UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

 

FORM 10-Q

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2018

 

Commission File Number: 000-51132

 

Major League Football, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-1568059

(State or other jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

7319 Riviera Cove #7

Lakewood Ranch, FL

 

  34202

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (847) 924-4332

 

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. Yes  ¨ No  x

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨ No  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller Reporting Company

x

 

 

Emerging Growth Company

¨

 

If an emerging growth company, indicate by check mark 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  ¨ No  x

 

The number of shares of the registrant’s common stock issued and outstanding as of June 6, 2018 is 59,499,488.

 

 
 
 
 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

Financial Statements

 

F-1

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

3

 

 

 

 

Item 4.

Controls and Procedures

 

5

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

 

9

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

10

 

 

 

 

Item 6.

Exhibits

 

10

 

 

2

 

  

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

MAJOR LEAGUE FOOTBALL, INC.

 

FINANCIAL STATEMENTS

 

January 31, 2018

 

(UNAUDITED)

 

CONTENTS

 

 

PAGE

 

 

 

 

BALANCE SHEETS

 

F-2

 

 

 

 

STATEMENTS OF OPERATIONS (Unaudited)

 

F-3

 

 

 

STATEMENTS OF CASH FLOWS (Unaudited)

 

F-4 – F-5

 

 

 

 

CONDENSED NOTES TO FINANCIAL STATEMENTS (Unaudited)

 

F-6-F–20

 

 

F-1
 

 

MAJOR LEAGUE FOOTBALL, INC.

BALANCE SHEETS

 

 

 

At January 31,

2018

 

 

At April 30,

2017

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

ASSETS 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$ -

 

 

$ 249

 

Prepaid legal

 

 

7,500

 

 

 

7,500

 

Prepaid audit

 

 

14,500

 

 

 

-

 

Prepaid consulting

 

 

-

 

 

 

83

 

TOTAL CURRENT ASSETS

 

 

22,000

 

 

 

7,832

 

 

 

 

 

 

 

 

 

 

Furniture, fixtures and equipment, net

 

 

-

 

 

 

2,494

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 22,000

 

 

$ 10,326

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$ 1,565,063

 

 

$ 1,376,150

 

Accounts payable - related parties

 

 

57,066

 

 

 

49,294

 

Accrued officer compensation

 

 

740,000

 

 

 

1,860,000

 

Accrued expenses

 

 

247,234

 

 

 

233,820

 

State income taxes payable

 

 

110,154

 

 

 

110,154

 

Convertible unsecured promissory note

 

 

50,000

 

 

 

50,000

 

Convertible secured promissory note, net of debt discounts

 

 

100,000

 

 

 

145,787

 

Notes payable

 

 

230,000

 

 

 

230,000

 

Notes payable, related parties

 

 

2,300

 

 

 

2,300

 

Accrued officer payroll taxes

 

 

37,111

 

 

 

93,279

 

Accrued interest

 

 

99,813

 

 

 

74,113

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

 

3,238,741

 

 

 

4,224,897

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE 6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value, 50,000,000 shares authorized;

 

 

 

 

 

 

 

 

Series A designated 7,500,000 shares and remainder undesignated;

 

 

 

 

 

 

 

 

No shares issued and outstanding at

 

 

 

 

 

 

 

 

January 31, 2018 and April 30, 2017, respectively

 

 

-

 

 

 

-

 

Common stock, $0.001 par value, 150,000,000 shares authorized;

 

 

 

 

 

 

 

 

57,999,488 and 54,416,295 shares issued and outstanding at

 

 

 

 

 

 

 

 

January 31, 2018 and April 30, 2017, respectively

 

 

57,999

 

 

 

54,416

 

Common stock issuable

 

 

-

 

 

 

400

 

Additional paid-in capital

 

 

22,011,364

 

 

 

21,927,952

 

Accumulated deficit

 

 

(25,286,104 )

 

 

(26,197,339 )

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDERS' DEFICIT

 

 

(3,216,741 )

 

 

(4,214,571 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$ 22,000

 

 

$ 10,326

 

 

See accompanying condensed notes to these unaudited financial statements.

 

F-2
 

 

MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the Three

 

 

For the Three

 

 

For the Nine

 

 

For the Nine

 

 

 

Months Ended

 

 

Months Ended

 

 

Months Ended

 

 

Months Ended

 

 

 

January 31,

2018

 

 

January 31,

2017

 

 

January 31,

2018

 

 

January 31,

2017

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

$ -

 

 

$ 234,452

 

 

$ 900

 

 

$ 1,409,913

 

Professional fees

 

 

21,303

 

 

 

110,120

 

 

 

177,314

 

 

 

1,718,750

 

Insurance

 

 

-

 

 

 

7,578

 

 

 

-

 

 

 

9,281

 

General and administrative

 

 

6,077

 

 

 

151,454

 

 

 

55,878

 

 

 

454,867

 

Total Operating Expenses

 

 

27,380

 

 

 

503,604

 

 

 

234,092

 

 

 

3,592,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(27,380 )

 

 

(503,604 )

 

 

(234,092 )

 

 

(3,592,811 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax penalties and interest

 

 

(4,538 )

 

 

(4,275 )

 

 

(13,414 )

 

 

(12,650 )

Write-off of furniture, fixtures and equipment

 

 

-

 

 

 

-

 

 

 

(2,494 )

 

 

-

 

Gain from waiver of accrued officer's compensation

 

 

1,176,168

 

 

 

-

 

 

 

1,176,168

 

 

 

-

 

Other income

 

 

-

 

 

 

-

 

 

 

34,980

 

 

 

-

 

Interest expense

 

