UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from ______ to _______
Commission File Number:
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
|
| |
| ||
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number, including area code: (
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2)has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large, accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Class |
| Outstanding as of December 14, 2021 |
Common Stock, $0.001 par value per share |
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TABLE OF CONTENTS
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| F-1 | |||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 3 | ||
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| 9 | |||
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| 12 | |||
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| 12 | |||
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| 12 | |||
| 2 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MAJOR LEAGUE FOOTBALL, INC.
FINANCIAL STATEMENTS
October 31, 2021
(UNAUDITED)
CONTENTS
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| F-2 | ||
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| F-3 | ||
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| F-4 | ||
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| F-6 | ||
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| F-8 |
| F-1 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
BALANCE SHEETS
|
| October 31, 2021 |
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| April 30, 2021 |
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| (Unaudited) |
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ASSETS | ||||||||
CURRENT ASSETS |
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Cash |
| $ |
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| $ |
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Prepaid consulting - related party |
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TOTAL CURRENT ASSETS |
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PROPERTY AND EQUIPMENT |
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Football equipment |
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Office equipment |
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TOTAL PROPERTY AND EQUIPMENT |
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OTHER ASSETS |
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Trademarks |
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Security deposits |
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TOTAL OTHER ASSETS |
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TOTAL ASSETS |
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| $ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES |
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Accounts payable |
| $ |
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| $ |
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Accounts payable - related parties |
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Accrued former officer compensation |
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Accrued expenses |
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State income taxes payable |
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Convertible unsecured promissory notes, net of $ |
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Convertible secured promissory notes, net of $ |
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Conversion option liability |
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Notes payable |
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Notes payable, related party |
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Accrued former officer payroll taxes |
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Accrued interest |
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Accrued interest - related party |
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TOTAL CURRENT LIABILITIES |
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COMMITMENTS AND CONTINGENCIES (NOTE 7) |
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STOCKHOLDERS’ DEFICIT | ||||||||
Common stock, $ |
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Common stock issuable; |
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Additional paid-in capital |
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Accumulated deficit |
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| ( | ) |
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TOTAL STOCKHOLDERS’ DEFICIT |
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| ( | ) |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ |
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| $ |
| ||
See accompanying condensed notes to these unaudited financial statements.
| F-2 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| For the Three Months Ended |
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| For the Six Months Ended |
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|
| October 31, 2021 |
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| October 31, 2020 |
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| October 31, 2021 |
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| October 31, 2020 |
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Operating Expenses |
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Professional fees |
| $ |
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| $ |
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| $ |
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| $ |
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General and administrative |
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Total Operating Expenses |
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Operating Loss |
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| ( | ) |
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Other Income (Expense) |
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Tax penalties and interest |
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| (5,681 | ) |
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| (5,400 | ) |
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| (11,278 | ) |
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| (10,672 | ) |
Interest expense |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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| ( | ) |
Settlement expense |
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| ( | ) |
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Late fees expense |
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| ( | ) |
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Gain (Loss) from change in fair value of conversion option liability |
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Total Other Income (Expense), net |
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Net Income (Loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
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Basic Net Income (Loss) Per Share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
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Diluted Net Income (Loss) Per Share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
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Weighted Average Shares - Basic |
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Weighted Average Shares - Diluted |
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See accompanying condensed notes to these unaudited financial statements.
| F-3 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED OCTOBER 31, 2021 AND 2020
(UNAUDITED)
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| Additional |
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| Total |
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| Common Stock |
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| Paid-In |
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| Accumulated |
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| Stockholders’ |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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For the Three Months Ended July 31, 2021 |
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Balance at July 31, 2021 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||
Conversion of convertible unsecured promissory notes |
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Conversion of convertible secured promissory note |
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Reclassification of put premium upon conversion of convertible secured promissory note |
|
| - |
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Net loss, three months ended October 31, 2021 |
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| - |
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Balance at October 31, 2021 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||
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| Additional |
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| Total |
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| Common Stock |
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| Paid-In |
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| Accumulated |
| Stockholders’ |
| |||||||||
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
| |||||
For the Three Months Ended October 31, 2020 |
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Balance at July 31, 2020 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||
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Conversion of convertible secured promissory note |
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| 12,720,000 |
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Reclassification of put premium upon conversion of convertible secured promissory note |
|
| - |
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Conversion of convertible unsecured promissory notes |
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Reclassification of put premium upon conversion of convertible unsecured promissory note |
|
| - |
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Issuance of common stock - $0.02 per share |
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Net loss, three months ended October 31, 2020 |
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| - |
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Balance at October 31, 2020 |
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | |||
See accompanying condensed notes to these unaudited financial statements.
| F-4 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (Continued)
FOR THE SIX MONTHS ENDED OCTOBER 31, 2021 AND 2020
(UNAUDITED)
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| Additional |
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| ||||||||||
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| Common Stock |
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| Common Stock Issuable |
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| Paid-In |
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| Accumulated |
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| Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
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For the Six Months Ended October 31, 2021 |
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Balance at April 30, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||
Issuance of common stock that was previously issuable |
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| ( | ) |
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Issuance of common stock to consultants for services |
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| - |
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Issuance of warrants to consultants for services |
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| - |
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| - |
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Conversion of convertible unsecured promissory notes |
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| - |
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Conversion of convertible secured promissory note |
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| - |
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Reclassification of put premium upon conversion of convertible unsecured promissory note |
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| - |
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| - |
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Net loss, six months ended October 31, 2021 |
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| - |
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| - |
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| ( | ) |
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Balance at October 31, 2021 |
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| $ |
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| - |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||
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| Additional |
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| Total |
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| Common Stock |
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| Paid-In |
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| Accumulated |
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| Stockholders’ |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Deficit |
| |||||
For the Six Months Ended October 31, 2020 |
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Balance at April 30, 2020 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | |||
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Conversion of convertible secured promissory note |
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Reclassification of put premium upon conversion of convertible secured promissory note |
|
| - |
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| ||||
Conversion of convertible unsecured promissory notes |
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|
| ( | ) |
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| ||||
Reclassification of put premium upon conversion of convertible unsecured promissory note |
|
| - |
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|
| 144,816 |
|
|
| - |
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|
| 144,816 |
| |
Issuance of common stock - $0.04 per share |
|
| 1,000,000 |
|
|
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Issuance of common stock - $0.004 per share |
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| 100,000 |
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|
| 100 |
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Issuance of common stock - $0.02 per share |
|
| 12,500,000 |
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|
| 12,500 |
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| 12,500 |
|
|
| - |
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| 25,000 |
|
Reduction in fair value of conversion option liability for conversion of promissory notes |
|
| - |
|
|
| - |
|
|
| 30,795 |
|
|
| - |
|
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| 30,795 |
|
Net income, six months ended October 31, 2020 |
|
| - |
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Balance at October 31, 2020 |
|
| 387,208,770 |
|
| $ | 387,209 |
|
| $ | 24,283,810 |
|
| $ | (28,704,182 | ) |
| $ | (4,033,163 | ) |
See accompanying condensed notes to these unaudited financial statements.
