Correspondence 0001493152-22-036689 from MDB Capital Holdings, LLC (MDBH) (CIK 0001934642) (MDBH)
MDB Capital Holdings, LLC (MDBH) (CIK 0001934642)
Date: Dec. 28, 2022 · CIK: 0001934642 · Accession: 0001493152-22-036689
AI Filing Summary & Sentiment
File numbers found in text: 333-268318
Letter
United States Securities and Exchange Commission Division of Corporation Finance – Office of Attention: Tonya Aldave MDB Capital Holdings, LLC Registration statement on form S-1 Filed on November 10, 2022 File No. 333-268318
Dear Sirs and Mesdames:
Reference is made to the letter of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”), dated December 7, 2022. This letter sets forth below the comments of that letter to the original filing of the registration statement on Form S-1 (“Form S-1”), of MDB Capital Holdings, LLC (the “Company”), filed on November 10, 2022, followed by the responses of the Company.
I am responding on behalf of the Company as its counsel.
Securities and Exchange Commission
December 28, 2022
Page
Registration Statement on Form S-1
Cover page
1. We note your disclosure that the “initial public offering price of [your] class A common shares is expected to be $12.00.” Please revise to clarify if the offering is at a fixed price, as opposed to referring to the offering price as “expected.” Or if $12.00 is intended to be the price range, please confirm you will comply with Rule 430A under the Securities Act. Please also clarify on the cover page if there is a minimum offering requirement and if there is an arrangement for funds to be received in escrow, trust or similar arrangement. Refer to Item 501(b)(8) of Regulation S-K.
Response:
The Company has revised the cover page of the prospectus to indicate that the offering price of $12.00 is fixed, and the securities are being offered on a no minimum / 833,333 share maximum basis. The term “expected” in reference to the offering price has been removed. The Company has also indicated that the purchase price of any subscribers will be put in an escrow account, and held there until closing or returned to subscribers if the offering is terminated.
The Company confirms that it will comply with Rule 430A under the Securities Act.
Prospectus Summary, page 1
2. Please include your revenue and net losses for the most recent audited period and interim stub to provide a financial snapshot of your company and to balance the disclosure in this section.
Response:
The Company has updated the Summary Consolidated Financial and Other Data section of the Prospectus Summary, which will reflect the following: (i) for the nine months ended September 30, 2022 the Company had operating income of $103,513 and a net loss of $5,202,581, and (ii) for the year ended December 31, 2021 the Company had an operating loss of $9,833,998 and a net loss of $15,672,970. The prospectus has been updated with the most recent audit period.
Securities and Exchange Commission
December 28, 2022
Page
3. Please explain in the summary, as you have in the risk factor at page 15, that your business model does not rely upon the receipt of operating cash flows from partner companies. Please also explain how you generate revenues, or advise.
Response:
The Company has added to the summary, in the sub-section “Overview” a paragraph that reflects the fact the business model is not relying on receipt of operating cash flows from the partner companies. We have also disclosed in the prospectus that we anticipate earning revenues from Public Ventures, LLC, an active broker dealer, and from PatentVest, Inc., an intellectual property analytics company with the objective of helping companies define, capitalize and protect their intellectual property.
Risk Factors
The market, including clients and potential investors, may be skeptical of the viability, page 25
4. Please briefly clarify here and in the business section what pipeline products you are referring to, what stage of development they are in, and what steps are further needed, if applicable, to make the pipeline products viable.
Response:
Both the risk factors and business sections about Invizyne has been edited to clarify what the pipeline products are and give some indication of the next steps. The Company wishes to point out to the Staff that the Invizyne products are still early stage and elements of viability are still being assessed, such as scaling up the manufacturing. Thus, a full layout of the steps to commercialization are not yet known, and it would be premature to publicly disclose such steps. This has been indicated in the disclosure about the pipeline products in both the risk factor and business sections.
Use of Proceeds, page 35
5. Please describe more specifically the intended uses of the net proceeds and the amount intended for each use or tell us why you are unable to do so. We also note your disclosure on page 57 that you “intend to use a portion of the capital raised in this offering to invest directly in the partner companies [you] co-found.” Refer to Item 504 of Regulation S-K.