 

(6,833 )

 

 

(165,953 )

 

 

(49,913 )

 

 

(495,680 )

Loss from change in fair value of conversion option liability

 

 

-

 

 

 

(351,196 )

 

 

-

 

 

 

(285,435 )

Total Other Income (Expense)

 

 

1,164,797

 

 

 

(521,424 )

 

 

1,145,327

 

 

 

(793,765 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$ 1,137,417

 

 

$ (1,025,028 )

 

$ 911,235

 

 

$ (4,386,576 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Net Income (Loss) Per Share

 

$ 0.02

 

 

$ (0.02 )

 

$ 0.02

 

 

$ (0.10 )

Diluted Net Income (Loss) Per Share

 

$ 0.02

 

 

$ (0.02 )

 

$ 0.01

 

 

$ (0.10 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares - Basic

 

 

55,698,734

 

 

 

47,442,045

 

 

 

56,861,767

 

 

 

44,880,110

 

Weighted Average Shares - Diluted

 

 

69,474,473

 

 

 

47,442,045

 

 

 

68,412,839

 

 

 

44,880,110

 

 

See accompanying condensed notes to these unaudited financial statements.

 

F-3
 

 

MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the

 

 

For the

 

 

 

Nine Months

Ended

 

 

Nine Months

Ended

 

 

 

January 31,

2018

 

 

January 31,

2017

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$ 911,235

 

 

$ (4,386,576 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

-

 

 

 

348

 

Write-off of furniture, fixtures and equipment

 

 

2,494

 

 

 

-

 

Gain from waiver of accrued officer compensation and related payroll taxes

 

 

(1,176,168 )

 

 

-

 

Amortization of prepaid consulting over service period

 

 

-

 

 

 

639,864

 

Issuance of common stock to employees for services

 

 

900

 

 

 

72,002

 

Amortization of common stock issued for employee services over vesting period

 

 

-

 

 

 

138,494

 

Amortization of stock options issued for employee services over vesting period

 

 

-

 

 

 

709,121

 

Revaluation of stock options issued for consulting services over service period

 

 

5,695

 

 

 

(87,256 )

Issuance of stock warrants for consulting services

 

 

-

 

 

 

828,549

 

Amortization of debt discount on convertible secured promissory note

 

 

-

 

 

 

415,890

 

Amortization of debt discount on convertible unsecured promissory note

 

 

-

 

 

 

25,206

 

Amortization of debt discount on stock warrant issued for forbearance agreement

 

 

11,829

 

 

 

-

 

Amortization of debt discount on common stock issued for forbearance agreement

 

 

12,384

 

 

 

-

 

Loss from change in fair value of conversion option liability

 

 

-

 

 

 

285,435

 

Issuance of common stock to consultant for resolution of warrant exercise price

 

 

-

 

 

 

41,337

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid legal

 

 

-

 

 

 

(7,500 )

Prepaid audit

 

 

(14,500 )

 

 

-

 

Prepaid consulting

 

 

83

 

 

 

(105 )

Accounts payable

 

 

188,913

 

 

 

271,888

 

Accounts payable - related parties

 

 

17,772

 

 

 

6,646

 

Accrued officer compensation

 

 

-

 

 

 

675,000

 

Accrued expenses

 

 

13,414

 

 

 

(19,806 )

Accrued officer payroll taxes

 

 

-

 

 

 

40,198

 

Advances

 

 

 

 

 

 

61,000

 

Accrued interest

 

 

25,700

 

 

 

54,584

 

Net cash used in operating activities

 

 

(249 )

 

 

(235,681 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of note payable

 

 

-

 

 

 

225,000

 

Proceeds from issuance of common stock

 

 

-

 

 

 

61,000

 

Repayment of notes payable

 

 

-

 

 

 

(25,000 )

Repayment of notes payable to related parties

 

 

 

 

 

 

(5,000 )

Net cash provided by financing activities

 

 

-

 

 

 

256,000

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

(249 )

 

 

20,319

 

CASH - BEGINNING OF PERIOD

 

 

249

 

 

 

3,799

 

CASH - END OF PERIOD

 

$ -

 

 

$ 24,118

 

 

See accompanying condensed notes to these unaudited financial statements.

 

F-4
 

 

MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CASH FLOWS (Continued)

(UNAUDITED)

 

 

 

For the

 

 

For the

 

 

 

Nine Months

Ended

 

 

Nine Months

Ended

 

 

 

January 31,

2018

 

 

January 31,

2017

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

 

 

 

 

 

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

Cash paid for interest

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Exercise of common stock to employees previously unvested

 

$

5,695

 

 

$ 3,750

 

Cashless exercise of stock warrant for consulting services

 

$ -

 

 

$ 13,000

 

Cashless exercise of stock warrant for consulting services from related party

 

$ 10,000

 

 

$ -

 

Change in conversion option liability for partial conversions of convertible secured promissory note

 

$ -

 

 

$ 151,364

 

Conversion of convertible secured promissory note

 

$ 70,000

 

 

$ 195,000

 

 

See accompanying condensed notes to these unaudited financial statements.

 

F-5
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 1- NATURE OF OPERATIONS, BASIS OF PRESENTATION, GOING CONCERN, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Major League Football, Inc. (the “Company”) is seeking to establish, develop and operate Major League Football (“MLFB”) as a professional spring/summer football league. Our anticipated launch is July/August 2018, consisting of a training camp and shortened 2018 developmental season. We anticipate a full season with training camp in March of 2019 with a regular eight team season commencing in late April of 2019 with playoffs and a championship game in July of 2019. In conjunction with the 2019 season, we intend to establish franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the NFL off-seasons, which will enable us to take a totally non-adversarial approach towards the National Football League (“NFL”). Our spring and early summer schedule ensures no direct competition with autumn/winter football, including the 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO’s, 27 Canadian Universities, and thousands of high school and collegiate institution teams.