| F-5 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For the Six Months Ended, |
| |||||
|
| October 31, 2021 |
|
| October 31, 2020 |
| ||
|
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| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
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| ||
Net income (loss) |
| $ | ( | ) |
| $ |
| |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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|
Amortization of debt discount on convertible unsecured promissory notes |
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Amortization of debt discount on convertible secured promissory notes |
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Issuance of common stock to consultants for services |
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Issuance of warrants to consultants for services |
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Settlement expense |
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Late fee on convertible promissory note in default |
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Conversion fees on convertible unsecured promissory notes |
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| ||
Accretion of put premium liability |
|
|
|
|
|
| ||
Gain (loss) from change in fair value of conversion option liability |
|
| 4,536 |
|
|
| (379,811 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
| ||
Accounts payable - related parties |
|
|
|
|
|
| ||
Accrued expenses |
|
|
|
|
|
| ||
Accrued interest |
|
|
|
|
|
| ||
Accrued interest - related party |
|
|
|
|
|
| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible unsecured promissory notes, net of issue costs |
|
|
|
|
|
| ||
Proceeds from issuance of convertible secured promissory note, net of issue costs |
|
|
|
|
|
| ||
Proceeds from issuance of note payable - related party |
|
|
|
|
|
| ||
Repayment of convertible secured promissory note |
|
| ( | ) |
|
|
| |
Proceeds from sale of common stock |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH |
|
| ( | ) |
|
| ( | ) |
CASH - BEGINNING OF PERIOD |
|
|
|
|
|
| ||
CASH - END OF PERIOD |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
|
|
|
CASH PAID FOR INCOME TAXES |
| $ |
|
| $ |
| ||
CASH PAID FOR INTEREST |
| $ |
|
| $ |
| ||
See accompanying condensed notes to these unaudited financial statements.
| F-6 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
|
| For the Six Months Ended, |
| |||||
|
| October 31, 2021 |
|
| October 31, 2020 |
| ||
|
|
|
|
|
|
| ||
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Reduction of put premium liability related to conversion and payment of promissory notes |
| $ |
|
| $ |
| ||
Reduction in fair value of conversion option liability for conversion of promissory note |
| $ |
|
| $ |
| ||
Conversion of convertible secured promissory note |
| $ |
|
| $ |
| ||
Conversion of convertible unsecured promissory notes |
| $ |
|
| $ |
| ||
Conversion of accrued interest on convertible unsecured promissory notes |
| $ |
|
| $ |
| ||
Discounts related to convertible promissory notes |
| $ |
|
| $ |
| ||
See accompanying condensed notes to these unaudited financial statements.
| F-7 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Major League Football, Inc. (the “Company,” “we,” “us” or “our”) is seeking to establish, develop and operate Major League Football (“MLFB”) as a professional spring/summer football league. We intend to establish franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the National Football League (“NFL”) off-seasons, which will enable us to take a totally non-adversarial approach towards the NFL. We have commenced the process of leasing playing venues and acquiring football equipment. We have obtained required workers compensation insurance for certain states where we will play games.
MLFB plans to serve as a pipeline to develop players, coaches, officials, scouts, trainers, and all other areas of the game that the NFL needs today. We will also give NFL representatives the opportunity to view our team practices, game footage, practice tapes and confer with league coaches, team officials and staff. We believe this will provide our league with recognition and demonstrate our economic model and the market’s desire for spring football.
Going Concern
The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern. As reflected in the unaudited financial statements, the Company had no revenues and had a net loss of $
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Subsequently, the COVID-19 pandemic has continued to spread and various state and local governments have issued or extended “shelter-in-place” orders, which have impacted and restricted various aspects of the Company’s operations. The spread of the pandemic has caused severe disruptions in the global economy and financial markets and could potentially create widespread business continuity issues of an unknown magnitude and duration.
MLFB is in the process of hiring several well-known and experienced coaches, scouts, and trainers as well as individuals looking to improve their skills in these areas. We believe this will provide MLFB with the recognition and credibility to demonstrate the viability of our economic model as well as the market’s desire for spring football. Management and our Board of Directors are focused on a planned 2022 football season and believe that this will allow us to put an economically sustainable league and product on the field.
The Company has engaged the services of a well-known and respected investment bank headquartered in New York to assist in that effort. In addition, our management has been engaged with several high net-worth individuals and funds who have expressed an interest in being part of our League as investors.
| F-8 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In view of these matters, recoverability of any asset amounts shown in the accompanying unaudited financial statements is dependent upon the Company’s ability to achieve a level of profitability. These matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the filing of the Company’s Form 10-Q with the Securities and Exchange Commission (“SEC”). Since inception, the Company has financed its activities from the sale of equity securities and from loans. The Company intends on financing its future development activities and its working capital needs from the sale of public equity securities and debt securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements.
We require short-term financing as well as financing over the next 12 months and as noted in previous filings, the Company has been pursuing short-term financing of approximately $
Basis of Presentation
The accompanying unaudited interim period financial statements of the Company are unaudited pursuant to certain rules and regulations of the SEC and include, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results of the periods indicated. Such results, however, are not necessarily indicative of results that may be expected for the full year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2021, as filed with the SEC on July 29, 2021. The interim unaudited operating results for the six months ended October 31, 2021 are not necessarily indicative of operating results expected for the full fiscal year.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from the estimates. Significant estimates in the accompanying unaudited financial statements include the valuation of derivative liabilities, estimates of loss contingencies, valuation of equity-based instruments issued for other than cash and valuation allowance on deferred tax assets.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at October 31, 2021 and April 30, 2021.
| F-9 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentrations
Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At October 31, 2021 and April 30, 2021, the Company did not have deposits with a financial institution that exceeded the FDIC deposit insurance coverage and determined that it had no cash equivalents.
Property and Equipment
The Company has $
Impairment of Long-Lived Assets
In accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
Convertible Promissory Notes and Related Embedded Derivatives
We account for the embedded conversion option contained in convertible instruments under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”. The embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives was determined using the Binomial Option Pricing model. On the initial measurement date, the fair value of the embedded conversion option derivative was recorded as a derivative liability and was allocated as debt discount up to the proceeds of the notes with the remainder charged to current period operations as initial derivative expense. Any gains and losses recorded from changes in the fair value of the liability for derivative contract is recorded as a component of other income (expense) in the accompanying unaudited Statements of Operations.
| F-10 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company follows ASU 260 regarding changes to the classification of certain equity-linked financial instruments (or embedded features) with down round features and clarifies existing disclosure requirements for equity-classified instruments. For freestanding equity-classified financial instruments, entities that present earnings per share (“EPS”) in accordance with Topic 260, to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related guidance in Topic 260.
