**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549






**FORM
      10-KSB**






**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**




**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2006**




*Commission
      File Number 0-11882*






**B2DIGITAL,
      INCORPORATED**


(Name
      of
      Small Business Issuer in its Charter)






**DELAWARE**


(State
      or
      Other Jurisdiction of Incorporation)






84-0916299


(I.R.S.
      Employer Identification No.)






4425
      Venture Cannon Avenue


Sherman
      Oaks, California 91423


(Address
      of Principal Executive Offices)






**ISSUER'S
      TELEPHONE NUMBER ISSUER'S FACSIMILE NUMBER**


Telephone
      (310) 281-2571 Facsimile (818) 808-0133






Securities
      registered under Section 12(b) of the Exchange Act:


None






Securities
      registered under Section 12(g) of the Exchange Act:




**COMMON
      STOCK- $.00001 PAR VALUE**


(Title
      of
      Class)






Indicated
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. o




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the issuer was required to file such reports), and (2) has been subject
      to
      such filing requirements for the past 90 days. Yes x No o







Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Issuer's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x




The
      Issuer's revenues for the year ended March 31, 2006 were $511,463.




As
      of May
      21, 2006, there were 1,773,870,939 shares of Common Stock issued and
      outstanding. The
      aggregate market value of the Issuer's common stock held by non-affiliates
      was
      $693,548 based on the closing price of the Issuer's common stock on May 21,
      2006
      of $0.004.




As
      of
      June 16, 2006, the Issuer had approximately 1,751,341* shares of its $.00001
      par
      value common stock outstanding. *Post 1-1,000 reverse split on June 16,
      2006.




Transitional
      Small Business Disclosure Format (Check one): Yes o No x







**B2DIGITAL,
      INCORPORATED**


**TABLE
      OF CONTENTS**




PAGE
                NO.PART IITEM 1
            
            DESCRIPTION OF BUSINESS
            
            4ITEM 2
            
            DESCRIPTION OF PROPERTY
            
            14ITEM 3
            
            LEGAL PROCEEDINGS
            
            14ITEM 4
            
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
              HOLDERS
            
            15PART IIITEM 5
            
            MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER
              MATTERS,AND
              SMALL BUSINESS ISSUER PURCHASES OF EQUITYSECURITIES
            
            15ITEM 6
            
            MANAGEMENT'S DISCUSSION AND ANALYSIS
              OR PLANOF
              OPERATION
            
            17ITEM 7
            
            FINANCIAL STATEMENTS
            
            27ITEM 8
            
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
              ONACCOUNTING
              AND FINANCIAL DISCLOSURE
            
            28ITEM 8A
            
            CONTROLS AND PROCEDURES
            
            28ITEM 8
            
            OTHER INFORMATION
            
            28PART IIIITEM 9
            
            DIRECTORS AND EXECUTIVE OFFICERS OF
              THE
              REGISTRANT
            
            29ITEM 10
            
            EXECUTIVE COMPENSATION
            
            31ITEM 11
            
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
              OWNERSAND
              MANAGEMENT AND RELATED STOCKHOLDER MATTERS
            
            33ITEM 12
            
            CERTAIN RELATIONSHIPS AND RELATED
              TRANSACTIONS
            
            34ITEM 13
            
            EXHIBITS
            
            35ITEM 14
            
            PRINCIPAL ACCOUNTANT FEES AND
              SERVICES
            
            37








**PART
      I**




**ITEM
      I. DESCRIPTION OF BUSINESS**




**OVERVIEW**




The
      "Company" or "B2Digital" is a provider of in-room, on-demand video entertainment
      and satellite services to the domestic lodging industry. B2Digital has a base
      of
      approximately 8,000 installed rooms, which consist of contract rights of Hotel
      Movie Networks with Pay Per View and Cable/Satellite access, and associated
      Hardware and Peripherals. The purchase of the assets of Hotel Movie Network
      in
      March 2003, enabled B2Digital to provide in-room video entertainment and
      information services on several platforms. The Video On Call system allows
      hotel
      guests to select, at any time, movies through the television set in their hotel
      rooms. The PPV S-8 system is a reliable basic Pay Per View system that allows
      the Company to enter the mid to small hospitality market on a cost effective
      basis.




In
      addition to movies, B2Digital's platforms provide for in-room viewing of select
      cable channels (such as HBO, Starz Encore, ESPN, CNN and the Disney Channel)
      and
      other interactive and information services, which include the capability for
      high-speed Internet access. B2Digital primarily provides its services under
      long-term contracts to hotel chains, hotel management companies, and
      individually owned and franchised hotel properties. B2Digital offers services
      predominantly in the smaller franchise hotel categories serving business
      travelers and other unaffiliated hotels.




All
      of
      the installed rooms of Hotel Movie Network are located in the United States
      and
      Canada.




The
      Company’s web site is www.B2digital.com . The
      information found on this website is not a part of, and is not incorporated
      by
      reference into, this or any other report the Company files with or furnishes
      to
      the SEC.




4


**HISTORY**




B2Digital,
      Inc. (referred to herein as "B2Digital", the "Company", or "BTOD"), a
      technological development corporation, was incorporated in Colorado on June
      8,
      1983. It was administratively dissolved in 1997 and as a part of winding up
      of
      its affairs, the directors acting as trustees, entered into a Plan of Merger
      in
      1999 with Telecommunication Products, Inc. a newly formed entity, and merged
      into it and then purchased Interleisure S.A., a privately held company
      incorporated under the laws of the commonwealth of the Dominican Republic.
      The
      predecessor business was to act as a developer of data compression technology
      and video-conferencing software but then ventured into other market
      opportunities. The Company failed in its business efforts prior to 2002. On
      July
      20, 2004, Telecommunication Products, Inc. changed its name to B2Digital,
      Incorporated. With the filing of Articles of Merger with the Delaware Secretary
      of State, we were redomiciled from Colorado to Delaware, and our number of
      authorized common shares was increased to 500,000,000.




Effective
      January 12, 2005, we amended our Certificate of Incorporation to increase our
      authorized common stock to 900,000,000 shares of common stock and to authorize
      50,000,000 shares of preferred stock, which may be designated in series at
      the
      discretion of the board of directors. 2,000,000 shares of preferred stock have
      been designated as Series A Convertible Preferred Stock.





Effective
      September 20, 2005, we amended our Certificate of Incorporation to increase
      our
      authorized common stock to 5,000,000,000 shares of common stock, $.00001 par
      value and to change the par value of preferred stock to $.00001. Subsequently,
      on June 16, 2006, we amended our Certificate of Incorporation to effect a
      reverse split of our common shares in a ratio of one new share for every one
      thousand (1,000) existing shares.




On
      September 2002, we entered into a Letter of Intent with Coast Communications,
      Inc. for the acquisition of the assets of privately-held Hotel Movie Networks,
      Inc., a Nevada Corporation domiciled in Mesa, Arizona. Such assets consist
      of
      inventory, contracts and contract rights with certain production studios. In
      March 2003, the Company entered into an agreement to purchase the assets of
      Hotel Movie Networks, Inc. which made the Company a supplier of Video On Demand
      ("VOD") and Satellite Guest Entertainment systems to the mid-market hospitality
      industry. The purchase included a customer base of over 8,000 rooms through
      contract rights. These contracts consist mainly of "Free-to-Guest" or
      "Pay-per-Stay" guest services. The transaction closed on August 1, 2003. The
      former shareholders of Hotel Movie Network received 2,000,000 shares of our
      common stock and $150,000 cash. Additionally, we issued a $1,400,000 Convertible
      note that pays 7.5% interest per annum.




Through
      the purchase of assets of Hotel Movie Network, we supply Video On Demand and
      Satellite Guest Entertainment systems to the mid-market hospitality industry.
      The purchase of the assets of Hotel Movie Networks, Inc. provides affiliation
      with an established network of professional guest systems installation
      contractors who are experienced and familiar with the Hotel Movie Network
      business model.




5


In
      January 2003, B2Digital purchased a complete inventory of guest entertainment
      systems from Omega Funding, Inc. consisting of hardware and peripherals for
      $100,000 in cash and 1,900,000 shares of common stock. This inventory can supply
      the necessary hardware for deployment into over 100,000 guest rooms at a savings
      over the current industry average installation cost per room.




On
      November 2003, the Company entered into an agreement with EchoStar and Dish
      Network which enables the Company to purchase programming at a favorable
      discount. We
      intend
      to bring consumers a quality experience through video on demand and through
      providing traditional cable, satellite and internet access to users of Hotel
      Movie Network.




On
      March
      6, 2004, we entered into a Letter of Agreement with B2 Networks, LLC, whereby
      B2
      Networks would provide data center facilities, management systems for video
      and
      set top services and assist with operating the B2digitaltv services. On April
      23, 2004, we agreed to purchase 20% of B2 Networks, LLC in exchange for
      1,667,667 shares of common stock and $500,000. On August 2004, we amended this
      agreement to reduce the amount of purchase to 10% of the LLC in exchange for
      $200,000 and 2,667,000 shares of common stock.




In
      June
      2004, the Company entered into a strategic alliance agreement with Powerlinx
      and
      Choice Hotels International, one of the largest hotel franchise companies in
      the
      world with more than 5,000 hotels, inns, all-suite hotels and resorts open
      and
      under development in 44 countries under the Comfort Inn, Comfort Suites,
      Quality, Clarion, Sleep Inn, Rodeway Inn, Econo Lodge and MainStay Suites brand
      names.




Pursuant
      to the agreement, B2 Networks and B2Digital is supplying Point-to-Point Wireless
      Local Loop internet connectivity in each hotel room through the B2 Wireless
      Access Point (B2WAP) which will connect to the in-room Hotellinktv.com for
      laptop users and the B2 Digital TV set top box and handheld remote control
      for
      in-room television. These products allow Powerlinx to market a large variety
      of
      in-room digital services, which include making airline reservations, ordering
      pizza, event ticketing, and transportation services, along with delivery of
      Hollywood movies, sports and live events, and distinct genres of Pay-Per-View
      content. We are also actively marketing the B2Wap service and the B2 Digital
      TV
      Broadband Set Top Television System with our complete Hotel and MDU Connectivity
      products through our business-to-business marketing partner, Powerlinx, Inc.
      In
      January 2006 B2Digital decided to terminate this agreement and the B2digitaltv
      services as it was not generating revenue and was not viable to continue.




On
      December 15, 2004, we entered into a Letter of Agreement with B2 Networks,
      LLC
      whereby B2 Networks is providing certain operations assistance to the company
      in
      exchange for a portion of the gross revenue or $10,000 per month. In January
      2006 B2Digital decided to terminate this agreement and the B2digitaltv services
      as it was not generating revenue and was not viable to continue.




6


On
      January 20, 2005, B2Digital, Inc. entered into a Purchase Agreement with
      EuroSwiss Equities, Ltd., a privately-held Caribbean company, whereby BTOD
      agreed to purchase certain online casinos from EuroSwiss, including marketing
      rights and back office support (the "Assets"). In exchange for the Assets,
      we
      agreed to pay EuroSwiss $300,000 and 1,000,000 shares of the BTOD’s Series A
      Convertible Preferred Stock, payable over three months. This agreement was
      subsequently terminated on May 4, 2005. No consideration was given to Euroswiss.




**INDUSTRY
      OVERVIEW**




The
      provision of in-room entertainment and information services to the lodging
      industry includes offering pay-per-view motion pictures, archived television
      content, games, music, internet connectivity, guest programming of select pay
      cable channels, and an increasing array of interactive programs and information
      services. Pay-per-view services were introduced in the early 1970's and have
      since become a standard amenity offered by many hotels to their guests.
      Historically, providers of programming to hotels delivered their content on
      a
      fixed time schedule that did not provide the hotel guest flexibility in choosing
      when to watch a movie. Typically, a guest would be offered a choice of four
      to
      eight movies, each of which would be shown once every two to four hours. The
      development of video switches enabled providers of pay-per-view services to
      offer scheduling flexibility to the viewer. Depending on the type of system
      installed and the size of the hotel, guests can choose up to 50 different movies
      with an on-demand system. Changes in technology have also led to the ability
      to
      provide a number of on-demand interactive services such as guest folio review,
      automatic checkout, survey completion, guest messaging, video games, and
      internet service. The market for in-room entertainment and information is
      characterized as a highly competitive environment among several
      industry-dedicated companies and a number of new entrants including cable
      companies, telecommunications companies, laptop connectivity companies and
      others.




**OUR
      BUSINESS**




Manual
      functions of the equipment and system are limited to changing videocassettes
      once per month and will be all handled by B2Digital's service personnel, who
      also update the system's movie titles screens. Hotel Movie Network's information
      system is capable of generating regular reports of guests' entertainment
      selections, permitting to adjust its programming to respond to viewing patterns.
      The number of guests that can view a particular movie at the same time varies
      from hotel to hotel depending upon the popularity of the movie and by providing
      more copies of the most popular programming titles to the hotels.




Increased
      deployment of high-speed, two-way digital communications capability may enable
      B2Digital to provide more advanced interactive and information features, such
      as
      video games, in addition to basic guest services such as video checkout, room
      service ordering and guest satisfaction surveys. The system also enables hotel
      owners to broadcast informational and promotional messages and to monitor room
      availability.




7


For
      example, in a typical hotel with 200 rooms, the central head-end video rack
      would consist of approximately 30 videocassette recorders containing up to
      four
      copies of the most popular movies and a total of up to 15 different titles.
      The
      system includes a computerized in-room on-screen menu that offers guests a
      list
      of only those movie selections available to the guest at that time. As a result,
      even though the on-screen menu may not include a list of all titles available
      in
      the particular hotel, the list includes all movies currently available to the
      guest, thus eliminating the possibility of a guest being disappointed when
      the
      guest's selection is not available.