 

Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms collectively means Major League Football, Inc., a Delaware corporation. Our principal offices are presently located at 7319 Riviera Cove #7, Lakewood Ranch, Florida, 34202. Our telephone number is (847) 924-4332. Our Internet website, currently under construction, will be located at: www.mlfb.com.

 

Going Concern

 

The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern. As reflected in the accompanying unaudited financial statements, the Company had no revenues and net cash used in operating activities of $249 for the nine months ended January 31, 2018. Although the Company had net income of $911,235, this amount included $1,176,168 of income from the waiver of two former officers accrued compensation and related payroll taxes. Without this adjustment, the Company would have had a net loss of $264,933. Additionally, at January 31, 2018, the Company has a working capital deficit of $3,216,741, an accumulated deficit of $25,286,104 and a stockholders' deficit of $3,216,741, which could have a material impact on the Company's financial condition and operations.

 

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 largely from the sale of public equity securities and convertible debt securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. We expect we will require additional short-term financing as well as financing over the next 12 months to position our Company for its anticipated launch in June/July of a training camp and shortened 2018 Developmental Season. Specifically, we will need to raise approximately $3 million between June and August 2018 and a subsequent raise and offerings of $20 million between September 2018 and March 2019, to cover our operating expenses for our 2019 full training camp and playing season in our designated cities. The unaudited financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern.

 

F-6
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 only 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, 2017, as filed with the SEC on April 25, 2018. The interim operating results for the nine months ending January 31, 2018 are not necessarily indicative of operating results expected for the full year.

 

SIGNIFICANT ACCOUNTING POLICIES

 

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 financial statements include the valuation of collateral on certain receivables, valuation of derivative liabilities, valuation of beneficial conversion features in convertible debt, valuation of equity-based instruments issued for other than cash, valuation allowance on deferred tax assets, depreciable lives and estimated residual value of furniture, fixtures and equipment.

 

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, 2018 and April 30, 2017.

 

Concentrations

 

Concentration of Credit Risk

 

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At January 31, 2018 and April 30, 2017, 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.

 

Furniture, Fixtures and Equipment

 

Furniture, fixtures and equipment are stated at cost, net of accumulated depreciation. For financial accounting purposes, depreciation is generally computed by the straight-line method over the following useful lives:

 

Furniture and fixtures

 

5 to 7 years

Computer and office equipment

 

3 to 7 years

 

Because of a lawsuit settlement on February 5, 2018 (See Note 6 – Commitments and Contingencies), the Company immediately gives up all right, title and interest to business equipment and office furniture in its previous Florida corporate office premises. Accordingly, during the nine months ended January 31, 2018, the Company expensed $2,494 for the write-off of the remaining net book value of the furniture, fixtures and equipment. For the nine months ended January 31, 2018 and 2017, the Company recorded $0 and $348 of depreciation expense.

 

F-7
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 was recorded as a component of other income (expense) in the accompanying unaudited statements of operations.

 

Revenue Recognition

 

League Tryout Camps

 

The Company recognizes league tryout camp revenue on the dates that the tryout camps were held. There were no tryout camps held by the Company during the nine months ended January 31, 2018 or 2017, 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 nine months ended January 31, 2018 and 2017, respectively.

 

Stock Based Compensation

 

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Pursuant to ASC 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

 

Net Loss per Share of Common Stock

 

The Company computes net earnings (loss) per share in accordance with 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 number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period and the Company’s diluted EPS excludes all dilutive potential common shares because their effect is anti-dilutive. At January 31, 2018, there were options to purchase 1,240,000 shares of the Company’s common stock, 5,532,400 warrants to purchase shares of the Company's common stock, 166,667 shares of the Company’s common stock reserved for issuance related to convertible unsecured notes payable and 4,761,905 shares of the Company’s common stock reserved for issuance related to convertible secured notes payable which may dilute future earnings per share.

 

F-8
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Related Parties

 

Parties are considered to be 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. All transactions are recorded at fair value of the goods or services exchanged.

 

NOTE 2 – DEBT

 

 

 

January 31,

2018

 

 

April 30,

 2017

 

Notes Payable:

 

 

 

 

 

 

Note payable – January 6, 2016. Interest at 8% and principal payable on demand.

 

$

100,000

 

 

$ 100,000

 

Note payable – June 6, 2016. Interest at 4% and principal payable on demand.

 

 

10,000

 

 

 

10,000

 

Note payable – August 4, 2016. Interest at 8% and principal payable on demand.

 

 

35,000

 

 

 

35,000

 

Note payable – September 27, 2016. Interest at 4% and principal payable on demand.

 

 

30,000

 

 

 

30,000

 

Note payable – September 29, 2016. Interest at 4% and principal payable on demand.

 

 

5,000

 

 

 

5,000

 

Note payable – September 29, 2016. Interest at 4% and principal payable on demand.

 

 

30,000

 

 

 

30,000

 

Note payable – October 3, 2016. Interest at 4% and principal payable on demand.