Convertible Notes With Variable Conversion Options
The Company has entered into convertible promissory notes, some of which contain variable conversion options, whereby the outstanding principal and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company treats these convertible promissory notes as stock settled debt under ASC 480, “Distinguishing Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount at the time of conversion and records the put premium as accretion to interest expense to the date of first conversion.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities where there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
| F-11 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s financial instruments consist principally of cash, football equipment, accounts payable, unsecured convertible notes payable, secured convertible notes payable, notes payable, and notes payable – related party. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the Company believes that the recorded values of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Assets and liabilities measured at fair value on a recurring basis consist of the following at October 31, 2021 and April 30, 2021:
|
| Carrying Value at October 31, |
|
| Fair Value Measurements at October 31, 2021 |
| ||||||||||
|
| 2021 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Conversion option liability |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
| Carrying Value at April 30, |
|
| Fair Value Measurements at April 30, 2021 |
| ||||||||||
|
| 2021 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Conversion option liability |
| $ | $ |
|
| $ |
|
| $ |
| ||||||
The following is a summary of activity of Level 3 assets and liabilities for the six months ended October 31, 2021:
Conversion Option Liability |
|
|
| |
Balance – April 30, 2021 |
| $ |
| |
Loss from change in the fair value of conversion option liability |
|
|
| |
Balance – October 31, 2021 |
| $ |
| |
Changes in fair value of the conversion option liability are included as a separate Other Income (Expense) item in the accompanying unaudited Statements of Operations.
Leases
The Company follows ASC 842 regarding leases whereby lessees need to recognize leases on their balance sheet as a right of use asset and a corresponding lease liability. We have elected to exclude leases with a lease term of one year or less. Accordingly, we have no leases over one year.
| F-12 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company will recognize revenue in accordance with the five-step method prescribed by ASC 606 “Revenues from Contracts with Customers”.
League Tryout Camps
The Company will recognize league tryout camp revenue on the dates that the tryout camps are held. There were no tryout camps held by the Company during the six months ended October 31, 2021 or 2020, respectively.
Football League Operations
The Company will recognize revenue from future football league operations including gate, parking and concessions, stadium advertising and merchandising, licensing fees, sponsorships, naming rights, broadcast and cable, franchise fees, social media and on-line digital media including merchandising, advertising, and subscriptions. Since the football operations have not commenced, there was no revenue from football league operations during the six months ended October 31, 2021 and 2020, respectively.
Income Taxes
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse.
Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce the deferred tax assets to the amount expected to be realized.
The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. At October 31, 2021 and April 30, 2021, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying unaudited financial statements.
| F-13 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on May 1, 2019.
Net Income (Loss) per Share of Common Stock
The Company computes net earnings (loss) per share per ASC 260-10, “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period and we have excluded all dilutive potential common shares because their effect is anti-dilutive, with the exception for the six months ended October 31, 2020, which is detailed in the table below.
Diluted EPS for the six months ended October 31, 2020 is as follows:
Numerator: |
|
|
| |
Net Income |
| $ |
| |
|
|
|
|
|
Denominator |
|
|
|
|
Weighted Average Shares – Basic |
|
|
| |
Convertible unsecured notes payable |
|
|
| |
Convertible secured notes payable |
|
|
| |
Weighted Average Shares – Diluted |
|
|
| |
|
|
|
|
|
Basic Net Income Per Share |
| $ |
| |
Diluted Net Income Per Share |
| $ |
| |
For the six months ended October 31, 2020, stock options to purchase
| F-14 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
At October 31, 2021, there were
Contingencies
Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed. The Company does not include legal costs in its estimates of amounts to accrue.
Related Parties
Parties are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. See Note 6 – Related Parties.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible notes.
| F-15 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis.
On May 1, 2021, we adopted the ASU using the modified retrospective method which did not have a material impact on the Company’s financial statements.
The Company has evaluated other recent accounting pronouncements and their adoption, and has not had, and is not expected to have, a material impact on the Company’s financial position or results of operations. Other new pronouncements issued but not yet effective until after October 31, 2021 are not expected to have a significant effect on the Company’s financial position or results of operations.
NOTE 2 – ACCRUED EXPENSES
The Company has recorded accrued expenses that consisted of the following:
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Penalties and interest - unpaid state income tax |
| $ |
|
| $ |
| ||
Unpaid federal income tax |
|
|
|
|
|
| ||
Legal settlement |
|
|
|
|
|
| ||
Late charges on unpaid promissory note |
|
|
|
|
|
| ||
Total Accrued Expenses |
| $ |
|
| $ |
| ||
| F-16 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Notes Payable: |
|
|
|
|
|
| ||
Aug 28, 2015. No stated interest and principal payable on demand. (Reclassed from Related Party) |
| $ |
|
| $ |
| ||
Nov.18, 2015. Interest at 8% and principal payable on demand. In Default |
|
|
|
|
|
| ||
Jun. 6, 2016. Interest at 4% and principal payable on demand. |
|
|
|
|
|
| ||
Aug. 4, 2016. Interest at 8% and principal payable on demand. In Default |
|
|
|
|
|
| ||
Sep. 27, 2016. Interest at 4% and principal payable on demand. |
|
|
|
|
|
| ||
Sep. 29, 2016. Interest at 4% and principal payable on demand. |
|
|
|
|
|
| ||
Sep. 29, 2016. Interest at 4% and principal payable on demand. |
|
|
|
|
|
| ||
Oct. 3, 2016. Interest at 4% and principal payable on demand. |
|
|
|
|
|
| ||
Sep. 25, 2019. Interest at 8% and principal and interest due Mar. 25, 2020 In Default with interest recorded at 22% default rate |
|
|
|
|
|
| ||
Apr. 9, 2020.Interest at 8% and principal due Oct. 9, 2020 In Default with interest recorded at 24% default rate |
|
|
|
|
|
| ||
Jul. 31, 2021. Interest at 10% and principal and interest due Dec. 31, 2021 |
|
|
|
|
|
| ||
Total Notes Payable |
| $ |
|
| $ |
| ||
At October 31, 2021 and April 30, 2021, the Company has recorded $
On September 25, 2019, the Company received $
| F-17 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (Continued)
On April 9, 2020, the Company received $
On July 31, 2021, the Company recorded a $
For the six months ended October 31, 2021 and 2020, the Company recorded $
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Notes Payable, Related Party: |
|
|
|
|
|
| ||
Mar. 5, 2020. Interest at 10% and principal due August 31, 2021 |
| $ |
|
| $ |
| ||
Aug. 12, 2020. Interest at 10% and principal due December 31, 2021 |
|
|
|
|
|
| ||
Total Notes Payable – Related Party |
| $ |
|
| $ |
| ||
On March 5, 2020, the Company received $
On August 12, 2020, the Company received $
For the six months ended October 31, 2021 and 2020, the Company recorded $
| F-18 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (Continued)
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Convertible Unsecured Promissory Notes: |
|
|
|
|
|
| ||
April 14, 2016 - Interest at 5% - principal and interest due 12 months from issuance date. In Default |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
May 2, 2019 - Interest at 10% - principal and interest due August 2, 2020. |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
May 8, 2019 - Interest at 12% - principal and interest due February 8, 2020. In Default with interest recorded at default rate of 24% |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
February 3, 2021, Interest at 10% - principal and interest due February 3, 2022 |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
March 17, 2021, Interest at 10% - principal and interest due March 17, 2022 |
|
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May 3, 2021, Interest at 10% - principal and interest due May 3, 2022 |
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June 7, 2021, Interest at 10% - principal and interest due June 7, 2022 |
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Plus: put premium |
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Less: debt discount |
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| ( | ) |
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| ( | ) |
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Total Convertible Unsecured Notes Payable, net of debt discount and put premium |
| $ |
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| $ |
| ||
In April 2016, the Company recorded a $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 and 2020 was $
| F-19 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (Continued)
Convertible Unsecured Promissory Note – May 2, 2019
On May 2, 2019 (the Original Issue Date (OID), the Company received $
The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to Sixty Percent (60%) of the of the average of the two lowest trades of the Common Stock during the fifteen (15) trading Days immediately preceding a conversion date (“Conversion Price”). The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the First Note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $
Through October 31, 2021, the lender had previously converted $
On January 25, 2021, the lender requested a $
| F-20 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 and 2020 was $
Convertible Unsecured Promissory Note – May 8, 2019
On May 8, 2019, the Company signed a SPA with an Investor that provides for the issuance of a
On May 8, 2019, the Company received $
The lender has the right at any time after the effective date, to convert all or part of the outstanding principal, accrued interest and $
Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.
