Correspondence 0001493152-23-003398 from MDB Capital Holdings, LLC (MDBH) (CIK 0001934642) (MDBH)
MDB Capital Holdings, LLC (MDBH) (CIK 0001934642)
Date: Feb. 2, 2023 · CIK: 0001934642 · Accession: 0001493152-23-003398
AI Filing Summary & Sentiment
File numbers found in text: 333-268318
Letter
United States Securities and Exchange Commission Division of Corporation Finance – Office of Finance Attention: Ms. Tonya Aldave Registration statement on Form S-1 Original file date: November 10, 2022 Amendment file date: December 28, 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 January 20, 2023, commenting on Amendment No. 1 to the registration statement on Form S-1 (“Form S-1”) of MDB Capital Holdings, LLC (the “Company”), filed on December 28, 2022.
I am responding on behalf of the Company as its counsel, to the comment letter. The response format sets forth the Staff comment followed by the response thereto of the Company.
Securities and Exchange Commission
February 2, 2023
Page
Amendment No. 1 to Registration Statement on Form S-1
General
1. We note your revised disclosure that you are offering securities on a no minimum basis. Please revise the use of proceeds and dilution sections to detail the use of proceeds and dilution if 25%, 50%, 75% and 100% of the securities are sold, or advise.
Response:
The Company has added disclosure in each of the Sections “Use of Proceeds” and “Dilution” to indicate the use of proceeds and dilution per class A common share for the four above indicated amounts of proceeds.
2. Please revise the summary section to disclose your multiple class share structure and explain the nature of the disparate voting rights and the risks the structure presents to investors.
Response:
The subsection “Two Class Shareholder Structure: class B common share control” section within the Section “Prospectus Summary” has been expanded to discuss further the risks presented to investors in the class A common shares and to add to that section from elsewhere in the prospectus the discussion about the difference in voting authority.
As has been stated previously in the prospectus, that the rights of the two classes of common shares are the same but for (i) the different number of votes per share between the classes and (ii) the fact that the class B common share has a conversion right into the class A common share.
3. We note that after the offering completion you will be a controlled company, with two of your shareholders holding more than 50% of the voting power. Please disclose the percentage of outstanding Class B shares that shareholders must keep in order to continue to control the outcome of matters submitted to shareholders for approval.
Response
In response to the Staff comment, the Company has inserted the following in relevant places in the prospectus to indicate when the controlled company status would end: “We will remain a controlled company until we have issued and outstanding 25,000,001 class A common shares, assuming no conversions of any class B common shares..” The Company believes, stating its response in this manner to indicate the number of class A common shares needed for that class to be in the majority is easier to understand than disclosing it in terms of percentages.
Securities and Exchange Commission
February 2, 2023
Page
4. We note your response to our prior comment 25. We have referred your response to the staff of the Division of Investment Management. You may receive further comment.
Response
No response required currently.
Prospectus Summary
Overview, page 1
5. We note your response to our prior comment 2 and reissue. Please revise the introductory paragraphs of your summary section to 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 introductory summary about the offering to include a brief statement of the revenue and net losses for the most recent audited period and interim stub period.
Alternate Page for Security Holder Prospectus
Selling Security Holders, page 5
6. We note the percentage of shares owned before and after the offering is based on a number as of September 30, 2022. Please update to the most recent practicable date or advise.
Response
The table has been updated to calculations as of January 31, 2023, based on the outstanding class A common shares as of December 31, 2022.
Securities and Exchange Commission
February 2, 2023
Page
7. Please briefly describe the transactions from which the selling shareholders originally received their shares, including the exemption from registration for the original transaction and the date of the transaction.
Response
There has been added to the description of the Section “Selling Security Holders” a paragraph about the private placement transaction in which the selling security holders acquired their class A common shares.
Risk Factors, page 11
8. Please add risk factor disclosure describing the fact that your multi-class capital structure may have anti-takeover effects preventing a change in control transaction that shareholders might consider in their best interests. In addition, add risk factor disclosure describing the risks to investors that future issuances of high-vote shares may be dilutive to low-vote shareholders.
