with customers, which primarily are professional services, listing fees on our

funding portal, and a portal fee of 4.9% of the money raised on the funding portal.

The transaction price is determined based

on the amount the Company expects to be entitled to receive in exchange for transferring the promised services to the customer.

The transaction price in the contract is allocated to each distinct performance obligation in an amount that represents the relative

amount of consideration expected to be received in exchange for satisfying each performance obligation.

Revenue is recognized

when performance obligations are satisfied.

The Company bills its customers for professional services and listing fees at a negotiated

The portal fee is fixed at 4.9%.

Most of the Contracts are typically one year or less.

For larger contracts, in addition

to the initial payment, the Company may allow for progress payments throughout the term of the contract.

and Estimates

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subscription terms are typically less than one year.

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.

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

ended January 31, 2021 and 2020 are considered contract revenues.

Contract revenue as of January 31, 2021 and April 30, 2020,

which has not yet been recognized, amounted to $589 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:

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.

Nine Months Ended January 31, 2021

Nine Months Ended January 31, 2020

Three Months Ended January 31, 2021

Three Months Ended January 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 nine-

and three-month periods ended January 31, 2020 and 2019, the Company had no convertible or dilutive securities.

– Principal Financing Arrangements

The following

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

following table summarizes components debt as of January 31, 2021 and April 30, 2020:

lender (affiliate)

payable –

related parties

payable – related parties

notes payable

payable –

As of October

payable – bank

As of January

31, 2021 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.

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.

Until November

5, 2020, the Lender 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.

As of January

31, 2021, the Lender owns 6.5% of the outstanding common stock of the Company and is no longer considered a related party.

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.

The Loan was not paid when it matured on October 31,

The Loan maturity date has been extended to April 30, 2021 and the annual interest rate has been raised to 8% per annum

effective November 1, 2020.

In connection

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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.

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.

As of January

31, 2021 and April 30, 2020, the Company’s related-party unsecured notes payable totaled $22,860 and $15,000, respectively.

There are three notes, payable on demand, with a zero percent interest rate.

Two of these notes, totaling $7,860, were not considered

related party loans on April 30, 2020 and were recorded as demand notes payable on that date.

The Company also owes $34,324 as

of January 31, 2021 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

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Accrued interest payable on the May

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

Loan amounted to $13,950 as of January 31, 2020.

The June Loan

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$6,727 of the June Loan is recorded as a current liability and the remaining $493,273 is classified as a long-term liability.

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%.

Accrued interest payable on the June Loan amounted to $11,661 as of January 31, 2021.

– Income Taxes

As of October

As of January

31, 2021 and April 30, 2020, the Company had net operating loss carryforwards for federal income tax purposes of approximately

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

Among numerous provisions, the Tax Act reduces the U.S.

corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries

that were previously tax deferred, and creates new taxes on certain foreign sourced earnings.

Among numerous provisions, the Tax Act reduced the U.S.

corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries

that were previously tax deferred, and created new taxes on certain foreign sourced earnings.

As a result of the Tax Act, the

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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.

company will utilize the deferred tax asset, there is no valuation allowance as of January 31, 2021 and April 30, 2020.

of January 31, 2020, the deferred tax asset has been reduced to $137,712 by the tax provision of $42,288 for the nine months ended

January 31, 2021.

For the nine- and three-month periods ended January 31, 2021, the Company recorded tax expense of $42,288 and

$19,890, respectively.

Due to the availability

of a net operating loss carryforward in fiscal 2020, for the nine- and three-month periods ended January

31, 2020, the Company recorded no tax expense .

– Related Party Transactions

The Company’s

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

majority shareholder, Netcapital Systems LLC, owns 1,671,360 shares of common stock, or 80.3% of the Company as of January 31,

The Company has a demand note payable to Netcapital Systems LLC of $4,600 and a demand note payable to one of its managers

In addition, the Company has accrued a payable of $3,817,516 for supplemental consideration owed in conjunction with

its purchase of Netcapital Funding Portal Inc.

This amount is scheduled to be paid off by the issuance of common stock.

the Company owes its largest shareholder $3,822,176.

of January 31, 2021 and April 30, 2020, the Company owes $34,490 and $0 to a company that is controlled by one of its directors.

to officers in the nine- and three-month periods ended January 31, 2021 consisted of common stock valued at $301,783 and $86,417

and cash wages of $210,462 and $72,000, respectively.

Compensation to officers in the nine- and three-month periods ended January

31, 2020 consisted of common stock valued at $145,685 and $77,750 and cash wages of $62,000 and $0 respectively.

to a related party consultant in the nine-and three-month periods ended January

31, 2021 and 2020 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.

Company’s earned revenues from Zelgor Inc.

of $1,400,000 and $350,000 in the nine- and three-month periods ended January

Company owes a director $16,680 as of January 31, 2021 and April 30, 2020, which is recorded as accounts payable, plus $15,000

in a non-interest-bearing note payable.

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

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

As of January 31, 2021 and April 30, 2020, 2,081,752

and 417,059 shares were outstanding, respectively.

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split was effective on November 5, 2020.

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

The financial statements as of and for the nine- and three-month periods ended January

31, 2021 and 2020 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.

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.

The shares were valued at $1,406.

In the second

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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.

The shares were valued at $18,557.