The Company evaluated the promissory note in accordance with ASC 815 “Derivatives and Hedging” and determined that there was a conversion option feature that should be bifurcated and accounted for as a conversion option liability in the balance sheet at fair value. The initial valuation and recording of the conversion option liability was $
| F-21 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
The Company evaluated the warrant and determined that there was no embedded conversion feature as the warrant contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings, and pro-rata distributions. The Company calculated the relative fair value between the note and the warrant on the issue date utilizing the Black Scholes Pricing Model for the warrant. As a result, the Company allocated $
As a result of the Company not paying the promissory note and accrued interest on the due date of February 8, 2020, the promissory note is in default at October 31, 2021 and April 30, 2021 with interest accrued at the default rate of 24%. However, the lender has not notified the Company of the default in writing but, the lender has several remedies including calling the principal amount and accrued interest due and payable immediately.
Through October 31, 2021, the lender had previously converted $
The Company has performed a periodic revaluation of the conversion option liability using the Binomial Lattice Pricing Model at each of the previous conversion dates and at April 30, 2021, that resulted in an estimated conversion option liability of $
The Company performed a revaluation of the conversion option liability using the Binomial Lattice Pricing Model at October 31, 2021, that resulted in an estimated conversion option liability of $
For the revaluation at October 31, 2021, it was estimated with the following assumptions: stock price $
Interest expense recorded in the accompanying unaudited Statement of Operations by the Company for the six months ended October 31, 2021 and 2020 was $
At October 31, 2021, the Company did not have sufficient shares reserved with the transfer agent for the potential conversion of the principal and accrued interest. At October 31, 2021, based upon the calculated conversion price, this would be
| F-22 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
Convertible Unsecured Promissory Note – February 3, 2021
On February 3, 2021, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a 10% convertible promissory note in the aggregate principal amount of $
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $
On February 3, 2021, the Company recorded debt issue costs of $
From August 4, 2021 through August 10, 2021, the lender elected to convert the entire $55,000 of principal and $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $
| F-23 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
Convertible Unsecured Promissory Note – March 17, 2021
On March 17, 2021, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a 10% convertible promissory note in the aggregate principal amount of $
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $
On March 17, 2021, the Company recorded debt issue costs of $
From September 17, 2021 through September 27, 2021, the lender elected to convert the entire $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $
| F-24 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
Convertible Unsecured Promissory Note – May 3, 2021
On May 3, 2021, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.
The principal amount and unpaid accrued interest may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs. Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount.
Date of Note Satisfaction | Payment Amount | |
0 to 30 days |
| |
31 to 60 days |
| |
61 to 90 days |
| |
91 to 120 days |
| |
121 to 180 days |
|
The Company evaluated the promissory note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $
On May 3, 2021, the Company recorded debt issue costs of $
| F-25 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $
Convertible Unsecured Promissory Note – June 7, 2021
On June 7, 2021, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price.
The principal amount and unpaid accrued interest may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs. Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount.
Date of Note Satisfaction | Payment Amount | |
0 to 30 days |
| |
31 to 60 days |
| |
61 to 90 days |
| |
91 to 120 days |
| |
121 to 180 days |
|
The Company evaluated the promissory note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $
| F-26 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
On June 7, 2021, the Company recorded debt issue costs of $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $
|
| October 31, 2021 |
|
| April 30, 2021 |
| ||
Convertible Secured Note Payable: |
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| ||
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|
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| ||
May 17, 2018 - Principal and interest at 8% due May 17, 2019. IN DEFAULT with interest recorded at default rate of 18%. |
| $ |
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| $ |
| ||
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August 3, 2021 – Principal and interest at 12% due August 3, 2022. |
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September 15, 2021 – Principal and interest at 12% due September 15, 2022 |
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Plus: put premium |
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Less: debt discount |
|
| ( | ) |
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| |
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|
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|
|
|
|
|
|
Total Convertible Secured Notes Payable |
| $ |
|
| $ |
| ||
Convertible Secured Note Payable – May 9, 2016
At April 30, 2021, the Company has a remaining balance of $0 from an original $
Convertible Secured Note Payable – May 17, 2018
At October 31, 2021, the Company has recorded $
| F-27 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
On August 5, 2021, the Company repaid $
On August 10, 2021, the lender elected to convert $
The Company evaluated the promissory note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the promissory note (1) embodies an unconditional obligation and (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based on a monetary amount known as the lender will receive $
As a result of the payment and conversion described above, the Company reclassified $
During the six months ended October 31, 2021 and 2020, the Company recorded $
Convertible Secured Note Payable – initial tranche August 3, 2021 and second tranche September 15, 2021
On August 3, 2021, the Company signed a Senior Secured Convertible Note (the “Note”) in the aggregate principal amount of up to $
Interest on the Note will be incurred at the rate of 12% per annum guaranteed and has a maturity date one year from the date of execution of the Note. In the event of an event of default, interest will be at the rate of twenty percent (20%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid.
The conversion price is a fixed $0.002 per share and conversion is not permitted for a minimum of six (6) months from the closing of each financing draw and pursuant to each draw, the Company will ensure that common stock is reserved for issuance on a one-to-one basis. If an Event of Default exists at any time after the Issue Date hereof, but prior to the Conversion Date has existed, the Conversion Price shall be the lesser of (i) $0.001 per share or (ii) seventy percent (70%) of the lowest trading price of the Common Stock during the ten (10) consecutive trading days including and immediately preceding the Conversion Date.
