UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the quarterly period ended |
Or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the transition period from _______________________to___________________________ |
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
The number of shares outstanding of the registrant’s common stock, par value of $0.00001 on August 13, 2021, was .
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
Consolidated Financial Statements
B2Digital, Incorporated
| 3 |
B2Digital, Incorporated
Consolidated Balance Sheets
As of June 30, 2021 (Unaudited) | As of March 31, 2021
| |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Deposits and prepaid expenses | ||||||||
| Total current assets | ||||||||
| Notes receivable and other receivables | ||||||||
| Operating lease right-of-use asset | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Intangible assets, net of accumulated amortization | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities & Stockholders' Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable & accrued liabilities | $ | $ | ||||||
| Contract liabilities | ||||||||
| Note payable- current maturity | ||||||||
| Note payable- in default | ||||||||
| Payable due for business acquisitions | ||||||||
| Convertible notes payable | ||||||||
| Derivative liabilities | ||||||||
| Lease liability, net of discounts, current | ||||||||
| Total current liabilities | ||||||||
| Lease liability, long-term | ||||||||
| Note payable- long-term | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 13) | ||||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, shares authorized, | ||||||||
| Series A: 2,000,000 shares convertible into shares of common stock issued and outstanding at June 30, 2021 and March 31, 2021, respectively; | ||||||||
| Series B: 40,000,000 shares convertible into 80,000,000 shares of common stock and shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively; | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders' Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| F-1 |
B2Digital, Incorporated
Consolidated Statements of Operations (Unaudited)
| For the three months ended | ||||||||
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Revenue: | ||||||||
| Live event revenue | $ | $ | ||||||
| Gym revenue | ||||||||
| Total revenue | ||||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| General and administrative corporate expenses | ||||||||
| General & administrative expenses | ||||||||
| Depreciation and amortization expense | ||||||||
| Total general and administrative corporate expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain on forgiveness of loan | ||||||||
| Grant income | ||||||||
| Gain on sale of assets | ||||||||
| Gain on extinguishment of debt | ||||||||
| Loss on settlement of debt | ( | ) | ||||||
| Gain (loss) on change in fair value of derivative liabilities | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted earnings per share on net loss | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares outstanding | ||||||||
See accompanying notes to the unaudited consolidated financial statements.
| F-2 |
B2Digital, Incorporated
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Three Months Ended June 30, 2021 and 2020 (Unaudited)
Preferred Stock Series A | Preferred Stock Series B | Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Sale of common stock | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | – | – | ||||||||||||||||||||||||||||||||||
| Issuance of convertible notes | – | – | – | |||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
Preferred Stock Series A |
Common Stock | Additional Paid in | Accumulated | Total Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount |
Capital | Deficit | Deficit | |||||||||||||||||||||
| Balance March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Sale of common stock for cash | – | ||||||||||||||||||||||||||
| Conversion of notes payable | – | ||||||||||||||||||||||||||
| Net Loss | – | – | ( | ) | ( | ) | |||||||||||||||||||||
| Balance June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | |||||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
| F-3 |
B2Digital, Incorporated
Consolidated Statements of Cash Flows (Unaudited)
| For the three months ended | ||||||||
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock compensation | ||||||||
| Depreciation and amortization | ||||||||
| Loss on settlement of debt | ||||||||
| Gain on forgiveness of loan | ( | ) | ||||||
| Gain on settlement of debt | ( | ) | ||||||
| Gain on sale of assets | ( | ) | ||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Interest expense on extinguishment of debt | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Right-of-use asset/liability | ||||||||
| Changes in operating assets & liabilities | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts receivable | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Business acquisitions | ( | ) | ||||||
| Payments to related parties | ( | ) | ||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Repayments related to payable due for business combinations | ( | ) | ||||||
| Repayments of notes payable | ( | ) | ||||||
| Repayments of convertible notes payable | ( | ) | ||||||
| Payment to note payable | ( | ) | ( | ) | ||||
| Issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Decrease in Cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash (and equivalents) at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| 23,000,000 shares of common stock issued for business combination | $ | $ | ||||||
| 29,454,800 shares returned in exchange for forgiveness of loan receivable | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements.
| F-4 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
In February 2017, the Board of Directors of B2Digital, Incorporated ("B2Digital" or the "Company") approved a complete restructuring, new management team and strategic direction for the Company. Capitalizing on its history in television, video and technology, the Company is now forging ahead and becoming a full-service live event sports company.
B2Digital's first strategy is to build an integrated live event Minor League for the Mixed Martial Arts (MMA) marketplace. B2Digital will be creating and developing Minor League champions that will move on to the MMA Major Leagues from the B2 Fighting Series (B2FS). This will be accomplished by sponsoring operating live events, acquiring existing MMA promotions and then inviting those champions to the B2FS Regional and National Championship Series. B2Digital will own all media and merchandising rights and digital distribution networks for the B2FS.
2017 marked the kickoff of the B2FS by sponsoring and acquiring MMA regional promotion companies for the development of the B2FS. The second strategy is that the Company plans to add additional sports, leagues, tournaments and special events to its live event business model. This will enable B2Digital to capitalize on their core technologies and business models that will be key to broadening the revenue base of the Company's live event core business. B2Digital will also be developing and expanding the B2Digital live event systems and technologies. These include systems for event management, digital ticketing sales, digital video distribution, digital marketing, Pay-Per View (PPV), fighter management, merchandise sales, brand management and financial control systems.
Basis of Presentation and Consolidation
The Company has eleven wholly-owned subsidiaries. Hardrock Promotions LLC which owns Hardrock MMA in Kentucky, Colosseum Combat LLC which owns Colosseum Combat MMA in Indiana, United Combat League MMA LLC, Pinnacle Combat LLC, Strike Hard Productions, LLC, ONE More Gym LLC, One More Gym Merrillville LLC, One More Gym Valparaiso LLC, One More Gym Tuscaloosa LLC, One More Gym Birmingham, Inc. and B2 Productions LLC.
The consolidated financial statements, which include the accounts of the Company and its eleven wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which include the accounts of the Company and its eight wholly-owned subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and presented in US dollars. The fiscal year end is March 31.
NOTE 2 - ACCOUNTING POLICIES
The significant accounting policies of the Company are as follows:
Basis of Accounting
The interim consolidated financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements; interim disclosures generally do not repeat those in the annual statements. The interim unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
| F-5 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Use of Estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant assumptions and estimates relate to the valuation of derivative liabilities and the valuation of assets and liabilities acquired through business combinations. Actual results could differ from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits primarily in four financial
institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC").
The Company has not experienced any losses related to amounts in excess of FDIC limits or $250,000. The Company did
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
Property and Equipment
Property and equipment are carried at cost. Depreciation
is provided on the straight-line method over the assets’ estimated service lives. Expenditures for maintenance and repairs are charged
to expense in the period in which they are incurred, and betterments are capitalized. The cost of assets sold or abandoned and the related
accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying consolidated statement
of operations of the respective period. The estimated useful lives range from
Goodwill
Goodwill represents the cost in excess of the
fair value of net assets acquired in business combinations. The Company tests goodwill for impairment on an annual basis and when events
or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is deemed to be impaired if the carrying
amount of goodwill exceeds its estimated fair value. During the three months ended June 30, 2021, the Company did
Other income
During the three months ended June 30, 2020,
the Company received $
| F-6 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue.
Income Taxes
The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated Statements of Operations in the period that includes the enactment date. Through June 30, 2021, the Company has an expected loss. Due to uncertainty of realization for these losses, a full valuation allowance is recorded. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.
| F-7 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company's Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the three months ended June 30, 2021 and 2020.
Inventory
Inventories are valued at the lower of cost (determined
on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write
down inventories to market value, if lower. As of June 30, 2021 and March 31, 2021, the Company had
The Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive. As of June 30, 2021 the convertible notes are indexed to shares of common stock.
The following table sets for the computation of basic and diluted earnings per share the three months ended June 30, 2021 and 2020:
June 30, 2021 | June 30, 2020 | |||||||
| Basic and diluted | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding: | ||||||||
| Basic & diluted | ||||||||
| F-8 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
The Company records stock-based compensation in accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,” which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided under ASC.
Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of June 30, 2021 there were options outstanding.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on April 1, 2020. The adoption of this standard did not have a material impact on the consolidated financial statements.
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning April 1, 2023 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| F-9 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 3 – GOING CONCERN
The accompanying financial statements have
been prepared on a going concern basis. For the three months ended June 30, 2021, the Company had a net loss of $
NOTE 4 – REVENUE
The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from live events, which primarily include ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue. Gym revenue comprises primarily of membership dues and subscription. Other gym revenue includes personal training, group fitness and meal planning.
Information about the Company’s net sales by revenue type for the three months ended June 30, 2021 and 2020 are as follows:
| For the three months ended | ||||||||
| June 30, | June 30, | |||||||
2021 (Unaudited) | 2020 (Unaudited) | |||||||
| Live events | $ | $ | ||||||
| Gym revenue | ||||||||
| Net sales | $ | $ | ||||||
All revenue is derived in the United States.