 

 

20,000

 

 

 

20,000

 

Total Notes payable

 

$ 230,000

 

 

$ 230,000

 

 

On January 6, 2016, the Company received $100,000 of proceeds from the issuance of a promissory note and recorded as Note Payable at April 30, 2017 and 2016. The terms of the promissory note include interest accrued at 8% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $14,709 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

On June 6, 2016, the Company received $10,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $664 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

On August 4, 2016, the Company received $130,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 8% annually and the principal and interest payable on demand. On (1) January 26, 2017, (2) February 16, 2017, (3) March 2, 2017 and (4) March 6, 2017, the Company repaid (1) $25,000, (2) $25,000 and (3) $20,000 and (4) $25,000 of principal and the outstanding balance of the promissory note is $35,000 at January 31, 2018. Through January 31,2018, the Company has accrued $7,353 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

On September 27, 2016, the Company received $30,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $1,617 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

On September 29, 2016, the Company received $5,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $268 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

F-9
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 2 – DEBT (CONTINUED)

 

On September 29, 2016, the Company received $30,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $1,611 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

On October 3, 2016, the Company received $20,000 of proceeds from the issuance of a promissory note and recorded as Note Payable. The terms of the promissory note include interest accrued at 4% annually and the principal and interest payable on demand. Through January 31, 2018, the Company has accrued $1,065 of interest related to the promissory note and included in accrued interest in the accompanying unaudited Balance Sheet.

 

 

 

January 31,

2018

 

 

April 30,

2017

 

Notes Payable, Related Party:

 

 

 

 

 

 

Notes payable, related party. Seven (7) separate loans beginning on February 11, 2015 with last loan on August 28, 2015. No interest and principal payable on demand.

 

$ 2,300

 

 

$ 2,300

 

 

From February to July 2015, an officer of the Company provided $15,300 of funds for working capital requirements. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand. During the three months ending October 31, 2015, the Company repaid $15,000 of these funds leaving a balance outstanding of $300. Additionally, on August 28, 2015, the officer personally repaid $20,000 of notes payable (see below). As a result, the outstanding balance owed to the officer was $20,300 at April 30, 2016. On (1) January 17, 2017, (2) February 1, 2017 and (3) February 2, 2017, the Company repaid (1) $5,000, (2) $2,000 and (3) $11,000 of principal and the outstanding balance of the note payable is $2,300 at January 31, 2018, recorded as Notes Payable – Related Parties in the accompanying unaudited Balance Sheet. See Note 5 – Related Party Transactions.

 

 

 

January 31,

2018

 

 

April 30,

2017

 

Convertible Unsecured Notes Payable:

 

 

 

 

 

 

Unsecured convertible promissory note payable – Interest accrued at 5% and principal and interest due 12 months from the issuance date.

 

$ 50,000

 

 

$ 50,000

 

 

On April 14, 2016, the Company received $50,000 of proceeds from the issuance of an unsecured convertible promissory note for working capital purposes. The terms include interest accrued at 5% annually and the principal and interest payable in one year on April 14, 2017. The note holder at its sole discretion, has the right to convert the principal amount, along with all accrued interest, into shares of the Company’s common stock at the conversion price of $0.30 per share. Through January 31, 2018, the Company has accrued $4,506 of interest related to the unsecured convertible promissory note and included in accrued interest in the accompanying unaudited Balance Sheet. The unsecured convertible promissory note is in default at January 31, 2018 and the note holder has several remedies including calling the principal amount and accrued interest due and payable immediately.

 

 

 

January 31,

2018

 

 

April 30,

2017

 

Convertible Secured Note Payable:

 

 

 

 

 

 

Secured convertible promissory note payable – originally issued March 9, 2016 - Interest accrued at 22% default rate - principal and interest due June 9, 2017

 

$ 100,000

 

 

$ 170,000

 

 

 

 

 

 

 

 

 

 

Less: debt discount

 

 

-

 

 

 

(24,213 )

 

 

 

 

 

 

 

 

 

Total Convertible Secured Notes Payable, net of debt discount

 

$ 100,000

 

 

$ 145,787

 

 

F-10
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 2 – DEBT (CONTINUED)

 

On March 9, 2016 (the Original Issue Date (OID), the Company received $445,000 of net proceeds for working capital purposes from the issuance of a $550,000 face value convertible secured promissory note with debt issue costs paid to or on behalf of the lender of $55,000. The terms include interest accrued at 10% annually and the principal and interest payable are payable in one year on March 9, 2017. Any amount of the principal or interest which is not paid when due shall bear Interest at the rate of the lower of Twenty-Two Percent (22%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid. At January 31, 2018, $68,019 of accrued interest was recorded in the accompanying unaudited Balance Sheet.

 

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 seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) Trading Days immediately preceding a Conversion Date. The promissory note contains customary affirmative and negative covenants of the Company. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.

 

As collateral security, the promissory note is secured by all collateral granted by a former officer of the Company to the Holder, including but not limited to two million (2,000,000) shares of Common Stock, in accordance with the terms and conditions of a Pledge Agreement by and between the former officer and the lender, dated as of the OID.

 

On March 9, 2017, the Company and the Lender of the above convertible secured promissory note with a remaining principal balance of $215,000 on that date, executed a forbearance agreement extending the note expiration date from March 9, 2017 to June 9, 2017. The terms of the forbearance agreement included that the Company (1) will have paid all remaining principal and accrued interest by June 9, 2017, (2) will issue 500,000 shares of common stock to the lender, (3) will pay the lender’s legal fees estimated to be approximately $2,000 before April 30, 2017, (4) will issue the lender 500,000 warrants to purchase common stock at $0.10 per share with a three-year term and (5) the outstanding principal balance of the note will bear interest at the “Default Interest” rate of twenty-two percent (22%), as defined in the note agreement. See Note 7– Subsequent Events.