The Company received $
| F-28 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 3 – DEBT (CONTINUED)
The Company evaluated the initial tranche in accordance with ASU 2020-06 “Debt—Debt with Conversion and Other Options” and determined that the conversion price is at a fixed rate. Further, due to the adoption of ASU 2020-06, no beneficial conversion feature was recorded. As a result, on the first tranche date of August 3, 2021, the Company recorded $
During the six months ended October 31, 2021, the Company recorded $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $
Second tranche – September 15, 2021
On September 15, 2021, the Company received a second tranche of $27,500 related to the Note in the aggregate principal amount of up to $
The terms for the second tranche are exactly the same as discussed above for the first tranche with interest at the rate of 12% per annum guaranteed, a maturity date one year from the date of execution of the Note and the conversion price is a fixed $0.002 per share and conversion is not permitted for a minimum of six (6) months from the closing of each financing draw and pursuant to each draw, the Company will ensure that common stock is reserved for issuance on a one-to-one basis.
The Company received $24,000 of net proceeds from the issuance of the second tranche of the Note after payment of $2,500 for the OID and $1,000 of debt issuance costs.
The Company evaluated the second tranche in accordance with ASU 2020-06 ASU 2020-06 “Debt—Debt with Conversion and Other Options” and determined that the conversion price is at a fixed rate. Further, due to the adoption of ASU 2020-06, no beneficial conversion feature was recorded. As a result, on the second tranche date of September 15, 2021, the Company recorded $27,500 as the liability for the Note with offsets of $2,500 for the OID and $1,000 of debt issue costs, both are being amortized to interest expense over the one-year term of the Note.
During the six months ended October 31, 2021, the Company recorded $126 for the amortization of the debt discount to interest expense and the debt discount balance was $874 at October 31, 2021. During the six months ended October 31, 2021, the Company recorded $315 for the amortization of the OID to interest expense and the OID balance was 2,185 at October 31, 2021.
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the six months ended October 31, 2021 was $416. At October 31, 2021, the Company has recorded $416 of accrued interest, respectively in the accompanying unaudited Balance Sheet. See Note 8 – Subsequent Events.
| F-29 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 4 – STOCK
Common Stock:
The Company is authorized to issue up to
Common Stock Issued
Effective June 22, 2021, the Company issued
Effective May 19, 2021, the Company granted
From August 4, 2021 through August 10, 2021, the lender of a $
On August 10, 2021, the lender of an original $
From September 17, 2021 through September 27, 2021, the lender of a $
| F-30 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 5 – STOCK BASED COMPENSATION
The following table summarizes stock option activity of the Company for the six months ended October 31, 2021:
|
| Stock Options Outstanding |
| |||||||||||||
|
| Number of |
|
| Weighted Average Exercise |
|
| Weighted Average Remaining Contractual |
|
| Aggregate Intrinsic |
| ||||
|
| Options |
|
| Price |
|
| Life (Years) |
|
| Value |
| ||||
Outstanding, April 30, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Outstanding, October 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable, October 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Effective May 19, 2021, the Company granted
The Company evaluated the issuance of the issued warrants in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for the stock warrants was $
The Company used the following assumptions in estimating fair value:
Stock Price |
| $ | |
|
Exercise Price |
| $ |
| |
Expected Remaining Term |
| |
| |
Volatility |
|
| % | |
Annual Rate of Quarterly Dividends |
|
| % | |
Risk Free Interest Rate |
|
| % | |
| F-31 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 5 – STOCK BASED COMPENSATION (Continued)
The following table summarizes stock warrant activity of the Company for the six months ended October 31, 2021:
|
| Stock Warrants Outstanding |
| |||||||||||||
|
| Number of |
|
| Weighted Average Exercise |
|
| Weighted Average Remaining Contractual |
|
| Aggregate Intrinsic |
| ||||
|
| Warrants |
|
| Price |
|
| Life (Years) |
|
| Value |
| ||||
|
|
|
|
|
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|
|
|
|
|
|
| ||||
Outstanding, April 30, 2021 |
|
| 1,500,000 |
|
| $ |
|
|
|
|
| $ |
| |||
Issued May 19, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Outstanding, October 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Exercisable, October 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
NOTE 6 – RELATED PARTY TRANSACTIONS
At October 31, 2021 and April 30, 2021, the Company has recorded $
On March 5, 2020 and August 12, 2020, a member of the Board of Directors, provided $
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Commitments and Contingencies for the Company have not changed from the disclosures in the Form 10-K for the years ended April 30, 2021 and 2020, filed on July 29, 2021, except for the following:
| F-32 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 7 – COMMITMENTS AND CONTINGENCIES (Continued)
Unpaid Taxes and Penalties
At October 31, 2021 and April 30, 2021, the Company owed the State of Delaware $
NOTE 8 – SUBSEQUENT EVENTS
Effective November 4, 2021, the lender of a $
Effective November 5, 2021 the Company received a third tranche of $
The terms for the third tranche are exactly the same as the previous two tranches with interest at the rate of
The Company received $
The Company evaluated the third tranche in accordance with ASU 2020-06 ASU 2020-06 “Debt—Debt with Conversion and Other Options” and determined that the conversion price is at a fixed rate. Further, due to the adoption of ASU 2020-06, no beneficial conversion feature was recorded. As a result, on the third tranche date of November 5, 2021, the Company recorded $
On November 24, 2021, the Company signed a Senior Secured Convertible Note (the “Note”) in the aggregate principal amount of $
| F-33 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 8 – SUBSEQUENT EVENTS (Continued)
Interest on the Note will be incurred at the rate of 12% per annum and has a maturity date one year from the date of execution of the Note. If there is an event of default, interest will be at the rate of sixteen percent (16%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid.
The Company issued ten million (
The Company received $
The Company evaluated the Note in accordance with ASU 2020-06 ASU 2020-06 “Debt—Debt with Conversion and Other Options” and determined that the conversion price is at a fixed rate. Further, due to the adoption of ASU 2020-06, no beneficial conversion feature was recorded. As a result, on the Note date of November 5, 2021, the Company recorded $
In relation to the
On the Note issue date of November 24, 2021, the Company recorded the warrant fair value of $
| F-34 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
October 31, 2021
NOTE 8 – SUBSEQUENT EVENTS (Continued
The Company utilized $
Effective December 9, 2021, the lender of a $
| F-35 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion contains forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “will,” “could,” “may” and similar expressions are intended to identify forward-looking statements. Such statements reflect our Company’s current views with respect to future events and financial performance and involve risks and uncertainties. Should one or more risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those anticipated, believed, expected, planned, intended, estimated, projected, or otherwise indicated. Readers should not place undue reliance on these forward-looking statements.
The following discussion is qualified by reference to and should be read in conjunction with our Company’s unaudited financial statements and the notes thereto.
Plan of Operation
We are seeking to establish, develop and operate MLFB as a professional spring/summer football league. We intend to establish franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the National Football League (“NFL”) off-seasons, which will enable us to take a totally non-adversarial approach towards the NFL. We have commenced the process of leasing playing venues and acquiring football equipment. We have obtained required workers compensation insurance for certain states where we will play games.
MLFB plans to serve as a pipeline to develop players, coaches, officials, scouts, trainers, and all other areas of the game that the NFL needs today. We will also give NFL representatives the opportunity to view our team practices, game footage, practice tapes and confer with league coaches, team officials and staff. We believe this will provide our league with recognition and demonstrate our economic model and the market’s desire for spring football.
