NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 eleven 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 U.S. 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”).
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 September 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 and six months ended September 30, 2021, the Company did not record
any impairment on goodwill.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
Other income
During the six months ended September 30, 2021
and September 30, 2020, the Company received $0 and $2,000, respectively 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 September 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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 six months ended September 30, 2021 and 2020, respectively.
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 September 30, 2021, the convertible notes are indexed to 810,258,880 shares of common stock.
The following table sets forth the computation
of basic and diluted earnings per share for the six months ended September 30, 2021 and 2020:
|
Schedule of Earnings Per Share, Basic and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
September 30,
2020
|
|
|
Basic and diluted
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,618,523
|
)
|
|
$
|
(1,764,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic & diluted
|
|
|
1,289,383,719
|
|
|
|
574,198,491
|
|
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 September 30, 2021, there were no options outstanding.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU No. 2017-04,
Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate
the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s
carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. Early adoption is permitted. We do not expect the adoption of this ASU to have a material effect on our consolidated
financial statements.
In August 2018, the FASB issued ASU No. 2018-13,
Fair Value Measurements (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in this update modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for the Registrants
for fiscal years beginning after December 15, 2019, and interim periods therein. Early adoption is permitted. The Company is currently
assessing the impact of this standard on our consolidated financial statements.
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 January 1, 2020 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.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic
815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated 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.
NOTE 3 – GOING CONCERN
The accompanying consolidated financial statements
have been prepared on a going concern basis. For the six months ended September 30, 2021, the Company had a net loss of $3,618,523, had
net cash used in operating activities of $2,634,963 had negative working capital of $5,589,042, accumulated deficit of $12,815,771 and
stockholders’ deficit of $3,946,129. 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 consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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. Live event revenue primarily includes 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 and six months ended September 30, 2021 and 2020 are as follows:
|
Schedule of net sales by revenue
type
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2021
(Unaudited)
|
|
|
2020
(Unaudited)
|
|
|
Live events
|
|
$
|
283,171
|
|
|
$
|
30,318
|
|
|
Gym revenue
|
|
|
376,839
|
|
|
|
105,609
|
|
|
Net sales
|
|
$
|
660,010
|
|
|
$
|
135,927
|
|
|
|
|
For the six months ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2021
(Unaudited)
|
|
|
2020
(Unaudited)
|
|
|
Live events
|
|
$
|
518,762
|
|
|
$
|
30,377
|
|
|
Gym revenue
|
|
|
710,013
|
|
|
|
165,571
|
|
|
Net sales
|
|
$
|
1,228,775
|
|
|
$
|
195,948
|
|
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted
of the following at September 30, 2021 and March 31, 2021:
|
Schedule of property and equipment
