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John E. Lux, Esq.
1629 K Street, Suite 300
Washington, DC 20006
Lux Law, pa
(202) 780-1000
john.lux@securities-law.info
October 5. 2018
Susan Bloch
Attorney
Division of Corporation Finance
Office of Transportation and Leisure
United States Securities and Exchange Commission
Washington, DC 20549
Re: B2Digital, Incorporated Offering Statement on Form 1-A Filed
August 21, 2018 File No. 024-10888
Dear Attorney Bloch:
On behalf of B2Digital, Incorporated (the "Company"), we respond as follows to
the Staffs comment letter, dated September 17, 2018, relating to the above-
captioned Offering Statement on Form 1-A ("Offering Statement").
Please note that for the Staffs convenience, we have recited each of the Staffs
comments in italics and provided the Company' s response to each comment
immediately thereafter.
Form 1-A filed on August 21. 2018 Cover Page
J. We note the statement that " The minimum purchase requirement per
investor is 200,000 Offered Shares ($800) . " Please confirm the $800 minimum
in parentheses given that you are offering the shares for $0. OJ.
Please also confirm the figures in the table on the cover page, which indicates
a
price to the public of$0.00J.
This section has been amended to read as follows:
The minimum purchase requirement per investor is 100,000 Offered Shares
($1,000); however, we can waive the minimum purchase requirement on a case-
by-case basis in our sole discretion.
2. We note your disclosure on the cover page that the Company may issue
the Secwities for cash, promissmy notes, services, and other consideration
and that "If securities are not sold for cash, the aggregate offe1ing
price or aggregate sales will be based on the value of the consideration as
established by bona fide sales of that consideration made within a
reasonable time, or, in the absence ofsales, on the fair value as determined by
an
accepted standard. Valuations of non-cash consideration will be
reasonable at the time made. " If applicable, please balance your disclosure
under
"Use of Proceeds, " to include this information. Please clarify what
would constitute "an accepted standard" and how you will determine whether
the valuation of the non-cash consideration was "reasonable " at the
time made.
This section has been deleted.
3. Please also clarify whether the follo wing statement on page 20 would
continue to hold true ifyou issue securities for consideration other than cash:
" The Company believes that the proceeds of this Offering will satisfy
its cash requirements for the next twelve (12) months, based on the successfiil
completion of the entire offering amount, even after considering the
costs associated with becoming a public reporting company." Explain how
much cash consideration you would need to receive in order to satisfy
your cash requirements for the next 12 months.
***FISMA & 0MB Memorandum M-07-16
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The securities will be sold only for cash.
4. We note that your officers and directors also hold Series A Preferred
Stock, which are entitled to 240 votes fo r each share. Please describe your
capital structure, including the different authorized classes of
common stock, in the prospectus summmy and risk factors sections. Disclose the
number of votes per share to which each class of common stock is
entitled and the effective voting power ofyour officers and directors.
In the offering circular summary, the following information has been added:
Voting Control
Assuming all shares offered hereby are sold, the officers and directors ofrhe
Company will control 39.51 % all stockholder votes.
In the risk factors section, in this section" Because directors and officers
currently and for the foreseeable future will continue to control B2Digital,
Incorporated, it is not likely that you will be able to elect directors or have
any say in the policies of B2Digital, Incorporated." the following has been
added:
Even if all shares offered hereby are sold, the current officers and directors
will control 39.51 percent of all shareholder votes, see "Principal
Shareholders."
The following table of voting rights has been added:
VOTING RIGHTS OF PRINCIPAL
STOCKHOLDERS
The following table sets forth certain information known to us regarding
beneficial ownership of our capital stock as of May 22, 2018 for (i) all
executive
officers and directors as a group and (ii) each person, or group of affiliated
persons, known by us to be the beneficial owner of more than ten percent (10%)
of
our capital stock. The percentage of beneficial ownership in the table below is
based on 331 ,533,444 shares of common stock deemed to be outstanding as of
May 31 , 2018.
Total Votes
from
Preferred and Percentage of
Common Total Votes
Shares of Stock Assuming All
Series A Shares of Outstanding Shares
Preferred Common on June 30, Offered are
Name and Address
Stock Owned Stock Owned 2018 Sold (1)
Paul D. H. LaBarre
*** (1)
850,000 59,191 ,494 263 ,191 ,494
16.04%
B2 Management Group , LLC
4522 West Village Drive, Suite 215 , Tampa, Florida 33624 (1)(2)(3)
850,000 153,000,000 357,000,000
21.76
Emry Capital, Inc.
