BTDG B2digital, Inc. - 10-K

Item 1A.

Risk Factors

The following is only a brief summary of the risks involved in investing in our Company. Investment in our securities involves risks. You should carefully consider the following risk factors in addition to other information contained in this 10-K. The occurrence of any of the following risks might cause you to lose all or part of your investment. Some statements in this 10-K, including statements in the following Risk Factors, constitute “Forward-Looking Statements.”

Risks Related to Our Business

The Company needs additional capital to support its operations or the growth of its business, and the Company cannot be certain that this capital will be available on reasonable terms when required, or at all.

In order for the Company to successfully execute its business plan, the Company will require additional financing which may not be available or on acceptable terms. If such financing is available, it may be dilutive to the equity interests of existing stockholders. Failure to obtain financing may have a material adverse effect on the Company’s financial position and may force the Company to seek protection from its creditors through bankruptcy proceedings or pursue other options such as sell assets. If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when required, the Company’s ability to continue to support the operation or growth of its business could be significantly impaired and its operating results may be harmed.

The Company’s inability to pay its secured debt, when due, will cause a default, which will allow the lender to foreclose on our assets and take control of the Company, which would adversely impact the Company’s business.

On July 7, 2022, the Company entered into a Securities Purchase Agreement (the “ SPA ”) with GS Capital Partners, LLC (the “ Lender ”) pursuant to which the Company issued to the Lender an 8% redeemable promissory note (the “ Note ”) in the principal amount of $483,000. Upon the occurrence of Event of Default (as defined in the Note) the Company will have a 15-day grace period, during which no default shall be deemed to have occurred (the “ Grace Period ”). After the conclusion of the Grace Period, the Lender will be required to provide the Company with written notice of default, after which time Lender will have a 45-day cure period to remedy such default (the “ Cure Period ”).

As long as there is no uncured Event of Default, the principal will be paid as follows:

$125,550 upon Closing;

$116,250 within 30 days of Closing;

$106,950 within 60 days of Closing; and

$100,440 within 90 days of Closing.

Pursuant to the SPA, the Company entered into the Pledge Agreement with the Lender, Greg P. Bell, and B2 Management Group LLC, a Nevada limited liability company (“ B2 Management ”), pursuant to which, as security for all existing and outstanding notes issued to the Lender, Mr. Bell and B2 Management pledged to the all shares of the Company’s Series A and Series B Preferred Stock owned by Mr. Bell and B2 Management, collectively (the “ Pledged Shares ”), and granted to the Lender a first priority lien on and a first priority security interest in the following (collectively, the “ Stock Collateral ”):

the Pledged Shares and all capital, revenue, profit, income, gain or other property or proceeds, return on contribution or otherwise with respect to the Pledged Shares;

all securities, moneys or property representing dividends or interest on any of the Pledged Shares, or representing a distribution in respect of the Pledged Shares, or resulting from a split-up, revision, reclassification or other like change of the Pledged Shares or otherwise received in exchange therefor, and any subscription warrants, rights or options issued to the holders of, or otherwise in respect of, the Pledged Shares (exclusive of any equity holder loans);

all right, title and interest of Mr. Bell and/or B2 Management in, to and under any policy of insurance payable by reason of loss or damage to the Pledged Shares and any other Stock Collateral;

all other payments due or to become due to Mr. Bell and/or B2 Management in respect of the Pledged Shares whether under any organizational document or otherwise, whether as contractual obligations, damages or otherwise;

all “accounts”, “general intangibles”, “instruments” and “investment property” (in each case as defined in the UCC) constituting or relating to the foregoing;

all proceeds of any of the foregoing property of Mr. Bell and/or B2 Management (including, without limitation, any proceeds of insurance thereon, all “accounts”, “general intangibles”, “instruments” and “investment property”, in each case as defined in the UCC, constituting or relating to the foregoing); and

all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof.

Pursuant to the Pledge Agreement, Mr. Bell and B2 Management entered into Irrevocable Proxies pursuant to which Mr. Bell and B2 Management appointed the Lender with full power to appoint a nominee or nominees to act from time to time, the true and lawful attorney and proxy of the Pledged Shares, at all annual and special meetings of the shareholders of the Company and to take any action by written consent with the same force and effect as either Mr. Bell or B2 Management might or could do.

Pursuant to the SPA, B2 Management entered into the Non-Recourse Guaranty and Security Agreement pursuant to which B2 Management granted to the Lender a security interest in the shares of Series A Preferred Stock owned by B2 Management and all proceeds and products thereof.