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
September 30,
2021
|
|
|
March 31,
2021
|
|
|
|
|
|
|
|
|
|
|
Gym equipment
|
|
$
|
507,906
|
|
|
$
|
420,880
|
|
|
Cages
|
|
|
151,009
|
|
|
|
132,350
|
|
|
Event assets
|
|
|
116,088
|
|
|
|
92,117
|
|
|
Furniture and fixtures
|
|
|
16,766
|
|
|
|
16,766
|
|
|
Production truck gear
|
|
|
11,740
|
|
|
|
11,740
|
|
|
Production equipment
|
|
|
58,704
|
|
|
|
32,875
|
|
|
Venue lighting system
|
|
|
38,266
|
|
|
|
37,250
|
|
|
Leasehold improvements
|
|
|
167,229
|
|
|
|
43,712
|
|
|
Electronics hardware and software
|
|
|
149,234
|
|
|
|
124,624
|
|
|
Trucks trailers and vehicles
|
|
|
225,278
|
|
|
|
197,921
|
|
|
|
|
|
1,442,220
|
|
|
|
1,110,235
|
|
|
Less: accumulated depreciation
|
|
|
(298,043
|
)
|
|
|
(165,236
|
)
|
|
|
|
$
|
1,144,177
|
|
|
$
|
944,999
|
|
Depreciation expense related to these assets for
the six months ended September 30, 2021 and 2020 amounted to $134,140 and $38,672, respectively.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets, net, consisted of
the following:
|
Schedule of intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
September 30,
2021
|
|
|
March
31,
2021
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
142,248
|
|
|
$
|
142,248
|
|
|
Software/website development
|
|
|
12,585
|
|
|
|
12,585
|
|
|
Customer relationships
|
|
|
216,343
|
|
|
|
170,031
|
|
|
|
|
|
371,176
|
|
|
|
324,864
|
|
|
Less: accumulated amortization
|
|
|
(152,353
|
)
|
|
|
(99,974
|
)
|
|
|
|
$
|
218,823
|
|
|
$
|
224,890
|
|
Licenses are amortized over 5 five years,
whereas customer relationships and software/website development are amortized over three 3 years. Amortization expense related to
these assets for the six months ended September 30, 2021 and 2020 amounted to $52,379
and $28,183,
respectively.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
|
Schedule of amortization expense
|
|
|
|
|
|
Estimated amortization expense for each of the next four years:
|
|
|
|
|
|
|
Fiscal year ended March 31, 2022
|
|
$
|
52,379
|
|
|
Fiscal year ended March 31, 2023
|
|
|
97,873
|
|
|
Fiscal year ended March 31, 2024
|
|
|
61,532
|
|
|
Fiscal year ended March 31, 2025
|
|
|
7,069
|
|
|
Total
|
|
$
|
218,823
|
|
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.
|
Schedule of business
combination purchase allocation
|
|
|
|
|
|
Consideration
|
|
|
|
|
|
Cash
|
|
$
|
125,000
|
|
|
|
|
|
|
|
|
Fair values of identifiable net assets:
|
|
|
|
|
|
Property & equipment:
|
|
|
|
|
|
Gym equipment
|
|
$
|
76,689
|
|
|
|
|
|
|
|
|
Intangible assets:
|
|
|
|
|
|
Customer relationships
|
|
|
46,311
|
|
|
|
|
|
|
|
|
Total fair value of identifiable net assets
|
|
$
|
125,000
|
|
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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 8 - NOTES PAYABLE
The following is a summary of notes payable as of September
30, 2021 and March 31, 2021:
|
Schedule of notes payable
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
Notes payable - current maturity:
|
|
|
|
|
|
|
|
|
|
Note Payable PPP SBA Loan
|
|
$
|
–
|
|
|
$
|
15,600
|
|
|
SBA EIDL Loan
|
|
|
10,000
|
|
|
|
10,000
|
|
|
SBA Loan Payable B2Digital
|
|
|
97,200
|
|
|
|
97,200
|
|
|
Notes payable – in default:
|
|
|
|
|
|
|
|
|
|
Emry Capital $14,000, 4% loan with principal and interest due April, 2020
|
|
|
14,000
|
|
|
|
14,000
|
|
|
Notes payable – long term:
|
|
|
|
|
|
|
|
|
|
WLES LP LLC $60,000, 5% loan due January 15, 2022
|
|
|
30,000
|
|
|
|
30,000
|
|
|
Brian Cox 401K
|
|
|
8,157
|
|
|
|
12,882
|
|
|
SBA Loan (Hillcrest)
|
|
|
35,400
|
|
|
|
35,400
|
|
|
SBA Loan (One More Gym, LLC)
|
|
|
52,528
|
|
|
|
63,047
|
|
|
GS Capital, LLC
|
|
|
153,000
|
|
|
|
–
|
|
|
Total notes payable
|
|
|
400,285
|
|
|
|
278,129
|
|
|
Less: long-term
|
|
|
(90,685
|
)
|
|
|
(105,929
|
)
|
|
Total
|
|
$
|
309,600
|
|
|
$
|
172,200
|
|
During the six months ended September 30, 2021,
the Company incurred $9,902 in interest expense related to notes payable.
During the six months ended September 30, 2021,
the Company repaid $4,724 on its loan payable to Brian Cox.