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Subsequently, the COVID-19 pandemic has continued to spread and various state and local governments have issued or extended “shelter-in-place” orders, which have impacted and restricted various aspects of the Company’s operations. The spread of the pandemic has caused severe disruptions in the global economy and financial markets and could potentially create widespread business continuity issues of an unknown magnitude and duration.
MLFB is in the process of hiring several well-known and experienced coaches, scouts, and trainers as well as individuals looking to improve their skills in these areas. We believe this will provide MLFB with the recognition and credibility to demonstrate the viability of our economic model as well as the market’s desire for spring football. Management and our Board of Directors are focused on a planned 2022 football season and believe that this will allow us to put an economically sustainable league and product on the field.
The Company has engaged the services of a well-known and respected investment bank headquartered in New York to assist in that effort. In addition, our management has been engaged with several high net-worth individuals and funds who have expressed an interest in being part of our League as investors.
| 3 |
| Table of Contents |
We require short-term financing as well as financing over the next 12 months and as noted in previous filings, the Company has been pursuing short-term financing of approximately $3 million followed by a tiered subsequent raise of approximately $27 million between the end of calendar 2021 and the first calendar quarter of 2022. However, as discussed previously, the impact of the COVID-19 pandemic may have material and adverse effects on our ability to successfully obtain the required capital in this timeframe.
Single Entity Structure
We intend to operate the league as a single entity owned, stand alone, independent sports league. The single entity structure will be based on the design of Major League Soccer (MLS), where a single entity sports league owns and operates all of its teams. This corporate structure provides several compelling benefits, including:
| • | Centralized contracting for ‘players’ services for controlled payrolls without violating antitrust laws |
| • | Greater parity among teams |
| • | Focus on the bottom line |
| • | Controlled costs |
Management believes that this structure will also promote efficiency by depoliticizing decisions on league policies and allowing decisions to be made with consistency and in a timely fashion. Economies of scale will be achieved through centralizing contract negotiations and handling business affairs in the league office to ensure that individual teams are unified in their decision-making. Further, under this structure, we expect teams will operate in the best interest of the league.
Single Entity Structure
We intend to operate the league as a single entity owned, stand alone, independent sports league. The structure will be based on the design of Major League Soccer (MLS), where a single entity sports league owns and operates all of its teams. This corporate structure provides several compelling benefits, including:
| · | Centralized contracting for ‘players’ services for controlled payrolls without violating antitrust laws |
| · | Greater parity among teams |
| · | Focus on the bottom line |
| · | Controlled costs |
Management believes that this structure will also promote efficiency by depoliticizing decisions on league policies and allowing decisions to be made with consistency and in a timely fashion. Economies of scale will be achieved through centralizing contract negotiations and handling business affairs in the league office to ensure that individual teams are unified in their decision-making. Further, under this structure, we expect teams will operate in the best interest of the league.
MLFB Market Opportunity
MLFB intends to establish a brand that is fan-friendly, exciting, affordable, and interactive, but most importantly provides consumers real value for their sports dollars. MLFB will underscore the fans’ access to team members, coaches, league officials and other fans. Although MLFB’s ticket pricing will be a fraction of that of the established professional leagues (NBA, MLB, NHL, and NFL), its ultimate goal will be to offer its fans an incomparable value-added experience for their entertainment dollar.
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Additionally, as a result of a carefully crafted study, we will not locate teams in any established NFL cities and more importantly in any Major League Baseball cities, thus avoiding direct in-season competition with an established sports entity. By positioning teams in prime emerging and under-represented markets throughout the contiguous 48 states (including placing teams in well respected and football fan friendly metropolitan markets in the country), our research suggests that an exciting sports entity like Major League Football will be viewed in a positive light by sports fans throughout the US. Of equal or greater importance to Major League Football is the fact that both established and peripheral football fans in these exciting new markets will finally be afforded the opportunity of establishing their own personal sports identity while at the same time fostering strong community pride.
Lastly, although MLFB’s long-range vision is to maintain a positive working relationship with the NFL, its ultimate intent is to function as an independent, stand-alone entity that captures sports content needed during off season. Although its economic model was, we believe, flawed, the professional Alliance of American Football teams drew a League wide average attendance of 15,000 fans per game and television ratings comparable to the NBA. The XFL had similar positive attendance in its five-game season.
MLFB intends to disseminate its message using a comprehensive marketing strategy that employs both traditional and new media marketing channels. MLFB’s marketing plans are anticipated to create multiple revenue streams and engage sports fans over a variety of mediums. Specifically, MLFB intends to develop a far-reaching Internet and mobile strategy that will serve as the backbone of its marketing strategy. This will include developing a mobile initiative, where fans can interact with the league, its players, its coaches, and other fans using their mobile phones all while taking advantage of the player name recognition that comes with fantasy football.
MLFB also intends to create an interactive website that includes a social networking aspect, podcasts, live video, and more. Along with this new media strategy, cross promotions will also be an important part of the MLFB’s marketing strategy. MLFB plans to work with businesses involved in video, television, print media and the Internet to promote its business. Much of the necessary preliminary work to meet this new strategy has already been performed by our previously announced external contractors, BDB Entertainment Group, Inc., and Red Moon Marketing.
We intend to review their qualifications and believe that the cumulative effect of this work will help it achieve its early objectives, which include the following:
| · | Establish itself as a recognized professional football league |
| · | Build a base of teams and fans broad enough to sustain business over the critical first five years of operation |
| · | Generate enough revenue to expand its operations in years three through six |
| · | Build successful teams located in regions where there are no existing MLB franchises |
| · | Adopt a spring schedule to avoid competing with NFL, collegiate and prep football |
| · | Provide year-round cash flow from multi-functioning revenue streams |
| · | Build a positive image for the league through year-round community relations campaigns |
Professional Sports Market
MLFB recognizes the NFL is the dominant professional sports league in the United States. Although it respects the success of the NFL business model, MLFB’s objective is to position itself as an independent, non-adversarial football league. MLFB believes that its own business model encompasses innovations that will be viewed positively by NFL officials, resulting in a strong working relationship between the two leagues. MLFB staff have held meetings with high-ranking NFL officials to discuss our plans.
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MLFB will endeavor to maximize ticket vendor technology and enhance its services to patrons with innovative ticketing procedures that include:
| · | Average ticket prices targeted at approximately 25% of the prices of NFL, NBA, NHL & MLB tickets. |
| · | Year-round cash flow from multiple revenue streams utilizing new technologies. |
| · | A highly developed marketing strategy that uses both traditional and new media to attract existing football fans as well as an entirely untapped market of potential new fans. |
| · | A more interactive website in professional sports using cutting edge technologies to preserve fan loyalty. |
| · | Proven executive staff members with considerable practical experience in professional football. |
| · | Player and coaching costs projected significantly less than those of the NFL, NBA, NHL, or MLB. |
Initially, teams will operate in either existing collegiate or municipal stadiums during the spring and early summer season. We believe that our business model and long-range vision possess many innovations that will be viewed in a positive light by NFL owners and league officials and will also lend itself to the potential of establishing a strong working relationship with our venture by positioning ourselves in a 100% non-adversarial position to the established NFL.