In the event that the Company defaults on the Note, the Lender could not only take control of the Company but could also foreclose on the Company’s assets, which would make an investment in the Company worthless.

A pandemic, epidemic or outbreak of an infectious disease in the markets in which the Company operates or that otherwise impacts its facilities and customers could adversely impact the Company’s business.

If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak of respiratory illness caused by a novel coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China, or other public health crisis were to affect the Company’s markets or facilities, or its customers, the Company’s business could be adversely affected. Consequences of the coronavirus outbreak are resulting in disruptions in or restrictions on the Company’s ability to travel and hold live events. If such an infectious disease broke out at the Company’s office, facilities or work sites, its operations may be affected significantly, its productivity may be affected, and the Company may incur increased costs. If the persons and entities with which the Company contracts are affected by an outbreak of infectious disease, its live events may be delayed or cancelled, and the Company may incur increased costs. If the Company’s subcontractors with whom it works were affected by an outbreak of infectious disease, the Company’s labor supply may be affected, and it may incur increased labor costs. In addition, the Company may experience difficulties with certain suppliers or with vendors in its supply chains, and its business could be affected if the Company becomes unable to procure essential equipment, supplies or services in adequate quantities and at acceptable prices. Further, an infectious outbreak may cause disruption to the U.S. economy, or the local economies of the markets in which the Company operates, increase costs associated with its business, affect job growth and consumer confidence, or cause economic changes that the Company cannot anticipate. Overall, the potential impact of a pandemic, epidemic or outbreak of an infectious disease with respect to the Company’s markets or its facilities is difficult to predict and could adversely impact the Company’s business. In response to the COVID-19 situation, federal, state and local governments (or other governments or bodies) are considering placing, or have placed, restrictions on travel and conducting or operating business activities. At this time those restrictions are very fluid and evolving. the Company has been and will continue to be impacted by those restrictions. Given that the type, degree and length of such restrictions are not known at this time, the Company cannot predict the overall impact of such restrictions on it, its customers, its subcontractors, and others with whom the Company works or the overall economic environment. As such, the impact these restrictions may have on the Company’s financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material. In addition, due to the speed with which the COVID-19 situation is developing and evolving, there is uncertainty around its ultimate impact on public health, business operations and the overall economy; therefore, the negative impact on the Company’s financial position, operating results and liquidity cannot be reasonably estimated at this time, but the impact may be material.

The success of the Company’s business is subject to the continued success and popularity of Mixed Martial Arts ("MMA").

MMA is currently a popular sport in the U.S., but the Company’s business is affected by consumer tastes and sports and entertainment trends, which are unpredictable and subject to change. Any decline in the popularity of MMA, changes in the Company’s fans' and customers' tastes or a material change in the perceptions of the MMA industry, whether due to internal or external factors, could adversely affect the Company’s operating results and have a material adverse effect on its business.

The Company may not be able to attract and retain key professional MMA fighters.

The Company’s business is dependent upon identifying, recruiting, and retaining highly regarded professional MMA fighters for its promotions. Fans and sponsors are attracted to events featuring top fighters, and the value placed on a promotion's television and other media rights is dependent to a great extent on the quality of the promotion's fighter roster. The Company may not be able to attract and retain key professional MMA fighters due to competition with other regional promoters for the same fighters. Failing to put on events featuring top professional fighters could adversely affect our operating results and have a material adverse effect on the Company’s business.

The Company may not be able to attract sufficient promotional and advertising sponsorships or maintain such arrangements.

The Company’s business strategy involves developing sponsorship arrangements, or expanding existing sponsorship arrangements, in support of its network of live MMA events. The Company will compete with larger, more established sports and entertainment organizations and media outlets for sponsorship and advertising revenue. Many factors, including the popularity and perception of MMA and the perceived quality of our promotions, will significantly affect the Company’s ability to secure and maintain important advertising and promotional arrangements. If the Company is unable to generate sponsorship and promotional revenue and increase that revenue over time, its operating results and business will be adversely affected.

The Company may be prohibited from promoting and conducting its live events if it does not comply with applicable regulations.

In various states in the U.S. and in some foreign jurisdictions, athletic commissions and other applicable regulatory agencies will require the Company to obtain licenses for promoters, medical clearances and/or other permits or licenses for athletes and/or permits for events in order for it to promote and conduct its live events. If the Company fails to comply with the regulations of a particular jurisdiction, it may be prohibited from promoting and conducting live events in that jurisdiction. The inability to present live events over an extended period of time or in a number of jurisdictions could lead to a decline in the revenue streams generated from the Company’s live events, in which case its operating results would be adversely affected.