B2Digital
      undertakes a significant investment when it installs its system in a hotel
      property, sometimes rewiring part of the hotel. Depending on the size of the
      hotel property, the quality of the cabling and antenna system at the hotel,
      and
      the configuration of the system installed, the installation cost of a new,
      on-demand system with movies, guest services, including the head-end equipment
      averages from approximately $80 to $120 per room.




The
      installation cost of a system with digital content storage is approximately
      $45
      per room higher than the system in the same size hotel. The system can be
      modified to enable On Call functionality for movies, games, Internet, and guest
      services at a cost of $280 per room. Video On Call will only be installed in
      association with videocassette players, rather than digital content storage,
      in
      certain markets due to constraints placed on B2Digital by most movie studios
      that provide B2Digital with movie content.




The
      Video
      System is the Company's primary platform. It consists of a microprocessor
      controlling the television in each room, and a central video rack and system
      computer located elsewhere in the hotel. Programming signals originate from
      videocassette players located within the head-end rack and are transmitted
      to
      individual rooms by way of video technology. The system computer controls movie
      starts automatically. The system computer also records the purchase by a guest
      of any title and reports billing data to the hotel's accounting system, which
      posts the charge to the guest's bill.




**SERVICES**




**Pay-Per-View
      Movie Services**




B2Digital
      provides on-demand and, in some cases, scheduled in-room television viewing
      of
      major motion pictures and independent non-rated motion pictures for mature
      audiences, for which a hotel guest pays on a per-view basis. Depending on the
      type of system installed and the size of the hotel, guests can choose up to
      30
      different movies with a Video On Call system, or from eight to twelve movies
      with a scheduled system.




8


B2Digital
      obtains non-exclusive rights to show recently released motion pictures from
      major motion picture studios generally pursuant to a master agreement with
      each
      studio. The license period and fee for each motion picture are negotiated
      individually with each studio, which typically receives a percentage of that
      picture's gross revenues generated by the pay-per-view system. Typically,
      B2Digital obtains rights to exhibit major motion pictures during the
      "Hotel/Motel Pay-Per-View Window," which is the time period after initial
      theatrical release and before release for home video distribution or cable
      television exhibition. B2Digital attempts to license pictures as close as
      possible to the motion pictures' theatrical release date to benefit from the
      studios' advertising and promotional efforts. B2Digital also obtains independent
      motion pictures, most of which are non-rated and are intended for mature
      audiences, for a one-time flat fee that is nominal in relation to the licensing
      fees paid for major motion pictures.




B2Digital
      provides service under contracts with hotels that generally provide for a term
      of five to seven years. Under these contracts, B2Digital installs its system
      into the hotel at B2Digital's cost and B2Digital retains ownership of all of
      the
      equipment used in providing the service. B2Digital has required the hotels
      to
      provide televisions. B2Digital's contracts with hotels generally provide that
      B2Digital will be the exclusive provider of in-room, pay-per-view video
      entertainment services to the hotel and generally permit B2Digital to set the
      movie price. Under certain circumstances, certain hotels may have the right
      to
      prior approval of the price increases, which approval may not be unreasonably
      withheld. The hotels collect movie-viewing charges from their guests and retain
      a commission equal to a negotiated percentage of the total pay-per-view revenue,
      which varies in relationship with the size and profitability of the system.
      Some
      contracts also require B2Digital to upgrade systems to the extent that new
      technologies and features are introduced during the term of the contract. At
      the
      scheduled expiration of a contract, B2Digital generally seeks to extend the
      agreement on terms that are based upon the competitive situation in the market.




The
      revenue which is generated from pay-per-view service is dependent on the
      occupancy rate at the property, the "buy rate" or percentage of occupied rooms
      that buy movies or other services at the property, and the price of the movie
      or
      service. Occupancy rates vary based on the property's location, its competitive
      position within the marketplace and, over time, based on seasonal factors and
      general economic conditions. For instance, occupancy rates and revenues per
      room
      typically are higher during the summer months and lower during the winter months
      due to seasonal travel patterns. Buy rates generally reflect the hotel's guest
      mix profile, the popularity of the motion pictures or services available at
      the
      hotel, and the guests' other entertainment alternatives. Buy rates also vary
      over time with general economic conditions and the business of B2Digital is
      closely related to the performance of the business and mid-sized hotel segments
      of the lodging industry. Movie price levels are set based on the guest mix
      profile at each property and overall economic conditions. Currently, movie
      prices typically range from $8.95 to $9.95 for a purchase by the hotel guest.




9


**Guest
      Programming Services**




B2Digital
      also markets guest-programming services pursuant to which a hotel may elect
      to
      receive one or more programming channels, such as HBO, CNN, ESPN, TBS, Disney
      Channel, Discovery Channel, and other cable networks, which the hotel provides
      to guests at no additional cost. B2Digital provides hotels with guest
      programming services through a variety of arrangements, including having the
      hotel pay the company a monthly fee per room for each programming channel
      selected, or including the cost or part of the cost of such programming within
      the Company's overall contractual arrangements with the hotel or hotels.
      B2Digital has a unique contract with each network vendor (approximately 30
      vendors, serving 50-60 channels). Payment to network vendors is based on
      subscriber/room count but also use variables such as the combination of channels
      received, occupancy, volume, and penetration. The term of the contracts with
      network vendors average three to five years.




**SUPPLIERS**




In
      some
      cases B2Digital contracts directly with various electronics firms for the
      manufacture and assembly of its systems hardware. Historically, these suppliers
      have been dependable and able to meet delivery schedules on time. The Company
      believes that, in the event of a termination of any of its sources, alternate
      suppliers could be located without incurring significant costs or delays.
      However, certain electronic component parts used with the Company's products
      are
      available from a limited number of suppliers and can be subject to temporary
      shortages. In such event, the Company could experience a temporary reduction
      in
      the rate of new installations and/or an increase in the cost of such
      installations. If the Company were to experience a shortage of any given
      electronic part, the Company believes that alternative parts could be obtained
      or system design changes could be made.




The
      head-end electronics for the Company's systems is assembled at the Company's
      facilities for testing prior to shipping. Following assembly and testing of
      equipment designed specifically for a particular hotel, the system is shipped
      to
      each location, where Hotel Movie Network’s trained technicians will install the
      system, typically assisted by independent contractors.




B2Digital,
      through its acquisition of Hotel Movie Network, maintains direct contractual
      relations with various suppliers of pay-per-view and guest programming services,
      including the motion picture studios and/or their domestic and international
      distributors and programming networks. B2Digital believes its relationships
      with
      all suppliers are adequate.




**SALES
      AND MARKETING**




Substantially
      all revenue is derived from obtaining contracts with hotels in the United States
      who are not under contract with existing vendors or whose contracts with other
      vendors are expiring or have expired. B2Digital believes that opportunities
      for
      additional growth in the markets in the United States are more limited than
      in
      the past. The Company strategy for new customers is to target both smaller
      hotels and lower cost hotels. Management anticipates that the lower costs and
      flexibility afforded by the Company's products will make marketing to smaller
      hotels and some lower cost hotels more economically attractive than in the
      past.




10


**CUSTOMERS**




The
      Company typically negotiates and enters into a separate contract with each
      hotel
      for the services provided. However, for some of the large hotel management
      companies the Company will negotiate and enter into a single master contract
      for
      the provision of services for all of the corporate-managed hotels of such
      management company. In the case of franchised or independently owned hotels,
      the
      contracts are generally negotiated separately with each hotel.




Existing
      contracts generally have a term of five to seven years from the date the system
      becomes operational. At expiration, B2Digital typically seeks to extend the
      term
      of the contract on then current market terms.




**COMPETITION**




In
      the
      U.S., taking into account the various providers of cable television services,
      there are numerous providers of in-room video entertainment to the lodging
      industry, and at least two of our competitors, LodgeNet Entertainment
      Corporation, and Inn Room Video, Inc., provide on-demand pay-per-view, guest
      programming and guest services by means of in-room television. Internationally,
      there are more companies competing in the pay-per-view lodging industry than
      in
      the United States.




Pay-per-view,
      the most profitable component of the services currently offered, competes for
      a
      guest's time and entertainment resources with broadcast television, guest
      programming, and cable television services. In addition, there are a number
      of
      competitors that are developing ways to use their existing infrastructure to
      provide in-room entertainment and/or information services to the lodging
      industry, including cable companies (including wireless cable)
      telecommunications companies, internet and high-speed connectivity companies,
      and direct-to-home and direct broadcast satellite companies. Some of these
      competitors have been providing guest programming services to hotels and are
      beginning to provide video-on-demand, Internet and high-speed connectivity
      to
      hotels.




B2Digital
      is a competitive provider of in-room video entertainment services to the United
      States lodging industry. Domestically, B2Digital competes with smaller providers
      for the mid size to small size lodging market.




Competition
      with respect to the provision of in-room video entertainment and information
      systems centers on a variety of factors, depending upon the circumstances
      important to a particular hotel. Among the more important factors are (i) the
      features and benefits of the entertainment and information systems, (ii) the
      quality of the vendor's technical support and maintenance services, and (iii)
      the financial terms and conditions of the proposed contract. With respect to
      hotel properties already receiving in-room entertainment services, the current
      provider may have certain informational and installation cost advantages
      compared to outside competitors.




11


Furthermore,
      while the Company is addressing the likelihood of increased demand for Internet
      services in the hotel guestroom, B2Digital may face additional competition
      in
      this area from traditional as well as new competitors. In addition, there are
      a
      number of potential competitors that could utilize their existing infrastructure
      to provide in-room entertainment to the lodging industry, including cable
      companies (including wireless cable), telecommunications companies, and
      direct-to-home and direct broadcast satellite companies. Some of these potential
      competitors already are providing guest programming services to hotels and
      testing on-demand video. Some of these competitors may be better funded from
      public capital or private venture capitals markets and have access to additional
      capital resources that B2Digital does not have.




B2Digital
      believes its competitive advantages include: (i) low price; and (ii) system
      reliability and high quality service.




B2Digital
      may compete with local cable television operators by customizing packages of
      programming to provide only those channels desired by the hotel subscriber,
      which typically reduces the overall cost of the service provided. B2Digital
      anticipates substantial competition in obtaining new contracts with major hotel
      chains. The Company believes that hotels view the provision of in-room on-demand
      entertainment and information both as a revenue source and as a source of
      competitive advantage because sophisticated hotel guests are increasingly
      demanding a greater range of quality entertainment and information alternatives.
      At the same time, B2Digital believes that certain major hotel chains have
      awarded contracts based primarily on the level and nature of financial and
      other
      incentives offered by the service provider. While the Company believes its
      competitive position could enable B2Digital to continue to enter into
      contractual arrangements that are attractive to hotels, its competitors may
      attempt to maintain or gain market share at the expense of profitability.
      B2Digital may not always be willing to match incentives provided by its
      competitors.




The
      communications industry is subject to rapid technological change. New
      technological developments could adversely effect B2Digital's operations unless
      the Company is able to provide equivalent services at competitive prices.




**INTERNATIONAL
      MARKETS**




In
      addition to its intended operations in the United States, B2Digital may in
      the
      future offer its services in Canada, Latin America, Puerto Rico, the U.S. Virgin
      Islands, Hong Kong, Singapore, Thailand, Australia, the Bahamas, Europe, and
      elsewhere in the Asia-Pacific region. However, the Company generally would
      also
      incur greater capital expenditures and operating and servicing costs outside
      the
      United States.




12


The
      competition to provide pay-per-view services to hotels is greater in
      international markets than in the United States. Expansion of B2Digital's
      operations into foreign markets involves certain risks that are not associated
      with further expansion in the United States, including availability of
      programming, government regulation, currency fluctuations, language barriers,
      differences in signal transmission formats, local economic and political
      conditions, and restriction on foreign ownership and investment. Consequently,
      these risks may hinder B2Digital's ability to create any base of hotel rooms
      in
      foreign markets.




**REGULATION**




The
      Communications Act of 1934, as amended by the Cable Communications Policy Act
      of
      1984, the Cable Television Consumer Protection and Competition Act of 1992
      and
      the Telecommunications Act of 1996, governs the distribution of video
      programming by cable, satellite or over-the-air technology, through regulation
      by the Federal Communications Commission, or FCC. However, because our video
      distribution systems do not use any public rights of way, they are not
      classified as cable systems and are subject to minimal regulation. Thus, the
      FCC
      does not directly regulate the pay-per-view or free-to-guest services provided
      by us to hotel guests.




Various
      laws and governmental regulations may affect the internet-based services
      potentially offered by us. There are currently few laws or regulations directly
      applicable to access to or commerce on commercial online services or the internet.
      However, because of the increasing popularity and use of commercial online
      services and the Internet, a number of laws and regulations may be adopted
      with
      respect to commercial online services and the Internet. The adoption of such
      laws or regulations in the future may slow the growth of commercial online
      services and the internet, which could in turn cause a decline in the demand
      for
      our internet-based services and products or otherwise have an adverse effect
      on
      us. Moreover, the applicability to commercial online services and the internet
      of existing laws governing issues such as property ownership, libel, personal
      privacy and taxation is uncertain and could expose us to liability.




On
      January 18, 2001, the FCC released a Notice of Inquiry regarding interactive
      television services, or ITV, over cable television. The FCC seeks comment on,
      among other things, an appropriate definition of ITV services, whether access
      to
      a high -speed connection is necessary to realize ITV capabilities, and whether
      a
      nondiscrimination rule is necessary and/or appropriate. The outcome of this
      proceeding and any rules ultimately adopted by the FCC could affect the ITV
      services currently offered by us and the ITV services which we may offer in
      the
      future.