During the six months ended September 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 six months ended September 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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
NOTE 9 – CONVERTIBLE NOTE PAYABLE
The following is a summary of convertible notes payable
as of September 30, 2021:
|
Schedule of convertible notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note*
|
|
Inception Date
|
|
Maturity
|
|
Coupon
|
|
|
Face Value
|
|
|
Unamortized Discount
|
|
|
Carrying Value
|
|
|
Note 5
|
|
1/27/2020
|
|
1/27/2021
|
|
|
8%
|
|
|
$
|
202,400
|
|
|
$
|
–
|
|
|
$
|
202,400
|
|
|
Note 6
|
|
2/19/2020
|
|
2/19/2021
|
|
|
8%
|
|
|
|
85,800
|
|
|
|
–
|
|
|
|
85,800
|
|
|
Note 7
|
|
3/10/2020
|
|
3/10/2021
|
|
|
8%
|
|
|
|
85,800
|
|
|
|
–
|
|
|
|
85,800
|
|
|
Note 8
|
|
8/4/2020
|
|
8/4/2021
|
|
|
8%
|
|
|
|
156,000
|
|
|
|
–
|
|
|
|
156,000
|
|
|
Note 9
|
|
10/2/2020
|
|
10/2/2021
|
|
|
8%
|
|
|
|
205,000
|
|
|
|
–
|
|
|
|
205,000
|
|
|
Note 10
|
|
10/15/2020
|
|
10/15/2021
|
|
|
8%
|
|
|
|
172,000
|
|
|
|
7,463
|
|
|
|
164,537
|
|
|
Note 11
|
|
11/2/2020
|
|
11/2/2021
|
|
|
8%
|
|
|
|
69,000
|
|
|
|
3,542
|
|
|
|
65,458
|
|
|
Note 12
|
|
11/12/2020
|
|
11/12/2021
|
|
|
8%
|
|
|
|
69,000
|
|
|
|
2,181
|
|
|
|
66,819
|
|
|
Note 14
|
|
12/10/2020
|
|
12/10/2021
|
|
|
8%
|
|
|
|
80,000
|
|
|
|
7,067
|
|
|
|
72,933
|
|
|
Note 16
|
|
1/14/2021
|
|
1/14/2022
|
|
|
8%
|
|
|
|
107,000
|
|
|
|
13,863
|
|
|
|
93,137
|
|
|
Note 17
|
|
1/27/2021
|
|
1/27/2021
|
|
|
8%
|
|
|
|
60,000
|
|
|
|
9,724
|
|
|
|
50,276
|
|
|
Note 20
|
|
4/30/2021
|
|
4/30/2022
|
|
|
8%
|
|
|
|
104,000
|
|
|
|
2,352
|
|
|
|
101,648
|
|
|
Note 21
|
|
5/25/2021
|
|
5/25/2022
|
|
|
8%
|
|
|
|
104,000
|
|
|
|
4,094
|
|
|
|
99,906
|
|
|
Note 22
|
|
06/24/2021
|
|
06/24/2022
|
|
|
8%
|
|
|
|
185,652
|
|
|
|
45,081
|
|
|
|
140,571
|
|
|
Note 23
|
|
07/01/2021
|
|
07/01/2022
|
|
|
8%
|
|
|
|
180,400
|
|
|
|
30,317
|
|
|
|
150,083
|
|
|
Note 24
|
|
07/24/2021
|
|
07/24/2022
|
|
|
8%
|
|
|
|
265,000
|
|
|
|
60,970
|
|
|
|
204,030
|
|
|
Note 25
|
|
08/04/2021
|
|
08/04/2022
|
|
|
8%
|
|
|
|
129,800
|
|
|
|
31,372
|
|
|
|
98,428
|
|
|
Note 26
|
|
08/11/2021
|
|
08/11/2022
|
|
|
8%
|
|
|
|
151,500
|
|
|
|
35,572
|
|
|
|
115,928
|
|
|
Note 27
|
|
08/16/2021
|
|
08/16/2022
|
|
|
8%
|
|
|
|
88,400
|
|
|
|
24,411
|
|
|
|
63,989
|
|
|
Note 28
|
|
08/20/2021
|
|
08/20/2022
|
|
|
8%
|
|
|
|
151,500
|
|
|
|
40,075
|
|
|
|
111,425
|
|
|
Note 29
|
|
08/30/2021
|
|
08/30/2022
|
|
|
8%
|
|
|
|
140,650
|
|
|
|
34,054
|
|
|
|
106,596
|
|
|
Note 30
|
|
09/02/2021
|
|
09/02/2022
|
|
|
8%
|
|
|
|
216,385
|
|
|
|
58,052
|
|
|
|
158,333
|
|
|
Note 31
|
|
09/17/2021
|
|
09/17/2022
|
|
|
8%
|
|
|
|
270,480
|
|
|
|
63,833
|
|
|
|
206,647
|
|
|
Note 32
|
|
09/30/2021
|
|
09/30/2022
|
|
|
8%
|
|
|
|
270,480