The Company could incur substantial liability in the event of accidents or injuries occurring during its events.

The Company intends to hold numerous live MMA events each year. Each live event will expose the Company’s employees who are involved in the production of those events to the risk of travel and match-related accidents, the costs of which may not be fully covered by insurance. The physical nature of the Company’s events will expose its professional MMA fighters to the risk of serious injury or death. Although the Company’s fighters, as independent contractors, are responsible for maintaining their own health, disability and life insurance, the Company insures medical costs for injuries that a fighter may suffer at its events. Any liability the Company incurs as a result of the death of, or a serious injury sustained by one of its fighters while fighting in a match at its events, to the extent not covered by the Company’s insurance, could adversely affect its business, financial condition and operating results.

The Company’s live events will entail other risks inherent in public live events, including air and land travel interruption or accidents, the spread of illness, pandemics, injuries resulting from building problems, equipment malfunction, terrorism or other violence, local labor strikes and other "force majeure" type events. These circumstances could result in personal injuries or deaths, canceled events and other disruptions to the Company’s business for which it does not carry business interruption insurance or result in liability to third parties for which the Company may not have insurance. The occurrence of any of these circumstances could adversely affect the Company’s business, financial condition, and results of operations.

The Company may be unable to establish, protect or enforce its intellectual property rights adequately.

The Company’s success will depend in part on its ability to establish, protect and enforce its intellectual property and other proprietary rights. The Company’s inability to protect its portfolio of copyrighted material, trade names and other intellectual property rights from infringement, piracy, counterfeiting or other unauthorized use could negatively affect its business. If the Company fails to establish, protect or enforce our intellectual property rights, it may lose an important advantage in the markets in which it competes. The Company’s intellectual property rights may not be sufficient to help it maintain its position in the markets and its competitive advantages. Monitoring unauthorized uses of and enforcing the Company’s intellectual property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful and may require a substantial amount of resources and divert the attention of management.

The Company relies on its marketing efforts and channels to promote its brand and events. These efforts may require significant expense and may not be successful.

The Company will employ various marketing tactics and use a variety of marketing channels to promote its brand, including sponsorships, advertisement, email and social media marketing. If the Company loses access to one or more of these channels for any reason, it will not be able to promote its brand or events effectively, which could limit the Company’s ability to grow. Further, if the marketing activities fail to generate traffic to the Company’s events, attract new fans or lead to new and renewal sales for its events, its business and operating results could be affected. There is no assurance in the results of the Company’s continuing marketing efforts. If customer acquisition cost increases, the operating results could also be affected.

Risks Relating to Our Financial Condition

There are doubts about the Company’s ability to continue as a going concern.

The Company is a development stage enterprise and has commenced planned principal operations. The Company had revenues of $2,502,302 and incurred losses of $11,276,819 for the fiscal year ended March 31, 2022. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

There can be no assurance that sufficient funds required during the next year or thereafter will be generated from operations or that funds will be available from external sources, such as debt or equity financings or other potential sources. The lack of additional capital resulting from the inability to generate cash flow from operations, or to raise capital from external sources would force the Company to substantially curtail or cease operations and would, therefore, have a material adverse effect on its business. Furthermore, there can be no assurance that any such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on the Company’s existing stockholders.

The Company intends to overcome the circumstances that impact its ability to remain a going concern through a combination of the growth of revenues, with interim cash flow deficiencies being addressed through additional equity and debt financing, which may be dilutive. The Company anticipates raising additional funds through public or private financing, strategic relationships, or other arrangements in the near future to support its business operations; however, the Company may not have commitments from third parties for a sufficient amount of additional capital. The Company cannot be certain that any such financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit its ability to continue its operations. The Company’s ability to obtain additional funding will determine its ability to continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on the Company’s financial performance, results of operations and stock price and require it to curtail or cease operations, sell off its assets, seek protection from its creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of the Company’s common stock, and debt financing, if available, may involve restrictive covenants, and strategic relationships, if necessary, to raise additional funds, and may require that the Company relinquish valuable rights. Please see Financial Statements – Note 3. Going Concern for further information.

The Company will require additional capital and this capital might not be available on acceptable terms, if at all.