Information about the Company’s contract liabilities for the three months ended June 30, 2021 and 2020 are as follows:
| As of | ||||||||
| June 30, | June 30, | |||||||
| 2021 | 2020 | |||||||
| Balance at beginning of year | $ | $ | ||||||
| Deferral of revenue | ||||||||
| Recognition of unearned revenue | ( | ) | ( | ) | ||||
| Balance at June 30 | $ | $ | ||||||
| F-10 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following at June 30, 2021 and March 31, 2021:
| June 30, 2021 | March 31, 2021 | |||||||
| Gym equipment | $ | $ | ||||||
| Cages | ||||||||
| Event assets | ||||||||
| Furniture and fixtures | ||||||||
| Production truck gear | ||||||||
| Production equipment | ||||||||
| Venue lighting system | ||||||||
| Leasehold improvements | ||||||||
| Electronics hardware and software | ||||||||
| Trucks trailers and vehicles | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense related to these assets for
the three months ended June 30, 2021 and 2020 amounted to $
NOTE 6 – INTANGIBLE ASSETS
Intangible assets, net, consisted of the following:
| As of | As of | |||||||
| June 30, 2021 | March 31, 2021 | |||||||
| Licenses | $ | $ | ||||||
| Customer relationships | ||||||||
| Software development | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Licenses are amortized over years,
whereas customer relationships are amortized over three
| F-11 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
| Estimated amortization expense for each of the next five years: | ||||
| Fiscal year ended March 31, 2022 | $ | |||
| Fiscal year ended March 31, 2023 | ||||
| Fiscal year ended March 31, 2024 | ||||
| Fiscal year ended March 31, 2025 | ||||
| Total | $ | |||
NOTE 7 – BUSINESS ACQUISITIONS
Club Fitness, LLC
On April 1, 2021, the Company entered into an agreement for the acquisition of 100% of the equity interest in Club Fitness LLC. The purchase price was $125,000 in cash. The acquisition closed in April 2021.
| Consideration | ||||
| Cash | $ | |||
| Fair values of identifiable net assets: | ||||
| Property & equipment: | ||||
| Gym equipment | $ | |||
| Intangible assets: | ||||
| Customer relationships | ||||
| Total fair value of identifiable net assets | $ |
The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted for as a business combination. The fair value of the net identifiable assets consisted of gym equipment of $76,689. The Company assigned a fair value of $46,311 in intangible assets – customer relationships. The intangible assets – customer relationships are being amortized over their estimated life, currently expected to be three years.
| F-12 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 8 - NOTES PAYABLE
The following is a summary of notes payable as of June 30, 2021 and March 31, 2021:
| As of | As of | |||||||
| June 30, | March 31, | |||||||
| 2021 | 2021 | |||||||
| Notes payable - current maturity: | ||||||||
| Note Payable PPP SBA Loan | $ | $ | ||||||
| SBA EIDL Loan | ||||||||
| SBA Loan Payable B2Digital | ||||||||
| Notes payable – in default: | ||||||||
| Emry Capital $ | ||||||||
| Notes payable – long term: | ||||||||
| WLES LP LLC $ | ||||||||
| Brian Cox 401K | ||||||||
| SBA Loan (Hillcrest) | ||||||||
| SBA Loan (One More Gym, LLC) | ||||||||
| GS Capital, LLC | ||||||||
| Total notes payable | ||||||||
| Less: long-term | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
On May 8, 2020, WLES LP LLC converted $30,000
of its $60,000 notes payable into 12,000,000 shares of common stock. As a result, the Company recorded a loss on settlement of debt in
the amount of $
During the three months ended June 30, 2021, the Company incurred $4,603 in interest expense related to notes payable.
During the three months ended June 30, 2021, the
Company repaid $
During the three months ended June 30, 2021, the
bank forgave $6,634 in principal and $1,069 in accrued interest on its SBA Loan (One More Gym, LLC). As a result, the Company recorded
$
During the three months ended June 30, 2021 the
bank forgave the Company’s PPP loan of $15,600. No interest was accrued as of the payoff date. As a result, the Company recorded
$
| F-13 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 9 – CONVERTIBLE NOTES PAYABLE
The following is a summary of convertible notes payable as of June 30, 2021:
| Note* | Inception Date | Maturity | Coupon | Face Value | Unamortized Discount | Carrying Value | ||||||||||||||
| Note 5 | $ | $ | $ | |||||||||||||||||
| Note 6 | ||||||||||||||||||||
| Note 7 | ||||||||||||||||||||
| Note 8 | ||||||||||||||||||||
| Note 9 | ||||||||||||||||||||
| Note 10 | ||||||||||||||||||||
| Note 11 | ||||||||||||||||||||
| Note 12 | ||||||||||||||||||||
| Note 14 | ||||||||||||||||||||
| Note 16 | ||||||||||||||||||||
| Note 17 | ||||||||||||||||||||
| Note 18 | ||||||||||||||||||||
| Note 19 | ||||||||||||||||||||
| Note 20 | ||||||||||||||||||||
| Note 21 | ||||||||||||||||||||
| Note 22 | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
* Notes 1, 2, 3 and 4 in the amounts of $82,000, $208,000, $27,000 and $62,000, respectively, were fully converted as of March 31, 2021.
Between April 1, 2021 and June 30, 2021, the Company
issued to “accredited investors,” Convertible Promissory Notes aggregating a principal amount of $
The outstanding principal amount of the Notes is convertible into the Company’s common stock at the lender’s option at $0.01 per share for the first six months of the term of the Notes. After the six-month anniversary, the conversion price is equal to 63% of the average of the three lowest trading prices of the Company’s common stock.
Accounting Considerations
The Company has accounted for the Notes as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option and default puts. The conversion option and default puts bear risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. The contracts do not permit the Company to settle in registered shares and the contracts also contain make-whole provisions both of which preclude equity classification. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative.
| F-14 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
The net proceeds were allocated to the compound embedded derivative and original issue discount. The notes will be amortized up to its face value over the life of Notes based on an effective interest rate. Amortization expense and interest expense for the three months ended June 30, 2021 is as follows:
| Note | Interest Expense | Accrued Interest | Amortization of Debt Discount | Unamortized | ||||||||||||
| Note 5 | $ | $ | $ | $ | ||||||||||||
| Note 6 | ||||||||||||||||
| Note 7 | ||||||||||||||||
| Note 8 | ||||||||||||||||
| Note 9 | ||||||||||||||||
| Note 10 | ||||||||||||||||
| Note 11 | ||||||||||||||||
| Note 12 | ||||||||||||||||
| Note 14 | ||||||||||||||||
| Note 15 | ||||||||||||||||
| Note 16 | ||||||||||||||||
| Note 17 | ||||||||||||||||
| Note 18 | ||||||||||||||||
| Note 19 | ||||||||||||||||
| Note 20 | ||||||||||||||||
| Note 21 | ||||||||||||||||
| Note 22 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
As of June 30, 2021, Note 5, Note 6, and Note
7 are considered in default. Upon an event of default, the interest accrues at 18%. Additionally, upon non-payment at maturity, the principal
increases by 10%. The principal on Note 5 increased by $
| F-15 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 10 –DERIVATIVE FINANCIAL INSTRUMENTS
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2021:
| June 30, 2021 | ||||||||
| The financings giving rise to derivative financial instruments | Indexed Shares | Fair Values | ||||||
| Compound embedded derivatives | $ | ( | ) | |||||
| Total | 559,931,126 | $ | (788,069 | ) | ||||
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2020:
| June 30, 2020 | ||||||||
| The financings giving rise to derivative financial instruments | Indexed Shares | Fair Values | ||||||
| Compound embedded derivatives | $ | ( | ) | |||||
| Total | 277,598,000 | $ | (334,222 | ) | ||||
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2021:
| The financings giving rise to derivative financial instruments and the income effects: | June 30, 2021 | |||
| Compound embedded derivatives | $ | |||
| Total gain (loss) | $ | |||
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2020:
| The financings giving rise to derivative financial instruments and the income effects: | June 30, 2020 | |||
| Compound embedded derivatives | $ | ( | ) | |
| Total gain (loss) | $ | ( | ) | |
The Company’s Convertible Promissory Notes issued between October 4, 2019 and June 24, 2021 gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
| F-16 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the embedded derivatives that have been bifurcated from the Convertible Notes and classified in liabilities:
| June 30, 2021 | ||
| Quoted market price on valuation date | $ |
|
| Contractual conversion rate | $ |
|
| Contractual term to maturity | ||
| Market volatility: | ||
| Equivalent Volatility | ||
| Interest rate |
The following table reflects the issuances of compound embedded derivatives and the changes in fair value inputs and assumptions related to the compound embedded derivatives during the period ended June 30, 2021 and March 31, 2021.
| June 30, | March 31, | |||||||
| 2021 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Issuances: | ||||||||
| Compound embedded derivatives | ||||||||
| Conversions | ( | ) | ||||||
| Derivative extinguished / debt repaid in cash | ( | ) | ( | ) | ||||
| Loss (gain) on changes in fair value inputs and assumptions reflected in income | ( | ) | ||||||
| Total | $ | $ | ||||||
| F-17 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
NOTE 11 - EQUITY
Preferred Stock
There are 50,000,000 shares authorized as preferred stock, of which 40,000,000 are designated as Series B and 2,000,000 are designated as Series A. 8,000,000 shares have yet to be designated. All 2,000,000 shares of Series A preferred are issued and outstanding. Each share of Series A preferred is convertible into 240 shares of common stock. The Series A Preferred Stock votes with the Common 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.