Although
      the FCC generally does not directly regulate the services provided by us, the
      regulation of video distribution and communications services is subject to
      the
      political process and has been in constant flux over the past decade. Further
      material changes in the law and regulatory requirements must be anticipated
      and
      our business could be adversely affected by future legislation or new
      regulations.




13


We
      do not
      purport to describe all present and proposed federal, state and local
      regulations and legislation relating to the video programming industry
      applicable to us. Other existing federal, state and local laws and regulations
      currently are, or may be, the subject of a variety of judicial proceedings,
      legislative hearings, and administrative and legislative proposals that could
      change in varying degrees the manner in which private cable operators, other
      video programming distributors, and Internet service providers operate. We
      cannot predict the outcome of these proceedings or their impact upon our
      operations at this time.




**PATENTS,
      TRADEMARKS AND COPYRIGHTS**




We
      have
      one patent registered in the Dominican Republic for our video technology. We
      own
      and, through our acquisition of Hotel Movie Network, our various trade names,
      trademarks, service marks, and logos to be used in our businesses, which we
      intend to actively protect.




**EMPLOYEES**




As
      of
      March 31, 2006, we employed 6 full-time employees and 2 consultants. None of
      the
      employees are subject to a collective bargaining agreement, and there is no
      union representation. We believe our employee relationships are good.




**RESEARCH
      AND DEVELOPMENT COSTS**




Over
      the
      last two years, we spent approximately $340,000 on research and development.




**ITEM
      2. DESCRIPTION OF PROPERTY**




We
      took
      over a yearly renewable lease through the acquisition of Hotel Movie Network.
      The facilities are located at 1030 S. Mesa Drive, Mesa, Arizona 85210. These
      premises have 30,000 square feet of storage and 5,000 square feet of offices
      and
      work shops, with a
      rent of $3,200 per month .
      We
      believe these facilities are adequate in size to handle all operations in the
      United States and the Caribbean for the foreseeable future.




Subsequent
      to March 31, 2006, we moved our administrative offices to 4425
      Venture Cannon Avenue, Sherman Oaks, California 91423, which is owned by our
      interim Chief Financial Officer. This space is being utilized on a temporary
      basis free of charge to save costs. There is no guarantee that this arrangement
      will continue.




**ITEM
      3. LEGAL PROCEEDINGS**




In
      July
      2003, we were served with a lawsuit from William B. Krusheski in United States
      District Court for Southern District of California. The complaint sought in
      excess of $75,000 on a note allegedly due and $135,000 in other compensatory
      damages. In June 2004, the county court of San Diego, California awarded a
      default judgment in favor of Mr. Krusheski in the amount of $135,000. The
      company has offered payments of $5,000 per month until the debt is settled.
      We
      have to date had no response or contact from Mr. Krusheski.




14


**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**




Not
      applicable.




**PART
      II**




**ITEM
      5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY SECURITIES**




Our
      common stock began trading on the Over-The-Counter Bulletin Board under the
      symbol "BTWO" on November 10, 2001. After June 16, 2006, we began to trade
      under
      the symbol “BTOD.” Prior to November 10, 2001, our common stock was quoted under
      the symbol "TLCR."




The
      following table sets forth the high and low bid prices for shares of our common
      stock for the periods noted, as reported by the National Daily Quotation Service
      and the Over-The-Counter Bulletin Board. Quotations reflect inter-dealer prices,
      without retail mark-up, mark-down or commission and may not represent actual
      transactions.




LOW
            
            HIGH2004First Quarter
            
            .15
            
            .21Second Quarter
            
            .04
            
            .16Third Quarter
            
            .04
            
            .13Fourth Quarter
            
            .04
            
            .122005First Quarter
            
            .007
            
            .01Second Quarter
            
            .004
            
            .01Third Quarter
            
            .001
            
            .009Fourth Quarter
            
            .001
            
            .0012006First Quarter
            
            .0004
            
            .0008





As
      of
      March 31, 2006, our common stock was held by approximately 407 stockholders
      of
      record. We believe that the number of beneficial owners is substantially greater
      than the number of record holders because a significant portion of our
      outstanding common stock is held of record in broker "street names" for the
      benefit of individual investors. The transfer agent of our common stock is
      Manhattan Stock Transfer. Their phone number is (631) 928 -7655.




15


**DIVIDEND
      POLICY**




Our
      Board
      of Directors determines any payment of dividends. We do not expect to authorize
      the payment of cash dividends on common stock in the foreseeable future. Any
      future decision with respect to dividends will depend on future earnings,
      operations, capital requirements and availability, restrictions in future
      financing agreements, and other business and financial considerations. Series
      of
      Preferred Stock when authorized with rights and privileges could require
      dividends. The Company has not paid any dividends in the past several years.




**RECENT
      SALES OF UNREGISTERED SECURITIES**




Previously
      reported.




**EQUITY
      COMPENSATION PLANS**




The
      following table sets forth as of March 31, 2006, compensation plans (including
      individual compensation arrangements) under which equity securities of the
      Company are authorized for issuance.




Equity
      Compensation Plan Information




Plan
                Category
            Number
                of securities to beissued upon exercise ofoutstanding
                options,warrants and rights
              
              (a)
            Weighted-averageexercise
                price of outstandingoptions, warrants and rights
              
              (b)
            Number
                of securities remainingavailable for future issuanceunder equity
                compensation plans(excluding securities reflectedin column
                (a))
              
              (c)Equity
                compensation plans approvedby security holders
            0
            0
            0Equity
                compensation plans not approvedby security holders
            5,000,000
            $.0145
            180,000,000Total
            5,000,000
            $.0145
            180,000,000*




*
      Pre
      1-1,000 reverse on June 16, 2006.




16


On
      October 12, 2004, the Company entered into a Fee Agreement for Professional
      Services with Weed & Co. LLP (the “Agreement”). Terms of the Agreement
      provided for, among other things, the issuance to Richard O. Weed, as designee
      of Weed & Co. LLP, 2,000,000 shares of common stock, and options to purchase
      2,000,000 shares of the Company's common stock at an exercise price of $.03
      per
      share. These options expire December 31, 2010. Further, pursuant to the
      Agreement, Mr. Weed was granted additional options to purchase common stock
      on
      the following dates: (1) on March 9, 2005, options to purchase 1,000,000 common
      shares at an exercise price of $.0093 per share, expiring December 31, 2010,
      (2)
      on October 9, 2005, options to purchase 1,000,000 common shares at an exercise
      price of $.002 per share, expiring December 31, 2010, and (3) on March 9, 2006,
      options to purchase 1,000,000 common shares at an exercise price of $.0011
      per
      share, expiring March 9, 2011. The options are not subject to dilution (i.e.,
      no
      adjustment to the number of shares or the exercise price) based upon any reverse
      split of the common stock. The options are exercisable in whole or in part
      with
      a promissory note of less than 45 days duration or upon common “cashless
      exercise” terms.




On
      January 10, 2005, we adopted the 2005 Non-Qualified Stock Compensation Plan
      whereby the corporation may compensate key employees, advisors and consultants
      by issuing them shares of its capital stock in exchange for services rendered
      and to be rendered and thereby conserve the corporation's cash resources. We
      reserved 60,000,000 shares of our $.001 par value common stock for issuance
      under the Plan and registered the shares on a Form S-8 registration statement
      with the Securities and Exchange Commission on January 11, 2005. On or about
      February 10, 2005, we amended the Stock Plan to authorize an additional
      100,000,000 shares and registered these additional shares on Form S-8. All
      shares have been issued out of this plan.




In
      August
      2005, we adopted the August 2005 Non-Qualified Stock Compensation Plan whereby
      the corporation may compensate key employees, advisors and consultants by
      issuing them shares of its capital stock in exchange for services rendered
      and
      to be rendered and thereby conserve the corporation's cash resources. We
      reserved 300,000,000 shares of our $.001 par value common stock for issuance
      under the Plan and registered the shares on a Form S-8 registration statement
      with the Securities and Exchange Commission on August 19, 2005. At March 31,
      2006, there were approximately 180,000,000 shares remaining for issuance
      (180,000 post 1-1,000 reverse on June 16, 2006).




**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**




You
      should read this section together with our consolidated financial statements
      and
      related notes thereto included elsewhere in this report.




**CAUTIONARY
      STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS**




This
      report contains forward-looking statements that involve risks and uncertainties.
      We generally use words such as "believe," "may," "could," "will," "intend,"
      "expect," "anticipate," "plan," and similar expressions to identify
      forward-looking statements, including statements regarding our expansion plans.
      You should not place undue reliance on these forward-looking statements. Our
      actual results could differ materially from those anticipated in the
      forward-looking statements for many reasons, including the risks described
      in
      our "Risk Factors" section and elsewhere in this report. Although we believe
      the
      expectations reflected in the forward-looking statements are reasonable, they
      relate only to events as of the date on which the statements are made, and
      our
      future results, levels of activity, performance or achievements may not meet
      these expectations. We do not intend to update any of the forward-looking
      statements after the date of this document to conform these statements to actual
      results or to changes in our expectations, except as required by law.




17


**CRITICAL
      ACCOUNTING POLICIES**




Cash
      and
      cash equivalents - For purposes of the statement of cash flows, the Company
      considers all highly liquid debt with original maturities of ninety days or
      less, to be cash equivalents.




Accounts
      receivable - The Company follows the allowance method of recognizing
      uncollectible accounts receivable. The allowance method recognizes bad debt
      expense as a percentage of accounts receivable based on a review of accounts
      receivable outstanding and the Company's prior history of uncollectible accounts
      receivable.




Fair
      value of financials instruments - The Company's financial instruments includes
      accounts receivable, accounts payable, notes payable and long-term debt. The
      fair market value of accounts receivable and accounts payable approximate their
      carrying values because their maturities are generally less than one year.
      Long-term notes receivable and debt obligations are estimated to approximate
      their carrying values based upon their stated interest rates.




Inventories
      - Inventories are stated at the lower of cost (first-in, first-out) or market.




Property
      and equipment - Property and equipment are stated at cost, net of accumulated
      depreciation. Depreciation is provided primarily by the straight-line method
      over the estimated useful lives of the related assets generally of five to
      seven
      years.




Income
      taxes -The Company accounts for income taxes in accordance with Statement of
      Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
      requires an asset and liability approach to financial accounting and reporting
      for income taxes. Deferred income tax assets and liabilities are computed
      annually for differences between the financial statement and tax basis of assets
      and liabilities that will result in taxable or deductible amounts in the future
      based on enacted tax laws and rates applicable to the periods in which the
      differences are expected to affect taxable income. Valuation allowances are
      established when necessary to reduce the deferred tax assets to the amount
      expected to be realized. Income tax expense is payable or refundable for the
      period plus or minus the change during the period in deferred tax assets and
      liabilities.




18


Use
      of
      estimates - The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.




Revenue
      recognition - The Company's revenues are derived principally from the sale
      of
      satellite systems and pay-per-view movies to hotels. Revenue from the sale
      of
      satellite systems is recognized after the system has been installed, and there
      are no longer any material commitments to the customer. The Company recognizes
      revenue from the pay-per-view movies on the accrual basis. The Company bills
      its
      customers for the month that services are performed.




Stock
      options - The Company accounts for stock options issued to employees in
      accordance with APB No.25.




The
      Company has elected to adopt the disclosure requirements of SFAS No.123
      "Accounting for Stock-based Compensation". This statement requires that the
      Company provide proforma information regarding net income (loss) and
      income (loss)
      per share as if compensation cost for the Company's stock options granted had
      been determined in accordance with the fair value based method prescribed in SFAS
      No.
      123. Additionally, SFAS No. 123 generally requires that the Company record
      options issued to non-employees, based on the fair value of the options.




Income
      (Loss) per share - Basic earnings per share includes no dilution and is computed
      by dividing net earnings (loss) available to stockholders by the weighted number
      of common shares outstanding for the period. Diluted earnings per share reflect
      the potential dilution of securities that could share in the Company's earnings.
      During the years ended March 31, 2006 and 2005, there were no dilutive
      securities.




RECENT
      ACCOUNTING PRONOUNCEMENTS




In
      November  2004,  the FASB issued  SFAS No.  151, 
"Inventory  Costs  an amendment  of  ARB  No. 
43,  Chapter  4."  This  Statement  clarifies  the
      accounting for abnormal amounts of idle facility expense, freight, handling
      costs,  and wasted materials.  This  Statement is
      effective  for inventory costs  incurred  during  fiscal
      years  beginning  after June 15, 2005.  The initial 
application  of SFAS No. 151 will have no impact on the  Company's
      financial statements.





In
      December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
      Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67."
      This
      Statement  references the financial  accounting and reporting guidance
      for real  estate  time-sharing  transactions  that is 
provided  in  AICPA Statement of  Position  04-2, 
"Accounting  for Real  Estate  Time-Sharing Transactions." This
      Statement also states that the guidance for incidental operations and costs
      incurred to sell real estate  projects does not apply to real estate
      time-sharing  transactions.  This Statement is effective for financial
      statements for fiscal years  beginning  after June 15, 2005. The
      initial application  of SFAS No. 152 will have no impact on the 
Company's financial statements.





19


In
      December 2004,  the FASB issued SFAS No. 153,  "Exchanges of
      Nonmonetary Assets - a replacement of APB Opinion No. 20 and FASB Statement
      No.
      3." This Statement eliminates the exception  for  nonmonetary 
exchanges  of  similar  productive  assets and replaces it
      with a general  exception for exchanges of  nonmonetary  assets
      that do  not  have  commercial  substance.  
A  nonmonetary  exchange  has commercial substance if the future
      cash flows of the entity are expected to change significantly  as a 
result  of the  exchange.  This Statement  is effective
      for  nonmonetary  asset  exchanges  occurring in
      fiscal  periods beginning after June 15, 2005. The Company does not
      expect  application of SFAS No. 153 to have a material affect on its
      financial statements.