Response:
The Company has edited the section, “Use of Proceeds,” to reflect its current intended uses of the proceeds from the offering. Also, the Company has indicated a prioritization of the uses of the funds raised in the offering due to the fact that this is a no minimum, maximum offering as stipulated in Item 504 of Regulation S-K.
Securities and Exchange Commission
December 28, 2022
Page
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 38
6. Please revise your Management’s Discussion and Analysis (MD&A) to discuss your financial condition and changes in financial condition for each of the periods presented as required by Item 303(a) of Regulation S-K.
Response:
Throughout the prospectus, the Company has updated the financial information to include the quarter ended September 30, 2022, and also updated the MD&A section accordingly.
Business, page 55
7. We note your references in several sections of the prospectus to your operations and employees in Nicaragua. Please revise the business section to explain briefly how many of your 30 full-time employees are in Nicaragua, what functions they perform, and how they fit into your overall business operations. Please also clarify and discuss what aspects of your business operations you plan to be in Nicaragua in the risk factor at page 17, “We plan on sourcing aspects of our business operations in Nicaragua.”
Response:
The Company has corrected the disclosure about having personnel in Nicaragua. The Company has no employees located in Nicaragua. The Company employs a company located in Nicaragua, MDB Capital, S.A., to provide services on an out-source, as requested basis. Two of the officers and the holders of the Class B Common Shares of the registrant, Messrs. Marlett and DiGiandomenico, own that company, and activities with that company are subject to conflict reviews of the audit committee of the registrant and disclosure in related party sections. A copy of the out-source agreement is filed as an exhibit to the registration statement. The Company has indicated that the services provided by MDB Capital , S.A. will be administrative, research and analytical in nature, but subject to the regulatory requirements applicable to the company requesting the services. It is anticipated that the services will be requested by Public Ventures, PatentVest and partner companies.
The Company has also clarified in the “Human Capital” sub-section of the section “Business” that it has an out-source service contract.
A copy of the service agreement has been filed with the registration statement.
Securities and Exchange Commission
December 28, 2022
Page
8. Please revise this section to provide additional details on how you invest in various companies, such as through holding their securities or otherwise, including your current investments into Public Ventures, PatentVest, and Invizyne. Please also clarify what you mean that you have helped them launch successful IPOs. In addition, disclose if you have any other business activities in addition to investment in such companies and, if so, describe such business activities in more detail. Please explain further what you mean by you generally remain involved with the companies for several years thereafter. Please explain the statement on page 58 that your public venture model is different than the typical venture capital fund model, by explaining why you think your model is different.
Response:
The Company wishes to clarify that it has not helped any of Public Ventures, PatentVest or Invizyne in an IPO, to date. These are wholly owned or majority owned companies.
The Company intends to hold its 100% interest in Public Ventures and PatentVest for the long term. The business of Public Ventures is that of a broker-dealer. It is expanding Public Ventures to also become a securities clearing corporation. PatentVest is a business that helps companies define, capitalize and protect their intellectual property. PatentVest is being expanded to add the services of a law firm, licensed in Arizona, and to increase its marketing so as to expand its client base. The Company has expanded the discussion of these companies in the prospectus to indicate the nature of the business activities.
Invizyne, is a 60% held subsidiary. The Company cannot say at this time if and when it will raise more financing from sources that might dilute its ownership. It is probable that more funding will be needed for its business plan. Funding may be from the holding company or from external sources, such as one or more private or public rounds of equity. Other value realization methods will also be considered, such as licensing, joint ventures, asset sales and mergers. It is currently anticipated that the means by which Invizyne will raise the next substantial capital increase will be by means of an initial public offering, however the timing is not yet known.
Currently the Company does not have any other business activities than those of Public Ventures, PatentVest and Invizyne. The Company also has a management company through which it hires certain individuals and through which it has the out-source service support agreement with the Nicaraguan company, MDB Capital, S.A., to provide certain services as stated therein.
Securities and Exchange Commission
December 28, 2022
Page
As explained in the prospectus, where this discussion has been expanded, and here in this letter in connection with Item 25, the holding company takes an ownership position and an active role in its companies that form its subsidiaries. The holding company and its personnel are founders, equity owners, actively establish the business plan, help execute the business plan, serve as directors and officer, oversee management hires and roles, and help with financing the enterprise of each of the subsidiaries.