The Company will require additional funds to respond to operate its business. Accordingly, the Company will need to engage in continued equity or debt financings to secure additional funds. If the Company raises additional funds through future issuances of equity or convertible debt securities, its existing stockholders could suffer significant dilution, and any new equity securities the Company issues could have rights, preferences, and privileges superior to those of its common stock. Any debt financing the Company secures in the future could involve restrictive covenants relating to the Company’s capital raising activities and other financial and operational matters, which may make it more difficult for the Company to obtain additional capital and to pursue business opportunities, including potential acquisitions. The Company may not be able to obtain additional financing on terms favorable to it, if at all. If the Company is unable to obtain adequate financing or financing on terms satisfactory to it when we required, its ability to continue to support its business growth and to respond to business challenges could be impaired, and the Company’s business may be harmed.

The Company’s management has a limited experience operating a public company and is subject to the risks commonly encountered by early-stage companies.

Although the Company’s management has experience in operating small companies, its management has not had to manage expansion while being a public company. Many investors may treat the Company as an early-stage company. In addition, the Company’s management has not overseen a company with large growth. Because the Company has a limited operating history, its operating prospects should be considered in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. These risks include:

risks that the Company may not have sufficient capital to achieve its growth strategy;

risks that the Company may not develop its product and service offerings in a manner that enables it to be profitable and meet our customers’ requirements;

risks that the Company’s growth strategy may not be successful; and

risks that fluctuations in our operating results will be significant relative to our revenues.

These risks are described in more detail below. The Company’s future growth will depend substantially on its ability to address these, and the other risks described in this section. If the Company does not successfully address these risks, its business could be significantly harmed.

The Company has limited operational history in an emerging industry, making it difficult to accurately predict and forecast business operations.

As the Company has limited operations in its business and has yet to generate significant revenue, it is extremely difficult to make accurate predictions and forecasts on its finances. This is compounded by the fact that the Company operates in a rapidly transforming industry. There is no guarantee that the Company’s products or services will remain attractive to potential and current users as these industries undergo rapid change, or that potential customers will utilize the Company’s services.

As a growing company, the Company has yet to achieve a profit and may not achieve a profit in the near future, if at all.

The Company has not yet produced a net profit and may not in the near future, if at all. The Company cannot be certain that it will be able to realize sufficient revenue to achieve profitability. The Company’s ability to continue as a going concern may be dependent upon raising capital from financing transactions, increasing revenue throughout the year and keeping operating expenses below revenue levels in order to achieve positive cash flows, none of which can be assured.

The Company is highly dependent on the services of its key executive, the loss of whom could materially harm the Company’s business and its strategic direction. If the Company loses key management or significant personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in its compensation costs, the Company’s business may materially suffer.

The Company is highly dependent on its management, specifically Greg P. Bell. The Company has an employment agreement in place with Mr. Bell. If the Company loses key employees, its business may suffer. Furthermore, the Company’s future success will also depend, in part, on the continued service of its management personnel and its ability to identify, hire, and retain additional key personnel. The Company does not carry “key-man” life insurance on the lives of any of its executives, employees, or advisors. The Company experiences intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of its business. Because of this competition, the Company’s compensation costs may increase significantly.

The Company operates in a highly competitive environment, and if it is unable to compete with its competitors, its business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.

The Company operates in a highly competitive environment. The Company’s competition includes all other companies that are in the business of entertainment events or other related companies. A highly competitive environment could materially adversely affect the Company’s business, financial condition, results of operations, cash flows and prospects.

The Company may not be able to compete successfully with other established companies offering the same or similar services and, as a result, the Company may not achieve its projected revenue and user targets.

If the Company is unable to compete successfully with other businesses in its existing markets, it may not achieve its projected revenue and/or customer targets. The Company competes with both start-up and established companies. Compared to the Company’s business, some of its competitors may have greater financial and other resources, have been in business longer, have greater name recognition and be better established.

The Company’s lack of adequate D&O insurance may also make it difficult for it to retain and attract talented and skilled directors and officers.

In the future the Company may be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date, the Company has not obtained directors and officers liability (“ D&O ”) insurance. Without adequate D&O insurance, the amounts the Company would pay to indemnify its officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on the Company’s financial condition, results of operations and liquidity. Furthermore, the Company’s lack of adequate D&O insurance may make it difficult for it to retain and attract talented and skilled directors and officers, which could adversely affect its business.

The Company expects to incur substantial expenses to meet its reporting obligations as a public company. In addition, failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s financial reporting and could harm its ability to manage its expenses.