This Statement 
      is effective for  nonmonetary  asset  exchanges  occurring
      in fiscal  periods beginning after June 15, 2005. The Company does not
      expect application of SFAS No. 153 to have a material affect on its
      financial statements.





In
      May
      2005, the FASB issued SFAS No. 154,  "Accounting Changes and Error - an
      amendment of APB Opinion No. 29." This Statement applies to all voluntary
      changes in accounting principle. It also applies to changes required by an
      accounting pronouncement in the usual instance that the pronouncement does
      not
      include specific transition provisions. When a pronouncement includes specific
      transition provisions, those provisions should be followed.  Opinion 20
      previously required that most voluntary changes in accounting principle be
      recognized by including in net income of the period of the change the cumulative
      effect of changing to the new accounting principle. This Statement requires
      retrospective application to prior periods financial statements of changes
      in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects of the cumulative effect of the change.
      This Statement  is effective for  accounting changes and
      corrections of errors made in fiscal years beginning after December 15, 2005.
      The Company does not expect application of SFAS No. 154 to have a material
      affect on its financial statements.





In
      February 2006, the FASB issued SFAS No. 155. This Statement amends FASB
      Statements No. 133, Accounting for Derivative Instruments and Hedging
      Activities, and No. 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities *.* This
      Statement resolves issues addressed in Statement 133 Implementation Issue No.
      D1, “Application of Statement 133 to Beneficial Interests in Securitized
      Financial Assets.” The Company does not expect application of SFAS No. 155
      to have a material affect on its financial statements.





In
      March
      2006, the FASB issued SFAS No. 156. This Statement amends FASB Statement No.
      140, Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities, with respect to the accounting for separately
      recognized servicing assets and servicing liabilities.
      This Statement is effective as of the beginning of its first fiscal
      year that begins after September 15, 2006. An entity should apply the
      requirements for recognition and initial measurement of servicing assets and
      servicing liabilities prospectively to all transactions after the effective
      date
      of this Statement. The Company does not expect application of SFAS No. 156
      to have a material affect on its financial statements.




20


**GOING
      CONCERN OPINION**




Our
      audited financial statements for the fiscal year ended March 31, 2006, reflect
      a
      net loss of $1,363,316 .
      These
      conditions raised substantial doubt about our ability to continue as a going
      concern.




**YEAR
      ENDED MARCH 31, 2006 AS COMPARED TO THE YEAR ENDED MARCH 31,
      2005**




**NET
      REVENUES**




Net
      revenues for the year ended March 31, 2006 were $511,463 compared to $683,323
      for the year ended March 31, 2005. The decrease is due to in part to less
      intense sales and marketing efforts during the 2006 fiscal year.




**COST
      OF SALES**




Cost
      of
      sales for the year ended March 31, 2006 were $191,525 compared to $323,813
      for
      the year ended March 31, 2005. Our cost of sales decreased due in part to a
      concentrated effort to reduce unnecessary expenses, which also resulted in
      an
      increased gross margin percentage for the 2006 fiscal year.




**OPERATING
      EXPENSES**




Operating
      expenses for the year
      ended March 31, 2006 were $1,566,754 compared to $4,951,240 for the year ended
      March 31, 2005. This decrease was due in part to a sharp decrease in general
      administration expenses in the amount of $2,250,737. Further, the Company
      recognized decreases in research and development expenses ($320,000) and
      inventory impairment expenses of $286,251 for the year ended March 31, 2006
      as
      compared to $1,100,000 for the fiscal year ended March 31, 2005.




The
      impairment of inventory was recognized because the Company has experienced
      little movement of its goods. However, management has been developing the
      technology which will allow the inventory to be utilized in formats compatible
      with current digital technologies.




**NET
      LOSS**




Net
      loss
      for the year ended March 31, 2006 was $ 1,363,316 compared
      to $4,801,840 for the year ended March 31, 2005. This change was due primarily
      to a sharp decrease in general and administrative expenses and inventory
      impairment from 2006 to 2005.




21


**BASIC
      AND DILUTED LOSS PER SHARE**




Our
      basic
      and diluted loss per share for the year ended March 31, 2006 was $2.04 compared
      to $27.81 for the year ended March 31, 2005.




**LIQUIDITY
      AND CAPITAL RESOURCES**




As
      of
      March 31, 2006, our current assets were $48,443 and
      current liabilities were $1,100,157. Cash and cash equivalents were $8,203.
      Our
      stockholder's deficit at March 31, 2006 was $2,795,389 .
      We had
      a net usage of cash due to operating activities in March 31, 2006 and 2005
      of
      $195,758 and $915,817, respectively. We had net cash used by financing
      activities of $198,250 and $925,858 for the twelve month period ended March
      31,
      2006 and 2005, respectively.




In
      January 2006, we initiated an offering in Europe pursuant to Regulation S.
      Pursuant to this offering, we transferred 40,000,000 shares of common stock,
      $.00001 par value, to a trustee in Europe for the sole purpose of selling shares
      in a Regulation S offering. Under the agreement with the trustee, we were to
      receive the net proceeds from the sale of these shares and any shares of common
      stock not sold by the trustee were to be returned to us upon our request. The
      trustee was granted 10,000,000 shares under Section 4(2) and/or Regulation
      S of
      the Securities Act under the agreement and is entitled to 2.5% of the volume
      of
      trade of the administered assets. We applied for and received a separate CUSIP
      number on these shares.





Beginning
      January 13, 2006, the 40,000,000 shares were sold in the European market for
      approximately $120,000 pursuant to Section 4(2) and/or Regulation S of the
      Securities Act. Selling fees and expenses were $10,000.


In
        May
        2006, we transferred 350,000,000 shares (pre-reverse) of common stock to
        a
        trustee in Europe for future Regulation S offerings overseas. These shares
        have
        not been sold to overseas investors. The trustee under the agreement is entitled
        to 2.5% of the volume of trade of the administered assets.




Our
      obligations include:




A
      Promissory note for $1,000,000 payable based on the purchase agreement of our
      subsidiary; Hotel Movie Network which pays 7.5% per annum. This note has no
      due
      date and may be paid anytime in stock or when funds are readily available.
      At
      March 31, 2006, $1,218,750 principal and interest was due under this
      note.




A
      promissory note for $800,000 payable for monies lent to company by our President
      and CEO Robert Russell which pays 7.5% per annum. This note is due on or before
      March 31 2007. At March 31, 2006, $920,000 principal and interest was due under
      this note.




**Agreement
      with B2 Networks**




On
      March
      6, 2004, we entered into a Letter of Agreement with B2 Networks, LLC, whereby
      B2
      Networks would provide data center facilities, management systems for video
      and
      set top services and assist with operating the Hotel Link services. On April
      23,
      2004, we agreed to purchase 20% of B2 Networks, LLC in exchange for 1,667,667
      shares of common stock and $500,000. On August 2004, we amended this agreement
      to reduce the amount of purchase to 10% of the LLC in exchange for $200,000
      and
      2,667,000 shares of common stock.




22


On
      December 15, 2004, we entered into a Letter of Agreement with B2 Networks
      whereby B2Networks will provide certain operations assistance to the company
      in
      exchange for a portion of gross revenue or $10,000 per month. This agreement
      was
      terminated in January 2006.




The
      amounts paid to B2 Networks have been recorded as research and development
      since
      the project has not achieved technical feasibility.




Dutchess
      Private Equities Fund II, LP




On
      February 23, 2005, Dutchess Private Equities Fund II, LP declared a note in
      the
      amount of $26,400 due. On July 7, 2005, Dutchess notified us that they elected
      to switch the Note and associated penalties to a Convertible Debenture with
      registration rights requiring that a registration agreement be filed within
      twenty days and effective within forty days. We have not filed a registration
      statement or made any payments on this Note and Dutchess is claiming penalties
      of $1,000 per day as a result. At July 6, 2005, Dutchess alleged the principal
      balance was $35,176.31. No action has been filed in this matter. In February
      2006, both parties agreed on an amount of $35,000 due as of May 31, 2006. The
      company has made total payments in the amount of $26,500.




**Employment
      Agreements**




On
      January 25, 2005, we entered into a new employment agreement with Robert Russell
      whereby Mr. Russell agreed to serve as Chief Executive Officer of the company
      for a period of three years for $240,000 per annum. Mr. Russell also received
      a
      signing bonus of 1,000,000 shares of Series A Convertible Preferred Stock.




On
      December 23, 2003, we entered into a consulting agreement with Marcia
      Pearlstein, whereby Ms. Pearlstein would act as Interim Chief Financial Officer
      and corporate secretary for one year for $60,000 per annum. On February 9,
      2005,
      we extended this agreement until December 31, 2005 and issued Ms. Pearlstein
      a
      signing bonus of 200,000 shares of Series A Convertible Preferred Stock. On
      January 4, 2006, we extended this agreement until December 31, 2006, decreasing
      Ms. Pearlstein’s salary to $30,000 per year.




On
      September 12, 2005, we entered into an employment agreement with Paul La Barre,
      whereby Mr. La Barre would serve as Vice-President and Chief Operation Officer
      for a period of three years. In exchange for services, Mr. La Barre is to
      receive a minimum base salary of $60,000 per annum and a one time grant of
      800,000 shares of Series A Preferred Stock.




23


**RISK
      FACTORS**




An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the following risk factors, other information included in
      this filing and information in our periodic reports filed with the SEC. If
      any
      of the following risks actually occur, our business, financial condition or
      results of operations could be materially and adversely affected, and you may
      lose some or all of your investment.




**RISKS
      ABOUT OUR BUSINESS**




**WE
      HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT WHICH MAY CONTINUE IN THE
      FUTURE AND WHICH MAY PREVENT US FROM OPERATING AND EXPANDING OUR BUSINESS.**




We
      have
      incurred significant net operating losses in each of the years ended March
      31,
      2006 and 2005. We realized a net loss of $1,363,316 for the twelve months
      ended March 31, 2006, as compared to net loss of $4,801,840 for the twelve
      months ended March 31, 2005. Our accumulated deficit through March 2006 was
      $11,199,249. We may continue to incur losses and may never achieve or sustain
      profitability. An extended period of losses and negative cash flow may prevent
      us from operating and expanding our business.




**OUR
      INDEPENDENT AUDITORS HAVE ISSUED A GOING CONCERN OPINION DUE TO OUR RECURRING
      LOSSES AND WORKING CAPITAL SHORTAGES, WHICH MEANS WE MAY NOT BE ABLE TO CONTINUE
      OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.**




Our
      audited financial statements for the fiscal year ended March 31, 2006, reflect
      a
      net loss of $1,363,316. These conditions raised substantial doubt about our
      ability to continue as a going concern if we do not acquire sufficient
      additional funding or alternative sources of capital to meet our working capital
      needs. If we do not obtain additional funding, we may not be able to continue
      our operations.




**WE
      NEED AND MAY BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
      WHICH
      COULD DILUTE OUR STOCKHOLDERS' INTERESTS OR IMPOSE BURDENSOME FINANCIAL
      RESTRICTIONS ON OUR BUSINESS.**




Historically,
      we have relied upon cash from financing activities to fund all of the cash
      requirements of our activities. We have not been able to generate any cash
      from
      our operating activities in the past and we may not be able to generate any
      significant cash in the future. Deteriorating global economic conditions and
      the
      effects of ongoing military actions against terrorists may cause prolonged
      declines in investor confidence in and accessibility to capital markets. Future
      financing may not be available on a timely basis, in sufficient amounts or
      on
      terms acceptable to us. Any future equity financing may also dilute existing
      stockholders' equity. Any debt financing or other financing of securities senior
      to common stock will likely include financial and other covenants that will
      restrict our flexibility. At a minimum, we expect these covenants to include
      restrictions on our ability to pay dividends on our common stock. If we find
      additional financing with satisfactory terms, your interests may be diluted
      and
      we may have to accept restrictions on our business.




24


**IF
      WE CAN NOT IMPLEMENT OUR BUSINESS PLANS REGARDING HOTEL MOVIE NETWORK, WE MAY
      NEVER BECOME PROFITABLE.**




Our
      business model includes leveraging the assets we acquired from Hotel Movie
      Network, Inc. We have just begun to incorporate these assets into our company.
      Accordingly, we are unable to predict the demand for our services and are therefore
      unable to predict whether our business model may be sustained. If we are unable
      to generate significant revenues under our current business model, we may never
      become profitable and, if we become profitable, we may not be able to sustain
      profitability. .




**OUR
      REVENUES, IF ANY, MAY BE AFFECTED BY THE SEASONAL OCCUPANCY RATES OF HOTELS
      WE
      DO BUSINESS WITH.**




Our
      revenue, if any, will partly depend on the occupancy rate of the hotel
      properties we serve. Occupancy rates can vary season to season based on the
      property's location and attractions nearby. Generally, occupancy rates are
      higher during the summer and lower during the winter. Occupancy rates affect
      our
      potential number of customers, which affects our revenue. Because we do not
      control occupancy rates, we may not be able to significantly influence negative
      trends or seasonality in our revenues, if any.




**OUR
      REVENUES, IF ANY, WILL BE AFFECTED BY FACTORS OUT OF OUR CONTROL.**




In
      addition to occupancy rates, our revenues will be affected by many factors
      out
      of our control including:




-
            the
                rate at which hotel guests buy our services;


-
            the
                popularity of movies we license;


-
            the
                amount of marketing studios used to promote their movies; and


-
            other
                entertainment options at the hotel property.