|
|
|
|
63,805
|
|
|
|
206,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
3,550,247
|
|
|
$
|
537,828
|
|
|
$
|
3,012,419
|
|
* 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 September 30, 2021,
the Company issued to “accredited investors,” Convertible Promissory Notes aggregating a principal amount of $2,258,247. The
Company received an aggregate net proceeds of $2,096,681 after $154,566 in original note discount and $7,000 in legal fees. 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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 six months ended September 30, 2021 is as follows:
|
Schedule of amortization expense, interest expense and accrued
interest on debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
Interest Expense
|
|
|
Accrued Interest
|
|
|
Amortization of Debt Discount
|
|
|
Unamortized
|
|
|
Note 5
|
|
$
|
9,183
|
|
|
$
|
39,315
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Note 6
|
|
|
3,892
|
|
|
|
15,693
|
|
|
|
–
|
|
|
|
–
|
|
|
Note 7
|
|
|
3,893
|
|
|
|
14,872
|
|
|
|
–
|
|
|
|
–
|
|
|
Note 8
|
|
|
1,949
|
|
|
|
14,429
|
|
|
|
9,379
|
|
|
|
–
|
|
|
Note 9
|
|
|
4,224
|
|
|
|
16,400
|
|
|
|
37,415
|
|
|
|
–
|
|
|
Note 10
|
|
|
3,468
|
|
|
|
13,195
|
|
|
|
20,501
|
|
|
|
7,463
|
|
|
Note 11
|
|
|
1,391
|
|
|
|
5,021
|
|
|
|
9,572
|
|
|
|
3,542
|
|
|
Note 12
|
|
|
1,391
|
|
|
|
4,870
|
|
|
|
6,137
|
|
|
|
2,181
|
|
|
Note 14
|
|
|
1,613
|
|
|
|
5,155
|
|
|
|
9,447
|
|
|
|
7,067
|
|
|
Note 16
|
|
|
2,158
|
|
|
|
6,074
|
|
|
|
9,205
|
|
|
|
13,863
|
|
|
Note 17
|
|
|
1,210
|
|
|
|
3,235
|
|
|
|
6,244
|
|
|
|
9,724
|
|
|
Note 18
|
|
|
912
|
|
|
|
2,370
|
|
|
|
9,192
|
|
|
|
24,247
|
|
|
Note 19
|
|
|
1,391
|
|
|
|
3,478
|
|
|
|
13,932
|
|
|
|
33,469
|
|
|
Note 20
|
|
|
2,097
|
|
|
|
3,488
|
|
|
|
992
|
|
|
|
2,352
|
|
|
Note 21
|
|
|
2,097
|
|
|
|
2,918
|
|
|
|
1,493
|
|
|
|
4,094
|
|
|
Note 22
|
|
|
3,744
|
|
|
|
3,988
|
|
|
|
12,448
|
|
|
|
45,081
|
|
|
Note 23
|
|
|
3,598
|
|
|
|
3,598
|
|
|
|
8,928
|
|
|
|
30,317
|
|
|
Note 24
|
|
|
3,775
|
|
|
|
3,775
|
|
|
|
10,395
|
|
|
|
60,970
|
|
|
Note 25
|
|
|
1,622
|
|
|
|
1,622
|
|
|
|
5,337
|
|
|
|
31,372
|
|
|
Note 26
|
|
|
1,660
|
|
|
|
1,660
|
|
|
|
6,042
|
|
|
|
35,572
|
|
|
Note 27
|
|
|
872
|
|
|
|
872
|
|
|
|
4,012
|
|
|
|
24,411
|
|
|
Note 28
|
|
|
1,361
|
|
|
|
1,361
|
|
|
|
6,641
|
|
|
|
40,075
|
|
|
Note 29
|
|
|
956
|
|
|
|
956
|
|
|
|
2,653
|
|
|
|
34,054
|
|
|
Note 30
|
|
|
1,328
|
|
|
|
1,328
|
|
|
|
4,433
|
|
|
|
58,052
|
|
|
Note 31
|
|
|
1,660
|
|
|
|
1,660
|
|
|
|
4,996
|
|
|
|
63,833
|
|
|
Note 32
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
63,805
|
|
|
Total
|
|
$
|
61,445
|
|
|
$
|
171,333
|
|
|
$
|
199,394
|
|
|
$
|
595,544
|
|
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
As of September 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.