On November 23, 2020, as part of an Employment Agreement, the Company’s Chief Executive Officer received shares of Series B Convertible Preferred Stock. Each share of Series B Preferred is convertible into two shares of common stock. As such the fair value, $, was based on the value of common shares on the date of agreement, $0.004 per share. The shares are considered immediately vested as of November 23, 2020.
Common Stock
Common Stock Issuances for the three months ended June 30, 2020
On April 23, 2020, the Company issued
shares of common stock in exchange for services valued at $
On May 14, 2020, the Company sold shares
of common stock for $
On May 25, 2020, the Company sold shares
of common stock for $
On June 1, 2020, the Company issued
shares of common stock in exchange for services valued at $
On June 1, 2020, the Company issued
shares of common stock in exchange for the acquisition of UCL MMA LLC valued at $
Common Stock Issuances for the three months ended June 30, 2021
On April 1, 2021, the Company issued
shares of stock to GS Capital in exchange for $
On April 10, 2021, the Company issuedshares of stock to AES Capital in exchange for $
On April 14, 2021, the Company issued
shares of stock to GS Capital in exchange for $
On May 13, 2021, the Company issued shares of stock to GS Capital in exchange for $
On May 21, 2021 the Company issued shares
of common stock to Rex Chan in exchange for contractor services valued at $
On May 21, 2021 the Company issued shares
of common stock to BM Giancarlo in exchange for management services valued at $
| F-18 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
On May 21, 2021 the Company issued shares
of common stock to Carlos Diaz in exchange for management services valued at $
On June 3, 2021, the Company issued shares of stock to AES Capital in exchange for $
On June 16, 2021, the Company issued
shares of stock to GS Capital in exchange for $
On June 25, 2021, the Company issued
shares of stock to AES Capital in exchange for $
NOTE 12 –LEASES
Kokomo lease
On October 1, 2020, the Company, under its subsidiary ONE More Gym LLC, entered into a facilities lease (“Kokomo Lease”) for 25,000 square feet in Kokomo, Indiana. The initial lease term is for five years and the lease commencement date is October 1, 2020. The monthly lease payments are $7,291.66 in year 1, $7,656.25 in year 2, $8,039.06 in year 3, and $8,441.02 in years 4 and 5.
Valparaiso Lease
The Company leases 11,676 square feet of office
space located at 1805 E. Lincolnway, Valparaiso, Indiana 46383. The Company assumed the lease (“Valparaiso Lease”) when it
acquired CFit Indiana Inc. on October 6, 2020. The monthly lease payments are $
Merrill Lease
In connection with the acquisition of CFit Indiana
Inc. on October 6, 2020, the Company acquired a facilities lease for 15,000 square feet at 6055N. Broadway Ave., Merrillville, Indiana.
The monthly lease payments are $
Tuscaloosa Lease
In connection with the acquisition of Hillcrest
Fitness LLC on December 1, 2020, the Company acquired a facilities lease at 6551 Highway 69 South, Tuscaloosa, AL 35405. The monthly lease
payments are $
Birmingham Lease
In connection with the acquisition of Club Fitness
LLC on April 1, 2021, the Company acquired a facilities lease at 2520 Moody Parkway, Mood, AL 35004. The monthly lease payments are $
Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations.
| F-19 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
Right-of-use asset is summarized below:
| June 30, 2021 | ||||||||||||||||||||||||
| Kokomo Lease | Valparaiso Lease | Merrill Lease | Tuscaloosa Lease | Birmingham Lease | Total | |||||||||||||||||||
| Office lease | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Right-of-use asset, net | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Operating lease liability is summarized below:
| June 30, 2021 | ||||||||||||||||||||||||
| Kokomo Lease | Valparaiso Lease | Merrill Lease | Tuscaloosa Lease | Birmingham Lease | Total | |||||||||||||||||||
| Office lease | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Less: current portion | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Long term portion | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| F-20 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
Maturity of the lease liability is as follows:
| June 30, 2021 | ||||||||||||||||||||||||
| Kokomo Lease | Valparaiso Lease | Merrill Lease | Tuscaloosa Lease | Birmingham Lease | Total | |||||||||||||||||||
| Fiscal year ending March 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Fiscal year ending March 31, 2023 | ||||||||||||||||||||||||
| Fiscal year ending March 31, 2024 | ||||||||||||||||||||||||
| Fiscal year ending March 31, 2025 | ||||||||||||||||||||||||
| Fiscal year ending March 31, 2026 | ||||||||||||||||||||||||
| Fiscal year ending March 31, 2027 | ||||||||||||||||||||||||
| Present value discount | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Lease liability | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
NOTE 13 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of June 30, 2021, the Company is not aware of any contingent liabilities that should be reflected in the consolidated financial statements.
The Company entered into employment agreements with its Chief Executive Officer and Executive Vice President as of November 24, 2017. Under the terms of these agreements the Company will be liable for severance and other payments under certain conditions. The employment agreement for the Executive Vice President is for a period of 36 months and renews for a successive two years unless written notice is provided by either party under the terms of the agreement. The employment agreement for the Chief Executive Officer can be terminated by the Chief Executive Officer upon three months written notice. Termination of the Chief Executive Officer requires 80% of the votes of all stockholders of the Company.
Each of the acquisition agreements contain a Management Services Agreement (“MSA”) whereby the Company agrees to pay a management fee based on certain performance targets. The MSA agreements expire 10 years from the acquisition agreement dates.
NOTE 14 - SUBSEQUENT EVENTS
Convertible Promissory Note
On July 1, 2021, the Company entered into an Agreement with Geneva Roth Remark Holdings, Inc. pursuant to which the Company issued to Geneva Roth Remark Holdings, Inc. a Promissory Note in the aggregate principal amount of $180,400. The note has a maturity date of July 1, 2022, and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent (8%) per annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment to Geneva Roth Remark Holdings, Inc. as set forth in the note.
| F-21 |
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
On July 27, 2021, the Company entered into an Agreement with GS Capital pursuant to which the Company issued to GS Capital a Promissory Note in the aggregate principal amount of $265,000. The note has a maturity date of July 27, 2022, and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent (8%) per annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment to GS Capital as set forth in the note.
On August 4, 2021, the Company entered into an Agreement with GS Capital pursuant to which the Company issued to GS Capital a Promissory Note in the aggregate principal amount of $129,800. The note has a maturity date of August 4, 2022, and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent (8%) per annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment to GS Capital as set forth in the note.
On August 11, 2021, the Company entered into an Agreement with GS Capital pursuant to which the Company issued to GS Capital a Promissory Note in the aggregate principal amount of $151,500. The note has a maturity date of August 11, 2022, and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent (8%) per annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment to GS Capital as set forth in the note.
Subscription Agreements
On July 13, 2021, the Company entered into a Subscription Agreement with Geneva Roth Remark Holdings Inc. for the sale of 25,000,000 shares of common stock for $100,000, or $0.004 per share. As of the date of this filing, the shares have not been issued.
On July 15, 2021, the Company entered into a Subscription Agreement with GS Capital, LLC for the sale of 25,000,000 shares of common stock for $100,000, or $0.004 per share. As of the date of this filing, the shares have not been issued.
On July 21, 2021, the Company entered into a Subscription Agreement with GS Capital, LLC for the sale of 25,000,000 shares of common stock for $100,000, or $0.004 per share. As of the date of this filing, the shares have not been issued.
| F-22 |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the section titled “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2021 filed on June 29, 2021. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements
Basis of Presentation
We have eleven wholly-owned subsidiaries. Hardrock Promotions LLC which owns Hardrock MMA in Kentucky, Colosseum Combat LLC which owns Colosseum Combat MMA in Indiana, United Combat League MMA LLC, Pinnacle Combat LLC, Strike Hard Productions, LLC, ONE More Gym LLC, One More Gym Merrillville LLC, One More Gym Valparaiso LLC, One More Gym Tuscaloosa LLC, One More Gym Birmingham, Inc. and B2 Productions LLC.
The consolidated financial statements, which include the accounts of the Company and its eight wholly owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated.
Forward-Looking Statements
Some of the statements under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” and “would” or the negatives of these terms or other comparable terminology.
You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Quarterly Report on Form 10-Q identify important factors, which you should consider in evaluating our forward-looking statements. These factors include, among other things:
| · | The unprecedented impact of COVID-19 pandemic on our business, customers, employees, consultants, service providers, stockholders, investors and other stakeholders; |
| · | The speculative nature of the business we intend to develop; |
| · | Our reliance on suppliers and customers; |
| · | Our dependence upon external sources for the financing of our operations, particularly given that there are concerns about our ability to continue as a “going concern;” |
| · | Our ability to effectively execute our business plan; |
| · | Our ability to manage our expansion, growth and operating expenses; |
| · | Our ability to finance our businesses; |
| 4 |
| · | Our ability to promote our businesses; |
| · | Our ability to compete and succeed in highly competitive and evolving businesses; |
| · | Our ability to respond and adapt to changes in technology and customer behavior; and |
| · | Our ability to protect our intellectual property and to develop, maintain and enhance strong brands. |
Although the forward-looking statements in this Quarterly Report on Form 10-Q are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as maybe be required by law, to update this Quarterly Report on Form 10-Q or otherwise make public statements updating our forward-looking statements.