While
      we
      may decide which hotels we enter into contracts with, many factors out of our
      control will ultimately affect the rate at which guests buy our services. We
      do
      not control all of the factors that could influence guests to make a decision
      to
      buy our services and therefore we can not control the amount of revenues we
      generate.




25


**WE
      DEPEND ON THIRD PARTIES FOR OUR PROGRAMMING CONTENT AND IF THEY INCREASE THEIR
      FEES, OUR PROFITABILITY COULD BE AFFECTED.**




Our
      programming content is provided by third parties. We currently pay a fee for
      the
      right to broadcast their programming. If these third parties increase their
      fees, we will have to either pass the increased costs on to our customers which
      could adversely affect our revenues or our profitability may decrease.




**IF
      WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, WE MAY NOT BE ABLE TO IMPLEMENT OUR
      BUSINESS PLAN AND BECOME PROFITABLE.**




Our
      business strategy envisions a period of rapid growth that may strain our
      administrative and operational resources. Our ability to effectively manage
      growth will require us to continue to expand the capabilities of our operational
      and management systems and to attract, train, manage and retain qualified
      engineers, technicians, salespersons and other personnel. We may not be able
      to
      manage our growth, particularly if our losses continue or if we are unable
      to
      obtain sufficient financing. If we are unable to successfully manage our growth,
      we may not be able to implement our business plan and become profitable.




**IF
      WE CAN NOT PROTECT OUR PROPRIETARY RIGHTS AND INTELLECTUAL PROPERTY, WE MAY
      NOT
      BE ABLE TO COMPETE EFFECTIVELY IN THE MARKETPLACE.**




We
      will
      rely on a combination of trade secrets and contractual provisions to protect
      our
      proprietary rights and products. These protections may not be adequate and
      competitors may independently develop technologies that are similar or identical
      to our products. We may experience delays in the introduction and market
      acceptance of new products due to the expense of adopting new technology and
      customer resistance to learning new technology. If we can not protect our
      proprietary rights and intellectual property, we may not be able to compete
      effectively in the marketplace.




**IF
      COMMUNICATIONS TO OUR PRIMARY SERVERS ARE INTERRUPTED, OUR OPERATIONS MAY NOT
      GENERATE REVENUE.**




Although
      our servers are maintained by our host, all of our primary servers are
      vulnerable to interruption by damage from fire, flood, power loss,
      telecommunications failure, break-ins, terrorist attacks and other events beyond
      our control. We do not maintain business interruption insurance. A significant
      system disruption would adversely affect our business, because we would be
      unable to deliver our services during the disruption and may therefore lose
      existing and potential customers.




**WE
      OPERATE WITHIN A HIGHLY COMPETITIVE MARKET AND IF WE DO NOT SUCCEED IN
      ATTRACTING CUSTOMERS, WE WILL NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.**




The
      market for on-demand video entertainment and satellite services is extremely
      competitive and can be significantly affected by many factors, including changes
      in local, regional or national economic conditions, changes in consumer
      preferences, brand name recognition and marketing and the development of new
      and
      competing technologies. We expect that existing businesses that compete with
      us
      have greater financial resources than we do and will be able to undertake more
      extensive marketing campaigns and adopt more aggressive advertising sales
      policies than we can. If we can not compete successfully, we may not be able
      to
      implement our business plan.




26


**ITEM
      7. FINANCIAL STATEMENTS**




B2Digital,
        Incorporated
 Financial
        Statements
 March
        31,
        2006
  Contents
  PageReport of independent Registered
                  Public
                  Accounting Firm
                
                F-1Financial StatementsBalance
                    Sheets
                
                F-2-F-3Statements
                    of Operations
                
                F-4Statements
                    of Stockholders' Equity (Deficit)
                
                F-5Statements
                    of Cash Flows
                
                F-6Notes to the Financial Statements
                
                F-7
                    to
                    F-13


27


Larry
      O'Donnell, CPA, P.C.Telephone (303) 745-4545 2228South Fraser Street
      Unit 1Aurora, Colorado 80014




Board
      of
      Directors


B2Digital,
      Incorporated




I
      have
      audited the accompanying balance sheet s of
      B2Digital, Incorporated as of March 31, 2006 and 2005 and the related statements
      of operations, stockholders' equity and cash flows for the two years then ended
      These financial statements are the responsibility of the Company's management.
      My responsibility is to express an opinion on this financial statement based
      on
      my audits.




I
      conducted my audit s in
      accordance with Standards Of the Public Companies Accounting Oversight Board
      (United States). Those standards require that I plan and perform the audit
      to
      obtain reasonable assurance about whether the financial statements are free
      of
      material misstatement. An audit includes examining, on a test basis, evidence
      supporting the amounts and disclosures in the financial statements. An audit
      also includes assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. I believe that my audits provide a reasonable basis for my
      opinion.




In
      my
      opinion, based on my audits and the report of other auditors, the financial
      statements referred to above fairly present in all material respects, the
      financial position of B2Digital, Incorporated as of March 31, 2006 and 2005
      the
      results of its operations and cash flows for the years then ended and in
      conformity with generally accepted accounting principles in the United States
      of
      America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 9 to the financial
      statements, the Company's significant operating losses raise substantial doubt
      about its ability to continue as a going concern. The financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.




*/s/* *Larry
              O'Donnell, CPA, P.C**Larry
              O'Donnell, CPA, P.C**June
                23, 2006*




F-1


B2
      Digital, Incorporated


Balance
        Sheets
  March
                    31, 2006
                
                
                March
                    31, 2005AssetsCash
                
                $
                8,203
                
                $
                5,711Accounts
                    receivable
                
                
                40,243
                
                
                76,744Inventories
                
                
                --
                
                
                287,301Prepaid
                    expenses
                
                
                --
                
                
                12,790Total
                    Current Assets
                
                
                48,443
                
                
                382,546Property
                    and Equipment:Hotel
                    equipment
                
                
                150,000
                
                
                622,805Office
                    furniture and equipment
                
                
                955,226
                
                
                454,121Leasehold
                    improvements
                
                
                --
                
                
                28,300Accumulated
                    Depreciation
                
                
                (1,010,226
                )
                
                (984,986
                )Total
                    Property and Equipment
                
                
                95,000
                
                
                120,258TOTAL
                    ASSETS
                
                $
                143,446
                
                $
                502,804





F-2


B2
        Digital, Incorporated
 Balance
          Sheets




March
                  31, 2006
              
              March
                  31, 2005Liabilities
                  and Stockholders' EquityCurrent
                Liabilities:Accounts
                  payable and accrued expenses
              
              $
              894,407
              
              $
              528,049Related
                  party loans payable
              
              
              14,500
              
              
              242,000Notes
                  payable
              
              
              120,000
              
              
              120,000Bond
                  payable
              
              
              71,250
              
              
              75,000Total
                  Current Liabilities
              
              
              1,100,157
              
              
              965,049Long-Term
                  Liabilities:Convertible
                  notes payable
              
              
              1,038,678
              
              
              1,438,678Note
                  payable related party
              
              
              800,000
              
              
              800,000Total
                  Long-Term Liabilities
              
              
              1,838,678
              
              
              2,238,678TOTAL
                  LIABILITIES
              
              
              2,938,835
              
              
              3,203,727Stockholders'
                  Equity:Preferred
                  stock,2006 $.00001 2005
                  $.001 par value;50,000,000
                  shares authorized;2,000
                  and 1,200 sharesissued
                  and outstanding,respectively
              
              
              --
              
              
              1Additional
                  paid in Capital
              
              
              708,000
              
              
              515,999Common
                  stock, 2006 $.00001 2005
                  $.001 par value:5,000,000,000
                  sharesauthorized,
                  963,971 and336,871
                  shares issued andoutstanding,
                  respectively
              
              
              10
              
              
              337Additional
                  paid in Capital
              
              
              7,735,850
              
              
              6,668,673Stock
                  subscription receivable
              
              
              (40,000
              )
              
              (50,000
              )Accumulated
                  deficit
              
              
              (11,199,249
              )
              
              (9,835,933
              )(2,795,389
              )
              
              (2,700,923
              )$
              143,446
              
              $
              502,804
  See
      Notes to Financial Statements





F-3


B2
      Digital, Incorporated


Statements
      of Operations




Years
                  ended March 31,2006
              
              2005Revenues
              
              $
              511,463
              
              $
              683,323Cost
                  of sales
              
              
              191,525
              
              
              323,813Gross
                  Profit
              
              
              319,938
              
              
              359,933Operating
                  Expenses:General
                  and Administrative Expenses
              
              
              1,270,503
              
              
              3,521,240Research
                  and development
              
              
              10,000
              
              
              330,000Impairment
                  of inventories
              
              
              286,251
              
              
              1,100,000Total
                  Operating Expenses
              
              
              1,566,754
              
              
              4,951,240Operating
                  Loss
              
              
              (1,246,816
              )
              
              (4,591,307
              )Other
                  Expenses:Interest
              
              
              116,500
              
              
              210,533Total
                  Other Expenses
              
              
              116,500
              
              
              210,583Net
                  Loss
              
              $
              (1,363,316
              )
              $
              (4,801,840
              )Basis
                  and DilutedEarnings(Loss)Per
                  Share
              
              $
              (2.04
              )
              $
              (27.81
              )Weighted
                  averageShares
                  out-standing
              
              
              667,020
              
              
              172,693




**See
      Notes to Financial Statements**




F-4


B2
      Digital, IncorporatedStockholders' Equity Years
        Ended March 31, 2006 and 2005




`Additional                              Additional
                                   Common Stock             Paid in    Preferred      Stock          Paid in     Accumulated
                               Shares        Amount         Capital      Shares       Amount         Capital       Deficit

Balance, March 31, 2004         74,707    $ 3,638,451     $        -        800     $ 800,000       $      -    $ (5,034,093)

Preferred stock retired              -              -              -       (800)     (800,000)             -               -

Exchange of no par value
shares for $.001 par
value shares                         -     (3,638,376)     3,638,376          -             -              -               -

Issuance of stock
for BB2 Network                  2,667              3         99,997          -             -              -               -

Issuance of common stock
for services based
on value of  services
performed                      190,208            190      2,174,510          -             -              -               -

Issuance of preferred
stock for services
based on value of
services performed                   -              -              -      1,200             1        515,999               -

Issuance of common
stock for cash                  85,989             86        755,773          -             -              -               -

Common shares
returned for no
consideration                  (16,700)           (17)            17          -             -              -               -

Net loss for the year                -              -              -          -             -              -      (4,801,840)

Balance, March 31, 2005        336,871    $       337     $6,668,673      1,200     $       1        515,999    $ (9,835,933)

Common shares issued
For services rendered          171,600            172        286,678          -             -              -               -

Common shares issued
For debt                        20,000             20         29,980          -             -              -               -

Common shares cancelled         (4,500)            (5)             5          -             -              -               -

Common shares issued
For note payable               440,000            440        749,560          -             -              -               -

Preferred shares issued
For cash                             -              -              -        800             1        191,999               -

Exchange of $.001 par
value shares for $.00001
par value shares                     -           (954)           954          -            (2)             2               -

Net loss for the year
Ended March 31, 2006                 -              -              -          -             -              -      (1,363,316)

Balance, March 31, 2006        963,971    $        10     $7,735,850      2,000     $       -       $708,000    $(11,199,249)`



**See
      Notes to Financial Statements**




F-5


B2
      Digital, Incorporated.


Statements
      of Cash Flows




Years
                  ended March 31,2006
              
              2005Cash
                Flows from Operating
                ActivitiesNet
                  income (loss)
              
              $
              (1,363,316
              )
              $
              (4,801,840
              )Adjustments
                  to reconcile net incometo
                  net cash from operating activitiesDepreciation
              
              
              --
              
              
              117,888Impairment
                  of inventories
              
              
              286,251
              
              
              1,100,000Stock
                  issued for Services
              
              
              286,849
              
              
              2,690,701Disposal
                  of fixed assets
              
              
              25,258
              
              
              --Decrease
                  (increase) in:Accounts
                  receivable
              
              
              36,501
              
              
              (16,340
              )Inventory
              
              
              1,050
              
              
              (15,935
              )Other
                  assets
              
              
              12,790
              
              
              (12,790
              )Increase
                  (decrease) in:Accounts
                  payable and accruedexpenses
              
              
              518,859
              
              
              22,499Net
                  cash provided (used)By
                  operating
              
              
              (195,758
              )
              
              (915,817
              )Cash
                  Flows From Investing ActivitiesAcquisition
                  of propertyAnd
                  equipment
              
              
              --
              
              
              (5,423
              )Net
                  cash provided (used) in investingactivities
              
              
              --
              
              
              (5,423
              )Cash
                  Flows From Financing ActivitiesIncrease
                  in Notes payable
              
              
              --
              
              
              120,000Proceeds
                  from sale of stock
              
              
              192,000
              
              
              805,858Cash
                  received on subscriptionsReceivable
              
              
              10,000
              
              
              10,000Decrease
                  in bonds payable
              
              
              (3,750
              )
              
              --Net
                  cash used by financingActivities
              
              
              198,250
              
              
              925,858Net
                  increase (decrease) in cash
              
              
              2,492
              
              
              4,618Cash,
                  beginning
              
              
              5,711
              
              
              1,093Cash,
                  ending
              
              $
              8,203
              
              $
              5,711Schedule
                of non-cash investing and financing transactionsCommon
                  stock issued for B 2 network
              
              $
              --
              
              $
              100,000Amounts
                  Payable Converted to
                preferred
                  Stock
              
              $
              --
              
              $
              800,000Common
                  stock issued for debt
              
              $
              --
              
              $
              156,000




**See
        Notes to Financial Statements**




F-6


B2Digital,
      Incorporated Telecommunication Products, Inc.


