Netcapital Inc (NCPL)

[Divest]

I think a merger is most likely. Here how I see it (This is a bit long):

In 1996 John Fanning founded Netcapital LLC, by 2010 it's just one of several LLCs that Fanning uses to invest in small companies. Here's an example that impacts VSTR, his investment into Paul Riss' company:

https://www.prnewswire.com/news-releases/netcapital-signs-agreement-to-buy-out-pervasips-lender-121885338.html

However in 2012 John Fanning's son starts a company called Zelgor, and hires a fellow student from his university named Jason Frishman as a consultant. Frishman understands the Jobs act and convinces John Fanning Sr. to let him use the Netcapital domain name for a new company that will use it to profit via equity crowdfunding.

Now go to Netcapital's About us page: https://netcapital.com/about
You will notice that John Fanning Sr. and Paul Riss are connected to Netcapital, Riss as Chef compliance officer and Fanning as an advisor. These to me are much more important to this story than may readily be apparent. If we return to 2014 Frishman has this great idea but how can he bring it to fruition?

Well remember that Netcapital had been one of several LLCs that Fanning used to invest in small companies, another such company was a company called Vaxstar LLC. And in 2010 Fanning had uses Vaxstar to divest the costs of his Netgames associated businesses such as Chess,net made himself an advisor and to become it's largest shareholder. So once he saw the potential of Frishman's equity crowdfunding idea in 2014 he had to change the direction of Valusetters and clean up the Netcapital LLC from the debts that it had incurred the earlier struggling investment in Pervasip. So that is what he did. First Valusetters changed its focus from games, to providing the same services that Netcapital does in a complimentary way.

From VSTR's 2018 10K:

In June of 2014, we opened our consulting practice, helping companies with capital raising, technology consulting, and strategic advice. We sometimes take an equity stake in these companies in exchange for our services and cross-pollinate the ideas, technology and expertise to enhance their operations, profits and market share.



One such company that we own equity in, as a result of our consulting services, is NetCapital Systems LLC (“NetCapital”). This company owns a Title III JOBS Act funding portal, and as of today is one of 44 FINRA approved crowdfunding portals allowed to sell securities in startup companies to non-accredited investors, via the Internet. We continue to consult for NetCapital (see https://netcapital.com) and have invested in additional early-stage companies that we met through NetCapital by providing our consulting services. We believe our investment in and future revenue potential from our relationship with NetCapital is significant.

Then a few months later Valuesetters absorbed all of Netcapital LLC's bad debts. From Pervasip's 10K:

We built a cloud-based VoIP business, and sold most of this business on September 30, 2014, to Vaxstar LLC, (“Vaxstar”) a company whose chief executive officer was our former chief information officer and member of our board of directors until September 15, 2014. This transaction allowed us to continue to own the technology that we had developed, while transferring the bulk of our fixed operating costs to another entity. Vaxstar simultaneously sold the business to Valuesetters, Inc. (“Valuesetters”) and Valuesetters signed a licensing agreement with us that allows us to operate as a cloud-based VoIP service provider on a variable cost basis. A percentage of each sales dollar that we earn is used to pay Valuesetters for all our operating costs, including technical support, billing, customer services and termination fees to carriers.

More importantly it allowed Netcapital LLC to start with a clean slate and gave it a sister company that could help it get off to a good start. Eventually with the new management team that came to the VSTR in 2017, Valuesetters and Netcapital entered into a fully symbiotic relationship where the success of one depends on the other. Valuesetter's needs Netcapital's funding portal to attract clients, and Netcapital needs Valuesetters to write their clients offering pages, assist with digital marketing in such a way as to attract investors etc. Since they already function as two halves of the same company it makes sense that someday they will merge into one company.