NOTE 10 –DERIVATIVE FINANCIAL INSTRUMENTS
The following tables summarize the components
of the Company’s derivative liabilities and linked common shares as of September 30, 2021:
|
Schedule of derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
The financings giving rise to derivative financial instruments
|
|
Indexed
Shares
|
|
|
Fair
Values
|
|
|
Compound embedded derivatives
|
|
|
810,258,880
|
|
|
$
|
(1,762,774
|
)
|
|
Total
|
|
|
810,258,880
|
|
|
$
|
(1,762,774
|
)
|
The following tables summarize the components
of the Company’s derivative liabilities and linked common shares as of September 30, 2020:
|
|
|
September 30, 2020
|
|
|
The financings giving rise to derivative financial instruments
|
|
Indexed
Shares
|
|
|
Fair
Values
|
|
|
Compound embedded derivatives
|
|
|
183,301,607
|
|
|
$
|
(599,454
|
)
|
|
Total
|
|
|
183,301,607
|
|
|
$
|
(599,454
|
)
|
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 September 30, 2021 and 2020:
|
The financings giving rise to derivative financial instruments and the income effects:
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
Compound embedded derivatives
|
|
$
|
(354,942
|
)
|
|
$
|
(511,975
|
)
|
|
Total (loss)
|
|
$
|
(354,942
|
)
|
|
$
|
(511,975
|
)
|
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 six months ended September 30, 2021 and 2020:
|
The financings giving rise to derivative financial instruments and the income effects:
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
Compound embedded derivatives
|
|
$
|
(665,813
|
)
|
|
$
|
(787,407
|
)
|
|
Total (loss)
|
|
$
|
(665,813
|
)
|
|
$
|
(787,407
|
)
|
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
The Company’s Convertible Promissory Notes
issued between October 4, 2019 and September 30, 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:
|
Significant inputs
|
|
|
|
|
September 30, 2021
|
|
|
Quoted market price on valuation date
|
$0.01
|
|
|
Contractual conversion rate
|
$0.00265-$0.01
|
|
|
Contractual term to maturity
|
0.005 Years – 1.0 Years
|
|
|
Market volatility:
|
|
|
|
Equivalent Volatility
|
93.44% - 184.40%
|
|
|
Interest rate
|
8.00%
|
|
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 September 30, 2021 and March 31, 2021.
|
Schedule of changes in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
March 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
1,137,623
|
|
|
$
|
58,790
|
|
|
Issuances:
|
|
|
|
|
|
|
|
|
|
Compound embedded derivatives
|
|
|
407,194
|
|
|
|
732,416
|
|
|
Conversions
|
|
|
–
|
|
|
|
(859,352
|
)
|
|
Derivative extinguished / debt repaid in cash
|
|
|
(136,666
|
)
|
|
|
(126,892
|
)
|
|
(Gain) loss on changes in fair value inputs and assumptions reflected in income
|
|
|
354,942
|
|
|
|
1,332,661
|
|
|
Total
|
|
$
|
1,763,093
|
|
|
$
|
1,137,623
|
|
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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.