Notes
      to
      Financial Statements




1.
      Summary of significant accounting policies




Nature
      of
      operations - The Company was incorporated in Colorado on June 8, 1983 as
      Telecommunication Products, Inc. (referred to herein as "Telecommunication
      Products," the "Company" or "Telpro"), a technological development corporation.
      The company was established as a developer of data compression technology.
      On
      July 20, 2004, Telecommunication Products, Inc. changed its name to B2Digital,
      Inc. and reincorporated in the State of Delaware.




The
      acquisition of Hotel Movie Networks Inc. which closed on August 1, 2003 provided
      a revenue-positive operations infrastructure and an extensive network of
      contractors throughout the United States to both deploy new technology and
      expand product lines. Operations consist of on going pay-per-view movie rentals
      from hotel establishments and related services with these hotel establishments.




On
      March
      6, 2004, we entered into a Letter of Agreement with B2 Networks, LLC, whereby
      B2
      Networks would provide data center facilities, management systems for video
      and
      set top services and assist with operating the Hotel Link services.




Cash
      and
      cash equivalents - For purposes of the statement of cash flows, the Company
      considers all highly liquid debt with original maturities of ninety days or
      less, to be cash equivalents.




Accounts
      receivable - The Company follows the allowance method of recognizing
      uncollectible accounts receivable. The allowance method recognizes bad debt
      expense as a percentage of accounts receivable based on a review of accounts
      receivable outstanding and the Company's prior history of uncollectible accounts
      receivable.




Fair
      value of financials instruments - The Company's financial instruments includes
      accounts receivable, accounts payable, notes payable and long-term debt. The
      fair market value of accounts receivable and accounts payable approximate their
      carrying values because their maturities are generally less than one year.
      Long-term notes receivable and debt obligations are estimated to approximate
      their carrying values based upon their stated interest rates.




Inventories
      - Inventories are stated at the lower of cost (first-in, first-out) or market.




Property
      and equipment - Property and equipment are stated at cost, net of accumulated
      depreciation. Depreciation is provided primarily by the straight-line method
      over the estimated useful lives of the related assets generally of five to
      seven
      years.




F-7


Income
      taxes -The Company accounts for income taxes in accordance with Statement of
      Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
      requires an asset and liability approach to financial accounting and reporting
      for income taxes. Deferred income tax assets and liabilities are computed
      annually for differences between the financial statement and tax basis of assets
      and liabilities that will result in taxable or deductible amounts in the future
      based on enacted tax laws and rates applicable to the periods in which the
      differences are expected to affect taxable income. Valuation allowances are
      established when necessary to reduce the deferred tax assets to the amount
      expected to be realized. Income tax expense is payable or refundable for the
      period plus or minus the change during the period in deferred tax assets and
      liabilities.




Use
      of
      estimates - The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.




Revenue
      recognition - The Company's revenues are derived principally from the sale
      of
      satellite systems and pay-per-view movies to hotels. Revenue from the sale
      of
      satellite systems is recognized after the system has been installed, and there
      are no longer any material commitments to the customer. The Company recognizes
      revenue from the pay-per-view movies on the accrual basis. The Company bills
      its
      customers for the month that services are performed.




Stock
      options - The Company accounts for stock options issued to employees in
      accordance with APB No.25.




The
      Company has elected to adopt the disclosure requirements of SFAS No.123
      "Accounting for Stock-based Compensation". This statement requires that the
      Company provide proforma information regarding net income (loss) and
      income (loss)
      per share as if compensation cost for the Company's stock options granted had
      been determined in accordance with the fair value based method prescribed in
      SFAS No. 123. Additionally, SFAS No. 123 generally requires that the Company
      record options issued to non-employees, based on the fair value of the options.




Income
      (Loss) per share - Basic earnings per share includes no dilution and is computed
      by dividing net earnings (loss) available to stockholders by the weighted number
      of common shares outstanding for the period. Diluted earnings per share reflect
      the potential dilution of securities that could share in the Company's earnings.
      During the years ended March 31, 2005 and 2004, there were no dilutive
      securities.




Recent
      accounting pronouncements




In
      November  2004,  the FASB issued  SFAS No.  151, 
"Inventory  Costs  an amendment  of  ARB  No. 
43,  Chapter  4."  This  Statement  clarifies  the
      accounting for abnormal amounts of idle facility expense, freight, handling
      costs,  and wasted materials.  This  Statement is
      effective  for inventory costs  incurred  during  fiscal
      years  beginning  after June 15, 2005.  The initial 
application  of SFAS No. 151 will have no impact on the  Company's
      financial statements.





F-8


In
      December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
      Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67."
      This
      Statement  references the financial  accounting and reporting guidance
      for real  estate  time-sharing  transactions  that is 
provided  in  AICPA Statement of  Position  04-2, 
"Accounting  for Real  Estate  Time-Sharing Transactions." This
      Statement also states that the guidance for incidental operations and costs
      incurred to sell real estate  projects does not apply to real estate
      time-sharing  transactions.  This Statement is effective for financial
      statements for fiscal years  beginning  after June 15, 2005. The
      initial application  of SFAS No. 152 will have no impact on the 
Company's financial statements.





In
      December 2004,  the FASB issued SFAS No. 153,  "Exchanges of
      Nonmonetary Assets - a replacement of APB Opinion No. 20 and FASB Statement
      No.
      3." This Statement eliminates the exception  for  nonmonetary 
exchanges  of  similar  productive  assets and replaces it
      with a general  exception for exchanges of  nonmonetary  assets
      that do  not  have  commercial  substance.  
A  nonmonetary  exchange  has commercial substance if the future
      cash flows of the entity are expected to change significantly  as a 
result  of the  exchange.  This  Statement  is
      effective for  nonmonetary  asset  exchanges  occurring in
      fiscal  periods beginning after June 15, 2005. The Company does not
      expect  application of SFAS No. 153 to have a material affect on its
      financial statements.


This 
      Statement  is effective for  nonmonetary  asset 
exchanges  occurring in fiscal  periods beginning after June 15, 2005.
      The Company does not expect application of SFAS No. 153 to have a material
      affect on its financial statements.





In
      May
      2005, the FASB issued SFAS No. 154,  "Accounting Changes and Error - an
      amendment of APB Opinion No. 29." This Statement applies to all voluntary
      changes in accounting principle. It also applies to changes required by an
      accounting pronouncement in the usual instance that the pronouncement does
      not
      include specific transition provisions. When a pronouncement includes specific
      transition provisions, those provisions should be followed.  Opinion 20
      previously required that most voluntary changes in accounting principle be
      recognized by including in net income of the period of the change the cumulative
      effect of  changing to the new accounting principle. This Statement
      requires retrospective application to prior periods financial statements of
      changes in accounting principle, unless it is impracticable to determine either
      the period-specific effects of the cumulative effect of the change. This 
Statement  is effective for  accounting changes and corrections of
      errors made in fiscal years beginning after December 15, 2005. The Company
      does
      not expect  application of SFAS No. 154 to have a material affect on its
      financial statements.





In
      February 2006, the FASB issued SFAS No. 155. This Statement amends FASB
      Statements No. 133, Accounting for Derivative Instruments and Hedging
      Activities, and No. 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities *.* This
      Statement resolves issues addressed in Statement 133 Implementation Issue No.
      D1, “Application of Statement 133 to Beneficial Interests in Securitized
      Financial Assets.” The Company does not expect  application of SFAS No. 155
      to have a material affect on its financial statements.





F-9


In
      March
      2006, the FASB issued SFAS No. 156. This Statement amends FASB Statement No.
      140, Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities, with respect to the accounting for separately
      recognized servicing assets and servicing liabilities. This 
Statement  is effective as of the beginning of its first fiscal year that
      begins after September 15, 2006. An entity should apply the requirements for
      recognition and initial measurement of servicing assets and servicing
      liabilities prospectively to all transactions after the effective date of this
      Statement. The Company does not expect  application of SFAS No. 156 to have
      a material affect on its financial statements.





2 .
      Agreement with B2 Networks




On
      March
      6, 2004, the Company entered into a Letter of Agreement with B2 Networks, LLC,
      whereby B2 Networks would provide data center facilities, management systems
      for
      video and set top services and assist with operating the Hotel Link services.
      On
      April 23, 2004, the Company agreed to purchase 20% of B2 Networks, LLC in
      exchange for 1,667,667 shares of common stock and $500,000. On August 2004,
      the
      Company amended this agreement to reduce the amount of purchase to 10% of the
      LLC in exchange for $200,000 and 2,667,000 shares of common stock.




On
      December 15, 2004, the Company entered into a Letter of Agreement with B2
      Networks whereby B2Networks will provide certain operations assistance to the
      company in exchange for a portion of gross revenue or $10,000 per month.




The
      amounts paid to B2 Networks have been recorded as research and development
      since
      the project has not achieved technical feasibility.




3 .
      Inventories




Inventories
      consist of finished goods.




During
      the years ended March 31, 2006 and 2005 the Company recognized an impairment
      loss of $286,251 and $1,100,000, respectively, related to inventories.




4 .
      Notes
      payable




The
      Company has a promissory note which bears interest at six percent and is
      unsecured. The note was originally due September, 2003. If the note is not
      paid
      at maturity, the unpaid balance and accrued interest shall bear interest at
      twelve percent. The note was retired in April 2005 in return for common stock
      and cash.




F-10


On
      April
      2004 the Company converted 800,000 shares of Series A preferred stock owned
      by
      the Company's president and CEO Robert Russell to a note payable. Mr Russell
      had
      previously converted the note payable into the preferred stock. The conversion
      is back to a note payable that reverts the capital back to its previous
      condition which pays 7.5% per annum. The note is due on or before March 31,
      2007.




5 .
      Bond
      payable




The
      Company has a bond payable which bears interest at ten percent and is unsecured.
      The bond was due July, 2004. The Company has negotiated the right to pay the
      bond when it has adequate source of funding.




6 .
      Stockholders Equity




Effective
      January 12, 2005, the Certificate of Incorporation was amended to increase
      the
      authorized common stock to 900,000,000 shares of common stock and to authorize
      50,000,000 shares of preferred stock.





Effective
      September 20, 2005, the Certificate of Incorporation was amended to increase
      our
      authorized common stock to 5,000,000,000 shares of common stock, $.00001 par
      value and to change the par value of preferred stock to $.00001.





On
      June
      16, 2006, the Certificate of Incorporation was amended to effect a reverse
      split
      of our common shares in a ratio of one new share for every one thousand (1,000)
      existing shares.




On
      January 10, 2005, the 2005 Non-Qualified Stock Compensation Plan was adopted
      whereby the company may compensate key employees, advisors and consultants
      by
      issuing them shares of its capital stock in exchange for services rendered
      and
      to be rendered and thereby conserve the corporation's cash resources. The
      Company reserved 60,000 (post reverse split) shares of our $.001 par value
      common stock for issuance under the Plan and registered the shares on a Form
      S-8
      registration statement with the Securities and Exchange Commission on January
      11, 2005. On or about February 10, 2005, the Stock Plan was amended to authorize
      an additional 100,000 shares and registered these additional shares on Form
      S-8.
      All shares have been issued out of this plan.




In
      August
      2005, the August 2005 Non-Qualified Stock Compensation Plan was adopted whereby
      the Company may compensate key employees, advisors and consultants by issuing
      them shares of its capital stock in exchange for services rendered and to be
      rendered and thereby conserve the corporation's cash resources. The Company
      reserved 300,000 (post reverse split) shares of our $.001 par value common
      stock
      for issuance under the Plan and registered the shares on a Form S-8 registration
      statement with the Securities and Exchange Commission on August 19, 2005. At
      March 31, 2006, there were approximately 180,000 shares remaining for issuance.




F-11


In
      January 2006, the Company initiated an offering in Europe pursuant to Regulation
      S. Pursuant to this offering, 40,000 (post reverse split) shares of common
      stock, $.00001 par value were transferred, to a trustee in Europe for the sole
      purpose of selling shares in a Regulation S offering. Under the agreement with
      the trustee, the Company is to receive the net proceeds from the sale of these
      shares and any shares of common stock not sold by the trustee are to be returned
      to the Company upon its request. The trustee was granted 10,000 (post reverse
      split) shares under Section 4(2) and/or Regulation S of the Securities Act
      under
      the agreement and is entitled to 2.5% of the volume of trade of the administered
      assets.





Beginning
      January 13, 2006, the 40,000 (post reverse split) shares were sold in the
      European market for approximately $120,000 pursuant to Section 4(2) and/or
      Regulation S of the Securities Act. Selling fees and expenses were $10,000.


In
        May
        2006, 350,000 (post reverse split) shares of common stock were transferred
        to a
        trustee in Europe for future Regulation S offerings overseas. These shares
        have
        not been sold to overseas investors. The trustee under the agreement is entitled
        to 2.5% of the volume of trade of the administered assets.




Stock
      options




On
      October 12, 2004, the Company entered into a Fee Agreement for Professional
      Services with Weed & Co. LLP (the “Agreement”). Terms of the Agreement
      provided for, among other things, the issuance to Richard O. Weed, as designee
      of Weed & Co. LLP, 2,000,000 shares of common stock, and options to purchase
      2,000,000 shares of the Company's common stock at an exercise price of $.03
      per
      share. These options expire December 31, 2010. Further, pursuant to the
      Agreement, Mr. Weed was granted additional options to purchase common stock
      on
      the following dates: (1) on March 9, 2005, options to purchase 1,000,000 common
      shares at an exercise price of $.0093 per share, expiring December 31, 2010,
      (2)
      on October 9, 2005, options to purchase 1,000,000 common shares at an exercise
      price of $.002 per share, expiring December 31, 2010, and (3) on March 9, 2006,
      options to purchase 1,000,000 common shares at an exercise price of $.0011
      per
      share, expiring March 9, 2011. The options are not subject to dilution (i.e.,
      no
      adjustment to the number of shares or the exercise price) based upon any reverse
      split of the common stock. The options are exercisable in whole or in part
      with
      a promissory note of less than 45 days duration or upon common “cashless
      exercise” terms.




