Mail Stop 4561
March 9, 2018
Alex Mardikian
Chief Executive Officer
OBITX, Inc.
4720 Salisbury Road
Jacksonville, FL 32256
Re: OBITX, Inc.
Registration Statement on Form S-1
Filed February 9, 2018
File No. 333-222978
Dear Mr. Mardikian:
We have reviewed your registration statement and have the following
comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by amending your registration statement
and providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your registration statement and the
information you
provide in response to these comments, we may have additional comments.
Cover Page
1. Please revise to clarify whether you are offering warrants to purchase 3
million shares of
common stock or the 3 million shares of common stock underlying the
warrants. While
your cover page and risk factor on page 22 indicates that you are
registering warrants,
your disclosure on page 14 indicates that you are registering the
underlying shares.
2. You state that OBITX will be an "independent, publicly-traded" company
following the
spin-off. Given that there is no public market for the company's stock,
please revise the
disclosure that characterizes the company as publicly-traded. Further,
provide
appropriate context regarding the statement that the company is
independent. In this
regard, we note that Mr. Rosenberg, one of your two directors, is the
chief executive
officer of MCIG, and that MCIG will hold approximately 95% of the voting
power of the
outstanding capital stock by virtue of its continued ownership of the
Series A Preferred
Stock.
Alex Mardikian
OBITX, Inc.
March 9, 2018
Page 2
3. Please disclose the fixed price, or price range, at which the selling
shareholders are
offering their securities pursuant to Item 501(b)(3) of Regulation S-K.
In this regard, we
note that there currently is no public market for your common stock but
that you plan to
seek quotation on the OTC Bulletin Board or one of the premium
marketplaces of OTC
Link ATS (i.e., OTCQX or OTCQB). As such, you may disclose that the
selling
shareholders will sell at a fixed price, or range, per share until your
common stock is
quoted on one of these markets and thereafter at prevailing market
prices or privately
negotiated prices.
Risk Factors, page 17
4. Update your discussion of the regulatory risks related to your digital
assets businesses.
5. On page 13, you state that your products "will provide your consumers in
.. . . the
cannabis markets with an advertising and marketing approach uniquely
designed for
them." Please add a risk factor that describes the risks and
consequences under federal
laws of engaging in business with cannabis markets.
6. Please confirm that you intend to file a Form 8-A to register your
common stock under
Section 12 of the Securities Exchange Act of 1934. If not, provide a
risk factor that
clarifies your reporting obligations if you are only subject to the
reporting obligations
imposed by Section 15(d) of the Exchange Act. To this end, explain the
effect on
investors of the automatic suspension under Section 15(d) of the
Exchange Act, as well
as the inapplicability of the proxy rules and Section 16 of the Exchange
Act.
"We will have broad discretion over the use of the net proceeds . . . ," page
22
7. You disclose that you will receive net proceeds from this offering. We
note, however,
that the selling shareholders will receive all the proceeds from this
offering, as stated in
the Use of Proceeds section. Please revise your disclosure to eliminate
the implication
that the potential sale of 3,000,000 shares of common stock pursuant to
the exercise of
the outstanding warrants is part of this offering.
Business, page 39
8. As your proposed business plan may involve acquiring, holding and
selling securities, it
appears that these activities may implicate obligations under the
federal securities laws,
including, but not limited to, any requirements to register as a
broker-dealer under the
Securities Exchange Act of 1934 or an investment company under the
Investment
Company Act of 1940. Please explain how you intend to conduct your
operations in
accordance with these requirements.
9. Your description of "Blockchain Network" on page 7 seems limited to one
type of
blockchain network rather than an expansive discussion of the various
types of
Alex Mardikian
OBITX, Inc.
March 9, 2018
Page 3
blockchain networks. Please either expand your discussion on page 42 or
limit your
definition of "Blockchain Network" on page 7 to conform to the
discussion. Describe the
"other strategic opportunities" in digital assets and blockchain
technologies you intend to
pursue.
10. We note you refer to various dates of incorporation throughout your Form
S-1 including
March 13, March 30 and April 3, 2017. We also note the consent of your
independent
auditor, filed as Exhibit 23, refers to an inception date of March 10,
2017 while page F-4
indicates a March 13, 2017 inception date. Please revise to clarify the
company's actual
dates of incorporation and inception throughout the filing. In addition,
revise to indicate
the specific period reported in your financial statements and related
disclosures for
operations, stockholders' equity and cash flows.
11. Since the OBITX, Inc. historical costs of doing business as a "spin-off"
entity from
MCIG, Inc. may not be indicative of expected future results and trends
please revise to
include unaudited pro forma financial information reflecting the impact
of this
transaction. Refer to Rule 11-01(a)(7) of Regulation S-X.
12. Please disclose whether you have entered into any agreements with MCIG,
Inc., such as a
separation agreement or transition services agreement, that will govern
the relationship
between you and MCIG after the spin-off. If you have executed such
agreements, file
them as exhibits to the registration statement pursuant to Item
601(b)(10) of Regulation
S-K. To the extent no such agreements exist, please address any material
risks to your
business in the prospectus summary and a risk factor.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Plan of Operations, page 45
13. We note that you use the terms "Digital Assets" and "cryptocurrency."
Please explain
what you mean by these terms and clarify that not all digital assets are
"currencies" and
may be securities or other types of assets. Identify the specific
digital assets or
"cryptocurrency" you currently hold and that you intend to acquire, hold
and trade.
14. Please identify the trading platforms or exchanges you intend to trade
these assets on and
disclose whether they are registered national securities exchanges or
alternative trading
systems. Please also disclose what you mean by "initial bounty
offerings."