0 30,000,000 30,000,000
1.83
Andrew Georgens (3)
100,000 1,022 ,880 25 ,022,280
1.53
Hugh Darryl Metz (3)
0 3,000,000 3,000,000
0.18
Robert Russell
200,000 4,000,000 40 ,000,000
3.17
Total Principal Stockholders
2,000,000 250,214,374 730,214,374
44.51
Total Officers and Directors
1,800,000 215,215 ,374 660,214,374
39.51
(1) Total Common Shares will be 1,641 ,533 ,444 if 100% of the Offering is
Sold
(2)B2 Management Group LLC is owned and controlled by Mr. Greg P. Bell, the
Company' s Chairman and Chief Executive Officer.
(3)Mr. Bell, who controls B2 Management Group , LLC is a director. Messrs.
LaBarre, Georgens and Metz are directors.
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In addition to the Connnon Stock, the Company has authorized a total of
50,000,000 shares of preferred stock, currently designated as Series A
Convertible
Preferred Stock and Series B Convertible Preferred Stock (" Series B Preferred
Stock"). 2,000,000 shares of Series A Preferred Stock are currently issued and
outstanding. The Series A Preferred Stock votes with the Connnon Stock on all
matters to be voted on by the common stock on an as-converted basis. On such
matters, each holder of Series A Preferred Stock is entitled to 240 votes for
each share of Series A Preferred Stock held by such shareholder.
Risk Facto rs. page 6
5. We note the risk factors titled "A reverse stock split may decrease
the liquidity of the shares .. " and "Follo wing a reverse stock split .. "
Please
clarify whether you are contemplating a reverse stock split at this
time.
The Company is not contemplating a reverse split and this risk factor has been
deleted.
Use ofProceeds. page 14
6. We note that some of the calculations in this section presume that
the total proceeds will be $12 million ify ou sell all shares being offered. We
also
note the statement on page 37 that y ou are "offering up to
$12,000,000 total of Securities. " This offering statement registers an
offering by the
company of 800 million shares at $0. OJ per share for total maximum
proceeds of $8 million. Please reconcile or explain.
The use of proceeds tables have been amended to reflect $6 million of gross
proceeds.
7. We note one of the uses ofproceeds is listed as acquisition of Fight
Group. Please expand y our disclosure to clarify if this is related to a
particular
business you plan to acquire. Refer to Instn1ction 7 to Item 6 of
Form 1-A. Please also explain if other material fimds may be needed in
conjunction
with this acquisition. Refer to Instruction 5 to Item 6 of Form 1-A.
This is not a particular business. The Company intends to expand by acquiring
local fight groups. These are generally small businesses and the impact of any
one fight group is not material to the entire Company. Please see the terms of
the acquisitions given in Note 3 of the financial statements.
The following has been added to the Use of Proceeds section:
We intend to expand by acquiring local fight groups. Generally, we pay a
portion of their purchase price in cash which represents an amount close to the
value
of their net assets plus a portion of the purchase price in stock which
represents three to four times the value of their net assets.
With regard to additional funds , the following has been added to the Use of
Proceeds section:
We do not expect to use material amounts of other funds in conjunction with the
proceeds.
Dilution. page 16
8. Please explain why you have used a "Price to the public charged for
each share in this offering " of $0.0040 when the offering price is $0.01.
Please
also confirm ifyou have used proceeds of $8 million in the
calculations in this section.
The dilution table has been amended to correct the offering price.
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Distribution. page 17
9. Please explain here that the offering in being conducted on a
"best-efforts" basis and that your officers are relying upon Rule 3a4-1 under
the
Securities Exchange Act of 1934, as you disclose on the cover page.
In this regard, we note that each ofyour officers are selling shareholders and
that one of the selling shareholders is B2 Management Group LLC,
which is owned and controlled by Mr. Greg P. Bell, the Company 's Chairman
and Chief Executive Officer.
The list of selling shareholders has changed. The new list is as follows and
does not include any officers, directors or principal shareholders:
Please disclose how investors would know if they are purchasing shares directly
from the company or from the officers as selling shareholders.
The following has been added:
In allocating subscriptions, the Company will first sell all of the shares
offered by the Company before selling shares offered by selling shareholders.
Please explain how the officers will comply with Rule 3a4-1, such as
subparagraph (a)(4)(iii).