The Company estimates that it will cost approximately $117,000 annually to maintain the proper management and financial controls for the Company’s filings required as a public reporting company. In addition, if the Company does not maintain adequate financial and management personnel, processes, and controls, it may not be able to accurately report its financial performance on a timely basis, which could cause a decline in the Company’s stock price and adversely affect our ability to raise capital.

Risks Relating to our Common Stock

In the event the Company fails to timely file its period SEC reports, it may lose its trading symbol on the OTC Markets and, if that happens, shareholders will suffer from a lack of liquidity.

The OTC Markets requires its companies provide periodic financial and business-related disclosure through several methods, including through filing with the SEC. The Company has elected to provide the required disclosure on the OTC Markets through this method. In the event that the Company fails to file its periodic filings with the SEC for a sustained period of time, the OTC Markets will suspend the Company’s trading symbol, which will lead to a revocation of the symbol. In the event that the Company loses its trading symbol and status with the OTC Markets, the liquidity of the Company’s common stock will be severely limited.

The price of the Company’s common stock may continue to be volatile.

The trading price of the Company’s common stock has been and is likely to remain highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control or unrelated to its operating performance. In addition to the factors discussed in this “Risk Factors” section and elsewhere, these factors include: the ongoing COVID-19 pandemic, the operating performance of similar companies; the overall performance of the equity markets; the announcements by the Company or its competitors of acquisitions, business plans, or commercial relationships; threatened or actual litigation; changes in laws or regulations relating to the Company’s business; any major change in the Company’s board of directors or management; publication of research reports or news stories about the Company, its competitors, or its industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; large volumes of sales of our shares of common stock by existing stockholders; and general political and economic conditions.

In addition, the stock market in general, and the market for developmental related companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies’ securities. This litigation, if instituted against the Company, could result in very substantial costs; divert management’s attention and resources; and harm the Company’s business, operating results, and financial condition.

The Company’s common stock is thinly traded, so the Company’s stockholders may be unable to sell at or near ask prices or at all if they need to sell their shares to raise money or otherwise desire to liquidate their shares.

The Company’s common stock has historically been sporadically traded on the OTC Markets, meaning that the number of persons interested in purchasing the Company’s shares at, or near ask prices at any given time, may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that the Company is a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if the Company came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as the Company or purchase or recommend the purchase of its shares until such time as the Company became more seasoned and viable. Consequently, there may be periods of several days or more when trading activity in the Company’s shares is minimal or non-existent, as compared to a seasoned issuer, which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. The Company cannot give shareholders any assurance that a broader or more active public trading market for its common shares will develop or be sustained, or that current trading levels will be sustained.

The market price for the Company’s common stock is particularly volatile given its status as a relatively unknown company with a small and thinly traded public float, limited operating history, and lack of revenue, which could lead to wide fluctuations in the Company’s share price. The price at which a shareholder purchases the Company’s shares may not be indicative of the price that will prevail in the trading market. The Company’s shareholders may be unable to sell their common shares at or above the purchase price, which may result in substantial losses to the Company’s shareholders.

The market for the Company’s shares of common stock is characterized by significant price volatility when compared to seasoned issuers, and the Company expects that its share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in the Company’s share price is attributable to a number of factors. First, as noted above, the Company’s shares are sporadically traded. Because of this lack of liquidity, the trading of relatively small quantities of shares may disproportionately influence the price of those shares in either direction. The price for the Company’s shares could, for example, decline precipitously in the event that a large number of the Company’s shares is sold into the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, the Company is a speculative investment due to, among other matters, its limited operating history and lack of significant revenue or profit to date, and the uncertainty of future market acceptance for the Company’s products. Because of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the securities of a seasoned issuer. The following factors may add to the volatility in the price of the Company’s shares: actual or anticipated variations in our quarterly or annual operating results; acceptance of the Company’s inventory of events, games, government regulations, announcements of significant acquisitions, strategic partnerships or joint ventures, the Company’s capital commitments and additions or departures of its key personnel. Many of these factors are beyond the Company’s control and may decrease the market price of its shares regardless of operating performance. The Company cannot make any predictions or projections as to what the prevailing market price for its shares will be at any time, including as to whether its shares will sustain their current market prices, or as to what effect the sale of shares or the availability of shares for sale at any time will have on the prevailing market price.

The Company’s shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The Company’s management is aware of the abuses that have occurred historically in the penny stock market. Although the Company does not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, the Company’s management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to its securities. The possible occurrence of these patterns or practices could increase the volatility of the Company’s share price.

The market price of the Company’s common stock may be volatile and adversely affected by several factors.