Critical Accounting Policies
Basis of Accounting
The financial information furnished herein reflects all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending March 31, 2022.
Use of Estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant assumptions and estimates relate to the valuation of derivative liabilities and the valuation of assets and liabilities acquired through business combinations. Actual results could differ from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits primarily in four financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses related to amounts in excess of FDIC limits or $250,000. The Company did not have any cash in excess of FDIC limits at June 30, 2021 and March 31, 2021, respectively.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
| 5 |
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided on the straight-line method over the assets’ estimated service lives. Expenditures for maintenance and repairs are charged to expense in the period in which they are incurred, and betterments are capitalized. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying consolidated statement of operations of the respective period. The estimated useful lives range from 3-7 years.
Goodwill
Goodwill represents the cost in excess of the fair value of net assets acquired in business combinations. The Company tests goodwill for impairment on an annual basis and when events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is deemed to be impaired if the carrying amount of goodwill exceeds its estimated fair value. As of June 30, 2021, there were no charges to goodwill impairment.
Other Income
During the three months ended June 30, 2021, the Company received $23,303 in grant income due to COVID-19 relief. The Company has recorded this grant income under other income in the Statement of Operations.
Revenue Recognition
Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue.
Income Taxes
The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated Statements of Operations in the period that includes the enactment date. Through June 30, 2021, the Company has an expected loss. Due to uncertainty of realization for these losses, a full valuation allowance is recorded. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.
| 6 |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the three months ended June 30, 2021 and 2020.
Inventory
Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of June 30, 2021 and March 31, 2021, the Company did not carry any finished goods inventory.
Earnings Per Share (EPS)
The Company utilize FASB ASC 260, Earnings per Share. Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive. As of June 30, 2021, the convertible notes are indexed to 559,931,126 shares of common stock.
The following table sets for the computation of basic and diluted earnings per share the three months ended June 30, 2021 and 2020:
| June 30, 2021 | June 30, 2020 | |||||||
| Basic and diluted | ||||||||
| Net loss | $ | (1,061,347 | ) | $ | (495,506 | ) | ||
| Net loss per share | ||||||||
| Basic | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of shares outstanding: | ||||||||
| Basic & diluted | 1,207,948,242 | 550,425,206 | ||||||
| 7 |
Stock Based Compensation
The Company records stock-based compensation in accordance with the provisions of FASB ASC Topic 718, Accounting for Stock Compensation, which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided under ASC.
Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of June 30, 2021, there were no options outstanding.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on April 1, 2019. The adoption of this standard did not have a material impact on the consolidated financial statements.
During the three months ended June 30, 2021 and 2020, the Company recorded $23,650 and $0 in stock-compensation expense, respectively.
Leases
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606.
On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and; (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.
Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented on the statements of operations.
As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the new guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.
| 8 |
Recently Adopted Accounting Pronouncements
In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. The new guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Recently, the FASB voted to delay the implementation date for this accounting standard, for smaller reporting companies, the new effective date is beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this ASU on the consolidated financial statements and is collecting and analyzing data that will be needed to produce historical inputs into any models created as a result of adopting this ASU. At this time, the Company does not believe the adoption of this ASU will have a material effect on the financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Organization and Nature of Business
Historically, we had been a provider of in-room, on-demand video entertainment and satellite services to the domestic lodging industry. In the past, we had provided video services to over 50,000 hotel rooms in the lodging industry. PPV lost a great deal of market share due to the increased internet use by hotel guests. With this loss, our Board of Directors agreed to dissolve Hotel Movie Network on March 11, 2010.
In February 2017, our Board of Directors approved a complete restructuring, new management team and strategic direction for the Company. Capitalizing on management’s history in television, video and technology, we are now forging ahead and becoming a full-service live event sports company.
Our Chairman and CEO is now Greg P. Bell. Mr. Bell has over 30 years of global experience developing more than 20 companies in the sports, television, entertainment, digital distribution and banking transaction industries. Capitalizing on the combination of his expertise, relationships and experience as well as his involvement with more than 40,000 live events over his career for major sports leagues and entertainment venues, we are in the process of developing and acquiring companies to become a premier vertically integrated live event sports company.
Our first strategy is to build an integrated live event minor league for the mixed martial arts (“MMA”) marketplace, which is a billion-dollar industry. We are creating and developing minor league champions that will move on to the MMA major leagues from the B2 Fighting Series (“B2FS”). This will be accomplished by sponsoring operating live events, acquiring existing MMA promotions and then inviting those champions to the B2FS Regional and National Championship Series. We own all media and merchandising rights and digital distribution networks for the B2FS. This concept was developed and test marketed for two years by Mr. Bell’s B2 Management Group, LLC.
2017 marked the kickoff of the B2FS by sponsoring and acquiring MMA regional promotion companies for the development of the B2FS. Our second strategy is to add additional sports, leagues, tournaments and special events to our live event business model. This will enable us to capitalize on our core technologies and business models that will be key to broadening the revenue base of our live event core business. We will also be developing and expanding the B2Digital live event systems and technologies. These include systems for event management, digital ticketing sales, digital video distribution, digital marketing, Pay-Per View (“PPV”), fighter management, merchandise sales, brand management and financial control systems.
| 9 |
Results of Operations
Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
Revenue
We had revenues of $568,765 for the three months ended June 30, 2021 versus revenues of $60,021 for the three months ended June 30, 2020. There was an increase of $235,532 in live event revenue due to the effects of reopening after the pandemic from COVID-19. There was an increase in gym revenue of $273,212, or 456% as the Company acquired four more gyms since the comparative period.
Cost of Sales
We incurred cost of sales of $203,502 for the three months ended June 30, 2021 versus cost of sales of $1,312 for the three months ended June 30, 2020. The increase of $202,190 is due to an increase in live events due to the reopening after the pandemic from COVID-19.
Operating Expenses
General & Administrative Expenses
General and administrative expenses include professional fees, all costs associated with marketing, press releases, public relations, rent, sponsorships and other expenses. We incurred general and administrative expenses of $1,553,880 for the three months ended June 30, 2021 versus general and administrative expenses of $164,788 for the three months ended June 30, 2020. The increase of $1,389,092 was primarily due to increased operations as a result of reopening after the pandemic from COVID-19.
Depreciation and Amortization Expense
We incurred depreciation and amortization expense of $88,049 for the three months ended June 30, 2021 versus depreciation expense of $32,972 for the three months ended June 30, 2020. The increase of $55,077 was due to the purchase of fixed and intangible assets a result of business acquisitions and an increase in capitalized assets for live events.
Other Income (Expense)
Our other income and expenses include interest expense, gain on forgiveness of loan, grant income, loss on settlement of debt, and gain (loss) on change in fair value of derivative liabilities. The increase of $563,528 was primarily due to changes in fair value of derivative instruments offset by an increase in interest expense.
Net Losses
We incurred a net loss of $1,061,347 for the three months ended June 30, 2021 versus a net loss of $495,506 for the three months ended June 30, 2020.
| 10 |
Current Liquidity and Capital Resources for the three months ended June 30, 2021 compared to the three months ended June 30, 2020
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| Summary of Cash Flows: | ||||||||
| Net cash used by operating activities | $ | (1,045,826 | ) | $ | (107,325 | ) | ||
| Net cash used by investing activities | (299,184 | ) | (1,554 | ) | ||||
| Net cash provided by financing activities | 1,334,619 | 117,737 | ||||||
| Net increase in cash and cash equivalents | (10,391 | ) | 8,858 | |||||
| Beginning cash and cash equivalents | 122,176 | 46,729 | ||||||
| Ending cash and cash equivalents | $ | 111,785 | $ | 55,587 | ||||
Operating Activities
Cash used in operations of $1,045,826 during the three months ended June 30, 2021 was primarily a result of our $1,061,347 net loss reconciled with our net non-cash expenses relating to stock compensation, settlement and extinguishment of debt, depreciation expense, inventory, prepaid expenses, accounts payable, accrued liabilities and deferred compensation. Cash used in operations of $107,325 during the three months ended June 30, 2020 was primarily a result of our $495,506 net loss reconciled with our net non-cash expenses relating to stock compensation, depreciation expense, inventory, prepaid expenses, accounts payable, accrued liabilities and deferred compensation.
Investing Activities
Net cash used in investing activities for the three months ended June 30, 2021 of $299,184 resulted from business acquisitions of $125,000 and capital expenditures in the amount of $174,184. Net cash used in investing activities for the three months ended June 30, 2020 of $1,554 resulted from the from the payments to related parties in the amount of $470 and capital expenditures in the amount of $1,084.