Common Stock
Common Stock Issuances for the six months ended
September 30, 2020
On April 23, 2020, the Company issued 4,292,915
shares of stock to GS Capital in exchange for the conversion of $7,341 in convertible note principal.
On May 8, 2020, the Company issued 12,000,000
shares of stock to WLES LP LLC in exchange for the conversion of $30,000 in convertible note principal. The 12,000,000 shares were valued
at $48,281 resulting in a loss on settlement of debt in the amount of $18,281.
On June 16, 2020, the Company issued 4,000,000
shares of common stock to Veyo Partners LLC in exchange for investor relation services valued at $14,400 or $0.0036 per share.
On July 10, 2020, the Company issued 4,000,000
shares of common stock to Veyo Partners LLC in exchange for investor relation services valued at $14,000 or $0.0035 per share.
On July 31, 2020, GS Capital converted $7,500
in principal and $488 in accrued interest of the October 4, 2019 $84,000 face value note into 5,071,885 shares of common stock. The 5,071,885
shares were valued at $16,558. The Company recorded the removal of the $7,500 in principle, $488 in interest, and $8,570 in derivative
liabilities resulting in no gain or loss.
On August 10, 2020, the Company issued 4,000,000
shares of common stock to Veyo Partners LLC in exchange for investor relation services valued at $34,800 or $0.0087 per share.
On August 13, 2020, the Company sold 13,333,334
shares of common stock for $100,000 or $0.0075 per share.
On August 19, 2020, the Company sold 13,333,334
shares of common stock for $100,000 or $0.0075 per share.
On August 20, 2020, GS Capital converted $12,500
in principal and $871 in accrued interest of the October 4, 2019 $84,000 face value note into 8,468,394 shares of common stock. The 8,468,394
shares were valued at $155,914. After recording the removal of the $12,500 in principal, $871 in interest, and $138,647 in derivative
liabilities, the Company recorded $3,896 as loss on extinguishment of debt.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
On September 1, 2020, the Company sold 13,333,334
shares of common stock for $100,000 or $0.0075 per share.
On September 9, 2020, GS Capital converted $55,000
in principal and $4,075 in accrued interest of the October 4, 2019 $84,000 face value note into 12,123,426 shares of common stock. The
12,123,426 shares were valued at $262,363. After recording the removal of the $55,000 in principal, $4,075 in interest, and $142,990 in
derivative liabilities, the Company recorded $60,298 as loss on extinguishment of debt.
On September 14, 2020, the Company sold 22,000,000
shares of common stock for $165,000 or $0.0075 per share.
On September 30, 2020, the Company issued 3,733,333
shares of common stock for services valued at $26,133 or $0.0070 per share.
Common Stock Issuances for the six months ended
September 30, 2021
On April 1, 2021, the Company issued 50,000,000
shares of stock to GS Capital in exchange for $200,000 or $0.004 per share.
On April 10, 2021, the Company issued 25,000,000
shares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
On April 14, 2021, the Company issued 13,750,000
shares of stock to GS Capital in exchange for $55,000 or $0.004 per share.
On May 13, 2021, the Company issued 50,000,000
shares of stock to GS Capital in exchange for $200,000 or $0.004 per share.
On May 21, 2021 the Company issued 1,500,000 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 2,000,000 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 2,000,000 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 25,000,000
shares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
On June 16, 2021, the Company issued 31,250,000
shares of stock to GS Capital in exchange for $125,000 or $0.004 per share.
On June 25, 2021, the Company issued 25,000,000
shares of stock to AES Capital in exchange for $100,000 or $0.004 per share.
On July 13, 2021, the Company issued 25,000,000
shares of stock to Geneva Roth in exchange for $100,000 or $0.004 per share.
On July 15, 2021, the Company issued 25,000,000
shares of stock to GS Capital in exchange for $100,000 or $0.004 per share.
On July 21, 2021, the Company issued 25,000,000
shares of stock to GS Capital in exchange for $100,000 or $0.004 per share.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 Lease7,624
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.