Track Record, page 55
9. We note your disclosure that you “successfully have used the public market to finance 16 companies,” and that all of their stocks traded at premiums to the IPO offering price post-IPO. We also note that you listed only three of these companies. Please tell us all 16 companies or remove references to a successful track record for a larger number of companies that are not listed in this section.
Response:
The Company has eliminated references to its track record throughout the prospectus, except for its discussion of the three investments and underwriting/selling agent activities it performed for Provention Bio, Inc., Cue BioPharma, Inc. and Pulse Biosciences, Inc., in the subsection “Past Examples” (renamed) in “Business.
Distribution of Rights to our Shareholders, page 58
10. We note your disclosure that you intend to partially raise capital for your partner companies through rights offerings, including offering rights in the partner shares to your shareholders. Please explain to us how you anticipate you will complete these anticipated offerings, such as if it will a registered offering. Discuss any risks with your anticipated plans, as applicable, or advise.
Response:
The Company has clarified that value creation and value realization could take different forms. These forms include internal holding company capital contribution, internal holding company lending, selling new equity of a subsidiary to external parties either by means of a rights offering, traditional private placement or public sale of securities as in the manner of an IPO for the subsidiary, licensing, joint venture, and/or asset sale or merger. Each method of value creation and value realization will have its own requirements, and determined by the particular set of circumstances and facts. Where a registration with the SEC will be required, the Company would follow those requirements. Certainly, if there is a rights offering by means of distribution at the holding company level, if that is the process, it would be a registered transaction given the anticipated number of public shareholders of the holding company.
Securities and Exchange Commission
December 28, 2022
Page
We have a number of risk factors about the operations and financing of our partner companies in the sub-section of the Risk Factor section, “Risks Relating To our General Business Operations.”
Our Corporate structure, page 59
11. Please tell us why Public Ventures and PatentVest do not appear on your corporate structure. In ad
Show Raw Text
CORRESP
1
filename1.htm
GOLENBOCK
EISEMAN ASSOR BELL & PESKOE LLP
711
THIRD AVENUE – 17TH FLOOR
NEW
YORK, NEW YORK 10017
Direct
Dial No.: (212) 907-7349
Direct
Fax No.: (212) 754-0330
Email
Address: AHudders@golenbock.com
December
28, 2022
United
States Securities and Exchange Commission
Division
of Corporation Finance – Office of
Finance
Washington,
DC 20549
Attention:
Tonya
Aldave
Susan
Block
William
Schroeder
Amit
Pande
Re:
MDB
Capital Holdings, LLC
Registration
statement on form S-1
Filed
on November 10, 2022
File No. 333-268318
Dear
Sirs and Mesdames:
Reference
is made to the letter of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”),
dated December 7, 2022. This letter sets forth below the comments of that letter to the original filing of the registration statement
on Form S-1 (“Form S-1”), of MDB Capital Holdings, LLC (the “Company”), filed on November 10, 2022, followed
by the responses of the Company.
I
am responding on behalf of the Company as its counsel.
Securities
and Exchange Commission
December
28, 2022
Page
2
Registration
Statement on Form S-1
Cover
page
1. We
note your disclosure that the “initial public offering price of [your] class A common
shares is expected to be $12.00.” Please revise to clarify if the offering is at a
fixed price, as opposed to referring to the offering price as “expected.” Or
if $12.00 is intended to be the price range, please confirm you will comply with Rule 430A
under the Securities Act. Please also clarify on the cover page if there is a minimum offering
requirement and if there is an arrangement for funds to be received in escrow, trust or similar
arrangement. Refer to Item 501(b)(8) of Regulation S-K.
Response:
The
Company has revised the cover page of the prospectus to indicate that the offering price of $12.00 is fixed, and the securities are being
offered on a no minimum / 833,333 share maximum basis. The term “expected” in reference to the offering price has been removed.
The Company has also indicated that the purchase price of any subscribers will be put in an escrow account, and held there until closing
or returned to subscribers if the offering is terminated.
The
Company confirms that it will comply with Rule 430A under the Securities Act.
Prospectus
Summary, page 1
2. Please
include your revenue and net losses for the most recent audited period and interim stub to
provide a financial snapshot of your company and to balance the disclosure in this section.
