What changed in this filing

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Item 1. Business

2021-08-31 compared with 2020-08-11 · 105 added, 133 removed, 6 unchanged (98% of the section changed)

We are a boutique

advisory firm, based in Boston, Massachusetts.

Our team of experts, including entrepreneurs, angel

investors, industry specialists and digital marketing professionals work with companies at all stages to provide assistance with

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

We specialize

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

We believe that

new capital raising techniques, such as Reg CF, democratize capital raising, similar to the way that social networks democratize

broadcast mechanisms that once belonged only to traditional media.

Reg CF is one of three securities exemptions that enable

online capital formation.

We are a fintech

company with a scalable technology platform that allows private companies to raise capital online and provides private equity investment

opportunities to investors.

The company's consulting group, Netcapital Advisors, delivers marketing and strategic advice and takes equity

positions in select companies with disruptive technologies.

The Netcapital funding portal is registered with the U.S.

Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (FINRA), a registered national securities association.

We specialize in

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

We believe that new capital

raising techniques, such as Reg CF, democratize capital raising, similar to the way that social networks democratize broadcast mechanisms

that once belonged only to traditional media.

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

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

Reg A+ enables

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

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

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

In 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.

The new regulations,

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

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

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

raising capital;

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

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

marketplace practices, capital raising trends, and comments received;

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

rules governing offering communications between investors and issuers, including permitting

certain “demo day”

activity without running afoul of the prohibition on general

solicitation;

certain disclosure and eligibility requirements and bad actor disqualification provisions

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

The SEC proposed

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

For 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.

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.

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

Consequently, we have negotiated a transaction to acquire an additional interest in our Netcapital investment.

operates a Title III JOBS Act funding portal, and as of today is one of only a few dozen FINRA approved Reg CF portals.

we have a verbal agreement, it is possible that the transaction will not occur.

Increasing our ownership in online businesses

with private equity platforms is a significant component of our business strategy.

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

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 fiscal 2020, many

high-tech firms have become our clients, including Kingscrowd LLC, Deuce Drone LLC and Watch Party LLC.

These companies have contributed

to our growth this fiscal year 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.

Reg A+ enables an issuer to raise up to $75

million online from anyone.

Reg CF, the smallest of the crowdfunding exemptions, allows issuers to raise up to $5 million from non-accredited

investors every 12 months.

The $5 million limit

was increased on March 15, 2021 by the Securities and Exchange Commission (the "SEC") from the previous level of $1.07 million.

We believe this change has already impacted the number of issuers and users on our website and consequently increased our sales.

website is posting a record number of users and dollars invested in June and July of 2021.

We also see from industry statistics that

investment commitments of Reg CF funding portals increased by $71 million, or 154%, to $117 million for the quarter ended June 30, 2021,

as compared to investment commitments of $46 million for the quarter ended June 30, 2020.

are encouraged by our growth over the past year, as the market share earned by the Netcapital funding portal in the quarter ended June

30, 2021 was 7.0% of the industry investment commitments, as compared to 2.2% of the industry investment commitments in the quarter ended

June 30, 2020.

We believe our increase in revenues and

our gain in market share over the past year is a trend we can continue.

However, our limited operating history and the uncertain nature

of our future operations and the markets we address or intend to address make predictions of our future results of operations difficult.

Development of

We were incorporated

in the State of Utah in April 1984 under our previous name, DBS Investments, Inc.

A change of control of our company occurred

in December 2003 and we changed our name to ValueSetters, Inc., when we, in conjunction with a plan of reorganization, merged

with Valuesetters L.L.C., an Arizona limited liability corporation.

When the operations

failed to generate enough revenue to sustain its business, we terminated operations and looked to invest in another business.

In order to take advantage of the increasing game activities on the Internet, on November 23, 2010, we signed a contract to purchase

all the assets of NetGames.com, a company that owned several websites and operated a small Internet-based chess game known as

In conjunction with the purchase of this website, Vaxstar LLC became the largest owner of our company.

also provided a working capital facility to the Company and is our senior secured lender.

As noted above,

in 2014, we began our consulting business, and we now own a portion of several companies as a result of our consulting work.

of these businesses operate solely on the Internet and many use the Internet to raise capital.

We believe the value of our ownership

interests in several of these companies may be significant.

However, over the past several years, we reduced

our book value of these investments to zero, based upon asset impairment guidelines, and once an asset has been designated as

impaired, it cannot be recorded at its market value.

to the equity stakes we have earned, our consulting business has generated the bulk of our revenues in fiscal 2020.

with a number of public and private companies that provide assistance with capital raising, strategy,

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

Most of our competitors have significant

financial resources and occupy entrenched positions in the market with name-brand recognition.

The majority of our capital raising

and digital marketing business is on the Internet.

to entry into most Internet markets are relatively low, making them accessible to a large number of entities and individuals.

We believe the principal competitive factors in our industry that create certain barriers to entry include but are not limited

to reputation, technology, financial stability and resources, proven track record of successful operations, critical mass, and

independent oversight and transparency of business practices.

While these barriers will limit those able to enter or compete effectively

in the market, it is likely that new competitors as well as laws and regulations of governmental authority will be established

in the future, in addition to our known current competitors.

face significant competition in every aspect of our business, including from companies that facilitate online capital formation

and the sharing of content and information, companies that enable marketers to display advertising, companies that distribute

video and other forms of media content, and companies that provide development platforms for applications developers.

compete to attract, engage, and retain customers, to attract and retain marketers, and to attract and retain developers to build

compelling applications that integrate with our products.

competition from current and future competitors may in the future materially adversely affect our business, revenues, operating

results and financial condition.