Financing Activities
Net cash provided by financing activities was $1,334,619 for three months ended June 30, 2021, which primarily consisted of $153,000 proceeds from the issuance of notes payable, $328,123 received from issuing convertible notes, $880,000 received from issuing common stock and reduced by $65,372 in repayments of convertible notes. Net cash provided by financing activities was $117,737 for three months ended June 30, 2020, which consisted of $122,800 from proceeds from the issuance of notes payable, $5,000 in payments related to payable due for business acquisitions, and $63 payment on notes payable.
Future Capital Requirements
Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for the remainder of fiscal year 2022 and for 2023 will depend on numerous factors, including management’s evaluation of the timing of projects to pursue. Subject to our ability to generate revenues and cash flow from operations and our ability to raise additional capital (including through possible joint ventures and/or partnerships), we expect to incur substantial expenditures to carry out our business plan, as well as costs associated with our capital raising efforts and being a public company.
Our plans to finance our operations include seeking equity and debt financing, alliances or other partnership agreements, or other business transactions, that would generate sufficient resources to ensure continuation of our operations.
| 11 |
The sale of additional equity or debt securities may result in additional dilution to our shareholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. Any such required additional capital may not be available on reasonable terms, if at all. If we were unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned activities and limit our operations which could have a material adverse effect on our business, financial condition and results of operations.
Inflation
The amounts presented in our consolidated financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Going Concern
The accompanying financial statements have been prepared on a going concern basis. For the three months ended June 30, 2021, the Company had a net loss of $1,061,347, had net cash used in operating activities of $1,045,826, and had negative working capital of $3,327,719. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our significant estimates and assumptions include the fair value of our common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to our deferred tax assets.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Our management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
| 12 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.
| Item 4. | Controls and Procedures. |
Disclosure Controls and Procedures
The Company has established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and, as such, is accumulated and communicated to the Company’s Chief Executive Officer, Greg P. Bell, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Bell, evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of June 30, 2021. Based on his evaluation, Mr. Bell concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2021.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s most recent fiscal quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 13 |
PART II—OTHER INFORMATION
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Unregistered Sales of Equity Securities
Convertible Note Issuances
Between April 1, 2021 and June 30, 2021, we issued to “accredited investors,” Convertible Promissory Notes aggregating a principal amount of $393,652. We received an aggregate net proceeds of $370,181 after $23,471 in original note discount. We have agreed to pay interest on the unpaid principal balance at the rate of 8% per annum from the dates on which Notes are issued until the same become due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. We have the right to prepay the Notes, provided we make a payment as set forth in the agreements.
The outstanding principal amount of the Notes is convertible into our common stock at the lender’s option at $0.01 per share for the first six months of the term of the Notes. After the six-month anniversary, the conversion price is equal to 63% of the average of the three lowest trading prices of our common stock.
These notes were issued without registration under the Securities Act of 1933, as amended, by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) promulgated thereunder, as transactions by an issuer not involving any public offering. No selling commissions were paid in connection with the issuance of the note.
Miscellaneous Share Issuances
During the quarter ended June 30, 2021, we issued 5,500,000 shares of our Common Stock to a total of three individuals. The securities were issued without registration under the Securities Act by reason of the exemption from registration afforded by the provisions of Section 4(a)(2) thereof, and Rule 506(b) promulgated thereunder, as a transaction by an issuer not involving any public offering. No selling commissions were paid in connection with the issuance of the securities.
Use of Proceeds
On February 2, 2021, our Registration Statement on Form S-1 (File No. 333-251846) was declared effective by the SEC and the offering was commenced upon effectiveness and is still ongoing as all of the 625,000,000 (for gross proceeds of $2,500,000) offered shares have not been sold and the offering has not been terminated.
During the quarter ended June 30, 2021, we sold a total of 220,000,000 shares of Common Stock for gross proceeds of $880,000. We did not pay any fees or commissions from the sales and received net proceeds of $880,000. The net proceeds were used as follows: 1) acquisition of gyms - $125,000, 2) cap-ex - $147,231, and 3) repayment of notes $74,354 working capital - $533,416.
| Item 6. | Exhibits. |
| SEC Ref. No. | Title of Document |
| 31.1* | Rule 13a-14(a) Certification by Principal Executive and Financial Officer |
| 32.1** | Section 1350 Certification of Principal Executive and Financial Officer |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104* | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
__________________
*Filed with this Report.
**Furnished with this Report.
| 14 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| B2Digital, Incorporated | ||
| Date: August 13, 2021 | By | /s/ Greg P. Bell |
| Greg P. Bell, Chief Executive Officer | ||
| (Principal Executive Officer and Principal | ||
| Financial Officer) | ||
| 15 |
Exhibit 31.1
CERTIFICATION
I, Greg P. Bell, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of B2Digital, Incorporated |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: August 13, 2021 | /s/ Greg P. Bell |
|
Greg P. Bell, Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of B2Digital, Incorporated (the "Company") on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Greg P. Bell, Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
/s/ Greg P. Bell
Greg P. Bell, Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer)
August 13, 2021
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2021 |
Mar. 31, 2021 |
|---|---|---|
| Preferred stock shares authorized | 50,000,000 | 50,000,000 |
| [custom:PreferredStockUndesignated-0] | 8,000,000 | 8,000,000 |
| Common stock par value | $ 0.00001 | $ 0.00001 |
| Common stock shares authorized | 5,000,000,000 | 5,000,000,000 |
| Common stock shares issued | 1,306,890,550 | 1,081,390,550 |
| Common stock shares outstanding | 1,306,890,550 | 1,081,390,550 |
| Series A Preferred Stock [Member] | ||
| Preferred stock shares issued | 240 | 240 |
| Preferred stock shares outstanding | 240 | 240 |
| Series B Preferred Stock [Member] | ||
| Preferred stock shares issued | 0 | 0 |
| Preferred stock shares outstanding | 0 | 0 |
Consolidated Statement of Changes in Stockholders' Equity (Deficit) (Unaudited) - USD ($) |
Preferred Stock Series A [Member] |
Preferred Stock Series B [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|---|---|
| Beginning balance, value at Mar. 31, 2020 | $ 20 | $ 5,394 | $ 3,600,197 | $ (3,816,978) | $ (211,367) | |
| Beginning balance, shares at Mar. 31, 2020 | 2,000,000 | 539,267,304 | ||||
| Sale of common stock for cash | $ 40 | 14,360 | 14,400 | |||
| [custom:SaleOfCommonStockForCashShares] | 4,000,000 | |||||
| Conversion of notes payable | $ 163 | 55,459 | 55,622 | |||
| Stock Issued During Period, Shares, Conversion of Convertible Securities | 16,292,915 | |||||
| Net Loss | (495,506) | (495,506) | ||||
| Ending balance, value at Jun. 30, 2020 | $ 20 | $ 5,597 | 3,670,016 | (4,312,484) | (636,851) | |
| Ending balance, shares at Jun. 30, 2020 | 2,000,000 | 559,560,219 | ||||
| Beginning balance, value at Mar. 31, 2021 | $ 20 | $ 400 | $ 10,815 | 7,652,677 | (9,197,248) | (1,533,336) |
| Beginning balance, shares at Mar. 31, 2021 | 2,000,000 | 40,000,000 | 1,081,390,550 | |||
| Sale of common stock | $ 2,200 | 877,800 | 880,000 | |||
| Sale of common stock, shares | 220,000,000 | |||||
| Issuance of common stock for services | $ 55 | 23,595 | 23,650 | |||
| Issuance of common stock for services, shares | 5,500,000 | |||||
| Issuance of convertible notes | 2,080 | 2,080 | ||||
| Net Loss | (1,061,347) | (1,061,347) | ||||
| Ending balance, value at Jun. 30, 2021 | $ 20 | $ 400 | $ 13,070 | $ 8,556,152 | $ (10,258,595) | $ (1,688,953) |
| Ending balance, shares at Jun. 30, 2021 | 2,000,000 | 40,000,000 | 1,306,890,550 |
ORGANIZATION AND NATURE OF BUSINESS |
3 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| ORGANIZATION AND NATURE OF BUSINESS | NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
In February 2017, the Board of Directors of B2Digital, Incorporated ("B2Digital" or the "Company") approved a complete restructuring, new management team and strategic direction for the Company. Capitalizing on its history in television, video and technology, the Company is now forging ahead and becoming a full-service live event sports company.
B2Digital's first strategy is to build an integrated live event Minor League for the Mixed Martial Arts (MMA) marketplace. B2Digital will be creating and developing Minor League champions that will move on to the MMA Major Leagues from the B2 Fighting Series (B2FS). This will be accomplished by sponsoring operating live events, acquiring existing MMA promotions and then inviting those champions to the B2FS Regional and National Championship Series. B2Digital will own all media and merchandising rights and digital distribution networks for the B2FS.
2017 marked the kickoff of the B2FS by sponsoring and acquiring MMA regional promotion companies for the development of the B2FS. The second strategy is that the Company plans to add additional sports, leagues, tournaments and special events to its live event business model. This will enable B2Digital to capitalize on their core technologies and business models that will be key to broadening the revenue base of the Company's live event core business. B2Digital will also be developing and expanding the B2Digital live event systems and technologies. These include systems for event management, digital ticketing sales, digital video distribution, digital marketing, Pay-Per View (PPV), fighter management, merchandise sales, brand management and financial control systems.