15. We note you have generated substantially all your revenue through sales
of your
marketing and consulting services to the "Digital Asset industry."
Describe the services
you have provided and clarify how you were compensated for them.
Disclose whether
you currently hold any digital assets.
Alex Mardikian
OBITX, Inc.
March 9, 2018
Page 4
16. With respect to your disclosure regarding the Uses of Cryptocurrencies on
page 42, we
note your expansive description of entities that are accepting
cryptocurrencies. Provide
the basis for these statements and note, if true, that other market
participants, such as
credit card companies and certain financial institutions are not
accepting such digital
assets.
17. Please describe the investment strategy/methodology you will follow to
make digital
asset purchases and build your portfolio. Disclose whether you intend to
acquire
securities in registered or unregistered offerings and how you will
determine whether you
can transfer or sell acquired assets. Discuss how your strategy may be
impacted by the
potential illiquidity and volatility of digital assets. Explain how you
will value the
digital assets you hold given their volatility and fragmentation,
potential for
manipulation, and general lack of regulation of underlying digital assets
markets.
Describe your intended custodial practices for the digital assets and the
cybersecurity
measures you intend to use to protect them.
18. You indicate that you will compete with entities that have greater
hashing capacity.
Discuss whether you intend to acquire digital assets through mining and,
if so, specify the
digital assets that you will mine and describe the unique characteristics
of each type of
mining, including the extent to which mining servers and associated
equipment will be
allocated to one digital asset versus another. Provide a detailed
discussion of the steps
you will take to launch your mining operations and describe how you will
fund those
operations.
19. We note your near-term goals include "expansion of [y]our Digital Assets"
and "further
expansion into the cryptocurrency markets." Please provide an enhanced
discussion of
your plan of operations for the next 12 months. Describe the anticipated
milestones with
regard to the development and commercialization of your existing products
and services
as well as the creation of a portfolio of digital assets. Further,
disclose how much
additional capital you need to accomplish each goal; how you plan to
raise that capital;
and how you will prioritize the allocation of capital.
Executive Compensation, page 50
20. Please explain how the $42,000 paid to Mr. Markidian for the period ended
October 31,
2017, was determined. We note your disclosures indicate that it may have
derived from a
consulting agreement. Refer to Item 402(o) of Regulation S-K.
Alex Mardikian
OBITX, Inc.
March 9, 2018
Page 5
Selling Shareholders, page 52
21. Your tabular disclosure indicates that the total number of Resale Shares
being registered
is 600,000, whereas your disclosure otherwise indicates that you are
registering
5,500,000 of such shares, including 2,500,000 outstanding shares of
common stock and
3,000,000 shares underlying outstanding warrants. Please reconcile.
Further, you should
provide footnote disclosure that identifies the nature of any position,
office, or other
material relationship that any of the selling shareholders have had with
you since
inception. Refer to Item 508 of Regulation S-K.
Index to Financial Statements, page 55
22. Tell us why you have not provided audited financial statements from the
period of
inception through fiscal year end April 30, 2017 separately from the
financial information
for the period ended October 31, 2017.
Report of the Independent Registered Public Accounting Firm, page F-2
23. Explain the Company's considerations to select an auditor based in
Israel for the audit.
In this regard, we note the Company's offices are in Jacksonville,
Florida.
Statements of Operations, page F-3
24. We note that you present a gross profit measure that excludes
depreciation and
amortization expense. Please tell us how you considered the guidance in
SAB Topic
11.B with regard to your presentation of depreciation and amortization
that is directly
attributable to the cost of sales. In this regard, if you do not
allocate any depreciation and
amortization to cost of sales, you should remove the gross profit
subtotal from your
statements of operations and re-label the cost of sales line item
throughout the filing to
indicate that it excludes depreciation and amortization. MD&A should be
revised to
reflect the impact of any reclassification in your financial statements.
Note 1. Organization and Basis of Presentation, page F-6
25. Please tell us whether your historical financial information reflects
certain expenses
incurred by your parent company, MCIG, Inc., on your behalf. If so,
please revise to
disclose this information. Refer to SAB Topic 1B.
26. Please clarify how you comply with the guidance in ASC 605 regarding
your revenue
recognition policies for each of your software and services products and
solutions.
Further, revise to state the date you expect to adopt ASC 606 and any
potential impact
from adoption, if known. Refer to SAB Topic 11M.
Alex Mardikian
OBITX, Inc.
March 9, 2018
Page 6
27. You appear to include two, duplicative disclosures related to
concentration of credit risk,
one on page F-7 and one on page F-10. Please revise accordingly.
28. In your disclosure related to concentration of credit risk and
significant customers on
page F-7, you state that one primary customer accounted for 99% of
revenues and 100%
of accounts receivable as of October 31, 2017. However, you also state
that you have
limited concentration of credit risk because of the diverse group of
customers you
provide services to. Please revise to reconcile these two statements.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Brittany Ebbertt, Staff Accountant, at (202) 551-3572
or Craig Wilson,
Senior Assistant Chief Accountant, at (202) 551-3226 if you have questions
regarding comments
on the financial statements and related matters. Please contact Bernard Nolan,
Attorney-Adviser,
at (202) 551-6515 or, in his absence, me at (202) 551-3453 with any other
questions. If you
require further assistance, you may contact Barbara C. Jacobs, Assistant
Director, at (202) 551-
3735.
Sincerely,
/s/ Jan Woo
Jan Woo
Legal Branch Chief
Office of
Information
Technologies and
Services
cc: Thomas G. Amon
Law Office of Thomas G. Amon