Response:
The
Company has updated the Summary Consolidated Financial and Other Data section of the Prospectus Summary, which will reflect the following:
(i) for the nine months ended September 30, 2022 the Company had operating income of $103,513 and a net loss of $5,202,581,
and (ii) for the year ended December 31, 2021 the Company had an operating loss of $9,833,998 and a net loss of $15,672,970. The
prospectus has been updated with the most recent audit period.
Securities
and Exchange Commission
December
28, 2022
Page
3
3. Please
explain in the summary, as you have in the risk factor at page 15, that your business model
does not rely upon the receipt of operating cash flows from partner companies. Please also
explain how you generate revenues, or advise.
Response:
The
Company has added to the summary, in the sub-section “Overview” a paragraph that reflects the fact the business model is
not relying on receipt of operating cash flows from the partner companies. We have also disclosed in the prospectus that we anticipate
earning revenues from Public Ventures, LLC, an active broker dealer, and from PatentVest, Inc., an intellectual property analytics company
with the objective of helping companies define, capitalize and protect their intellectual property.
Risk
Factors
The
market, including clients and potential investors, may be skeptical of the viability, page 25
4. Please
briefly clarify here and in the business section what pipeline products you are referring
to, what stage of development they are in, and what steps are further needed, if applicable,
to make the pipeline products viable.
Response:
Both
the risk factors and business sections about Invizyne has been edited to clarify what the pipeline products are and give some indication
of the next steps. The Company wishes to point out to the Staff that the Invizyne products are still early stage and elements of viability
are still being assessed, such as scaling up the manufacturing. Thus, a full layout of the steps to commercialization are not yet known,
and it would be premature to publicly disclose such steps. This has been indicated in the disclosure about the pipeline products in both
the risk factor and business sections.
Use
of Proceeds, page 35
5. Please
describe more specifically the intended uses of the net proceeds and the amount intended
for each use or tell us why you are unable to do so. We also note your disclosure on page
57 that you “intend to use a portion of the capital raised in this offering to invest
directly in the partner companies [you] co-found.” Refer to Item 504 of Regulation
S-K.
Response:
The
Company has edited the section, “Use of Proceeds,” to reflect its current intended uses of the proceeds from the offering.
Also, the Company has indicated a prioritization of the uses of the funds raised in the offering due to the fact that this is a no minimum,
maximum offering as stipulated in Item 504 of Regulation S-K.
Securities
and Exchange Commission
December
28, 2022
Page
4
Management’s
Discussion and Analysis of Financial Condition and Results of Operations, page 38
6. Please
revise your Management’s Discussion and Analysis (MD&A) to discuss your financial
condition and changes in financial condition for each of the periods presented as required
by Item 303(a) of Regulation S-K.
Response:
Throughout
the prospectus, the Company has updated the financial information to include the quarter ended September 30, 2022, and also updated the
MD&A section accordingly.
Business,
page 55
7. We
note your references in several sections of the prospectus to your operations and employees
in Nicaragua. Please revise the business section to explain briefly how many of your 30 full-time
employees are in Nicaragua, what functions they perform, and how they fit into your overall
business operations. Please also clarify and discuss what aspects of your business operations
you plan to be in Nicaragua in the risk factor at page 17, “We plan on sourcing aspects
of our business operations in Nicaragua.”
Response:
The
Company has corrected the disclosure about having personnel in Nicaragua. The Company has no employees located in Nicaragua. The Company
employs a company located in Nicaragua, MDB Capital, S.A., to provide services on an out-source, as requested basis. Two of the officers
and the holders of the Class B Common Shares of the registrant, Messrs. Marlett and DiGiandomenico, own that company, and activities
with that company are subject to conflict reviews of the audit committee of the registrant and disclosure in related party sections.
A copy of the out-source agreement is filed as an exhibit to the registration statement. The Company has indicated that the services
provided by MDB Capital , S.A. will be administrative, research and analytical in nature, but subject to the regulatory requirements
applicable to the company requesting the services. It is anticipated that the services will be requested by Public Ventures, PatentVest
and partner companies.
The
Company has also clarified in the “Human Capital” sub-section of the section “Business” that it has an out-source
service contract.
A
copy of the service agreement has been filed with the registration statement.