Basis of Presentation and Consolidation
The Company has eleven wholly-owned subsidiaries. Hardrock Promotions LLC which owns Hardrock MMA in Kentucky, Colosseum Combat LLC which owns Colosseum Combat MMA in Indiana, United Combat League MMA LLC, Pinnacle Combat LLC, Strike Hard Productions, LLC, ONE More Gym LLC, One More Gym Merrillville LLC, One More Gym Valparaiso LLC, One More Gym Tuscaloosa LLC, One More Gym Birmingham, Inc. and B2 Productions LLC.
The consolidated financial statements, which include the accounts of the Company and its eleven wholly-owned subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which include the accounts of the Company and its eight wholly-owned subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and presented in US dollars. The fiscal year end is March 31.
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ACCOUNTING POLICIES |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTING POLICIES | NOTE 2 - ACCOUNTING POLICIES
The significant accounting policies of the Company are as follows:
Basis of Accounting The interim consolidated financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements; interim disclosures generally do not repeat those in the annual statements. The interim unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant assumptions and estimates relate to the valuation of derivative liabilities and the valuation of assets and liabilities acquired through business combinations. Actual results could differ from these estimates and assumptions.
Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits primarily in four financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses related to amounts in excess of FDIC limits or $250,000. The Company did not have any cash in excess of FDIC limits at June 30, 2021 and 2020, respectively.
Fair Value of Financial Instruments The Company’s financial instruments consist primarily of accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
Property and Equipment Property and equipment are carried at cost. Depreciation is provided on the straight-line method over the assets’ estimated service lives. Expenditures for maintenance and repairs are charged to expense in the period in which they are incurred, and betterments are capitalized. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying consolidated statement of operations of the respective period. The estimated useful lives range from 3 to 7 years.
Goodwill Goodwill represents the cost in excess of the fair value of net assets acquired in business combinations. The Company tests goodwill for impairment on an annual basis and when events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is deemed to be impaired if the carrying amount of goodwill exceeds its estimated fair value. During the three months ended June 30, 2021, the Company did not record any impairment on goodwill.
Other income
During the three months ended June 30, 2020, the Company received $2,000 in grant income due to COVID-19 relief. The Company has recorded this grant income under other income in the Statement of Operations.
Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue.
Income Taxes The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated Statements of Operations in the period that includes the enactment date. Through June 30, 2021, the Company has an expected loss. Due to uncertainty of realization for these losses, a full valuation allowance is recorded. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.
Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company's Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
Impairment of Long-Lived Assets In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the three months ended June 30, 2021 and 2020.
Inventory Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of June 30, 2021 and March 31, 2021, the Company had no Finished Goods Inventory.
The Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive. As of June 30, 2021 the convertible notes are indexed to shares of common stock.
The following table sets for the computation of basic and diluted earnings per share the three months ended June 30, 2021 and 2020:
The Company records stock-based compensation in accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,” which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided under ASC.
Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of June 30, 2021 there were options outstanding.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on April 1, 2020. The adoption of this standard did not have a material impact on the consolidated financial statements.
Recently Adopted Accounting Pronouncements In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning April 1, 2023 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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GOING CONCERN |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 3 – GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis. For the three months ended June 30, 2021, the Company had a net loss of $1,061,347, had net cash used in operating activities of $1,045,826, had negative working capital of $3,327,719, accumulated deficit of $10,258,595 and stockholders’ deficit of $1,688,953. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of this filing. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, to fund possible future acquisitions, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements by continuing to issue additional equity and debt securities. The outcome of these matters cannot be predicted at this time and there are no assurances that, if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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REVENUE |
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| REVENUE | NOTE 4 – REVENUE
The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from live events, which primarily include ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue. Gym revenue comprises primarily of membership dues and subscription. Other gym revenue includes personal training, group fitness and meal planning.
Information about the Company’s net sales by revenue type for the three months ended June 30, 2021 and 2020 are as follows:
All revenue is derived in the United States.
Information about the Company’s contract liabilities for the three months ended June 30, 2021 and 2020 are as follows:
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PROPERTY AND EQUIPMENT |
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| PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following at June 30, 2021 and March 31, 2021:
Depreciation expense related to these assets for the three months ended June 30, 2021 and 2020 amounted to $61,859 and $18,943, respectively.
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INTANGIBLE ASSETS |
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| INTANGIBLE ASSETS | NOTE 6 – INTANGIBLE ASSETS
Intangible assets, net, consisted of the following:
Licenses are amortized over years, whereas customer relationships are amortized over three 3 years. Amortization expense related to these assets for the three months ended June 30, 2021 and 2020 amounted to $26,190 and $14,029 respectively.
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BUSINESS ACQUISITIONS |
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| BUSINESS ACQUISITIONS | NOTE 7 – BUSINESS ACQUISITIONS
Club Fitness, LLC
On April 1, 2021, the Company entered into an agreement for the acquisition of 100% of the equity interest in Club Fitness LLC. The purchase price was $125,000 in cash. The acquisition closed in April 2021.
The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted for as a business combination. The fair value of the net identifiable assets consisted of gym equipment of $76,689. The Company assigned a fair value of $46,311 in intangible assets – customer relationships. The intangible assets – customer relationships are being amortized over their estimated life, currently expected to be three years.
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NOTES PAYABLE |
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| NOTES PAYABLE | NOTE 8 - NOTES PAYABLE
The following is a summary of notes payable as of June 30, 2021 and March 31, 2021:
On May 8, 2020, WLES LP LLC converted $30,000 of its $60,000 notes payable into 12,000,000 shares of common stock. As a result, the Company recorded a loss on settlement of debt in the amount of $18,281.
During the three months ended June 30, 2021, the Company incurred $4,603 in interest expense related to notes payable.
During the three months ended June 30, 2021, the Company repaid $2,347 on its loan payable to Brian Cox.
During the three months ended June 30, 2021, the bank forgave $6,634 in principal and $1,069 in accrued interest on its SBA Loan (One More Gym, LLC). As a result, the Company recorded $7,703 in gain on forgiveness of loan.
During the three months ended June 30, 2021 the bank forgave the Company’s PPP loan of $15,600. No interest was accrued as of the payoff date. As a result, the Company recorded $15,600 in gain on forgiveness of loan.
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CONVERTIBLE NOTES PAYABLE |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE NOTES PAYABLE | NOTE 9 – CONVERTIBLE NOTES PAYABLE
The following is a summary of convertible notes payable as of June 30, 2021:
* Notes 1, 2, 3 and 4 in the amounts of $82,000, $208,000, $27,000 and $62,000, respectively, were fully converted as of March 31, 2021.
Between April 1, 2021 and June 30, 2021, the Company issued to “accredited investors,” Convertible Promissory Notes aggregating a principal amount of $393,652. The Company received an aggregate net proceeds of $370,181 after $23,471 in original note discount. The Company has agreed to pay interest on the unpaid principal balance at the rate of eight percent (8%) per annum from the dates on which Notes are issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Notes, provided it makes a payment as set forth in the agreements.
The outstanding principal amount of the Notes is convertible into the Company’s common stock at the lender’s option at $0.01 per share for the first six months of the term of the Notes. After the six-month anniversary, the conversion price is equal to 63% of the average of the three lowest trading prices of the Company’s common stock.
Accounting Considerations
The Company has accounted for the Notes as a financing transaction, wherein the net proceeds that were received were allocated to the financial instrument issued. Prior to making the accounting allocation, the Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative features consisted of the embedded conversion option and default puts. The conversion option and default puts bear risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. The contracts do not permit the Company to settle in registered shares and the contracts also contain make-whole provisions both of which preclude equity classification. Current accounting principles that are also provided in ASC 815 do not permit an issuer to account separately for individual derivative terms and features that require bifurcation and liability classification. Rather, such terms and features must be and were bundled together and fair valued as a single, compound embedded derivative.
The net proceeds were allocated to the compound embedded derivative and original issue discount. The notes will be amortized up to its face value over the life of Notes based on an effective interest rate. Amortization expense and interest expense for the three months ended June 30, 2021 is as follows:
As of June 30, 2021, Note 5, Note 6, and Note 7 are considered in default. Upon an event of default, the interest accrues at 18%. Additionally, upon non-payment at maturity, the principal increases by 10%. The principal on Note 5 increased by $18,400, Note 6 increased by $7,800 and Note 7 increased by $7,800.
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DERIVATIVE FINANCIAL INSTRUMENTS |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 10 –DERIVATIVE FINANCIAL INSTRUMENTS
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2021:
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2020:
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2021:
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2020:
The Company’s Convertible Promissory Notes issued between October 4, 2019 and June 24, 2021 gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the embedded derivatives that have been bifurcated from the Convertible Notes and classified in liabilities:
The following table reflects the issuances of compound embedded derivatives and the changes in fair value inputs and assumptions related to the compound embedded derivatives during the period ended June 30, 2021 and March 31, 2021.
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EQUITY |
3 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Equity [Abstract] | |
| EQUITY | NOTE 11 - EQUITY
Preferred Stock
There are 50,000,000 shares authorized as preferred stock, of which 40,000,000 are designated as Series B and 2,000,000 are designated as Series A. 8,000,000 shares have yet to be designated. All 2,000,000 shares of Series A preferred are issued and outstanding. Each share of Series A preferred is convertible into 240 shares of common stock. The Series A Preferred Stock votes with the Common 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.