The market price of the Company’s common stock could fluctuate significantly in response to various factors and events, including, but not limited to:

the unprecedented impact of COVID-19 pandemic on our business, customers, employees, consultants, service providers, stockholders, investors, and other stakeholders;

the Company’s ability to integrate operations, technology, products, and services;

our ability to execute our business plan;

operating results below expectations;

our issuance of additional securities, including debt or equity or a combination thereof;

announcements of technological innovations or new products by us or our competitors;

loss of any strategic relationship;

industry developments, including, without limitation, changes in competition or practices;

economic and other external factors;

period-to-period fluctuations in our financial results; and

whether an active trading market in our common stock develops and is maintained.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Company’s common stock. Issuers using the Alternative Reporting standard for filing financial reports with OTC Markets are often subject to large volatility unrelated to the fundamentals of the company.

Pandemics, natural disasters and geo-political events could adversely affect the Company’s business.

Pandemics, natural disasters, including hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, weather conditions, including winter storms, droughts, and tornadoes, whether as a result of climate change or otherwise, and geo-political events, including civil unrest or terrorist attacks, that affect the Company, or other service providers, could adversely affect the Company’s business.

The Company does not expect to pay dividends in the future; any return on investment may be limited to the value of the Company’s common stock.

The Company does not currently anticipate paying cash dividends in the foreseeable future. The payment of dividends on the Company’s common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. The Company’s current intention is to apply net earnings, if any, in the foreseeable future to increasing the Company’s capital base and development and marketing efforts. There can be no assurance that the Company will ever have sufficient earnings to declare and pay dividends to the holders of its common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of the Company’s board of directors. If the Company does not pay dividends, its common stock may be less valuable because a return on investment will only occur if its stock price appreciates.

The Company’s issuance of additional shares of common stock, or options or warrants to purchase those shares, would dilute shareholders’ proportionate ownership and voting rights.

As of March 31, 2022 the Company was entitled under its Certificate of Incorporation to issue up to 5,000,000,000 shares of common stock as of September 1, 2022 the company is entitled under its Certificate of Incorporation to issue up to 20,000,000,000 shares of common stock. The Company has issued and outstanding 2,171,546,992 shares of common stock as of September 19, 2022. In addition, the Company is entitled under its Certificate of Incorporation to issue “blank check” preferred stock. The Company’s board may generally issue shares of common stock, preferred stock, options, or warrants to purchase those shares, without further approval by our shareholders based upon such factors as the Company’s board of directors may deem relevant at that time. It is likely that the Company will be required to issue a large number of additional securities to raise capital to further its development. It is also likely that the Company will issue a large number of additional securities to directors, officers, employees, and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under the Company’s stock plans. The Company cannot give any assurance that it will not issue additional shares of common stock, or options or warrants to purchase those shares, under circumstances the Company may deem appropriate at that time.

The existence of indemnification rights to the Company’s directors, officers and employees may result in substantial expenditures by the Company and may discourage lawsuits against its directors, officers and employees.

The Company has contractual indemnification obligations under its agreements with its directors, officers, and employees. The foregoing indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers, and employees that the Company may be unable to recoup. These provisions and resulting costs may also discourage the Company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by the Company’s shareholders against its directors, officers, and employees even though such actions, if successful, might otherwise benefit the Company and shareholders.

The Company may become involved in securities class action litigation that could divert management’s attention and harm its business.

The stock market, in general, and the shares of early-stage companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of the Company’s shares could fall regardless of its operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of the Company’s shares suffers extreme fluctuations, then it may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing the Company’s business.

As a public company, the Company may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. The Company’s management has limited experience as a management team in a public company and, as a result, projections may not be made timely or set at expected performance levels and could materially affect the price of the Company’s shares. Any failure to meet published forward-looking statements that adversely affect the stock price could result in losses to investors, stockholder lawsuits or other litigation, sanctions or restrictions issued by the SEC.

The Company’s common stock is currently deemed a “penny stock,” which makes it more difficult for the Company’s shareholders to sell their shares.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.

Disclosure also must be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities, and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

As an issuer of a “penny stock,” the protection provided by the federal securities laws relating to forward-looking statements does not apply to the Company.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not misleading. Such an action could hurt the Company’s financial condition.

Securities analysts may elect not to report on the Company’s common stock or may issue negative reports that adversely affect the stock price.