 

The Company evaluated the forbearance agreement as to whether it was an extinguishment or modification of debt. In concluding on the accounting, the Company evaluated ASC 470-50, Debtor’s Accounting for a Modification or Exchange of Debt Instruments. The Company determined that the forbearance agreement was not an extinguishment of debt or a material modification. The Company will adjust the carrying amount of the debt for any premium or discount, including stock and warrant issuances, and will amortized over the modification period of three months through June 9, 2017.

 

The Company evaluated the warrant and determined that there was no derivative treatment required as the warrant contained a fixed 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 outstanding principal of the note ($215,000) and the warrant on March 9, 2017 utilizing the Black Scholes Pricing Model for the warrant. The Company allocated $28,015 to the warrant which was recorded as a debt discount with an offset to additional paid in capital in the accompanying unaudited Balance Sheet.

 

The Company valued the 500,000 shares of common stock issued to the lender based upon the quoted market price of $0.08 on March 9, 2017, the date of grant, or $40,000, recorded as a debt discount with an offset to additional paid in capital.

 

In total on the forbearance date of March 9, 2017, the Company recorded the following debt discounts as offsets to the note which were amortized over the 90-day term of the forbearance agreement through June 9, 2017: (1) warrant relative fair value of $28,015 and (2) common stock relative fair value effective March 9, 2017. From March 9, 2017 through April 30, 2017, the Company recorded amortization of the debt discount to interest expense in the amounts of (1) $16,187 against the warrant relative fair value of $28,015 and (2) $16,947 against the common stock relative fair value. At April 30, 2017, the remaining combined warrant and stock unamortized debt discount was $24,213 and classified as an offset to the $170,000 note balance.

 

F-11
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 2 – DEBT (CONTINUED)

 

From May 1, 2017 through October 31, 2017, the Company recorded amortization of the remaining debt discount of $24,213 to interest expense in the accompanying unaudited Statement of Operations in amounts of (1) $11,829 against the warrant relative fair value $12,384 against the common stock relative fair value. As a result, the debt discount has been amortized in full at October 31, 2017.

 

From March 9, 2016 through April 30, 2017, the lender elected to convert $380,000 of the principal amount of the note into 5,409,226 shares of common stock resulting in a note balance of $170,000 at April 30, 2017.

 

From May 1, 2017 through October 31, 2017, the lender elected to convert $70,000 of the principal amount of the note into 2,168,193 shares of common stock resulting in a note balance of $100,000 at January 31, 2018.

 

NOTE 3 – STOCK

 

Common Stock:

 

The Company is authorized to issue up to 150,000,000 shares of common stock at $0.001 par value per share. At January 31, 2018, 57,999,488 shares were issued and outstanding. Additionally, there are 1,500,000 shares of stock issued to former officers that were terminated prior to the vesting period of four years through July 14, 2018. In accordance with their employment agreements, if the Employee’s employment is terminated by Employee or the Company, any shares not yet released to Employee upon the termination date shall be returned to the treasury of the Company, and Employee shall be entitled to no compensation for such shares.

 

The 1,500,000 unvested shares were valued at $0.05 per share or $75,000 and were being amortized to compensation expense over the vesting period with an unamortized balance of $44,896 at April 30, 2017. Because of the termination discussion above, the Company recorded no compensation expense for the nine months ended January 31, 2018 and will no longer record any further compensation expense related to the unvested shares and will pursue the return of the 1,500,000 unvested shares held by the employees that should be returned to treasury.

 

Common Stock Issued

 

On May 8, 2017, the Company issued 15,000 shares of common stock to employees as a component of a Registration Statement on Form S-8 for an aggregate of 8,690,000 shares of the Company’s common stock. The shares were issued per the Company’s 2014 Employee Stock Plan. The Company valued the stock based upon the quoted market price of $0.05 per share on the date

of grant, or $900 and was classified as stock compensation expense for the nine months ended January 31, 2018 in the accompanying unaudited Statement of Operations.

 

On June 5, 2017, the Company issued 400,000 shares of common stock to a consultant that exercised 400,000 warrants at an exercise price of $0.01 or $4,000 of consideration. The shares were recorded by the Company as Common Stock Issuable at April 30, 2017 because the Company had signed the documentation in April 2017.

 

From May 1, 2017 through August 1, 2017, the lender of a convertible secured promissory, elected to exercise their right to convert on several dates during the above period, an aggregate amount of $70,000 of the remaining $170,000 convertible secured promissory note at April 30, 2017 (See Note 2 – Debt). 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 seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) Trading Days immediately preceding a Conversion Date. Based upon the calculated Conversion Prices ranging from $0.03 to $0.04 per share on the respective conversion dates, the Company issued 2,168,193 shares of common stock to the lender.

 

F-12
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 3 – STOCK (CONTINUED)

 

Securities Purchase Agreement

 

On June 22, 2017, the Board of Directors elected President Jerry C. Craig, as an additional Director and as Chief Executive Officer. On June 23, 2017, Michael D. Queen resigned from the Board of Directors.

 

On June 22, 2017, the Board of Directors approved an offer for sale, and to sell, up to 43,000,000 shares of convertible preferred stock to be designated Series A Convertible Preferred Stock, par value $.001 per share, in an offering intended to be exempt from registration under the Securities Act of 1933, pursuant to Regulation D of the Securities Act of 1933.

 

On September 5, 2017, Compass Creek Capital, Inc. (“CCC”), controlled by Jerry C. Craig, the Company’s CEO, supplied documents to the Company which it represented demonstrated a deposit of $3 million into the Company’s bank account. pursuant to a Purchase Agreement executed on or about June 22, 2017. Per the terms of the agreement, the Company was to grant CCC 42,857,143 shares of the Company’s Series A convertible preferred stock at .001 par value. This stock has the same powers, preferences and rights and the qualifications, limitations or restrictions as the common stock. The Company issued the convertible preferred stock in a nonpublic offering pursuant to Regulation D. With the shares owned by CCC, it would hold a significant ownership of the total outstanding stock. In addition to the Convertible Preferred Shares directly owned by CCC, the Company granted to CCC, an option to purchase 171,428,571 of the Company’s Series A convertible preferred stock at $.07.