F-12


The
      following is a schedule of the activity relating to the Company’s stock options
      and warrants.




Year
                EndedMarch
                31, 2006
            
            
            Year
                EndedMarch
                31, 2005Weighted
                Avg.Shares(x
                1,000)
            
            
            Exercise
Price
            
            
            Weighted
                Avg.Shares(x
                1,000)
            
            
            Exercise
PriceOptions
                outstanding atbeginning
                of year
            
            
            3,000
            
            $
            0.231
            
            
            --
            
            $
            --Granted:Options
            
            
            2,000
            
            $
            .002-$.0011
            
            
            3,000
            
            $
            .03-$.0093Exercised
            
            
            --
            
            $
            --
            
            
            --
            
            $
            --Expired:
            
            
            (--
            )
            $
            --
            
            
            --
            
            $
            --Options
                outstanding andexercisable
                at endof
                period
            
            
            5,000
            
            $
            0.0145
            
            
            3,000
            
            $
            0.0231Weighted
                average fairvalueof
                options andwarrantsgranted
                duringthe
                year
            
            
            
            
            $
            --
            
            
            
            
            $
            --





The
      following table summarizes information about the Company’s stock options
      outstanding at March 31, 2006, all of which are exercisable.




Range
                of AverageExercise Prices
            
            Weighted
                AverageNumberOutstanding
            
            RemainingContractual
                Life
            
            Weighted
                AverageExercise
                Price$0.0093-0.0011
            
            5,000,000
            
            5
                years
            
            $
                0. 0145




Preferred
      stock




The
      Company has 50,000,000 authorized shares $.00001 par value preferred stock
      with
      rights and preferences as designated by the board of directors at the time
      of
      issuance. The board has designated two million shares as Series A each share
      may
      be converted into 240 shares of common stock.




7 .
      Income
      taxes




There
      is
      no provision for income taxes since the Company has incurred net operating
      losses. Income taxes at the federal statutory rate is reconciled to the
      Company's actual income taxes as follows:




2006
            
            2005Federal
              income tax benefit at statutory
              rate (34%)
            
            $
            (409,000
            )
            $
            (1,400,000
            )State
              income tax benefit net of
              federal tax effect
            
            
            (87,000
            )
            
            (217,000
            )Deferred
              income tax valuation allowance
            
            
            496,000
            
            
            1,617,000$
            --
            
            $
            --




The Company's deferred tax assets are as follows:




Net
              operating loss carryforward
            
            $
            3,371,000
            
            $
            2,875,000Valuation
              allowance
            
            
            (3,371,000
            )
            
            (2,875,000
            )$
            --
            
            $
            --





At
      March
      31, 2006, the Company has net operating loss carryforwards of approximately
      $8
      million which may be available to offset future taxable income through 2026.




8.
      Litigation




In July
      2003, we were served with a lawsuit from William B. Krusheski in United States
      District court for Southern District of California. The complaint seeks in
      excess of $75,000 on a note allegedly due and $135,000 in other compensatory
      damages. In April 2004 the Company entered into a settlement agreement with
      incremental cash payments totaling $100,000 payable over the course of 4 months
      beginning May 15, 2004. In June 2004, the county court of San Diego, California
      awarded a default judgment in favor of Mr. Krusheski in the amount of $135,000.
      The company has offered payments of $5,000 per month until the debt is settled.
      We have to date had no response from Mr. Krusheski.




9 .
      Going
      Concern




The
      Company's financial statements are prepared using generally accepted accounting
      principles applicable to a going concern which contemplates the realization
      of
      assets and liquidation of liabilities in the normal course of business. The
      Company has incurred losses from operations which have resulted in an
      accumulated deficit of $ 11,199,249 at March
      31, 200 6 ,
      which
      together raises substantial doubt about the Company's ability to continue as
      a
      going concern. The accompanying financial statements do not include any
      adjustments relating to the recoverability and classification of asset carrying
      amounts or the amount and classification of liabilities that might result from
      the outcome of this uncertainty. Management believes that the Company will
      generate sufficient revenue and commissions through its licensing agreements
      and
      hotel pay-per-view to cover operating expenses in the future, although no
      assurance of this can be given.




10.
      Subsequent event




After
      February 23, 2006, the Board of Directors approved a reverse split of all
      outstanding shares of its common stock . As a result of the reverse split,
      each
      1,000 shares of common stock issued and outstanding immediately prior to the
      effective date will be combined and converted into one new share of common
      stock. The reverse split is effective at the opening of business on Friday,
      June
      16, 2006.





The
      effects of the reverse stock split has been reflected retroactively. The shares
      in the accompanying financial statements have been shown after the affect of
      the
      reverse stock split.




F-13


**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**




None.




**ITEM
      8A. CONTROLS AND PROCEDURES**




An
      evaluation was performed under the supervision and with the participation of
      our
      management, including our Chief Executive Officer and our Interim Chief
      Financial Officer, of the effectiveness of our disclosure controls and
      procedures as of March 31, 2006. Based on that evaluation, our management,
      including the CEO and CFO, concluded that our disclosure controls and procedures
      are effective to ensure that information required to be disclosed by us in
      reports that we file or submit under the Securities Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC's rules and forms.




During
      the last fiscal quarter, there were no changes in our internal control over
      financial reporting that have materially affected, or that are reasonably likely
      to materially affect our internal control over financial reporting.




**ITEM
      8B. OTHER INFORMATION**




On
      December 15, 2004, we entered into a Letter of Agreement with B2 Networks,
      LLC
      whereby B2 Networks is providing certain operations assistance to the company
      in
      exchange for a portion of the gross revenue or $10,000 per month. In January
      2006 B2Digital decided to terminate this agreement and the B2digitaltv services
      as it was not generating revenue and was not viable to continue.




On
      December 23, 2003, we entered into a consulting agreement with Marcia
      Pearlstein, whereby Ms. Pearlstein would act as Interim Chief Financial Officer
      and corporate secretary for one year for $60,000 per annum. On February 9,
      2005,
      we extended this agreement until December 31, 2005 and issued Ms. Pearlstein
      a
      signing bonus of 200,000 shares of Series A Convertible Preferred Stock. On
      January 4, 2006, we extended this agreement until December 31, 2006 decreasing
      Ms. Pearlstein’s salary to $30,000 per year.




On
      February 7, 2006, the Company’s Board of Directors and stockholders with a
      majority of the voting power authorized the Board of Directors to amend its
      Certificate of Incorporation, in their sole discretion, to effect a reverse
      split of all outstanding shares of its common stock at any time within the
      next
      twelve months in a range between ten (10) and one thousand (1,000), pursuant
      to
      which any whole number of outstanding shares between and including 10 and 1,000
      would be combined into one share of common stock. The outstanding preferred
      stock was not affected by any reverse split. This information was disclosed
      in a
      Schedule 14C information statement on February 23, 2006.





28


After
      February 23, 2006, the Board of Directors met and selected the 1-1,000 ratio
      and
      instructed management to prepare and file the amendment to the Company’s
      Certificate of Incorporation reflecting that ratio. The reverse split was
      effective at the opening of business on Friday, June 16, 2006.




Subsequent
      to March 31, 2006, on July 5, 2006, the Board of Directors designated 40,000,000
      shares of preferred stock, $.00001 par value, as Series B Convertible Preferred
      Stock. The Series B does not have any voting rights with the common stockholders
      and does not have a liquidation preference, does not accrue, earn or participate
      in any dividends and is not subject to redemption. Twelve months after the
      original issuance date, but not before, each outstanding share of Series B
      Convertible Preferred Stock may be converted at the option of the holder into
      five (5) shares of common stock.




PART
      III




ITEM
        9.
        DIRECTORS, EXECUTIVE OFFICERS OF REGISTRANT AND COMPLIANCE WITH SECTION16(a)
        OF
        THE EXCHANGE ACT
  NAME
                
                AGE
                
                POSITIONRobert
                  C. Russell
                
                39
                
                CEO
                  and DirectorIgor
                  Loginov
                
                45
                
                Chief
                  Technical Officer, DirectorMarcia
                  A. Pearlstein
                
                51
                
                Interim
                  Chief FinancialOfficer,
                  CorporateSecretary,
                  DirectorPaul
                  La Barre
                
                61
                
                Vice-President,
                    Chief Operation Officer,Director
  29
 Robert
          C.
          Russell has been our Chief Executive Officer and director since January
          2002 and
          is responsible for managing our overall business affairs. Prior to this,
          Mr.
          Russell was President and Chief Executive Officer of Interleisure S.A.
          from
          January 1999 to January 2002 when InterLeisure was purchased by
          Telecommunication Products Inc. Interleisure S.A. was a technology company
          developing data compression software and systems for the internet market.
          He is
          a native of Northern Ireland who attended Damelin College in South Africa,
          where
          he obtained a National diploma in financial management.




Igor
      Loginov, PhD has been our Chief Technological Officer since May 2002 and is
      responsible for the design, development, and deployment of our technology.
      Prior
      to this, Mr. Loginov was a Senior Project Manager for Interleisure S.A. from
      July 2000 until July 2002 when InterLeisure was purchased by Telecommunication
      Products, Inc. From 1998 to 2000 Mr. Loginov held a role as a Senior Software
      Engineer for Semantica, Ltd, where he led development of accounting and business
      software applications. Mr. Loginov has over fifteen years of experience in
      computer and Internet-related technologies and holds a Doctorate degree in
      physics obtained from Belarussian State University.




Marcia
      A.
      Pearlstein has been the Corporate Secretary and Interim Chief Financial Officer
      since December 21, 2003. Ms. Pearlstein joined B2Digital in 2002. A native
      of
      the United States she obtained her B.S. and M.B.A. in Business Administration
      with a concentration in Finance from the University of Pennsylvania graduating
      Summa Cum Laude. Prior to joining B2Digital Ms. Pearlstein worked at an
      executive placement service in which she was General Manager and Controller
      over
      a seven-year period.


Paul
        LaBarre was appointed Vice President and Chief Operation Officer and director
        on
        September 12, 2005. **** **His
        education includes:** A.A.S.,
        Paralegal Studies, University of San Gabriel; B.A., 1966; B.S.E.E., 1970,
        A.S.U.; M.B.A., Alameda College, From1997. until present Mr. La Barre has
        served
        as President/CEO of Hotel Movie Network and Coast Communications,
        Inc.




**AUDIT
      COMMITTEE FINANCIAL EXPERT**




The
      Company does not have an audit committee financial expert, but plans to
      designate an expert once it generates sufficient revenue.




**SECTION
      16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**




Section
      16(a) of the Securities Exchange Act of 1934 requires the Corporation's
      executive officers and directors and holders of greater than 10% of our
      outstanding common stock to file initial reports of their ownership of our
      equity securities and reports of changes in ownership with the Securities and
      Exchange Commission. Based solely on a review of the copies of such reports
      furnished to us and written representations from our executive officers and
      directors, we believe that all Section 16(a) filing requirements were complied
      with in the fiscal year ended March 31, 2006 except that Mr. La Barre failed
      to
      timely file a Form 3 after his appointment as an officer on September 12, 2005.
      This Form was subsequently filed.




30


**CODE
      OF ETHICS**




The
      Company has adopted a code of ethics that applies to its principal executive
      officers, principal financial officers and principal accounting officers or
      controllers and those performing similar functions.




**ITEM
      10. EXECUTIVE COMPENSATION**




The
      following table sets forth certain information regarding our Executive Officers’
compensation earned for fiscal years ending March 31, 2006, 2005 and 2004:




SUMMARY
      COMPENSATION TABLE




ANNUAL
                COMPENSATIONName
                & Principal Position
            Year
            Salary
                ($)
            OtherAnnualBonus
            RestrictedCompensation
                ($)
            OptionsStockAwards
            LTIPSARs(#)
            Payouts($)
            All
                OtherCompensation
                ($)Robert
                C. Russell,President
            2006
              2005
              2004
            240,000(1)
              150,000(2)
              120,000
            0
              0
              300,000
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              430,000(3)
              0Marcia
                A. Pearlstein
              Secretary,
                Interim CFO
            2006
              2005
              2004
            60,000(4)
              60,000(5)
              12,000
            0
              4,000
              9,000
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              86,000(6)
              0Igor
                Loginov,Chief Technology Officer
            2006
              2005
              2004
            0
              0
              0
            0
              0
              0
            0
              0
              9,000
            0
              0
              0
            0
              0
              0
            0
              0
              0
            0
              0
              0Paul
                La Barre,Chief OperationOfficer
            2006*
            30,000(7)
            0
            0
            0
            0
            0
            192,000(8)




·
              Mr.
                  La Barre was appointed September 12, 2005
  (1)
              $21,715
                  of this amount has been paid, the remainder has been
                  accrued.
 (2)
              $110,000
                  of this amount has been paid, the remainder has been
                  accrued.
 (3)
              On
                  February 10, 2005,Mr.
                  Russell received a signing bonus of 1,000,000 shares of Series
                  A
                  Convertible Preferred Stock. These shares were valued at $.43 per
                  share.
 (4)
              $10,750
                  of this amount has been paid, the remainder has been
                  accrued.
 (5)
              Payable
                  in common stock, valued at $.001 per
                  share.
 (6)
              On
                  February 10, 2005, Ms. Pearlstein received a signing bonus of 200,000
                  shares of Series A Convertible Preferred Stock. These shares were
                  valued
                  at $.43 per share.
 (7)
              This
                  amount has been accrued but not
                  paid.
 (8)
              On
                  September 12, 2005, Mr. La Barre received 800,000 shares of Series
                  A
                  Convertible Preferred Stock. These shares were valued at $.24 per
                  share.