Audience
MLFB believes that today’s market demands a controlled deliverable to a targeted viewing audience as well as controlled advertising deliverables to specific targeted demographic audiences as well. Other sports attract audiences that are only a fraction of that number, in producing the sponsor and advertiser concerns. Therefore, retaining the mass appeal needed to attract such an audience is an over-arching consideration that shapes much of what we do and what concerns the Company.
Merchandising & Licensing Overview
The thrust of our licensing and co-branding strategy is to create an increase in brand value for MLFB and the partners we align with. In order for the league to have a robust licensing and co-branding business, we have created a 3-tier approach that focuses on generating strong revenue streams for the league and initiating value based collaborative efforts that further enhance the MLFB brand.
The main benefits of the program are:
| · | Fans will find quality items at more favorable price points. |
| · | Teams will have higher profit on items and stop tying up money on inventory they cannot’ properly sell. |
| · | More fans will be wearing and supporting the team and league branded merchandise. |
We plan to develop private label products where we will feature products that are fan favorites (hats, shirts, popular novelties, and gifts, etc.) all manufactured at the highest level, and priced below traditional licensed sports merchandise programs. All merchandise, when league sanctioned, will be pre- ticketed and priced.
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Financial Condition
As reflected in the unaudited financial statements, the Company had no revenues and had a net loss of $743,989 for the six months ended October 31, 2021. Additionally, the Company had net cash used in operating activities of $188,004 for the six months ended October 31, 2021. At October 31, 2021, the Company has a working capital deficit of $4,578,129, an accumulated deficit of $29,736,711 and a stockholders’ deficit of $4,507,299, which could have a material impact on the Company’s financial condition and operations.
Results of Operations
Three months ending October 31, 2021, compared to the three months ended October 31, 2020
For the three months ended October 31, 2021 and 2020, we had no revenue, respectively. The Company is working through its business plan to establish, develop and operate MLFB as a professional spring football league.
Total operating expenses for the three months ended October 31, 2021 were $101,292 as compared to total operating expenses for the three months ended October 31, 2020 of $77,018 or an increase of $24,274. The increase in expense from 2020 to 2021 was primarily from a $23,885 increase in general and administrative expenses. The increase in general and administrative expenses was primarily from a $21,662 increase in rent expense and $2,098 of travel expense.
Other income (expense) for the three months ended October 31, 2021 was $81,773 of expense compared to $6,964 of expense for the three months ended October 31, 2020 or an increase in expense of $74,809. The increase in expense from 2020 to 2021 was primarily from a $53,299 loss for change of fair value of conversion option liability and a 19,479 increase in interest expense. The increase in interest expense was primarily from $12,175 of amortization of debt issue costs and original issue discount on convertible promissory notes and $7,304 for interest on other debt.
Because of the above, we had a net loss of $183,065 as compared to a net income of $83,982 for the three months ended October 31, 2021 and 2020, respectively.
Six months ending October 31, 2021, compared to the six months ended October 31, 2020
For the six months ended October 31, 2021 and 2020, we had no revenue, respectively. The Company is working through its business plan to establish, develop and operate MLFB as a professional spring football league.
Total operating expenses for the six months ended October 31, 2021 were $516,502 as compared to total operating expenses for the six months ended October 31, 2020 of $196,383 or an increase of $320,119. The increase in expense from 2020 to 2021 was primarily from a $319,008 increase in general and administrative expenses. The increase in general and administrative expenses was primarily from compensation expense for key Company individuals of $191,250 for common stock issued and $98,781 for the issuance of warrants, both with no comparable amount in 2020. Additionally, there was a $27,448 increase in rent expense in 2021 over 2020.
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Other income (expense) for the six months ended October 31, 2021 was $227,487 of expense compared to $292,662 of income for the six months ended October 31, 2020 or an increase in expense of $527,089. The increase in expense from 2020 to 2021 was primarily from a $384,347 decrease in the gain for change of fair value of conversion option liability, a $89,136 increase in interest expense and $55,000 of settlement expense. The increase in interest expense was primarily from $67,633 of put premium liability expense for convertible unsecured promissory notes in 2021 with no comparable amount in 2020. Additionally, the increase in interest expenses was from a $11,921 increase in the amortization of debt discounts and an increase of $9,882 for interest on debt. The $55,000 of settlement expense is from the issuance of a note payable to a party that paid for certain company expenses previously with no comparable amount in 2020.
Because of the above, we had a net loss of $743,989 as compared to a net income of $103,219 for the six months ended October 31, 2021 and 2020, respectively.
Liquidity and Capital Resources
From inception, our Company has relied upon the infusion of capital through equity transactions and the issuance of debt to obtain liquidity. We had only $2,874 of cash at October 31, 2021. Consequently, payment of operating expenses will have to come similarly from either equity capital to be raised from investors or from borrowed funds. There is no assurance that we will be successful in raising such additional equity capital or additional borrowings or if we can, that we can do so at a cost that management believes to be appropriate. See Significant Events for additional discussion.
Condensed Cash Flow Activity
The following table summarizes selected items from our condensed unaudited Statements of Cash Flows for the six months ended October 31, 2021 and 2020:
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| For the Six Months Ended, |
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| October 31, 2021 |
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| October 31, 2020 |
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Net cash used in operating activities |
| $ | (188,004 | ) |
| $ | (96,820 | ) |
Net cash provided by financing activities |
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| 171,100 |
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| 95,400 |
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Net decrease in cash |
| $ | (16,904 | ) |
| $ | (1,420 | ) |
Net Cash Used in Operating Activities
Net cash used in operating activities was $188,004 during the six months ended October 31, 2021, compared to $96,820 used during the six months ended October 31, 2020, or a decrease in cash used of $91,184. After adjusting for non-cash expense (gain) items of $432,831 in 2021 and $(372,051) in 2020, adjusted net cash used in operations would be $311,158 in 2021 and $268,832 in 2020, or an increase of $42,326. After making these non-cash adjustments, the previously discussed Results of Operations analysis shows that the increase in the net cash used in operating activities was primarily from an increase in the expenses of the Company from 2020 to 2021.
Net Cash Used in Investing Activities
There were no investing activities for both the six months ended October 31, 2021 and 2020, respectively.
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Net Cash Provided by Financing Activities
Financing activities provided $171,100 of net cash during the six months ended October 31, 2021, as compared to $95,400 provided during the six months ended October 31, 2020, or an increase of $75,700. The increase in net cash provided from 2020 to 2021 was primarily from (1) $95,000 of proceeds from the issuance of convertible secured promissory notes and $126,100 of proceeds from the issuance of convertible unsecured promissory notes in 2021 with no comparable amount in 2020, (2) a $50,000 repayment of a convertible secured promissory note in 2021 with no comparable amount in 2020, (3) a $30,000 of proceeds from the issuance of a note payable – related party in 2020 with no comparable amount in 2021 and (4) $65,400 of proceeds from the sale of common stock in 2020 with no comparable amount in 2021.