We are subject,

both directly and indirectly, to various laws and regulations relating to our business.

If any of the laws are amended, compliance

could become more expensive and directly affect our income.

We intend to comply with such laws, but new restrictions may arise

that could materially adversely affect our Company.

and Development

currently have a budget specifically allocated for research and development purposes.

A change of control of our company occurred in December

2003 and we changed our name to ValueSetters, Inc., when we, in conjunction with a plan of reorganization, merged with Valuesetters L.L.C.,

an Arizona limited liability corporation.

In order to take

advantage of the increasing game activities on the Internet, on November 23, 2010, we signed a contract to purchase all the assets of

NetGames.com, a company that owned several websites and operated a small Internet-based chess game known as Chess.net.

As noted above, in

2014, we began our consulting business, and we now own a portion of several companies as a result of our consulting work.

Many of these

businesses operate solely on the Internet and many use the Internet to raise capital.

We believe the value of our ownership interests

in several of these companies may be significant.

In 2016, we began consulting for companies seeking to raise capital via Reg CF.

2020, we purchased Netcapital Funding Portal Inc., a regulated funding portal operating under the provisions of Reg CF.

On November 5,

2020, we changed our name to Netcapital Inc.

to leverage the strength of Netcapital’s well-established brand and unique private

capital markets platform.

We compete with a

number of public and private companies that provide assistance with capital raising, strategy, technology

consulting, and digital marketing.

Most of our competitors have significant financial resources and occupy entrenched positions

in the market with name-brand recognition.

The majority of our capital raising and digital marketing business is on the Internet.

The barriers to entry

into most Internet markets are relatively low, making them accessible to a large number of entities and individuals.

We believe the principal

competitive factors in our industry that create certain barriers to entry include but are not limited to reputation, technology, financial

stability and resources, proven track record of successful operations, critical mass, and independent oversight and transparency of business

While these barriers will limit those able to enter or compete effectively in the market, it is likely that new competitors

as well as laws and regulations of governmental authority will be established in the future, in addition to our known current competitors.

face significant competition in every aspect of our business, including from companies that facilitate online capital formation and the

sharing of content and information, companies that enable marketers to display advertising, companies that distribute video and other

forms of media content, and companies that provide development platforms for applications developers.

We compete to attract, engage,

and retain customers, to attract and retain marketers, and to attract and retain developers to build compelling applications that integrate

with our products.

Increased competition

from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial

Industry Regulation

We are subject, both

directly and indirectly, to various laws and regulations relating to our business.

If any of the laws are amended, compliance could become

more expensive and directly affect our income.

We intend to comply with such laws, but new restrictions may arise that could materially

adversely affect our Company.

Specifically, the SEC regulates our funding portal business, and our funding portal is also a member of

FINRA and is regulated by FINRA.

Research and Development

We do not currently

have a budget specifically allocated for research and development purposes.

Major Customers

year ended April 30, 2020, one customer constituted 47% of our revenues, a second customer constituted 31% of our revenues and

a third customer accounted for 13%

of our revenues.

In the year ended April 30, 2019, one customer constituted 65% of our revenues and a second customer constituted

23% of our revenues.

a corporate website with the address http://www.valuesetters.com/ and our chess game maintains a website with the address http://www.chess.net/.

have not incorporated by reference into this Report on Form 10-K the information on any of our websites and you should not consider

any of such information to be a part of this document.

For the year ended

April 30, 2021, the Company had one customer that constituted 30% of its revenues, a second customer that constituted 15% of its revenues,

a third customer that constituted 14% of its revenues and a fourth customer that accounted for 11% of its revenues.

For the year ended

April 30, 2020, the Company had one customer that constituted 47% of its revenues, a second customer that constituted 31% of its revenues

and a third customer that accounted for 13% of its revenues.

Corporate Information

We maintain a corporate

website with the address http://www.netcapitalinc.com, our funding portal maintains a website with the address http://www.netcapital.com,

and Netcapital Advisors maintains a website at http://www.netcapitaladvisors.com.

We have not incorporated by reference into

this Report on Form 10-K the information on any of our websites and you should not consider any of such information to be a part of this

Our website addresses are included in this document for reference only.

We make available

free of charge through our corporate website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports

on Form 8-K, and amendments to these reports through a link to the EDGAR database as soon as reasonably practicable after we electronically

file such material with, or furnish such material to the SEC.

You can also read and copy any materials we file with

the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.

You can obtain additional information about

the operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330.

In addition, the SEC maintains a website (www.sec.gov)

that contains reports, proxy and information statements, and other information regarding issuers that file electronically with

the SEC, including all of our filings.

free of charge through our corporate website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form

8-K, and amendments to these reports through a link to the EDGAR database as soon as reasonably practicable after we electronically file

such material with, or furnish such material to the SEC.

You can also read and copy any materials we file with the SEC at

the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.

You can obtain additional information about the operation

of the Public Reference Room by calling the SEC at 1.800.SEC.0330.

In addition, the SEC maintains a website (www.sec.gov) that contains

reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including all

of our filings.

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-K

Item 1. Business