 

On October 4, 2017, the Company, through Mr. Craig, purported to terminate Frank Murtha, Senior Executive Vice President from all positions with MLFB. The departure of Mr. Murtha left Jerry C. Craig as the sole director and officer of the Company.

 

On October 13, 2017, the acting General Counsel resigned from the Company. On this same day, the Company notified its sole Director and Officer, Jerry C. Craig, that he was in breach of the Securities Purchase Agreement dated June 20, 2017 due to his failure to provide valid documentation of his compliance with the Securities Purchase Agreement. Mr. Craig, the President, CEO and sole Director, had provided a bank document reflecting a deposit of $3 million into a Company account on September 5, 2017. CCC, with Jerry C. Craig as its beneficial owner, was the mandated purchaser of the shares in the Purchase Agreement. On that basis, the Company filed a Form 3 reflecting ownership of the forty-two (42) million preferred shares. Subsequently, that bank account was closed. On September 29, 2017, Mr. Craig submitted new documents reflecting a $3 million transfer to a different Company account. Despite these documents, there was never any evidence provided that these funds had ever been made available for payment of outstanding and current liabilities of the Company or that these funds would remain in a Company Account.

 

On October 13, 2017, Jerry C. Craig, sole Director and Officer, stated his belief that the Securities Purchase Agreement was null and void, based upon CCC’s inability to complete the necessary due diligence. Jerry C. Craig believes this negated his obligation to pay the required funds called for by the Securities Purchase Agreement. His failure to pay the funds terminated his purported election to the Board and appointment as CEO. Kris Craig, an officer of the Company and spouse of Jerry C. Craig, submitted her resignation on Saturday, October 14, 2017.

 

With the termination of Mr. Craig’s position and Kris Craig’s resignation, there were no Officers or Directors remaining with the Company. The securities agreed to be purchased by CCC, as set forth in the Securities Purchase Agreement, will now revert to the Company. Under Delaware law, if there are no Directors of a Company, any officer or shareholder can call a special meeting to elect board members.

 

On November 1, 2017, following termination of Mr. Craig’s positions within the Company, it was determined that Mr. Craig’s attempted termination of Frank Murtha was void, and he returned to MLFB in his prior position as Senior Executive Vice President. Pursuant to the Company’s Bylaws, in the absence of the President, Frank Murtha, as the Senior Executive Vice President, is authorized to perform the duties of the President. Mr. Murtha intends to call a shareholder’s meeting to elect directors soon.

 

F-13
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 3 – STOCK (CONTINUED)

 

On December 10, 2017, the Senior Vice President of the Company, exercised 1,000,000 stock warrants at an exercise price of $0.01 per share or $10,000. Mr. Murtha paid for the exercise price of $10,000 by electing the cashless exchange option included in the warrant to decrease the balance due him for unreimbursed business expenses.

 

NOTE 4 – STOCK BASED COMPENSATION

 

Stock Options to Consultants

 

Effective July 14, 2014, the Company granted 4,150,000 stock options to purchase common stock to consultants pursuant to the 2014 Plan and shall vest pursuant to the vesting provision contained in each of the stock option agreements. The exercise price of the stock options is $0.05 per share.

 

Of the 4,150,000 stock options, 1,100,000 vested immediately on the grant date of July 14, 2014 and the remaining 3,050,000 stock options vested over a period of three to four years based upon the specific consulting agreements. The Company valued the stock options in accordance with ASC 505, Stock Compensation – Non-Employees, by using the Black Scholes Pricing Model. In January 2015, 300,000 of the vested stock options were exercised leaving a balance of 800,000 unexercised vested stock options. 350,000 of the vested stock options were forfeited during the three months ended July 31, 2017 because they had not been exercised during the three-month timeframe after these consulting agreements were terminated. The remaining 450,000 vested stock options are held by the Senior Executive Vice President of the Company.

  

The remaining 3,050,000 unvested stock options were being re-measured by the Company each reporting period and the resulting fair value used to determine the new remaining consulting expense to be recorded over the vesting period of three to four years. Effective in December 2014, 1,050,000 of the unvested stock options were canceled due to the termination of the underlying consulting agreements resulting in a balance of 2,000,000 stock options outstanding at April 30, 2017.

 

All employees and consultants holding a stock option to purchase common stock of the Company were terminated during the three months ended July 31, 2017 except for the Senior Executive Vice President of the Company. Both stock option plans state that when an employee ceases to be an employee (such event being called a “Termination”), options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within three months of the date of such Termination. Because the three-month timeframe occurred, and no employee exercised their related stock options, the Company has calculated that 1,250,000 of the 2,000,000 remaining stock options from above have been forfeited. The remaining 750,000 stock options are held by the Senior Executive Vice President of the Company and re-measured these at January 31, 2018 and recorded $5,695 of consulting expense during the nine months ended January 31, 2018 in the accompanying unaudited Statement of Operations.