At this time, no securities analysts provide research coverage of the Company’s common stock, and securities analysts may not elect to provide such coverage in the future. It may remain difficult for the Company, with its small market capitalization, to attract independent financial analysts that will cover the Company’s common stock. If securities analysts do not cover the Company’s common stock, the lack of research coverage may adversely affect the stock’s actual and potential market price. The trading market for the Company’s common stock may be affected in part by the research and reports that industry or financial analysts publish about the Company’s business. If one or more analysts elect to cover the Company and then downgrade the stock, the stock price would likely decline rapidly. If one or more of these analysts cease coverage of the Company, it could lose visibility in the market, which, in turn, could cause the Company’s stock price to decline. This could have a negative effect on the market price of the Company’s common stock.

Item 7.

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” herein. 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 ten wholly-owned subsidiaries. Hardrock Promotions LLC which owns Hardrock MMA in Kentucky, United Combat League MMA LLC, Pinnacle Combat LLC, Strike Hard Productions, 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 ten 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K 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;

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 Annual Report on Form 10-K are based on our beliefs, assumptions, and expectations, considering 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 Annual Report on Form 10-K or otherwise make public statements updating our forward-looking statements.

Critical Accounting Policies

Basis of Accounting

The accompanying consolidated financial statements were prepared in conformity with U.S. GAAP.

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 March 31, 2022 and 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.

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 three to seven years.

Assets Held for Sale

We consider properties to be Assets held for sale when management approves and commits to a plan to dispose of a property or group of properties. The property held for sale prior to the sale date is separately presented on the balance sheet as Assets held for sale. During the fourth quarter of fiscal 2022 management initiated the sale of the gyms located in Indiana: One More Gym Kokomo, One More Gym Valparaiso and One More Gym Merrillville. We completed the sale during the first quarter of fiscal 2023 with proceeds of $80,000, reflecting a loss of $162,298. We have no additional assets held for sale.

Long-Lived Assets

Management reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. For assets held for use, the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

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.

Live Event 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 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

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 for gym membership dues. Members pay their dues on the monthly anniversary of when they join the gym. Dues are recognized as revenue over the period they are earned. Any unearned dues 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 March 31, 2022, 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.

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 years ended March 31, 2022, and 2021.

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 March 31, 2022 and 2021, the Company did not have balances in finished goods inventory, respectively.

Earnings Per Share (EPS)

The Company utilizes 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 March 31, 2022, the convertible notes are indexed to 3,606,309,640 shares of common stock.

The following table sets for the computation of basic and diluted earnings per share the years ended March 31, 2022 and 2021:

March 31,

March 31,

Basic and diluted

Net loss

Net loss per share

Basic

Diluted

Weighted average number of shares outstanding:

Basic & diluted

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 March 31, 2022, 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 years ended March 31, 2022 and 2021, the Company recorded $626,050 and $409,333 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.

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.

Organization and Nature of Business

We are the premier development league for MMA. We operate in two major branded segments: The B2 Fighting Series and The Official B2 Training Facilities Network, which is comprised of our two ONE MORE Gym Facilities. We primarily derive revenues from live event ticket sales, pay-per-view ticket sales, content media marketing, and fitness facility memberships.

The Live Events segment (the B2 Fighting Series) is primarily engaged with scheduling, organizing, and producing live MMA events, marketing those events, and generating both live audience and PPV ticket sales, as well as creatively marketing the archived content generated through its operations in this segment. We own all media rights, merchandising rights, digital distribution networks of the B2 Fighting Series. We also plan to generate additional revenues over time from endorsement deals with global brands as its audience grows. The B2 Fighting Series is licensed in 20 U.S. states to operate LIVE MMA Fights. Most B2 Fighting Series events sell out at the gate. We now operate at a pace of more than 40 events per year.

The B2 Training Facilities segment operates primarily through our ONE More Gym Facilities brand. We currently operate two ONE More Gym locations.

For more information about B2Digital, visit our website at www.B2FS.com. We do not incorporate the information on or accessible through our website into this 10-K. We have included our website address in this 10-K solely as an inactive textual reference.

Results of Operations for the Year Ended March 31, 2022, Compared to the Year Ended March 31, 2021

Revenue

We had total revenues of $2,502,302 for the year ended March 31, 2022, versus revenues of $951,302 for the year ended March 31, 2021. There was an increase in live event revenue of $749,430, or 247%, due to an increase in live events related to less restrictions resulting from the COVID-19 pandemic. There was an increase in gym revenue of $801,570, or 124%, due to the increase in the number of gym locations over the prior period.