Valparaiso Additional Space Lease
On August 30, 2021, the Company entered into a
facilities lease (“Valparaiso Additional Space”) for 6,380 square feet in Valparaiso, Indiana. The initial lease term is for
five years and the lease commencement date is August 30, 2021. The monthly lease payments are $4,250.00 plus Common Area Maintenance (“CAM”)
in year 1, $5,316.66 plus (“CAM”) in year 2 and 3, and $6,380.00 plus (“CAM”) in year 4 and 5. The Company has
the option to renew at a rental rate of $6,911.66 plus (“CAM”) for years 2029 through 2033.
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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
Right-of-use asset is summarized below:
|
Summary of right-of-use asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
|
Kokomo
Lease
|
|
|
Valparaiso
Lease
|
|
|
Merrill
Lease
|
|
|
Tuscaloosa
Lease
|
|
|
Birmingham
Lease
|
|
|
Valparaiso
Additional Lease
|
|
|
Total
|
|
|
Office lease
|
|
$
|
375,483
|
|
|
$
|
374,360
|
|
|
$
|
701,404
|
|
|
$
|
222,087
|
|
|
$
|
284,745
|
|
|
$
|
372,778
|
|
|
$
|
2,330,857
|
|
|
Less: accumulated amortization
|
|
|
(61,255
|
)
|
|
|
(102,574
|
)
|
|
|
(66,088
|
)
|
|
|
(39,078
|
)
|
|
|
(18,695
|
)
|
|
|
(3,114
|
)
|
|
|
(290,804
|
)
|
|
Right-of-use asset, net
|
|
$
|
314,228
|
|
|
$
|
271,786
|
|
|
$
|
635,316
|
|
|
$
|
183,009
|
|
|
$
|
266,050
|
|
|
$
|
369,664
|
|
|
$
|
2,040,053
|
|
Operating lease liability is summarized below:
|
Summary
of operating lease liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
|
Kokomo
Lease
|
|
|
Valparaiso Lease
|
|
|
Merrill
Lease
|
|
|
Tuscaloosa Lease
|
|
|
Birmingham
Lease
|
|
|
Valparaiso
Additional
Lease
|
|
|
Total
|
|
|
Office lease
|
|
$
|
322,413
|
|
|
$
|
271,786
|
|
|
$
|
681,570
|
|
|
$
|
183,009
|
|
|
$
|
266,051
|
|
|
$
|
375,884
|
|
|
$
|
2,100,713
|
|
|
Less: current portion
|
|
|
(63,246
|
)
|
|
|
(113,315
|
)
|
|
|
(95,730
|
)
|
|
|
(56,858
|
)
|
|
|
(48,163
|
)
|
|
|
(9,999
|
)
|
|
|
(387,311
|
)
|
|
Long term portion
|
|
$
|
259,167
|
|
|
$
|
158,471
|
|
|
$
|
585,840
|
|
|
$
|
126,151
|
|
|
$
|
217,888
|
|
|
$
|
365,885
|
|
|
$
|
1,713,402
|
|
Maturity of the lease liability is as follows:
|
Summary of maturity of lease liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
|
|
Kokomo
Lease
|
|
|
Valparaiso
Lease
|
|
|
Merrill
Lease
|
|
|
Tuscaloosa Lease
|
|
|
Birmingham
Lease
|
|
|
Valparaiso
Additional
Lease
|
|
|
Total
|
|
|
Fiscal year ending March 31, 2022
|
|
$
|
45,938
|
|
|
$
|
67,137
|
|
|
$
|
58,756
|
|
|
$
|
36,000
|
|
|
$
|
36,000
|
|
|
$
|
15,780
|
|
|
$
|
259,611
|
|
|
Fiscal year ending March 31, 2023
|
|
|
94,172
|
|
|
|
134,274
|
|
|
|
201,450
|
|
|
|
72,000
|
|
|
|
72,000
|
|
|
|
63,122
|
|
|
|
637,018
|
|
|
Fiscal year ending March 31, 2024
|
|
|
98,880
|
|
|
|
100,706
|
|
|
|
201,450
|
|
|
|
72,000
|
|
|
|
72,000
|
|
|
|
66,441
|
|
|
|
611,477
|
|
|
Fiscal year ending March 31, 2025
|
|
|
101,292
|
|
|
|
–
|
|
|
|
201,450
|
|
|
|
30,000
|
|
|
|
72,000
|
|
|
|
76,400
|
|
|
|
481,142
|
|
|
Fiscal year ending March 31, 2026
|
|
|
50,646
|
|
|
|
–
|
|
|
|
184,664
|
|
|
|
–
|
|
|
|
72,000
|
|
|
|
79,665
|
|
|
|
386,974
|
|
|
Fiscal year ending March 31, 2027
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
6,000
|
|
|
|
89,460
|
|
|
|
95,460
|
|
|
Fiscal year ending March 31, 2028
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
89,460
|
|
|
|
89,460
|
|
|
Fiscal year ending March 31, 2029
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
67,095
|
|
|
|
67,095
|
|
|
Present value discount
|
|
|
(68,515
|
)
|
|
|
(30,330
|
)
|
|
|
(166,199
|
)
|
|
|
(26,991
|
)
|
|
|
(63,949
|
)
|
|
|
(171,540
|
)
|
|
|
(527,524
|
)
|
|
Lease liability