The following has been added to the offering statement:
Mr. Bell will assist the Company in selling shares in this offering. He will
restrict his participation to any one or more of the following activities: (I)
preparing
any written communication or delivering such communication through the mails or
other means that does not involve oral solicitation by him of a potential
purchaser, or (2) responding to inquiries of a potential purchaser in a
communication initiated by the potential purchaser, provided, however, that the
content
of such responses are limited to information contained in this offering
document.
In addition, please revise the selling shareholder table on page 19 to indicate
Mr. Bell 's involvement with B2 Management Group and to note which of the
selling shareholders are also officers or directors of the company.
As neither Mr. Bell nor B2 Management Group is a selling shareholder, this has
been omitted.
Finally, please clarify whether you will involve underwriters given that
footnote 4 to the table on the cover page references "estimated total offering
expenses,
including underwriting discount and commissions " and your statement on page 17
that " The initial public offering price was determined by negotiation
between us and the Underwriter. "
As no underwriter will be selling stock in this offering, these references to
underwriters have been omitted.
The reference on footnote 4 of the cover page to "estimated total offering
expenses, including underwriting discount and commissions" has been revised to
read "estimated offering expenses" and delete the reference to underwriting
discount and commissions."
The statement on page 17 that "The initial public offering price was determined
by negotiation between us and the Underwriter. " has been omitted.
Management's Discussion and Analvsis o[Financial Condition and Results
o[Operations, page 20
JO. Please provide a discussion on results of operations for each year
and interim period for which financial statements are required, as well as a
discussion of liquidity and capital resources. Refer to Item 9(a) and
(b) to Part II of Form 1-A.
The section on Management's Discussion and Analysis has been so amended.
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Business. page 23
11. We note your disclosure here and in the summary section that you are
in the process of developing and acquiling companies to become a vertically
integrated live event sports company. Please briefly expand to
clarify what stage in your planned development process you are currently in,
and how
you are currently generating revenue. Please also briefly explain how
the completed acquisitions you list relate to your current and planned
business operations.
Please note the following in the section on Expansion by Acquisition:
The goodwill of each of these companies is substantial and intangible as the
key assets are the brands, relationships with the athletes by the operator and
past
success in each marketplace. IN regards to the licenses to hold LIVE events
since these are more based on the intangible experience of the business and not
expensive to acquire and can be cancelled by the state if the business violates
any of the regulations we chose to put them into goodwill.
Accountants' Compilation Report. page F-2
12. Please note that compilation reports are not appropriate to present
because the association of the accountant provides no basis for reliance.
Accordingly, please remove the accountants' compilation report.
The accountant's compilation report has been removed.
Note 3: Business Acquisitions. page F-18
13. We note that you allocated a significant portion of the purchase
prices to goodwill. We also note per page 23 that two of the purchased entities
own
licenses to hold live events. Please tell us your consideration of
allocating a portion of the purchase p1ice to licenses, a definite lived
intangible,
pursuant to ASC 350.
Please note the information in the section entitled "Expansion by Acquisition"
including the following:
We intend to expand by acquiring local fight groups. Generally, we pay a
portion of their purchase price in cash which represents an amount close to the
value
of their net assets plus a portion of the purchase price in stock which
represents three to four times the value of their net assets. Any excess of the
purchase
price over the fair value of the assets is recorded as goodwill. The revenues
and profits from these acquired local fight groups is substantial in relation
to their
assets, including licenses.
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Signatures
14. Please also include signatures for a majority of your board of
directors. Refer to Instructions to Signatures on Form 1-A.
The signatures have been so revised and now include all of the directors.
Other
The Company hereby acknowledges:
should the Commission or the staff, acting pursuant to delegated
authority, declare the filing qualified, it does not foreclose the Commission
from
taking any action with respect to the filing ;
the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing qualified, does not relieve the
company from
its full responsibility for the adequacy and accuracy of the
disclosure in the filing; and
the company may not assert staff comments and the declaration of
qualification as a defense in any proceeding initiated by the Commission or any
person under the federal securities laws of the United States.
We acknowledge being aware that the company and its management are
responsible for the accuracy and adequacy of their disclosures,
notwithstanding any review, comments, action or absence of action by the staff.
If you would like any further information or have any questions, please
do not hesitate to contact me on my private line - 727 656 5504 or at the fax
number given above.
Sincerely,
/s/ John E . Lux
John E. Lux
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