Response
There has been added to the Section “Risk Factors,” subsection “Risks Related to this Being a Public Company and Owning Our Class A Common Shares” a risk factor indicating several aspects of the class A common shares and class B common shares that present anti-takeover impediments and a risk factor how the board of directors of the Company may issue additional securities that have a dilutive effect on the voting authority of the class A common shares.
The market, including clients and potential investors, may be skeptical, page 24
9. We note your response to our prior comment 4 and your disclosure here and on page 67 that Invizyne’s “SimplePath systems and the resultant pipeline products are in various stages of the research and development phase, the pilot production phase and/or in pre-clinical assessment as a therapeutic.” Please explain what you mean by “pilot production phase,” because it appears that Invizyne has not obtained FDA approval to begin production of any of its products. If FDA approval is not required for any of Invizyne’s pipeline products, please revise to explain why it is not required, in the alternative, please remove references to “pilot production.”
Response
The disclosure in the risk factor “The market, including clients and potential investors, may be skeptical…” and the disclosure in the business section about Invizyne has been adjusted to explain what is meant by the term “pilot production.”
Securities and Exchange Commission
February 2, 2023
Page
At this point in time, the research and development of potential products by Invizyne are in such an early stage, there is no determination yet to be made whether or not any potential products will be of a nature that requires FDA or any other governmental approval. So to date, no FDA approval is needed or has been sought. The potential products may remain purely at the laboratory level or be developed such that they are not for medical or other direct human use that would need governmental approvals. Of course, if the potential products will require government approval, then those applicable rules and regulations will be considered and followed. In the two areas of disclosure in the prospectus, we have indicated that the research is early.
PatentVest is licensed to offer legal services under Arizona law, page 26
10. Please advise and expand your risk factor disclosure, if applicable, as to whether any additional regulatory approvals are necessary for PatentVest to launch its law firm operations once it is a subsidiary of a public company. Please also include a discussion of the regulations that will materially impact the firm, under “Regulation,” as applicable. Please also discuss if Arizona is the only state that allows a law firm to be owned by a non-lawyer and discuss the extent this would prevent the law firm from expanding outside of Arizona.
Response
The law license for the Arizona law firm of PatentVest has been fully and finally issued. Therefore, there is no risk factor that would be relevant relating to any additional regulatory approvals for establishment of the Arizona law firm.
In the sub-section “Regulation” of “Business” there has been added a discussion about the applicable court rules which govern the operation of the law firm business of PatentVest.
Securities and Exchange Commission
February 2, 2023
Page
There has been added to the Section “Business”, in the subsection about “PatentVest,” a discussion that Arizona and Colorado are the only two states that currently permit a non-lawyer ownership of a law firm. It is also indicated in the disclosure that since the firm plans to operate only in Arizona and most of its law practice will be focused on patent prosecution, which is federally oriented, there is no anticipated need to be able to have offices in jurisdictions other than Arizona.
Use of Proceeds, page 34
11. We note your response to our prior comment 5 and your revised disclosure that you plan to negotiate acquisition of certain technology. If any material amount of proceeds is to be used to acquire assets, otherwise than in the ordinary course of business, please describe briefly and state the cost of the assets and whether such assets are to be acquired from your affiliates or associates. Refer to Instruction 5 to Item 504 of Regulation S-K.
Response
At this time there are no activities to acquire technologies. Therefore, there is no allocation in the use of proceeds for the expense of any activities for acquisitions. There, however, is allocation for investigations to locate future technologies for review and due diligence activities. There is no current plan to acquire assets from affiliates or associates, so no disclosure about affiliate acquisition has been added to the Section “Use of Proceeds.”
Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 38
12. We note that Other operating income, which appears to primarily comprise income from trading, is a significant source of your revenues in 2022. To the extent trading revenues continue to be significant please revise to separately disclose them in your statements of operations, and enhance your discussion about your trading volumes including any quantitative information to provide a reader better understanding of any material changes in trends that affect your operating results.
