What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-03-22 compared with 2020-12-15 · 79 added, 128 removed, 87 unchanged (70% of the section changed)

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and notes thereto appearing elsewhere in this report.

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

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

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

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

is a digital private markets ecosystem.

We help private companies at all stages to build, grow, and fund their businesses

with a full range of services from strategic advice to raising capital.

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

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raise up to $5 million from non-accredited investors every 12 months.

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

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

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

The new proposal intends to create a more rational framework

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

new regulations 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

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

raising capital;

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

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

marketplace practices, capital raising trends, and comments received;

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

rules governing offering communications between investors and issuers, including permitting

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

solicitation;

certain disclosure and eligibility requirements and bad actor disqualification provisions

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

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

Reg CF, the new rules include:

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

the investment limits for investors in Reg CF offerings by:

applying any investment limits to accredited investors;

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

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

on how much they can invest.

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 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 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.

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

of our future results of operations difficult.

acquired Netcapital Funding Portal Inc (“FP”).

Prior to March 15, 2021, the maximum dollar amount that an issuer could

raise on FP’s funding portal was $1,070,000.

Three issuers that reached the maximum amount plan to return to the funding

portal to raise $5 million.

If those three issuers are successful at raising $5 million, FP will earn a fee of 4.9% of the amount

One of these issuers reached the prior maximum level of $1,070,000 in less than one day.

We believe the increase of the

maximum offering limit to $5 million will be beneficial to many issuers and to our Company and will increase the potential revenues

of Operations

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

Nine Months Ended January 31, 2021 Compared to the Nine Months Ended January 31, 2020

for the nine months ended January 31, 2021 increased by $2,177,683, or 137%, to $3,770,813 as compared to $1,593,130 reported

for the nine months ended January 31, 2020.

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

and specifically to two customers that accounted for an aggregate of 55% of our revenues, or $2,060,486 in the nine months ended

January 31, 2021.

Costs of revenues

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

increased by $722,133 to $730,343 for the nine-months ended January 31, 2021 from $8,210 reported in the nine-months ended January

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.

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.

compensation expense increased by $153,660, or 66%, to $386,121 for the nine months ended January 31, 2021, as compared to $232,461

reported for the nine months ended January 31, 2020.

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.

expense decreased by $82,315, or 94%, to $5,085 for the nine months ended January 31, 2021, from $87,400 for the nine months ended

January 31, 2020.

The decrease is attributed to our increase in wages during the nine-month period ended January 31, 2021.

administrative expenses increased by $194,113, or 474%, to $235,054 for the nine months ended January 31, 2021, from $40,941 for

the nine months ended January 31, 2020.

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

sales activity.

Interest expense

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

increased by $39,387, or 275%, to $53,690 for the nine-month period ended January 31, 2021, as compared to $14,303 for the nine

months ended January 31, 2020.

Our debt balances were higher at January 31, 2021 as compared to January 31, 2020 due to

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

In addition, effective November 1, 2020, the annual interest rate on our $1,000,000

senior secured note increased from 1.25% to 8%.

Three Months Ended January 31, 2021 Compared to the Three Months Ended January 31, 2020

for the three-months ended January 31, 2021 increased by $519,922, or 69%, to $1,277,327 as compared to $757,405 reported for

the three months ended January 31, 2020.

The increase in revenues is primarily attributable to the inclusion of revenues

of $353,041 during the period ended January 31, 2021, from the funding portal subsidiary that we purchased in November 2020.

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.

increased by $12,757 to $16,119 for the three-months ended January 31, 2021 from $3,362 reported in the three-months ended January

The increase is primarily attributable to our purchase of the funding portal.

compensation increased by $2,282, or 2%, to $126,212 for the three-months ended January 31, 2021 from $123,930 reported in the

three-months ended January 31, 2020.

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.

expense decreased by $7,200, or 100%, to $0 for the three months ended January 31, 2021, from $7,200 for the three months ended

January 31, 2020.

The decrease is attributed to our increase in wages during the three-month period ended January 31, 2021.

administrative expenses increased by $151,896, or 1,983%, to $159,554 for the three-months ended January 31, 2021 from $7,658

reported in the three-months ended January 31, 2020.

The increase is primarily attributable to increased levels of customer

service and sales activity and the acquisition of a wholly owned subsidiary, FP.

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.

increased by $25,437, or 542%, to $30,126 for the three-month period ended January 31, 2021, as compared to $4,689 for the three

months ended January 31, 2020.

Our debt balances were higher at January 31, 2021 as compared to January 31, 2020 due to

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

In addition, effective November 1, 2020, the annual interest rate on our $1,000,000

senior secured note increased from 1.25% to 8%.

and Capital Resources

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Net cash used

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.

in operating activities amounted to $2,475,484 in the nine-months ended January 31, 2021 as compared to net cash used in operating

activities of $10,880 in the nine months ended January 31, 2020.

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

nine-months ended January 31, 2021 was net income of $103,535 plus stock-based compensation expense of $386,121.

These sources

were offset by non-cash revenue from the receipt of equity of $2,319,532 and changes in non-cash working capital balances of $716,896.

The principal source of cash from operating activities in the nine-months ended January 31, 2020 was net income of $1,162,100

and stock-based compensation of $232,461, but these sources were offset by an increase in non-cash revenue from the receipt of

equity of $1,410,796.

Cash provided

by investing activities totaled $364,939 in the nine months ended January 31, 2021, from the purchase of our funding portal business.

There was no investing activity in the nine months ended January 31, 2020.

months ended January 31, 2021, 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 six months ended October 31, 2019, net cash used in financing activities

For the nine months ended January 31, 2020, net cash used in financing activities

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

In the six-months

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

In the nine-months

ended January 31, 2021 and 2020, there were no expenditures for capital assets.

We do not anticipate any capital expenditures

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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.

further development of our 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 January 31, 2021.

We believe we can renegotiate the payment terms of

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

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

In February 2021 we borrowed again from

the USSBA approximately $1.8 million.

We owe $1,000,000

under a secured term loan that matures on April 30, 2021.

We believe we can renegotiate the payment terms of the loan.

for payment from the lender will have an adverse impact on our ability to achieve our longer-term business objectives and will

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

While we continually

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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