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) |
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(State or other jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
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(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 March 10, 2023 |
Common Stock, $0.001 par value per share |
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TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
| Table of Contents |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MAJOR LEAGUE FOOTBALL, INC.
FINANCIAL STATEMENTS
January 31, 2023
(UNAUDITED)
CONTENTS
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| F-2 | ||
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| F-9 |
| F-1 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
BALANCE SHEETS
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| January 31, 2023 |
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| April 30, 2022 |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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Accounts receivable |
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Prepaid fees |
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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 and office equipment, net of accumulated depreciation of $ |
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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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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable |
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Accounts payable - related parties |
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Accrued former officer compensation and payroll taxes |
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Accrued expenses |
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Accrued payroll |
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Subscription payable |
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Deferred revenue |
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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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Warrant derivative liability |
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Notes payable net of $ |
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Notes payable, related party |
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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 8) |
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STOCKHOLDERS’ DEFICIT |
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Common stock, $ |
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Additional paid-in capital |
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Subscription receivable |
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Accumulated deficit |
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TOTAL STOCKHOLDERS’ DEFICIT |
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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)
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| For the Three Months Ended |
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| For the Nine Months Ended |
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| January 31, 2023 |
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| January 31, 2022 |
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| January 31, 2023 |
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| January 31, 2022 |
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Revenue |
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Online store sales |
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Total Revenue |
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Cost of Revenue |
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Online store costs |
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Total Cost of Revenue |
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Gross Margin |
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Operating Expenses |
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Professional fees |
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Football camp expense |
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Compensation expense |
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Write off of prepaid investor relations |
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Rent expense |
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Depreciation expense |
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General and administrative expense |
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Total Operating Expenses |
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Operating Loss |
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Other Income (Expense) |
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Tax penalties and interest |
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Interest expense |
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Settlement income (expense) |
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Other expense |
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Gain (loss) from change in fair value of conversion option liability |
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Gain from change in fair value of warrant derivative liability |
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Total Other Income (Expense) |
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Net Income (Loss) |
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Deemed Dividend |
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Net Loss Available to Common Shareholders |
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Basic and Diluted Net Loss Per Share Available to Common Shareholders |
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Weighted Average Shares - Basic and Diluted - Available to Common Shareholders |
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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 JANUARY 31, 2023 AND 2022
(UNAUDITED)
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| Additional |
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| Total |
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| Common Stock |
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| Stockholders’ |
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| Receivable |
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For the Three Months Ended January 31, 2023 |
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Balance at October 31, 2022 |
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Sale of common stock |
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Common stock offering costs |
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Conversion of convertible unsecured promissory notes |
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Conversion of convertible secured promissory notes |
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Issuance of common stock for equity line of credit |
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Reclassification from equity of initial conversion option derivative value |
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Reclassification from equity of initial warrant derivative value |
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Deemed dividend related to the triggering of the full ratchet anti-dilution provision of warrants at fair value |
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Reclassification of put premium upon conversion of convertible unsecured promissory notes |
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Net income, three months ended January 31, 2023 |
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Balance at January 31, 2023 |
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| Additional |
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| Total |
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For the Three Months Ended January 31, 2022 |
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Balance at October 31, 2021 |
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Conversion of convertible unsecured promissory notes |
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Conversion of convertible secured promissory note |
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Issuance of warrant with convertible secured promissory note |
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Reclassification of put premium upon conversion of convertible unsecured promissory notes |
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Reclassification of put premium upon conversion of convertible secured promissory note |
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Net loss, three months ended January 31, 2022 |
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Balance at January 31, 2022 |
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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
FOR THE NINE MONTHS ENDED JANUARY 31, 2023 AND 2022
(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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| Subscription |
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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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| Receivable |
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| Deficit |
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| Deficit |