Off-Balance Sheet Arrangements
At October 31, 2021, we did not have any off-balance sheet arrangements that we believe have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies
Our Company’s accounting policies are more fully described in Note 1 of Notes to unaudited Condensed Financial Statements. As disclosed in Note 1 of the unaudited Condensed Notes to Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on our management’s best knowledge of current events and actions our Company may undertake in the future, actual results could differ from the estimates.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures at October 31, 2021 and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls over financial reporting constituted a material weakness as discussed below.
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| 1. | Our Company does not have a full time Controller or Chief Financial Officer and utilizes a part time consultant to perform these critical responsibilities. This lack of full-time accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control. Additionally, the Company determined that certain transactions may have been allowed without proper authority and approval. The Company has analyzed these transactions and believes that the internal controls required to safeguard company assets from unauthorized transactions were not present. |
| 2. | Additionally, management determined during its internal control assessment the following weakness(s), while not considered material, are items that should be considered by the Board of Directors for resolution immediately: (i) our Company IT process should be strengthened as there is no disaster recovery plan, no server, and the Company accounting records are maintained through a consultant. The Company should consider the purchase and implementation of a server and proper back-ups off site to ensure that accounting information is safeguarded; and (ii) our Company should implement a policies and procedures manual. |
To mitigate the above weaknesses(s), to the fullest extent possible, our Company has engaged a financial consultant with significant accounting and reporting experience to assist in becoming and remaining current with its reporting responsibilities. Additionally, as soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures to mitigate the weaknesses discussed above. Additionally, the Company plans on hiring a fulltime Controller or Chief Financial Officer when funds are sufficient.
Changes in Internal Control Over Financial Reporting.
No change in our Company’s internal control over financial reporting occurred during our fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Significant Events
On November 24, 2021, the Company signed a Senior Secured Convertible Note (the “Note”) in the aggregate principal amount of $315,000 with an original issue discount of 10% (“OID”) convertible into shares of the Company’s $0.001 par value common stock.
Interest on the Note will be incurred at the rate of 12% per annum and has a maturity date one year from the date of execution of the Note. If there is an event of default, interest will be at the rate of sixteen percent (16%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid.
The conversion price is a fixed $0.008 per share and conversion is not permitted for a minimum of one hundred eight (180) days from the closing date and the Company will ensure that common stock is reserved for issuance on a one and one half (1.5x) coverage basis. If there is an event of default, the outstanding principal and accrued interest (including default interest) multiplied by 125% is due and payable and at the sole option of the noteholder, payment will be in either cash or the Company’s $0.001 par value common stock based upon the fixed $0.008 conversion price.
The Company issued ten million (10,000,000) non-returnable warrants with a five (5) year term with an exercise price of $0.035 per share into the Company’s $0.001 par value common stock. Additionally, the Company issued fifteen million (15,000,000) returnable warrants with a five (5) year term that can only be exercised upon an event of default at an exercise price of $0.03 per share into the Company’s $0.001 par value common stock. Both warrants include down round protection and are subject to any reverse split adjustment.
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The Company received $255,820 of net proceeds from the issuance of the Note after payment of $31,500 for the OID and $27,680 of debt issuance costs. The Company will have the option to prepay at any time with no prepayment penalty.
In relation to the 15,000,000 contingent returnable warrants issued, the Company evaluated the warrants in accordance with ASC 815-40 and determined that there was no scope exception and should be accounted for at the time of issuance. The Company evaluated both warrants and determined that there was no embedded conversion feature as the warrants contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings and pro rate distributions. The Company calculated the relative fair value between the note and the warrants on the issue date utilizing the Black Scholes Pricing Model for the warrants. As a result, the Company allocated $143,001 to the warrants and will be recorded as a debt discount with an offset to additional paid in capital. The warrant calculations used the following assumptions; stock price $0.0116, warrant exercise price $0.035, expected term of 5 years, expected volatility of 316% and discount rate of 0.06%.
On the note issue date of November 24, 2021, the Company recorded the following debt discounts as offsets to the $315,000 note payable and will be amortized over the one-year term of the note: (1) OID of $31,500, (2) debt issue costs of $27,680 and (3) warrant fair value of $143,001.
The Company utilized $217,509 of the net proceeds to pay off $185,000 of principal from a Senior Secured Convertible Note with a $750,000 facility that commenced August 3, 2021 in full. The payoff included the $185,000 of principal, guaranteed interest of $22,044 and a 5% early payment premium of $8,665. Additionally, as a result of the payoff, the Company will amortize to interest expense the remaining debt discounts recorded of $14,515 related to OID and $13,141 of debt issue costs.
As previously disclosed, the Company has engaged the services of a well-known and respected investment bank headquartered in New York to assist in pursuing short-term financing of approximately $3 million followed by a planned tiered subsequent raise of approximately $27 million between the end of calendar 2021 and the first calendar quarter of 2022. In addition, our management has been engaged with several high net-worth individuals and funds who have expressed an interest in being part of our League as investors.
The investment bank has recently presented to the Company for its consideration a non-binding Term Sheet from a Fund for a common stock equity line in the amount of $5,000,000 (Five Million Dollars). This is currently being actively reviewed but has not yet been accepted. The Company has continued its discussions with high net-worth individuals and one other Fund interested in investing in the Company. There is no guarantee that the Term Sheet will be consummated into full definitive documents and an eventual funding for the Company.
In addition the Company has recently retained legal counsel who are preparing filings with the SEC for a Tier 2 Regulation A offering of common stock. This process is currently underway as of the date of the filing of this form 10-Q. There is no guarantee that a Tier 2 Regulation A offering will be consummated and an eventual funding to the Company.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The information required herein is incorporated by reference from Note 7 – Commitments and Contingencies in the Notes to the Unaudited Condensed Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Our Company sold the following securities without registering the securities under the Securities Act:
From August 4, 2021 through August 10, 2021, the lender of a $55,000 convertible unsecured promissory note elected to convert the entire principal amount and $2,750 of accrued interest into 11,105,164 shares of the Company’s $0.001 par value common stock.
On August 10, 2021, the lender of an original $80,000 convertible secured promissory note elected to convert $5,998 of the principal into 2,498,971 shares of the Company’s $0.001 par value common stock.
From September 17, 2021 through September 27, 2021, the lender of a $41,000 convertible unsecured promissory note elected to convert the entire principal amount and $2,050 of accrued interest into 4,659,872 shares of the Company’s $0.001 par value common stock.
No underwriters were utilized, and no commissions or fees were paid with respect to any of the above transactions. These persons were the only offerees in connection with these transactions. We relied on Section 4(a)(2), 4(a)(5) and Regulation D of the Securities Act since the transactions do not involve any public offering.
Item 6. Exhibits.
The following exhibits are included herein:
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Major League Football, Inc. | |||
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December 14, 2021 | By: | /s/ Francis J. Murtha | |
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| Francis J. Murtha |
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| Principal Executive Officer and Principal Financial Officer |
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