Response
The Company has updated the Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations section to enhance the discussion on trading volumes and trends that affected operating results for other operating income.
Securities and Exchange Commission
February 2, 2023
Page
Broker Dealer and Intellectual Property Service Segment (Public Ventures and PatentVest) Results of Operations for the Years Ended December 31, 2021 and 2020, page 45
13. Please refer to comment 16. We note from your response that the realized gain on investment securities related to investments acquired through open market purchases, founders shares, or warrants from investment banking deals. We further note from your response and your disclosure on page 46 that you used ASC 320-10 to determine the amount of realized gain. Please address the following:
● Please provide us detailed information by investment type, such as equity securities, debt securities, and warrants, for the investments sold or purchased during 2020, including acquisition price, sale price and realized gain(s) or loss.
● Given that the guidance in ASC 320-10 relates to debt securities, please tell us how you accounted for your investments in securities other than debt securities.
● Please also tell us and revise your accounting policy footnote to disclose the authoritative accounting guidance you relied upon to account for each of these types of securities. Please also tell us if and how you considered the guidance in ASC 940 for any of your assets held in your broker dealer subsidiary.
Response
Please see below for detailed information by investment type for the investments sold or purchased during 2020, including acquisition price, sale price and realized gain(s) or loss.
The Company updated the financial footnotes to include disclosure of ASC 321-10 Accounting for Equity Interests and ASC 815-10 Derivatives and Hedging.
The Company used the following authoritative accounting guidance that was relied upon to account for the following types of securities:
● Investments at amortized cost ASC 320-10;
● Investments at fair value ASC 940-320-30, ASC 321-10, and ASC 815-10;
● Investments
Show Raw Text
CORRESP
1
filename1.htm
GOLENBOCK
EISEMAN ASSOR BELL & PESKOE LLC
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
February
2, 2023
United
States Securities and Exchange Commission
Division
of Corporation Finance – Office of Finance
Washington,
DC 20549
Attention:
Ms.
Tonya Aldave
Ms.
Susan Block
Mr.
William Schroeder
Mr.
Amit Pande
Re:
MDB
Capital Holdings, LLC
Registration
statement on Form S-1
Original
file date: November 10, 2022
Amendment
file date: December 28, 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 January 20, 2023, commenting on Amendment No. 1 to the registration statement on Form S-1 (“Form S-1”) of MDB Capital
Holdings, LLC (the “Company”), filed on December 28, 2022.
I
am responding on behalf of the Company as its counsel, to the comment letter. The response format sets forth the Staff comment followed
by the response thereto of the Company.
Securities
and Exchange Commission
February
2, 2023
Page
2
Amendment
No. 1 to Registration Statement on Form S-1
General
1. We
note your revised disclosure that you are offering securities on a no minimum basis. Please
revise the use of proceeds and dilution sections to detail the use of proceeds and dilution
if 25%, 50%, 75% and 100% of the securities are sold, or advise.
Response:
The
Company has added disclosure in each of the Sections “Use of Proceeds” and “Dilution” to indicate the use of
proceeds and dilution per class A common share for the four above indicated amounts of proceeds.
2. Please
revise the summary section to disclose your multiple class share structure and explain the
nature of the disparate voting rights and the risks the structure presents to investors.
Response:
The
subsection “Two Class Shareholder Structure: class B common share control” section within the Section “Prospectus Summary”
has been expanded to discuss further the risks presented to investors in the class A common shares and to add to that section from elsewhere
in the prospectus the discussion about the difference in voting authority.
As
has been stated previously in the prospectus, that the rights of the two classes of common shares are the same but for (i) the different
number of votes per share between the classes and (ii) the fact that the class B common share has a conversion right into the class A
common share.