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For the Nine Months Ended January 31, 2023 |
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Balance at April 30, 2022 |
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Sale of common stock |
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Common stock offering costs |
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Conversion of convertible unsecured promissory notes |
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Conversion of convertible secured promissory notes |
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Issuance of common stock for settlements |
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Issuance of common stock from cashless exercise of warrants |
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Issuance of common stock with convertible unsecured promissory note |
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Issuance of common stock with note payable |
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Issuance of common stock to employee for services |
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| ||||||
Issuance of warrant to employee for services |
|
| - |
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Issuance of common stock to consultants for services |
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Issuance of common stock for equity line of credit |
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| ( | ) |
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| |||||
Issuance of warrant with convertible secured promissory note |
|
| - |
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| |||||
Issuance of warrant for equity line of credit |
|
| - |
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| |||||
Reclassification from equity of initial conversion option derivative value |
|
| - |
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| ( | ) |
|
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| ( | ) | |||
Reclassification from equity of initial warrant derivative value |
|
| - |
|
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|
| ( | ) |
|
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| ( | ) | ||
Deemed dividend related to the triggering of the full ratchet anti-dilution provision of warrants at fair value |
|
| - |
|
|
|
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|
|
| ( | ) |
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| ||||
Reclassification of put premium upon conversion of convertible secured promissory note |
|
| - |
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| |||||
Reclassification of put premium upon conversion of convertible unsecured promissory notes |
|
| - |
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| |||||
Net loss, nine months ended January 31, 2023 |
|
| - |
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| ( | ) |
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| ( | ) | |||
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Balance at January 31, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | |||
See accompanying condensed notes to these unaudited financial statements.
| F-5 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED JANUARY 31, 2023 AND 2022
(UNAUDITED)
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| Additional |
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| Total |
| ||||||||||||
|
| 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 Nine Months Ended January 31, 2022 |
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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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| $ | ( | ) |
| $ | ( | ) | |||||
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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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| - |
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| ||||||
Issuance of warrants to consultants for services |
|
| - |
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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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Issuance of warrant with convertible secured promissory note |
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| - |
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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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| |||||
Reclassification of put premium upon conversion of convertible secured promissory note |
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| - |
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| - |
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Net loss, nine months ended January 31, 2022 |
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| - |
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| - |
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| ( | ) |
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| ( | ) | |||
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Balance at January 31, 2022 |
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|
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| $ |
|
|
| - |
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| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) | ||||
See accompanying condensed notes to these unaudited financial statements.
| F-6 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| For the Nine Months Ended, |
| |||||
|
| January 31, 2023 |
|
| January 31, 2022 |
| ||
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| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
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| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net 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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| ||
Amortization of debt discount on notes payable |
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| ||
Issuance of common stock to employee for services |
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| ||
Issuance of warrant to employee for services |
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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 (income) |
|
| ( | ) |
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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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| ||
Write off of prepaid investor relation fees |
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| ||
Accretion of put premium liability |
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| ||
Loss (Gain) from change in fair value of conversion option liability |
|
| ( | ) |
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|
| |
Gain from change in fair value of warrant derivative liability |
|
| ( | ) |
|
|
| |
Depreciation expense |
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|
| ||
Changes in operating assets and liabilities: |
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Accounts receivable |
|
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|
| ||
Prepaid fees |
|
|
|
|
| ( | ) | |
Accounts payable |
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|
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|
| ||
Accounts payable - related parties |
|
| ( | ) |
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|
| |
Subscription payable |
|
|
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|
| ||
Deferred revenue |
|
| ( | ) |
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|
| |
Accrued expenses |
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|
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|
| ||
Accrued payroll |
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|
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|
| ||
Accrued interest |
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| ||
Accrued interest - related party |
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| ||
Net cash used in operating activities |
|
| ( | ) |
|
| ( | ) |
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|
CASH FLOWS FROM INVESTING ACTIVITIES |
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Trademark filling fees |
|
|
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|
| ( | ) | |
Purchase of football equipment |
|
| ( | ) |
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| |
Net cash used in investing activities |
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| ( | ) |
|
| ( | ) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from issuance of convertible unsecured promissory notes, net of issue costs |
|
|
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| ||
Proceeds from issuance of convertible secured promissory notes, net of issue costs |
|
|
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| ||
Proceeds from issuance of notes payable, net of issue costs |
|
|
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|
| ||
Repayment of note payable |
|
| ( | ) |
|
|
| |
Repayment of convertible unsecured promissory note |
|
| ( | ) |
|
|
| |
Repayment of convertible secured promissory note |
|
|
|
|
| ( | ) | |
Proceeds from sale of common stock |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
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| ||
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|
|
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|
|
NET DECREASE IN CASH |
|
| ( | ) |
|
| ( | ) |
CASH - BEGINNING OF PERIOD |
|
|
|
|
|
| ||
CASH - END OF PERIOD |
| $ |
|
| $ |
| ||
See accompanying condensed notes to these unaudited financial statements.