On November 23, 2020, as part of an Employment Agreement, the Company’s Chief Executive Officer received shares of Series B Convertible Preferred Stock. Each share of Series B Preferred is convertible into two shares of common stock. As such the fair value, $, was based on the value of common shares on the date of agreement, $0.004 per share. The shares are considered immediately vested as of November 23, 2020.
Common Stock
Common Stock Issuances for the three months ended June 30, 2020
On April 23, 2020, the Company issued shares of common stock in exchange for services valued at $25,600 or $0.0064 per share.
On May 14, 2020, the Company sold shares of common stock for $10,000 or $0.0064 per share.
On May 25, 2020, the Company sold shares of common stock for $75,000 or $0.0064 per share.
On June 1, 2020, the Company issued shares of common stock in exchange for services valued at $428,800 or $0.0064 per share.
On June 1, 2020, the Company issued shares of common stock in exchange for the acquisition of UCL MMA LLC valued at $39,000 or $0.0065 per share.
Common Stock Issuances for the three months ended June 30, 2021
On April 1, 2021, the Company issued shares of stock to GS Capital in exchange for $200,000 or $0.004 per share.
On April 10, 2021, the Company issuedshares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
On April 14, 2021, the Company issued shares of stock to GS Capital in exchange for $55,000 or $0.004 per share.
On May 13, 2021, the Company issued shares of stock to GS Capital in exchange for $200,000 or $0.004 per share.
On May 21, 2021 the Company issued shares of common stock to Rex Chan in exchange for contractor services valued at $6,450 or $0.0043 per share representing the share price at the date of the transaction.
On May 21, 2021 the Company issued shares of common stock to BM Giancarlo in exchange for management services valued at $8,600 or $0.0043 per share representing the share price at the date of the transaction.
On May 21, 2021 the Company issued shares of common stock to Carlos Diaz in exchange for management services valued at $8,600 or $0.0043 per share representing the share price at the date of the transaction.
On June 3, 2021, the Company issued shares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
On June 16, 2021, the Company issued shares of stock to GS Capital in exchange for $125,000 or $0.004 per share.
On June 25, 2021, the Company issued shares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
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LEASES |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | NOTE 12 –LEASES
Kokomo lease
On October 1, 2020, the Company, under its subsidiary ONE More Gym LLC, entered into a facilities lease (“Kokomo Lease”) for 25,000 square feet in Kokomo, Indiana. The initial lease term is for five years and the lease commencement date is October 1, 2020. The monthly lease payments are $7,291.66 in year 1, $7,656.25 in year 2, $8,039.06 in year 3, and $8,441.02 in years 4 and 5.
Valparaiso Lease
The Company leases 11,676 square feet of office space located at 1805 E. Lincolnway, Valparaiso, Indiana 46383. The Company assumed the lease (“Valparaiso Lease”) when it acquired CFit Indiana Inc. on October 6, 2020. The monthly lease payments are $7,624.50 and the lease expires on December 31, 2023.
Merrill Lease
In connection with the acquisition of CFit Indiana Inc. on October 6, 2020, the Company acquired a facilities lease for 15,000 square feet at 6055N. Broadway Ave., Merrillville, Indiana. The monthly lease payments are $11,189.50 and the lease expires on February 28, 2026.
Tuscaloosa Lease
In connection with the acquisition of Hillcrest Fitness LLC on December 1, 2020, the Company acquired a facilities lease at 6551 Highway 69 South, Tuscaloosa, AL 35405. The monthly lease payments are $6,000 and the lease expires on March 6, 2024.
Birmingham Lease
In connection with the acquisition of Club Fitness LLC on April 1, 2021, the Company acquired a facilities lease at 2520 Moody Parkway, Mood, AL 35004. The monthly lease payments are $6,000 and the lease expires on April 30, 2026.
Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations.
Right-of-use asset is summarized below:
Operating lease liability is summarized below:
Maturity of the lease liability is as follows:
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 13 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of June 30, 2021, the Company is not aware of any contingent liabilities that should be reflected in the consolidated financial statements.
The Company entered into employment agreements with its Chief Executive Officer and Executive Vice President as of November 24, 2017. Under the terms of these agreements the Company will be liable for severance and other payments under certain conditions. The employment agreement for the Executive Vice President is for a period of 36 months and renews for a successive two years unless written notice is provided by either party under the terms of the agreement. The employment agreement for the Chief Executive Officer can be terminated by the Chief Executive Officer upon three months written notice. Termination of the Chief Executive Officer requires 80% of the votes of all stockholders of the Company.
Each of the acquisition agreements contain a Management Services Agreement (“MSA”) whereby the Company agrees to pay a management fee based on certain performance targets. The MSA agreements expire 10 years from the acquisition agreement dates.
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SUBSEQUENT EVENTS |
3 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 14 - SUBSEQUENT EVENTS
Convertible Promissory Note
On July 1, 2021, the Company entered into an Agreement with Geneva Roth Remark Holdings, Inc. pursuant to which the Company issued to Geneva Roth Remark Holdings, Inc. a Promissory Note in the aggregate principal amount of $180,400. The note has a maturity date of July 1, 2022, and the Company has agreed to pay interest on the unpaid principal balance of the note at the rate of eight percent (8%) per annum from the date on which the note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment to Geneva Roth Remark Holdings, Inc. as set forth in the note.
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ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Accounting | Basis of Accounting The interim consolidated financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements; interim disclosures generally do not repeat those in the annual statements. The interim unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
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| Use of Estimates | Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The most significant assumptions and estimates relate to the valuation of derivative liabilities and the valuation of assets and liabilities acquired through business combinations. Actual results could differ from these estimates and assumptions.
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| Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits primarily in four financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses related to amounts in excess of FDIC limits or $250,000. The Company did not have any cash in excess of FDIC limits at June 30, 2021 and 2020, respectively.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist primarily of accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
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| Property and Equipment | Property and Equipment Property and equipment are carried at cost. Depreciation is provided on the straight-line method over the assets’ estimated service lives. Expenditures for maintenance and repairs are charged to expense in the period in which they are incurred, and betterments are capitalized. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying consolidated statement of operations of the respective period. The estimated useful lives range from 3 to 7 years.
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| Goodwill | Goodwill Goodwill represents the cost in excess of the fair value of net assets acquired in business combinations. The Company tests goodwill for impairment on an annual basis and when events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is deemed to be impaired if the carrying amount of goodwill exceeds its estimated fair value. During the three months ended June 30, 2021, the Company did not record any impairment on goodwill.
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| Other income | Other income
During the three months ended June 30, 2020, the Company received $2,000 in grant income due to COVID-19 relief. The Company has recorded this grant income under other income in the Statement of Operations.
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| Revenue Recognition | Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. The majority of revenues are received from ticket and beverage sales before and during the live events. Sponsorship revenue is also recognized when the live event takes place. Any revenue received for events that have yet to take place are recorded in deferred revenue.
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| Income Taxes | Income Taxes The Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated Statements of Operations in the period that includes the enactment date. Through June 30, 2021, the Company has an expected loss. Due to uncertainty of realization for these losses, a full valuation allowance is recorded. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.
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| Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company's Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. There were no impairment charges recorded during the three months ended June 30, 2021 and 2020.
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| Inventory | Inventory Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of June 30, 2021 and March 31, 2021, the Company had no Finished Goods Inventory.
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| Earnings Per Share (EPS) |
The Company utilize FASB ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common shares available upon exercise of stock options and warrants using the treasury stock method, except for periods of operating loss for which no common share equivalents are included because their effect would be anti-dilutive. As of June 30, 2021 the convertible notes are indexed to shares of common stock.
The following table sets for the computation of basic and diluted earnings per share the three months ended June 30, 2021 and 2020:
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| Stock Based Compensation |
The Company records stock-based compensation in accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,” which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided under ASC.
Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of June 30, 2021 there were options outstanding.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on April 1, 2020. The adoption of this standard did not have a material impact on the consolidated financial statements.