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

and 781 shares of restricted stock to its current Chief Marketing Officer as compensation.

The shares were valued at $6,240.

5, 2020, the Company issued 1,666,360 shares of restricted stock to purchase Netcapital Funding Portal Inc.

quarter of fiscal 2020, the Company issued an aggregate of 1,406 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 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.

The shares were valued at $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 $305,000.

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.

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

The Company issued

6,250 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 156 shares of common stock to its Chief Marketing Officer.

The shares were valued

at $2,344 and recorded as an expense in the quarter ended October 31, 2019.

The Fair Value

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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 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

guidance of the ASC 718 “Accounting for Stock-Based Compensation.” For the nine- and three-month periods ended

January 31, 2021, the Company recorded $386,121 and $126,212, respectively,

in stock-based compensation expense.

For the nine- and three-month periods ended January 31, 2020, the Company recorded $232,461

and $123,930, respectively, in stock-based compensation expense.

As of January

31, 2021, there was $249,092 of prepaid stock-based compensation expense for services that end on August 31, 2021.

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.

As of January

31, 2020, an aggregate of 782 and 9,636 shares of common stock can be earned by the Company’s Marketing Manager and Chief

Marketing Officer, respectively, from unvested stock grants.

For the Marketing Manager, shares vest at a rate of 156 shares per

quarter, over the next five quarters.

For the Chief Marketing Officer, shares vest at a rate of 260 shares per month, over the

next thirty-seven 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

Nine Months Ended January 31, 2021

Nine Months Ended January 31, 2020

Three Months Ended January 31, 2021

Three Months Ended January 31, 2020

Chief Executive Officer

Chief Financial Officer

Chief Marketing Officer

Related party consultant

Director of Business Development

Marketing consultant

Business consultant

Total stock-based compensation expense

table below presents the prepaid compensation expense as of January 31, 2021 and April 30, 2020:

January 31,2021

April 30, 2020

Chief Executive Officer

Chief Financial Officer

Related party consultant

Business 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

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

by providing 30-day written notice.

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12 – Concentrations

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.

For the nine-

and three-month periods ended January 31, 2021, the Company had one related party customer that constituted 37% and 0% of its

revenues, respectively, a second customer that constituted 18% and 0% of its revenues, a third customer that constituted 13% and

37% of its revenues, respectively and a fourth customer that constituted 9% and 28% of its revenues, respectively.

For 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.

– Investments

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

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 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.

(“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 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.

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

$0 for the nine- and three-months ended January 31, 2021.

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

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

The ChipBrain 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 $0 for the nine-

and three-months ended January 31, 2021.

the Company entered a consulting contract with a related party, 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 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

$0 for the nine- and three-months ended January 31, 2021.

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 October 31, 2020, the Company owns 528 Netcapital

As of January 31, 2021, 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

for a $40,000 fee over a 5-month period.

Half the fee is payable

in stock and half is payable in cash.

As of January 31, 2021, the Company had earned $40,000, including $20,000 worth of stock.

The following

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

table summarizes the components of investments as of January 31, 2021 and April 30, 2020:

January 31, 2021

April 30, 2020

Netcapital Systems LLC

Watch Party LLC

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Deuce Drone LLC

Investments at cost

KingsCrowd LLC

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

– Subsequent Events

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”)

– Business Acquisition

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.

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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

is a tax-free merger of Netcapital Funding Portal Inc.

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

Acquisition Vehicle Inc., an indirect wholly owned subsidiary of the Company, wherein FP was 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 Act of 1933, which

allows private companies to raise up to $5 million every 12 months.

ASC 805-10-25-4

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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.

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

In conjunction with

the purchase, Systems agreed to vote all of its shares of common stock to support the resolutions of the existing board of directors

of the Company.

The following

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

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

with the Agreement.

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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

Payment of promissory notes and interest

Total consideration

Recognized amounts of identifiable assets acquired and liabilities assumed:

Current assets

Accounts payable

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Platform issuers

identifiable net assets

Unpatented technology

Total 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

of the common shares issued as the consideration for FP was determined by the most recent (the prior day’s) closing price

of the Company’s common shares at the time the shares were issued.

The fair value of the assets and the liabilities of FP

equaled their book value.

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

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.

This amount is derived from valuing the IP functionality,

brand, and license of FP at $1,000,000;

valuing current issuers and pipeline issuers at approximately $14,000 each;

valuing platform

users at $382 each;

and valuing investors at $1,025 each.

These values are derived from comparing the FP Intangible Assets to

the values recorded by funding portal offerings of FP’s competitors in public filings via Regulations CF and Regulation

of purchase price over the total identifiable tangible net assets is $344,810, which leaves an aggregate value of $14,803,954

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 $14,803,954.

revenues and earnings are included in the Company’s consolidated income statements through the day of closing of November

The consolidated income statements for the nine- and three-month periods ended January 31, 2021, include $353,041 in

revenues from FP.

If the entities had been combined for the 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 –

Supplemental 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.

– Subsequent Events

issued 75,000 shares in February 2021 under a one-year consulting agreement.

2021, the Company received an additional SBA loan of $1,885,800.

The 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 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.

In March 2021,

the Company approved the issuance of approximately 398,000 shares of its common stock to pay the promissory notes and accrued

interest payable of $3,817,516 in conjunction with the acquisition of FP.

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