| F-7 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
STATEMENTS OF CASH FLOWS (Continued)
(UNAUDITED)
|
| For the Nine Months Ended, |
| |||||
|
| January 31, 2023 |
|
| January 31, 2022 |
| ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS |
|
|
|
|
|
| ||
CASH PAID FOR INCOME TAXES |
| $ |
|
| $ |
| ||
CASH PAID FOR INTEREST |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Reduction of put premium liability related to conversion and payment of promissory notes |
| $ |
|
| $ |
| ||
Conversion of convertible secured promissory note |
| $ |
|
| $ |
| ||
Conversion of convertible unsecured promissory notes and accrued interest |
| $ |
|
| $ |
| ||
Conversion of accrued interest on convertible secured promissory notes |
| $ |
|
| $ |
| ||
Discounts related to convertible promissory notes |
| $ |
|
| $ |
| ||
Fair value of warrants issued with secured convertible promissory notes |
| $ |
|
| $ |
| ||
Reclassification from equity of initial conversion option derivative value |
| $ |
|
| $ |
| ||
Reclassification from equity of initial warrant derivative value |
| $ |
|
| $ |
| ||
Deemed dividend related to the triggering of the full ratchet anti-dilution provision of warrants at fair value |
| $ |
|
| $ |
| ||
Warrant and common stock offering costs |
| $ |
|
| $ |
| ||
See accompanying condensed notes to these unaudited financial statements.
| F-8 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
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”) plans to establish, develop, and operate Major League Football (“MLFB”) as a professional Spring/Summer football League with 4 initial Franchises located in cities overlooked in large part by existing professional sports leagues and provide fans with high quality players and competition in the NFL’s off-season. Our plan that was initiated in June 2022 was that the initial teams would be located in Ohio, Virginia, Arkansas, and Alabama. Our proposed spring playing schedule avoids all competition with the NFL and colleges and these initial cities have both a passion for sports and football as well as stadium venues whose size will provide our fans an excellent viewing experience at a reasonable rental expense to MLFB. All potential venues are equipped for high quality multi-platform media transmission allowing us the broadcast all our games in multi-levels of today’s technology.
We commenced football training camp operations in June 2022 with a camp start date of July 18, 2022, which was located at Ladd-Peebles Stadium in Mobile, Alabama. The training camp was comprised of the four initial teams and included over 260 potential players and coaches. The camp included transportation of certain football equipment from a Texas warehouse along with the purchase of new equipment. However, due to a significant delay in negotiating the stadium lease, the Company was delayed in obtaining additional funding from a planned registration statement. The Company was funding the training camp operations from the sale of convertible promissory notes and the sale of common stock from an existing Regulation A offering. Because of a delay in funding, the Company suffered a significant cash flow issue with the payment of hotels and other training camp operating expenses. As a result, the Company shut down the training camp on July 29, 2022. As a result of the shutdown of the training camp, the Company has incurred a significant number of unpaid charges which are recorded as accounts payable at January 31, 2023.