|
|
$
|
322,413
|
|
|
$
|
271,786
|
|
|
$
|
681,570
|
|
|
$
|
183,009
|
|
|
$
|
266,051
|
|
|
$
|
375,884
|
|
|
$
|
2,100,713
|
|
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
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 September 30, 2021, the Company is not aware of any contingent liabilities that should be
reflected in the consolidated financial statements.
The Company entered into an employment agreement
with its Executive Vice President as of November 24, 2017. Under the terms of the agreement, the Company will be liable for severance
and other payments under certain conditions. The employment agreement 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.
On November 29, 2020, with Greg P. Bell abstaining,
the board of directors of the Company approved the Chairman of the Board and Chief Executive Officer & President Agreement dated effective
November 23, 2020 with Mr. Bell, the Company’s Chairman of the Board, CEO, and President. The agreement supersedes the previous
agreement of the same title dated effective November 24, 2017. The term of the agreement is until Mr. Bell is removed from his executive
positions by 80% of the voting control of the Company unless Mr. Bell is legally incapacitated (until legal capacity is regained), as
determined by a court of competent jurisdiction or upon Mr. Bell’s death. Mr. Bell can terminate the agreement upon three months’
prior written notice to the Company.
Pursuant to the agreement, Mr. Bell is entitled
to an annual salary of $120,000 and Mr. Bell was also issued 40,000,000 shares of the Company’s Series B Convertible Preferred Stock
(the “Series B Preferred Stock”).
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 October
8, 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 $86,900. The note has a maturity date of October 8, 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.
B2DIGITAL, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
On October 26, 2021,
the Company entered into an Agreement with Sixth Street Lending LLC pursuant to which the Company issued to Sixth Street Lending LLC a
Promissory Note in the aggregate principal amount of $46,800. The note has a maturity date of October 26, 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 October 30, 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 $270,480. The note has a maturity date of October 19, 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 November 3, 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 $270,480. The note has a maturity date of November 3, 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 October 26, 2021,
the Company entered into a Subscription Agreement with Geneva Roth Remark Holdings for the
sale of 11,250,000 shares of common stock for $45,000, or $0.004 per share. As of the date of this filing, the shares have not been issued.
Amendments to Convertible Promissory Notes
Effective October 18, in order to memorialize
a prior verbal agreement between the Company and the lender, each of the Company’s notes issued on January 27, 2020, February 19,
2020, March 10, 2020, August 4, 2020, October 2, 2020, October 15, 2020, November 2, 2020, November 12, 2020, December 10, 2020, January
14, 2021, January 27, 2021, May 25, 2021, June 24, 2021, July 24, 2021, August 4, 2021, August 11, 2021, August 20, 2021, August 30, 2021,
September 2, 2021, September 17, 2021, and September 30, 2021, respectively, the Company and a lender entered into amendments to the issued
convertible promissory notes which extended each of the maturity dates to April 18, 2021. In addition, the lender waived any penalty interest
that would have accrued due to any defaults.