 

The Company used the following assumptions in estimating fair value:

 

Stock Price (re-measurement date of October 31, 2017)

 

$ 0.03

 

Exercise Price

 

$ 0.05

 

Expected Remaining Term

 

6.45 years

 

Volatility

 

 

76 %

Annual Rate of Quarterly Dividends

 

 

0.00 %

Risk Free Interest Rate

 

 

1.44 %

 

Stock Options to Employees

 

On February 24, 2015, pursuant to the terms of the 2014 Employee Stock Plan the Company issued to its employees, options to purchase up to 5,900,000 shares of common stock at an exercise price of $0.30 per share. The options vested over various periods from quarterly to 4 years, with 830,000 options vesting immediately. These options expire on February 23, 2025.

 

On December 10, 2015, 1,718,750 of the unvested options were forfeited and on March 10, 2016, 1,281,250 of the unvested options expired. As a result, 2,070,000 unvested options were outstanding at April 30, 2017.

 

F-14
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)

 

As discussed above, all employees holding a stock option to purchase common stock of the Company were terminated during the three months ended July 31, 2017, except for the Senior Executive Vice President of the Company. After the three-month timeframe passed, and no employee exercised their related stock options, all 2,070,000 of the remaining unvested stock options have been forfeited and no further compensation expense was recorded during the nine months ended January 31, 2018.

  

Effective June 10, 2016, the Company granted 1,910,000 options to purchase common stock to five employees. The exercise price is $0.31 per share and on the grant date, 102,500 of the options vested immediately and the remaining 1,807,500 options were vested in various stages over a three-year period.

 

As discussed above, all employees holding a stock option to purchase common stock of the Company were terminated during the three months ended July 31, 2017, except for the Senior Executive Vice President of the Company. After the three-month timeframe passed, and no employee exercised their related stock options, all 1,807,500 of the remaining unvested stock options have been forfeited and no further compensation expense was recorded during the nine months ended January 31, 2018.

 

Additionally, all 102,500 vested stock options were forfeited because they were not exercised during this three-month timeframe.

 

The following table summarizes employee and consultant stock option activity for the nine months ended January 31, 2018:

 

 

 

Stock Options Outstanding

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Life (Years)

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2017

 

 

7,690,000

 

 

$ 0.22

 

 

 

7.90

 

 

$ 19,600

 

Forfeited resulting from termination

 

 

(6,450,000 )

 

$

 

 

 

 

 

 

 

Outstanding, January 31, 2018

 

 

1,240,000

 

 

$ 0.08

 

 

 

6.53

 

 

$

 

Exercisable, January 31, 2018

 

 

1,090,000

 

 

$ 0.08

 

 

 

6.51

 

 

$

 

 

Stock Warrants

 

On December 10, 2017, the Senior Executive Vice President of the Company, exercised 1,000,000 stock warrants at an exercise price of $0.01 per share or $10,000. Mr. Murtha paid for the exercise price of $10,000 by electing the cashless exchange option included in the warrant to decrease the balance due under outstanding expenses owed by the Company. See Note 3 – Stock.

 

The following table reflects stock warrant activity for the nine months ended January 31, 2018:

 

 

 

Stock Warrants Outstanding

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Life (Years)

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2017

 

 

6,532,500

 

 

$ 0.25

 

 

 

1.79

 

 

$ 177,850

 

Exercised

 

 

(1,000,000 )

 

$ 0.01

 

 

 

 

 

 

 

Outstanding, January 31, 2018

 

 

5,532,500

 

 

$ 0.25

 

 

 

1.03

 

 

$ 75,500

 

Exercisable, January 31, 2018

 

 

5,532,500

 

 

$ 0.25

 

 

 

1.03

 

 

$ 75,500

 

 

F-15
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

Effective December 4, 2017, the previous Chief Operating Officer of the Company executed an agreement waiving his right to $560,000 of compensation that had been accrued by the Company. Additionally, the waiver stated that no further compensation was due to the former officer. 

 

Effective December 4, 2017, the previous President of the Company executed an agreement waiving his right to $560,000 of compensation that has been accrued by the Company. Additionally, the waiver stated that no further compensation was due to the former officer.

 

Because of the above waivers, the Company reduced accrued officer compensation by $1,120,000 and reduced the related accrued payroll taxes by $56,168 on the effective date of December 4, 2017. The total adjustment of $1,176,168 is classified as a separate other income item in the accompanying unaudited Statement of Operations.

 

At January 31, 2018, the Company has accrued $740,000 for unpaid officer compensation and accrued $37,111 for the employers share of payroll taxes related to the unpaid officer compensation in the accompanying unaudited Balance Sheet. The accrued compensation is related to two former officers and the Company believes that because of the termination of all officers, there is no employment agreement or compensation due to the former officers. However, the two former officers did not sign a waiver of accrued compensation like the other two discussed above and the Company has continued to accrue for the two former officer’s compensation at January 31, 2018.

 

At January 31, 2018, the Company has a $2,300 remaining unpaid balance on a promissory note due to a former officer that originally $15,300 of funds for working capital requirements. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand. The Company is classified the promissory note as Notes Payable – Related Parties in the accompanying unaudited Balance Sheet. See Note 2 – Debt.

 

At January 31, 2018, the Company has recorded $57,066 of accounts payable – related parties for Company related expenses. This includes $55,126 paid by the Senior Executive Vice President on behalf of the Company, $1,815 paid by the Company’s authorized in-house counsel on behalf of the Company and $125 paid by a former officer of the Company on behalf of the Company.

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Office Lease

 

On July 31, 2015, the Company executed a lease agreement for its new corporate headquarters and training facility in Lakewood Ranch, Manatee County, Florida. The term of the lease is two (2) years at a monthly rental rate of $11,918. At closing, the Company paid an $11,918 security deposit, which was recorded in other assets at April 30, 2017.