We have commenced planning for a full spring football season in 2023, which is dependent on adequate funding, tentatively commencing with training camp in May 2023 and games from June through July 2023 and a championship game held in July 2023. This schedule is being developed with our broadcaster’s input as to what dates are compatible with their preferred broadcast schedule.
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 limited revenues and had a net income (loss) of $
We require short-term financing as well as financing over the next 12 months and we have been pursuing, and will continue to pursue, short-term financing, with the intention of securing larger, more permanent financing facilities.
| F-9 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On September 7, 2022, the
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 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.
COVID-19
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. 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.
The future operational and financial impact of the COVID-19 pandemic is difficult to determine, and it is not possible to predict the duration and severity of the economic disruption, government restrictions and stimulus, social distancing and phased re-opening of economies, nor estimate the impact that this may have on the Company, its financial condition, and its results of operations. While we believe that the coronavirus pandemic has not had a significant impact on our financial condition and results of operations at this time, the potential economic impact brought by the coronavirus pandemic, which may be exacerbated by the global macroeconomic uncertainty from the ongoing conflict between Russia and Ukraine, is difficult to assess or predict. There may be developments outside of our control that require us to adjust our operating plans. Given the nature of the situation, we cannot reasonably estimate the impact of the coronavirus pandemic on our financial condition, results of operations or cash flows in the future.
| F-10 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying 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, 2022, as filed with the SEC on July 29, 2022. The interim unaudited operating results for the three and nine months ended January 31, 2023 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 useful life of property and equipment, 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.
Reclassification
The Company reclassed rent expense from general and administrative expense for the three and nine months ended January 31, 2022, in the amount of $
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 January 31, 2023 and April 30, 2022.
Concentrations - Concentration of Credit Risk
Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. We maintain our cash balances in financial institutions that from time to time exceed amounts insured by the FDIC (up to $
| F-11 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included in the statement of operations.
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 within this Topic contained in the convertible instruments are accounted for as derivative liabilities at the date of issuance and 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. The classification of equity-linked contracts is reassessed at each balance sheet date. If the classification required under this subtopic changes as a result of events during the period, the contract shall be reclassified at the date of the event that caused such reclassification. If reclassification is required, the change in fair valuer of the contract during the period the contract was classified as equity shall be accounted for as an adjustment to stockholders’ equity. The contract is subsequently adjusted to fair value through earnings. Such a reclassification event occurred during the three and nine months ended January 31, 2023, as more fully disclosed below.
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.
| F-12 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 trading 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 to interest expense.
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.
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.
| F-13 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Assets and liabilities measured at fair value on a recurring basis consist of the following at January 31, 2023 and April 30, 2022:
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| Carrying Value at January 31, |
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| Fair Value Measurements at January 31, 2023 |
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| 2023 |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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Conversion option liability |
| $ | |
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| $ | |
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| $ |
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| $ | |
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Warrant derivative liability |
| $ | |
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| $ | $ |
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| $ | |
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| Carrying Value at April 30, |
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| Fair Value Measurements at April 30, 2022 |
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| 2022 |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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Conversion option liability |
| $ |
|
| $ |
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| $ |
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| $ |
| ||||
The following is a summary of activity of Level 3 assets and liabilities for the nine months ended January 31, 2023:
Conversion Option Liability |
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| |
Balance – April 30, 2022 |
| $ |
| |
Initial value of conversion option liability |
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| |
Gain from change in the fair value of conversion option liability |
|
| ( | ) |
Balance – January 31, 2023 |
| $ |
| |
Warrant Derivative Liability |
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Balance – April 30, 2022 |
| $ |
| |
Initial value of warrant derivative liability |
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| |
Gain from change in the fair value of warrant derivative liability |
|
| ( | ) |
Balance – January 31, 2023 |
| $ |
| |
Changes in fair value of the conversion option liability and warrant derivative 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. The Company has no leases with over one year term.
| F-14 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sequencing
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement or upon a triggering event and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
As a result of entering into warrant and convertible debt agreements, for which such instruments contained certain anti-dilution provisions, the Company could not demonstrate it has sufficient authorized shares and as a result, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Accordingly, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 “Derivatives and Hedging” whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based options issued to employees or directors. See Net Income (Loss) per Share below.