Securities
and Exchange Commission
December
28, 2022
Page
5
8. Please
revise this section to provide additional details on how you invest in various companies,
such as through holding their securities or otherwise, including your current investments
into Public Ventures, PatentVest, and Invizyne. Please also clarify what you mean that you
have helped them launch successful IPOs. In addition, disclose if you have any other business
activities in addition to investment in such companies and, if so, describe such business
activities in more detail. Please explain further what you mean by you generally remain involved
with the companies for several years thereafter. Please explain the statement on page 58
that your public venture model is different than the typical venture capital fund model,
by explaining why you think your model is different.
Response:
The
Company wishes to clarify that it has not helped any of Public Ventures, PatentVest or Invizyne in an IPO, to date. These are wholly
owned or majority owned companies.
The
Company intends to hold its 100% interest in Public Ventures and PatentVest for the long term. The business of Public Ventures is that
of a broker-dealer. It is expanding Public Ventures to also become a securities clearing corporation. PatentVest is a business that
helps companies define, capitalize and protect their intellectual property. PatentVest is being expanded to add the services of a
law firm, licensed in Arizona, and to increase its marketing so as to expand its client base. The Company has expanded the discussion
of these companies in the prospectus to indicate the nature of the business activities.
Invizyne,
is a 60% held subsidiary. The Company cannot say at this time if and when it will raise more financing from sources that might dilute
its ownership. It is probable that more funding will be needed for its business plan. Funding may be from the holding company or from
external sources, such as one or more private or public rounds of equity. Other value realization methods will also be considered, such
as licensing, joint ventures, asset sales and mergers. It is currently anticipated that the means by which Invizyne will raise
the next substantial capital increase will be by means of an initial public offering, however the timing is not yet known.
Currently
the Company does not have any other business activities than those of Public Ventures, PatentVest and Invizyne. The Company also has
a management company through which it hires certain individuals and through which it has the out-source service support agreement with
the Nicaraguan company, MDB Capital, S.A., to provide certain services as stated therein.
Securities
and Exchange Commission
December
28, 2022
Page
6
As
explained in the prospectus, where this discussion has been expanded, and here in this letter in connection with Item 25, the holding
company takes an ownership position and an active role in its companies that form its subsidiaries. The holding company and its personnel
are founders, equity owners, actively establish the business plan, help execute the business plan, serve as directors and officer, oversee
management hires and roles, and help with financing the enterprise of each of the subsidiaries.
Track
Record, page 55
9. We
note your disclosure that you “successfully have used the public market to finance
16 companies,” and that all of their stocks traded at premiums to the IPO offering
price post-IPO. We also note that you listed only three of these companies. Please tell us
all 16 companies or remove references to a successful track record for a larger number of
companies that are not listed in this section.
Response:
The
Company has eliminated references to its track record throughout the prospectus, except for its discussion of the three investments and
underwriting/selling agent activities it performed for Provention Bio, Inc., Cue BioPharma, Inc. and Pulse Biosciences, Inc., in the
subsection “Past Examples” (renamed) in “Business.
Distribution
of Rights to our Shareholders, page 58
10. We
note your disclosure that you intend to partially raise capital for your partner companies
through rights offerings, including offering rights in the partner shares to your shareholders.
Please explain to us how you anticipate you will complete these anticipated offerings, such
as if it will a registered offering. Discuss any risks with your anticipated plans, as applicable,
or advise.
Response:
The
Company has clarified that value creation and value realization could take different forms. These forms include internal holding company
capital contribution, internal holding company lending, selling new equity of a subsidiary to external parties either by means of a rights
offering, traditional private placement or public sale of securities as in the manner of an IPO for the subsidiary, licensing, joint
venture, and/or asset sale or merger. Each method of value creation and value realization will have its own requirements, and determined
by the particular set of circumstances and facts. Where a registration with the SEC will be required, the Company would follow those
requirements. Certainly, if there is a rights offering by means of distribution at the holding company level, if that is the process,
it would be a registered transaction given the anticipated number of public shareholders of the holding company.
Securities
and Exchange Commission
December
28, 2022
Page
7
We
have a number of risk factors about the operations and financing of our partner companies in the sub-section of the Risk Factor section,
“Risks Relating To our General Business Operations.”
Our
Corporate structure, page 59
11. Please
tell us why Public Ventures and PatentVest do not appear on your corporate structure. In
ad