3. We
note that after the offering completion you will be a controlled company, with two of your
shareholders holding more than 50% of the voting power. Please disclose the percentage of
outstanding Class B shares that shareholders must keep in order to continue to control the
outcome of matters submitted to shareholders for approval.
Response
In
response to the Staff comment, the Company has inserted the following in relevant places in the prospectus to indicate when the controlled
company status would end: “We will remain a controlled company until we have issued and outstanding 25,000,001 class A common shares,
assuming no conversions of any class B common shares..” The Company believes, stating its response in this manner to indicate the
number of class A common shares needed for that class to be in the majority is easier to understand than disclosing it in terms of percentages.
Securities
and Exchange Commission
February
2, 2023
Page
3
4. We
note your response to our prior comment 25. We have referred your response to the staff of
the Division of Investment Management. You may receive further comment.
Response
No
response required currently.
Prospectus
Summary
Overview,
page 1
5. We
note your response to our prior comment 2 and reissue. Please revise the introductory paragraphs
of your summary section to 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 introductory summary about the offering to include a brief statement of the revenue and net losses for the most
recent audited period and interim stub period.
Alternate
Page for Security Holder Prospectus
Selling
Security Holders, page 5
6. We
note the percentage of shares owned before and after the offering is based on a number as
of September 30, 2022. Please update to the most recent practicable date or advise.
Response
The
table has been updated to calculations as of January 31, 2023, based on the outstanding class A common shares as of December 31, 2022.
Securities
and Exchange Commission
February
2, 2023
Page
4
7. Please
briefly describe the transactions from which the selling shareholders originally received
their shares, including the exemption from registration for the original transaction and
the date of the transaction.
Response
There
has been added to the description of the Section “Selling Security Holders” a paragraph about the private placement transaction
in which the selling security holders acquired their class A common shares.
Risk
Factors, page 11
8. Please
add risk factor disclosure describing the fact that your multi-class capital structure may
have anti-takeover effects preventing a change in control transaction that shareholders might
consider in their best interests. In addition, add risk factor disclosure describing the
risks to investors that future issuances of high-vote shares may be dilutive to low-vote
shareholders.
Response
There
has been added to the Section “Risk Factors,” subsection “Risks Related to this
Being a Public Company and Owning Our Class A Common Shares” a risk factor indicating several aspects of the class A common shares
and class B common shares that present anti-takeover impediments and a risk factor how the board of directors of the Company may issue
additional securities that have a dilutive effect on the voting authority of the class A common shares.
The
market, including clients and potential investors, may be skeptical, page 24
9. We
note your response to our prior comment 4 and your disclosure here and on page 67 that Invizyne’s
“SimplePath systems and the resultant pipeline products are in various stages of the
research and development phase, the pilot production phase and/or in pre-clinical assessment
as a therapeutic.” Please explain what you mean by “pilot production phase,”
because it appears that Invizyne has not obtained FDA approval to begin production of any
of its products. If FDA approval is not required for any of Invizyne’s pipeline products,
please revise to explain why it is not required, in the alternative, please remove references
to “pilot production.”
Response
The
disclosure in the risk factor “The market, including clients and potential investors, may be skeptical…” and the disclosure
in the business section about Invizyne has been adjusted to explain what is meant by the term “pilot production.”
Securities
and Exchange Commission
February
2, 2023
Page
5
At
this point in time, the research and development of potential products by Invizyne are in such an early stage, there is no determination
yet to be made whether or not any potential products will be of a nature that requires FDA or any other governmental approval. So to
date, no FDA approval is needed or has been sought. The potential products may remain purely at the laboratory level or be developed
such that they are not for medical or other direct human use that would need governmental approvals. Of course, if the potential products
will require government approval, then those applicable rules and regulations will be considered and followed. In the two areas of disclosure
in the prospectus, we have indicated that the research is early.