Operating Expenses

Operating expenses are all expenses including merchant fees, payroll, utilities, professional fees, all costs associated with marketing, press releases, public relations, rent, sponsorships, and other expenses. We incurred operating expenses of $10,552,426 for the year ended March 31, 2022, versus operating expenses of $3,563,734 for the year ended March 31, 2021. The increase of $6,988,692 was primarily due to an increase in the number of live events, increased operations as a result of gym acquisitions, increased salaries, investor relations and professional fees due to the growth of the business. Additionally, a loss on impairment of assets was recorded for $560,156.

Depreciation and Amortization Expense

We incurred depreciation and amortization expense of $462,004 for the year ended March 31, 2022, versus depreciation expense of $186,063 for the year ended March 31, 2021. The increase of $275,941 was due to an increase in capitalized assets and intangible assets as a result of business acquisitions.

Other Income (Expense)

Our other income and expenses include gain on forgiveness of loan, gain on bargain purchase, grant income, loss on extinguishment of debt, gain on extinguishment of debt, change in fair value of derivative liabilities and interest expense. We incurred other expenses of $2,764,691 for the year ended March 31, 2022, versus other expenses of $2,581,775 for the year ended March 31, 2021. The increase in other expenses of $182,916 was primarily due to an increase in interest expense. This increase was primarily offset by gains recorded in the extinguishment of debt.

Net Losses

We incurred a net loss of $11,276,819 for the year ended March 31, 2022, versus a net loss of $5,380,270 for the year ended March 31, 2021.

Current Liquidity and Capital Resources for the Year Ended March 31, 2022, Compared to the Year Ended March 31, 2021

March 31,

Summary of Cash Flows:

Net cash used by operating activities

Net cash used by investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Beginning cash and cash equivalents

Ending cash and cash equivalents

Operating Activities

Cash used in operations of $6,518,124 during the year ended March 31, 2022 was primarily a result of our $11,276,819 net loss reconciled with our net non-cash expenses relating to stock compensation, depreciation and amortization expense, loss on settlement of debt, loss on extinguishment of debt, loss on goodwill impairment, gain on forgiveness of loan, gain on bargain purchase, gain on extinguishment of debt, amortization of debt discount, day one derivative loss, changes in fair value of derivative liabilities, inventory, prepaid expenses, accounts payable, accrued liabilities and deferred compensation. Cash used in operations of $2,052,264 during the year ended March 31, 2021 was primarily a result of our $5,380,270 net loss reconciled with our net non-cash expenses relating to stock compensation, depreciation and amortization expense, loss on settlement of debt, loss on extinguishment of debt, loss on goodwill impairment, gain on forgiveness of loan, gain on bargain purchase, gain on extinguishment of debt, amortization of debt discount, day one derivative loss, changes in fair value of derivative liabilities, inventory, prepaid expenses, accounts payable, accrued liabilities and deferred compensation.

Investing Activities

Net cash used in investing activities for the year ended March 31, 2022, of $757,170 resulted from payments for capital expenditures related to capital expenditures in the amount of $592,170 and business acquisitions in the amount of $165,000. Net cash used in investing activities for the year ended March 31, 2021, of $715,737 resulted from payments related to business acquisitions in the amount of $215,000 and capital expenditures in the amount of $500,737.

Financing Activities

Net cash provided by financing activities was $7,192,741 for the year ended March 31, 2022, which consisted of $150,000 from proceeds from the issuance of notes payable, $6,456,855 from proceeds from the issuance of convertible notes payable, $540,733 payments on convertible notes payable, $23,681 payment on notes payable, $74,700 for the repurchase of common stock and proceeds from the issuance of common stock of $1,225,000. Net cash provided by financing activities was $2,843,448 for year ended March 31, 2021, which consisted of $122,766 from proceeds from the issuance of notes payable, $1,200,000 from proceeds from the issuance of convertible notes payable, $15,000 in payments related to payable due for business acquisitions, $107,500 payments on convertible notes payable, $11,818 payment on notes payable, and $1,655,000 in proceeds from the issuance of common stock.

Future Capital Requirements

Our current available cash and cash equivalents are insufficient to satisfy our liquidity requirements. Our capital requirements for the fiscal year 2022-23 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.

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 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 consolidated financial statements have been prepared on a going concern basis. For the year ended March 31, 2022, the Company had a net loss of $(11,276,819), had net cash used in operating activities of $6,518,124, had negative working capital of $(11,387,636), accumulated deficit of $(20,474,067), and stockholders’ deficit of $(10,204,271). 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.

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.