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 and Training Camps
The Company will recognize league tryout and training camp revenue on the dates that the events are held. The Company commenced a training camp on July 18, 2022 in Mobile, Alabama but this was terminated on July 29, 2022 due to a lack of sufficient funding. The Company did not charge players a training camp fee and as a result, there was no revenue from tryout and training camps during the three and nine months ended January 31, 2023 or 2022, 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, as applicable. The Company football league operations had not commenced as of January 31, 2023. The Company commenced the selling of on-line digital media merchandise through a third party drop shipper on April 29, 2022 and customers sent cash for certain items that were not shipped until May 2022. The Company recorded $
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.
| F-15 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 January 31, 2023 and April 30, 2022, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying unaudited financial statements.
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.
Net Income (Loss) per Share of Common Stock
The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.”, which 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 number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period and diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Securities that could potentially dilute earnings per share in the future are as follows:
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| January 31, 2023 |
|
| April 30, 2022 |
| ||
Warrants to purchase common stock - * |
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Options to purchase common stock |
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Conversion of convertible unsecured promissory notes - * |
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Conversion of convertible secured promissory notes - * |
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Total |
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*Based on the Company's sequencing policy, certain dilutive securities above the Company’s authorized shares of
Effective September 15, 2022, the Company’s determined that because of entering into certain warrant and convertible debt agreements, for which such instruments contained anti-dilution provisions, the Company could not demonstrate that it had sufficient authorized shares and as a result, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares.
| F-16 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As a result of the sale of the Company’s common stock at a price of $
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 7 – 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.
| F-17 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 January 31, 2023 are not expected to have a significant effect on the Company’s financial position or results of operations.
NOTE 2 – PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, consisted of the following:
|
| Estimated Life |
| January 31, 2023 |
|
| April 30, 2022 |
| ||
Football Equipment |
|
| $ |
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| $ |
| |||
Office Equipment |
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| |||
Less: Accumulated Depreciation |
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| ( | ) |
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| |
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| $ |
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| $ |
| ||
The Company commenced training camp operations on June 9, 2022, including the transportation of certain football and office equipment previously held in storage or purchased during the nine months ended January 31, 2023. As a result, the Company commenced depreciation of certain of its football and office equipment.
During the nine months ended January 31, 2023, the Company purchased $
| F-18 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 3 – ACCRUED EXPENSES
The Company has recorded accrued expenses that consisted of the following:
|
| January 31, 2023 |
|
| April 30, 2022 |
| ||
Penalties and interest - unpaid state income tax |
| $ |
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| $ |
| ||
Unpaid federal income tax |
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Legal settlement (See Note 8 – Commitments and Contingencies) |
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Accrued payroll tax |
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Accrued penalties for failure to file federal tax returns |
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Late charges on unpaid promissory note |
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Total Accrued Expenses |
| $ |
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| $ |
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NOTE 4 – DEBT
|
| January 31, 2023 |
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| April 30, 2022 |
| ||
Notes Payable: |
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Aug 28, 2015. No stated interest and principal payable on demand. |
| $ |
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| $ |
| ||
Nov.18, 2015. Interest at 8% and principal payable on demand. In Default |
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Jun. 6, 2016. Interest at 4% and principal payable on demand. |
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Aug. 4, 2016. Interest at 8% and principal payable on demand. In Default |
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Sep. 27, 2016. Interest at 4% and principal payable on demand. |