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| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In September 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for the Company beginning April 1, 2023 and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
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ACCOUNTING POLICIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted |
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REVENUE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of revenue |
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| Schedule of deferred revenue |
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PROPERTY AND EQUIPMENT (Tables) |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and equipment |
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INTANGIBLE ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible assets |
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| Estimated amortization expense |
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BUSINESS ACQUISITIONS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business combination purchase allocation |
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NOTES PAYABLE (Tables) |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of notes payable |
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CONVERTIBLE NOTES PAYABLE (Tables) |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible note payable |
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| Amortization expense, interest expense and accrued interest |
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DERIVATIVE FINANCIAL INSTRUMENTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of derivative liabilities |
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2020:
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2021:
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended June 30, 2020:
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| Significant inputs |
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| Schedule of changes in fair value of derivatives |
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LEASES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of right-of-use asset |
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| Lease, Cost [Table Text Block] |
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| Summary of maturity of lease liability |
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ACCOUNTING POLICIES (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Accounting Policies [Abstract] | ||
| Net loss | $ (1,061,347) | $ (495,506) |
| Net loss per share | ||
| Basic | $ (0.00) | $ (0.00) |
| Diluted | $ (0.00) | $ (0.00) |
| Weighted average number of shares outstanding: | ||
| Basic & diluted | 1,207,948,242 | 550,425,206 |
ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Mar. 31, 2021 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Cash in excess of FDIC limit | $ 0 | $ 0 | |
| Property useful life | 3 to 7 years | ||
| Impairment of goodwill | $ 0 | ||
| Grant income | 0 | $ 2,000 | |
| Finished Goods Inventory | $ 0 | $ 0 | |
| Anti-dilutive securities | 559,931,126 | ||
| Equity Option [Member] | |||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
| Options outstanding | 0 | ||
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Net Income (Loss) Attributable to Parent | $ 1,061,347 | $ 495,506 | ||
| Net Cash Provided by (Used in) Operating Activities | 1,045,826 | 107,325 | ||
| [custom:WorkingCapital-0] | 3,327,719 | |||
| Retained Earnings (Accumulated Deficit) | 10,258,595 | $ 9,197,248 | ||
| Stockholders' Equity Attributable to Parent | $ 1,688,953 | $ 636,851 | $ 1,533,336 | $ 211,367 |
REVENUE (Details - Net sales by revenue type) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Disaggregation of Revenue [Line Items] | ||
| Net sales | $ 568,765 | $ 60,021 |
| Live Events [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Net sales | 235,591 | 59 |
| Gym [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Net sales | $ 333,174 | $ 59,962 |
REVENUE (Details - Deferred revenue) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Balance at beginning of year | $ 119,504 | $ 13,992 |
| Deferral of revenue | 169,798 | 37,960 |
| Recognition of unearned revenue | (204,694) | (30,668) |
| Balance at end of year | $ 84,608 | $ 21,284 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 61,859 | $ 18,943 |
INTANGIBLE ASSETS (Details - Intangible assets, net) - USD ($) |
Jun. 30, 2021 |
Mar. 31, 2021 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | $ 371,176 | $ 324,864 |
| Less: accumulated amortization | (126,163) | (99,974) |
| Intangible assets net | 245,013 | 224,890 |
| License [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 142,248 | 142,248 |
| Customer Relationships [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | 216,343 | 170,031 |
| Software Development [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets gross | $ 12,585 | $ 12,585 |
INTANGIBLE ASSETS (Details - Estimated amortization expense) - USD ($) |
Jun. 30, 2021 |
Mar. 31, 2021 |
|---|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||
| Fiscal year ended March 31, 2022 | $ 78,569 | |
| Fiscal year ended March 31, 2023 | 97,842 | |
| Fiscal year ended March 31, 2024 | 61,533 | |
| Fiscal year ended March 31, 2025 | 7,069 | |
| Total | $ 245,013 | $ 224,890 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Finite-Lived Intangible Assets [Line Items] | ||
| Amortization | $ 26,190 | $ 14,029 |
| Licensing Agreements [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Finite-Lived Intangible Asset, Useful Life | 5 years | |
| Customer Relationships [Member] | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Finite-Lived Intangible Asset, Useful Life | 3 years | |
BUSINESS ACQUISITIONS (Details - allocation of purchase) - Club Fitness [Member] |
Apr. 02, 2021
USD ($)
|
|---|---|
| Business Acquisition [Line Items] | |
| Cash | $ 125,000 |
| Total fair value of identifiable net assets | 125,000 |
| Customer Relationships [Member] | |
| Business Acquisition [Line Items] | |
| Intangible assets | 46,311 |
| Gym Equipment [Member] | |
| Business Acquisition [Line Items] | |
| Property & equipment | $ 76,689 |
NOTES PAYABLE (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Obligation with Joint and Several Liability Arrangement [Line Items] | ||
| Loss on modification of debt | $ 0 | $ (18,281) |
| Gain on forgiveness of loan | 23,303 | $ 5,040 |
| Wles Lp [Member] | ||
| Obligation with Joint and Several Liability Arrangement [Line Items] | ||
| Loss on modification of debt | 18,281 | |
| Brian Cox [Member] | ||
| Obligation with Joint and Several Liability Arrangement [Line Items] | ||
| Repayment of Loan payable | 2,347 | |
| Small Business Loan [Member] | ||
| Obligation with Joint and Several Liability Arrangement [Line Items] | ||
| Gain on forgiveness of loan | 7,703 | |
| P P P Loan [Member] | ||
| Obligation with Joint and Several Liability Arrangement [Line Items] | ||
| Gain on forgiveness of loan | $ 15,600 | |
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Debt Instrument [Line Items] | ||
| Debt face amount | $ 1,799,902 | |
| Net proceeds | 370,181 | $ 0 |
| Convertible Note 1 [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt face amount | 393,652 | |
| Original issue discount | 23,471 | |
| Convertible Notes 1 [Member] | ||
| Debt Instrument [Line Items] | ||
| Net proceeds | 370,181 | |
| Convertible Note 5 [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt face amount | 202,400 | |
| Principal increases | 18,400 | |
| Convertible Note 6 [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt face amount | 85,800 | |
| Principal increases | 7,800 | |
| Convertible Note 7 [Member] | ||
| Debt Instrument [Line Items] | ||
| Debt face amount | 85,800 | |
| Principal increases | $ 7,800 | |
DERIVATIVE FINANCIAL INSTRUMENTS (Details - Derivative liabilities) - USD ($) |
3 Months Ended | |
|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
| Compound embedded derivatives, shares | 559,931,126 | 277,598,000 |
| Compound embedded derivatives, value | $ (788,069) | $ (334,222) |
| Compound embedded derivatives | 310,871 | (275,432) |
| Total gain (loss) | $ 310,871 | $ (275,432) |
DERIVATIVE FINANCIAL INSTRUMENTS (Details - Significant inputs) |
3 Months Ended |
|---|---|
|
Jun. 30, 2021
$ / shares
| |
| Derivative [Line Items] | |
| Quoted market price on valuation date | 0.0041 |
| Contractual term to maturity | 0.095 Years – 1.0 Years |
| Equivalent Volatility | 21.33% - 230.47% |
| Interest rate | 8.00% |
| Minimum [Member] | |
| Derivative [Line Items] | |
| Contractual conversion rate | $ 0.0027 |
| Maximum [Member] | |
| Derivative [Line Items] | |
| Contractual conversion rate | $ 0.01 |
DERIVATIVE FINANCIAL INSTRUMENTS (Details - Change in fair value) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2021 |
Mar. 31, 2021 |
|
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
| Derivative liabilities, beginning balance | $ 1,137,623 | $ 58,790 |
| Compound embedded derivatives | 42,058 | 732,416 |
| Conversions | 0 | (859,352) |
| Derivative extinguished / debt repaid in cash | (80,740) | 126,892 |
| Derivative extinguished / debt repaid in cash | 80,740 | (126,892) |
| Loss (gain) on changes in fair value inputs and assumptions reflected in income | (310,871) | 1,332,661 |
| Derivative liabilities, ending balance | $ 788,069 | $ 1,137,623 |
LEASES (Details - Operating lease liability) - USD ($) |
Jun. 30, 2021 |
Mar. 31, 2021 |
|---|---|---|
| Lessee, Lease, Description [Line Items] | ||
| Office lease | $ 1,798,082 | |
| Less: current portion | (341,974) | $ (264,165) |
| Long term portion | 1,456,108 | $ 1,319,457 |
| Kokomo Lease [Member] | ||
| Lessee, Lease, Description [Line Items] | ||
| Office lease | 336,180 | |
| Less: current portion | (60,606) | |
| Long term portion | 275,574 | |
| Valparaiso Lease [Member] | ||
| Lessee, Lease, Description [Line Items] | ||
| Office lease | 298,395 | |
| Less: current portion | (110,528) | |
| Long term portion | 187,867 | |
| Merrill Lease [Member] | ||
| Lessee, Lease, Description [Line Items] | ||
| Office lease | 689,785 | |
| Less: current portion | (68,402) | |
| Long term portion | 621,383 | |
| Tuscaloosa Lease [Member] | ||
| Lessee, Lease, Description [Line Items] | ||
| Office lease | 196,361 | |
| Less: current portion | (55,460) | |
| Long term portion | 140,901 | |
| Birmingham Lease [Member] | ||
| Lessee, Lease, Description [Line Items] | ||
| Office lease | 277,361 | |
| Less: current portion | (46,978) | |
| Long term portion | $ 230,383 |
LEASES (Details Narrative) - USD ($) |
6 Months Ended | 8 Months Ended | |
|---|---|---|---|
Apr. 02, 2021 |
Oct. 06, 2020 |
Dec. 01, 2020 |
|
| Valparaiso Lease [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly lease payments | $ 7,624 | ||
| Lease expiration date | Dec. 31, 2023 | ||
| Merrill Lease [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly lease payments | $ 11,189 | ||
| Lease expiration date | Feb. 28, 2026 | ||
| Tuscaloosa Lease [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly lease payments | $ 6,000 | ||
| Lease expiration date | Mar. 06, 2024 | ||
| Birmingham Lease [Member] | |||
| Lessee, Lease, Description [Line Items] | |||
| Monthly lease payments | $ 6,000 | ||
| Lease expiration date | Apr. 30, 2026 |
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