31


**EMPLOYMENT
      AGREEMENTS**




We
      entered into a formal written employment agreement with Mr. Russell effective
      January 25, 2002 which provides payments aggregating $125,000 per year. The
      agreement was suspended and was reinstated in September 2003. On January 25,
      2005, we entered into a new agreement with Robert Russell whereby Mr.
      Russell agreed
      to serve as Chief Executive Officer of the company for a period of two years
      for
      $240,000 per annum. Mr. Russell also received a signing bonus of 1,000,000
      shares of Series A Convertible Preferred Stock.




On
      December 23, 2003, we entered into a consulting agreement with Marcia
      Pearlstein, whereby Ms. Pearlstein would act as Interim Chief Financial Officer
      and corporate secretary for one year for $60,000 per annum. On February 9,
      2005,
      we extended this agreement until December 31, 2005 and issued Ms. Pearlstein
      a
      signing bonus of 200,000 shares of Series A Convertible Preferred Stock. On
      January 4, 2006, we extended this agreement until December 31, 2006 decreasing
      Ms. Pearlstein’s salary to $30,000.




On
      September 12, 2005, we entered into an employment agreement with Paul La Barre,
      whereby Mr. La Barre would serve as Vice-President and Chief Operation Officer
      for a period of three years. In exchange for services, Mr. La Barre is to
      receive a minimum base salary of $60,000 per annum and a one time grant of
      800,000 shares of Series A Preferred Stock.




**OPTIONS**




For
      our
      fiscal year ending March 31, 2006, we did not issue options to our executive
      officers or directors and they did not exercise any options.




**COMPENSATION
      OF DIRECTORS**




We
      do not
      currently compensate our directors although the Company intends to do so in
      accordance with industry standards when cash flow resulting so dictates. There
      are no stock options, stock grants, plans, LTIPS or Stock Appreciation Rights
      in
      which any directors, have participated in the past fiscal year.




32


**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**




The
      following table sets forth certain information regarding beneficial ownership
      of
      our common stock as of June 16, 2006 (i) by each person who is known by us
      to
      beneficially own more than 5% of our voting securities; (ii) by each of our
      officers and directors; and (iii) by all of our officers and directors as a
      group. Unless otherwise indicated, each person's address is c/o B2Digital,
      Inc.,
      4425 Venture Cannon Ave., Sherman Oaks, CA 91423.




Title
                of Class
            
            Name
                and Addressof
                Beneficial Owner
            
            Amount
                and Natureof
                Beneficial  Owner(1)
            
            Percent
                of ClassCommon Stock
            
            Robert
              Russell
              CEO,
                Director
            
            18,140
            
            1.0%Series
                APreferred
                Stock
            
            
            
            1,000,000(2)
            
            50.0%Common Stock
            
            Paul La BarreChief Operation
              Officer
            
            558
            
            <1%Series
                APreferred
                Stock
            
            
            
            800,000(2)
            
            40.0%Common Stock
            
            Igor LoginovChief Technology
              Officer
            
            240
            
            <1%Common Stock
            
            Marcia A. PearlsteinChief Financial
              Officer
            
            4,200
            
            <1%Series
                APreferred
                Stock
            
            
            
            200,000(2)
            
            10.0%Common Stock
            
            Shares
                of all directors andexecutive
                officersas
                a group (4 persons)
            
            23,138
            
            1.32%Series
                APreferred
                Stock
            
            Shares
                of all directors andexecutive
                officersas
                a group (3 persons)
            
            2,000,000(2)
            
            100%Common StockOptions
            
            Richard O. WeedWeed & Co.
              LLP
              4695
                  MacArthur Ct., Ste. 1430Newport
                  Beach, CA 92660
            
            5,000,000(3)
            
            96.6%(4)




33


(1)
            As
                adjusted for the 1-1,000 reverse split on June 16, 2006, there are
                approximately 1,751,341 shares of common stock issued and outstanding
                (not
                including shares to be issued in lieu of fractional shares). All
                shares
                listed have been adjusted, as applicable, for the reverse split.
                The
                calculation of percentage ownership for each listed beneficial owner
                is
                based upon the number of shares of common stock issued and outstanding
                on
                June 16, 2006, plus shares of common stock subject to options held
                by such
                person on June 16, 2006 and exercisable within 60 days thereafter.
                The
                persons and entities named in the table have sole voting and investment
                power with respect to all shares shown as beneficially owned by them.


(2)
            Series
                A Convertible Preferred Stock is convertible into common stock at
                a rate
                of 240 shares per each share of Series A held. The Series A votes
                with the
                common stock on an as converted
                basis.


(3)
            Richard
                O. Weed, as designee of Weed & Co. LLP, pursuant to a fee agreement
                for professional services holds options to purchase 2,000,000 shares
                of
                the Company's common stock at an exercise price of $.03 per share.
                These
                options expire December 31, 2010. Further, pursuant to the Agreement,
                Mr.
                Weed was granted additional options to purchase common stock on the
                following dates: (1) on March 9, 2005, options to purchase 1,000,000
                common shares at an exercise price of $.0093 per share, expiring
                December
                31, 2010, (2) on October 9, 2005, options to purchase 1,000,000 common
                shares at an exercise price of $.002 per share, expiring December
                31,
                2010, and (3) on March 9, 2006, options to purchase 1,000,000 common
                shares at an exercise price of $.0011 per share, expiring March 9,
                2011.


(4)
            Upon
                conversion of all options.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




On
      April
      2004, the Company converted 800,000 shares of Series A preferred stock owned
      by
      the Company's president and CEO Robert Russell to a note payable. Mr. Russell
      had previously converted the note payable into the preferred stock. The
      conversion is back to a note payable that reverts the capital back to its
      previous condition which pays 7.5% per annum. This note is due on or before
      March 31 , 2007. At
      March 31, 2006, $920,000 principal and interest was due under the
      note.




For
      the
      year ended March 31, 2005, Mr. Russell, our Chief Executive Officer, received
      a
      signing bonus of 1,000,000 shares of Series A Convertible Preferred Stock,
      valued at $.43 per share. The shares convert into common stock at a rate of
      240
      shares per one share of common stock.






For
      the
      year ended March 31, 2005, Ms. Pearlstein, our Interim Chief Financial Officer,
      received a signing bonus of 200,000 shares of Series A Convertible Preferred
      Stock, valued at $.43 per share. The shares convert into common stock at a
      rate
      of 240 shares per one share of common stock. We also issued Ms. Pearlstein
      4,000,000 shares of common stock; which was expensed at $4,000. On
      January 4, 2006, we extended this agreement until December 31, 2006 decreasing
      Ms. Pearlsteins salary to $30,000.




For
      the
      year ended March 31, 2006, Mr. La Barre, our Chief Operation Officer, received
      800,000 shares of Series A Convertible Preferred Stock, valued at $.24 per
      share. The shares convert into common stock at a rate of 240 shares per one
      share of common stock.




34


**ITEM
      13. EXHIBITS**




The
      following exhibits are included as part of this Form 10-KSB. Reference to "the
      Company" in this Exhibit List means B2Digital, Incorporated, a Delaware
      corporation.




Number
              Description
  2.1
                Asset
                    Purchase Agreement between the Company and Hotel Movie Network,
                    Inc., dated March 31, 2003 (incorporated by reference toExhibit
                    10 of the Form 8-K filed on April 18,
                    2003).
  3.1(a)
              Restated
                  Articles of Incorporation (filed as an exhibit to thecompany's
                  Form 8-K filed on October 19, 2001 and incorporated byreference
                  herein)
  3.1(b)
              Amendment
                  to Certificate of Incorporation (Incorporated by referencefrom
                  10QSB dated December 31, 2004).
  3.1(c)
              Certificate
                  of Designation of Series A Convertible Preferred Stock (incorporated
                  by
                  reference to Form 10-KSB for March 31,
                  2005).
  3.1(d)
              Certificate
                  of Amendment to Certificate of Incorporation (incorporated
                  by reference from Schedule 14C filed November 28,
                  2005)
  3.1(e)
              Certificate
                  of Amendment to Certificate of Incorporation (incorporated
                  by reference from Form 8-K filed June 16,
                  2006)
  3.1(f)
              Certificate
                  of Designation of Series B Convertible Preferred
                  Stock
  3.2
              Bylaws
                  (incorporated by reference to Exhibit 3.2 of the company'sRegistration
                  Statement on Form S-18, Registration No.
                  2-86781-D)
  4.1
              2005
                  Non-Qualified Stock Compensation Plan, as amended (filed as Exhibit
                  10.1
                  tothe
                  Company's Form S-8 filed on February 10, 2005 and incorporated
                  byreference
                  herein).
  4.2
              August
                  2005 Non-Qualified Stock Compensation Plan (filed as Exhibit 10.1
                  to the
                  Company's Form S-8 filed on August 19, 2005 and incorporated by
                  reference)
  10.1
              Employment
                  Agreement dated January 25, 2005, with Robert C. Russell(Incorporated
                  by reference from 10QSB dated December 31,
                  2004).
  10.2
              Marketing
                  and Services Agreement between the company andInnNovations
                  Multimedia Systems Inc dated April 12, 2004(Incorporated
                  by reference to 8-K filed April 12,
                  2004).
  10.3
              Member
                  Interest Purchase Agreement between the company andB2Networks,
                  Inc. dated April 23, 2004 (Incorporated by reference to8-K
                  filed April 23, 2004).




35




10.4
              Consultant
                  Agreement with Marcia A. Pearlstein (incorporated byreference
                  from Form 10-QSB dated September 30,
                  2004).
  10.5
              Membership
                  Interest Agreement with B2 Networks, LLC, as amended(incorporated
                  by reference to Form 8-K filed August 12,
                  2004)
  10.6
              Operations
                  Agreement with B2 Networks LLC (Incorporated by referencefrom
                  Form 10-QSB dated December 31,
                  2004).
  10.7
              Fee
                  Agreement with Richard O. Weed of Weed & Co. LLP (Filed as Exhibit
                  10.2 to Form S-8 filed January 11, 2005).
  10.8
              Settlement
                  Agreement between B2Digital and Coast Communications dated 9-12-05
                  (Incorporated by reference from Exhibit 16.1 of Form 8-K dated
                  10-25-05).
  10.9
              Employment
                  Agreement with Paul La Barre (Filed as Exhibit 10.2 and incorporated
                  by
                  reference to Form 8-K filed October 4,
                  2005).
  10.10
              Trust
                  Agreement
  14.1
              Code
                  of Ethics (Incorporated by reference to 10KSB filed June 19,2004)
  31.1
              Section
                  302 Certification of the Chief Executive
                  Officer.
  31.2
              Section
                  302 Certification of the Interim Chief Financial
                  Officer.
  32.1
              Section
                  906 Certification of the Chief Executive Officer and InterimChief
                  Financial Officer




36


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES & SERVICES**




**Audit
      Fees**




The
      aggregate fees billed by Larry O'Donnell, CPA, P.C. for professional services
      rendered for the audit of the Company's annual financial statements on Form
      10-KSB and the reviews of the financial statements included in the Company's
      Form 10-QSB's for the fiscal years ended March 31, 2006 was $10,490 and
      March 31, 2005 was $15,760, respectively.




**Audit
      Related Fees, Tax Fees or All Other Fees**




There
      were no other fees for the years ended March 31, 2006 or March 31, 2005.




**POLICY
      ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
      OF
      INDEPENDENT AUDITORS**




The
      Company currently does not have a designated Audit Committee, and accordingly,
      the Company's Board of Directors' policy is to pre-approve all audit and
      permissible non-audit services provided by the independent auditors. These
      services may include audit services, audit-related services, tax services and
      other services. Pre-approval is generally provided for up to one year and any
      pre-approval is detailed as to the particular service or category of services
      and is generally subject to a specific budget. The independent auditors and
      management are required to periodically report to the Company's Board of
      Directors regarding the extent of services provided by the independent auditors
      in accordance with this pre-approval, and the fees for the services performed
      to
      date. The Board of Directors may also pre-approve particular services on a
      case-by-case basis.




**SIGNATURES**




In
      accordance with Section 13 and 15 (d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**B2Digital,
              Incorporated***Date:
              July 7,
              2006*
            *By:*
            */s/* *Robert
              C. Russell**Robert
              C. Russell,**Chief
                Executive Officer*




37


In
      accordance with the Exchange Act, this report statement has been signed below
      by
      the following persons on behalf of the registrant in the capacities and on
      the
      dates stated.




*SIGNATURE*
            
            *TITLE*
            
            *DATE**/s/ Robert C. Russell*
              *____________________________Robert C.
                Russell*
            
            *President, Chief Executive
              Officer,*
              *Director*
            
            *July 7,
              2006**/s/ Marcia A. Pearlstein*
              *____________________________*
              *Marcia A. Pearlstein*
            
            *Interim Chief Financial
Officer,
              Secretary,Director*
            
            *July 7,
              2006**/s/ Igor
              Loginov____________________________Igor
              Loginov*
            
            *Chief Technical Officer,Director*
            
            *July 7,
              2006**/s/ Paul La
              Barre* *____________________________**Paul
              La Barre*
            
            *Vice President, Chief
Operation
              Officer, Director*
            
            *July 7,
              2006*


38