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Sep. 29, 2016. Interest at 4% and principal payable on demand. |
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Sep. 29, 2016. Interest at 4% and principal payable on demand. |
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Oct. 3, 2016. Interest at 4% and principal payable on demand. |
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Sep. 25, 2019. Interest at 8% and principal and interest due Mar. 25, 2020 In Default with interest recorded at 22% default rate |
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Apr. 9, 2020.Interest at 8% and principal due Oct. 9, 2020 In Default with interest recorded at 24% default rate |
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Jul. 31, 2021. Interest at 10% and principal and interest due Jul. 31, 2022. In Default |
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Jul. 15, 2022. Interest at 10% and principal and interest due Jul. 15, 2023 |
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Less: Debt Discount |
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| ( | ) |
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Total Notes Payable |
| $ |
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| $ |
| ||
At January 31, 2023 and April 30, 2022, the Company has recorded $
At October 31, 2022, a promissory note in the amount of $
| F-19 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 4 – DEBT (Continued)
Included in the $
Note Payable – September 25, 2019
On September 25, 2019, the Company received $
Note Payable – April 9, 2020
On April 9, 2020, the Company received $
Note Payable – July 31, 2021
On July 31, 2021, the Company recorded a $
| F-20 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 4 – DEBT (Continued)
Note Payable – July 15, 2022
On July 15, 2022, the Company received $
Additionally, the note payable provided for the issuance of one million (
The note payable included a provision as follows – “in the event that the Company at its own will files a qualified Offering Statement on Form 1-A transaction and it is effective, the lender may choose to convert any amount up to the entire balance of the note including guaranteed interest into shares of the Company’s Common Stock at the Reg A offering price.” The Company previously filed and had an approved Form 1-A transaction on February 8, 2022, and further amended the price to $
The Company
In total, the Company recorded $
For the three and nine months ended January 31, 2023, the Company recorded $
|
| January 31, 2023 |
|
| April 30, 2022 |
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Notes Payable, Related Party: |
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Mar. 5, 2020. Interest at 10% and principal due April 30, 2023 |
| $ |
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| $ |
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Aug. 12, 2020. Interest at 10% and principal due April 30, 2023 |
|
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Total Notes Payable – Related Party |
| $ |
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| $ |
| ||
| F-21 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 4 – DEBT (Continued)
Note Payable – Related Party – March 5, 2020
On March 5, 2020, the Company received $25,000 of proceeds from the issuance of a note payable with a director of the Company. The terms including interest accrued at
Note Payable – Related Party – August 12, 2020
On August 12, 2020, the Company received $
For the three and nine months ended January 31, 2023, the Company recorded $
|
| January 31, 2023 |
|
| April 30, 2022 |
| ||
Convertible Unsecured Promissory Notes: |
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April 14, 2016 - Interest at 5% - principal and interest due 12 months from issuance date. In Default |
| $ |
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| $ |
| ||
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May 2, 2019 - Interest at 10% - principal and interest due August 2, 2020. |
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May 8, 2019 - Interest at 12% - principal and interest due February 8, 2020. In Default with interest recorded at default rate of 24% |
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January 4, 2022, Interest at 8% - principal and interest due January 4, 2023 |
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June 29, 2022, Interest at 8% - principal and interest due June 29, 2023 |
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July 13, 2022, Interest at 10% - principal and interest due January 13, 2023. In Default. |
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July 15, 2022, Interest at 8% - principal and interest due July 15, 2023 |
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September 1, 2022, Interest at 10% - principal and interest due March 31, 2023 |
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Plus: put premium |
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Less: debt discount |
|
| ( | ) |
|
| ( | ) |
|
|
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|
|
Total Convertible Unsecured Notes Payable, net of debt discount and put premium |
| $ |
|
| $ |
| ||
| F-22 |
| Table of Contents |
MAJOR LEAGUE FOOTBALL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2023
NOTE 4 – DEBT (CONTINUED)
Convertible Unsecured Promissory Note – April 14, 2016
On April 14, 2016, the Company recorded a $
Interest expense recorded in the accompanying unaudited Statements of Operations by the Company for the three and nine months ended January 31, 2023 was $
Convertible Unsecured Promissory Note – May 2, 2019
On May 2, 2019 (the Original Issue Date (OID), the Company received $