PatentVest
is licensed to offer legal services under Arizona law, page 26
10. Please
advise and expand your risk factor disclosure, if applicable, as to whether any additional
regulatory approvals are necessary for PatentVest to launch its law firm operations once
it is a subsidiary of a public company. Please also include a discussion of the regulations
that will materially impact the firm, under “Regulation,” as applicable. Please
also discuss if Arizona is the only state that allows a law firm to be owned by a non-lawyer
and discuss the extent this would prevent the law firm from expanding outside of Arizona.
Response
The
law license for the Arizona law firm of PatentVest has been fully and finally issued. Therefore, there is no risk factor that would be
relevant relating to any additional regulatory approvals for establishment of the Arizona law firm.
In
the sub-section “Regulation” of “Business” there has been added a discussion about the applicable court rules
which govern the operation of the law firm business of PatentVest.
Securities
and Exchange Commission
February
2, 2023
Page
6
There
has been added to the Section “Business”, in the subsection about “PatentVest,” a discussion that Arizona and
Colorado are the only two states that currently permit a non-lawyer ownership of a law firm. It is also indicated in the disclosure that
since the firm plans to operate only in Arizona and most of its law practice will be focused on patent prosecution, which is federally
oriented, there is no anticipated need to be able to have offices in jurisdictions other than Arizona.
Use
of Proceeds, page 34
11. We
note your response to our prior comment 5 and your revised disclosure that you plan to negotiate
acquisition of certain technology. If any material amount of proceeds is to be used to acquire
assets, otherwise than in the ordinary course of business, please describe briefly and state
the cost of the assets and whether such assets are to be acquired from your affiliates or
associates. Refer to Instruction 5 to Item 504 of Regulation S-K.
Response
At
this time there are no activities to acquire technologies. Therefore, there is no allocation in the use of proceeds for the expense of
any activities for acquisitions. There, however, is allocation for investigations to locate future technologies for review and due diligence
activities. There is no current plan to acquire assets from affiliates or associates, so no disclosure about affiliate acquisition has
been added to the Section “Use of Proceeds.”
Management’s
Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 38
12. We
note that Other operating income, which appears to primarily comprise income from trading,
is a significant source of your revenues in 2022. To the extent trading revenues continue
to be significant please revise to separately disclose them in your statements of operations,
and enhance your discussion about your trading volumes including any quantitative information
to provide a reader better understanding of any material changes in trends that affect your
operating results.
Response
The
Company has updated the Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations
section to enhance the discussion on trading volumes and trends that affected operating results for other operating income.
Securities
and Exchange Commission
February
2, 2023
Page
7
Broker
Dealer and Intellectual Property Service Segment (Public Ventures and PatentVest) Results of Operations for the Years Ended December
31, 2021 and 2020, page 45
13. Please
refer to comment 16. We note from your response that the realized gain on investment securities
related to investments acquired through open market purchases, founders shares, or warrants
from investment banking deals. We further note from your response and your disclosure on
page 46 that you used ASC 320-10 to determine the amount of realized gain. Please address
the following:
●
Please
provide us detailed information by investment type, such as equity securities, debt securities, and warrants, for the investments
sold or purchased during 2020, including acquisition price, sale price and realized gain(s) or loss.
●
Given
that the guidance in ASC 320-10 relates to debt securities, please tell us how you accounted for your investments in securities other
than debt securities.
●
Please
also tell us and revise your accounting policy footnote to disclose the authoritative accounting guidance you relied upon to account
for each of these types of securities. Please also tell us if and how you considered the guidance in ASC 940 for any of your assets
held in your broker dealer subsidiary.
Response
Please
see below for detailed information by investment type for the investments sold or purchased during 2020, including acquisition
price, sale price and realized gain(s) or loss.
The
Company updated the financial footnotes to include disclosure of ASC 321-10 Accounting for Equity Interests and ASC 815-10 Derivatives
and Hedging.
The
Company used the following authoritative accounting guidance that was relied upon to account for the following types of securities:
● Investments
at amortized cost ASC 320-10;
● Investments
at fair value ASC 940-320-30, ASC 321-10, and ASC 815-10;
● Investments