 

On June 2, 2016, the Company received a notice of default letter related to the corporate office lease in Florida. The letter demanded payment for the full amount outstanding within seven days or the Landlord may pursue all legal remedies including termination of the lease. On June 22, 2016, the Company received a complaint notice as the defendant in a lawsuit filed related to the corporate office lease in Florida.

 

On August 5, 2016, the Company paid $100,000 for the settlement of the lawsuit filed by the landlord and discussed above. The $100,000 payment was for outstanding rent of $98,173, which included $3,699 in attorney’s fees and the August 1, 2016 rent.

 

F-16
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES (Continued)

 

On August 28, 2017, the Company was served with a Motion for Final Judgment. The Landlord filed a Motion for Summary Judgment for back rent, attorney’s fees and foreclosure of a Landlord’s Lien. The Company responded, and the court granted the Motion as to liability for back rent without assessing an amount and denied the remainder of the Motion. As second Motion for Summary Judgment was filed as to the remaining issues. While pending, the parties reached a settlement on February 5, 2018. The terms of the settlement agreement included:

 

 

1.

The Company immediately gives up all right, title and interest to business equipment and office furniture in the premises;

 

2.

The Company immediately gives up all right, title and interest to its deposit in the sum of $11,918;

 

3.

The landlord will continue to store the Company’s football equipment until June 7, 2018;

 

4.

The Company will pay the landlord $40,000 on June 1, 2018 by TCA $40,000;

 

5.

If the Company makes the required $40,000 payment, then it will be entitled to possession of all its football equipment free of any landlord encumbrance and;

 

6.

If the Company fails to make the $40,000 payment, it shall relinquish all right, title and interest in the football equipment to the landlord.

 

Effective May 31, 2018, the landlord and the Company executed a first amendment to the February 5, 2018 settlement discussed above which specified:

 

 

a. In lieu of making the payment of $40,000 on June 1, 2018, the Company will pay the landlord a $5,000 installment of the $40,000 payment on June 4. 2018;

 

 

 

 

b. The Company will pay the landlord $503 on June 4, 2018, as reimbursement for an additional month of storage space rental; and

 

 

 

 

c. The Company will pay the landlord the $35,000 balance of the original $40,000 payment on or before June 30, 2018.

 

If the Company fails timely to make any payment specified above, the Company unconditionally and irrevocably transfers all right, title and interest in and to the football equipment in landlord’s possession and landlord may immediately dispose of same as it chooses.

 

On June 4, 2018, the Company made the required $5,000 installment of the $40,000 payment and the $503 reimbursement for an additional month of storage space rental.

The Company is currently in discussions for new corporate headquarters.

 

Lawsuit for Legal Fees

 

On May 9, 2009, Stradley Ronon Stevens & Young, LLP, filed a lawsuit against the Company in the U.S. District Court for the District of Delaware for failure of the Company to pay legal fees owed in the amount of $166,129. On April 2, 2009, to avoid the cost of litigation, the Company agreed to a Consent of Judgment against it in the amount of $166,129 and the Company continues to carry this amount as accounts payable at January 31, 2018. The Company negotiated with Stradley and in July 2014, isued Stradley 100,000 shares of common stock valued at $0.05 per share, the quoted market price on the date of grant, as a sign of good faith towards a resolution. The Company is still in discussions with the law firm related to this Judgment and anticipates a resolution in the future.

 

F-17
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES (Continued)

 

Vendor Lawsuits

 

H&J Ventures, LLC (“H&J”) is a debtor in a chapter 7 bankruptcy proceeding. On October 4, 2016, the chapter 7 trustee (the “Trustee”) of the bankruptcy estate of H&J sent a letter to the Company claiming that the Company owed $7,800,000 to H&J relating to an October 1, 2014 agreement between the Company and H&J, and that the Trustee would accept a settlement payment of $6,630,000 to resolve the matter. The Company disputes this claim in its entirety. On December 9, 2016, the Trustee served the Company with a subpoena relating to this matter. The Company has retained counsel with respect to this matter and will respond to the subpoena as it is lawfully required to do; however, the Company considers this claim to be without merit. The Company engaged a law firm to assist in the matter and on January 23, 2017, paid a $7,500 retainer, which continues to be classified as prepaid legal fees in the accompanying unaudited Balance Sheet at January 31, 2018.

 

On August 24, 2017, the Company and H&J agreed to a $50,000 settlement payment by the Company to the bankruptcy trustee to resolve the matter. The settlement required the Company to make the payment by September 7, 2017 and failure to pay as per the terms of the settlement would probably result in sanctions of some type, and result in the settlement being set aside, to allow the trustee to pursue the full range of damages. It was represented at the mediation that an expert for the Trustee would opine that services rendered by H&J under the contract had a current value of the approximate sum of $2,000,000.

 

The former CEO of the Company at that time, submitted the required $50,000 payment in a timely fashion to the trustee. However, on September 15, 2017, the trustee notified the Company that the payment made was returned for insufficient funds. The former CEO was given an opportunity by the trustee to rectify the issue with a valid payment on or before September 18, 2017, which payment did not occur. The trustee was willing to accept a $50,000 payment by the Company to settle the matter but is under no obligation to accept such payment and the trustee may pursue the full range of damages against Company. The Company has recorded accrued expenses of $50,000 for the potential settlement in the accompanying unaudited Balance Sheet at January 31, 2018.

 

On December 29, 2017, the trustee for H&J filed a second lawsuit against the Company and the former CEO, individually. The lawsuit requests damages for not consummating the settlement described above and for submission of an invalid $50,000 payment which was returned for insufficient funds. The Company has properly responded to the lawsuit in a timely manner. However, the former CEO did not respond in a timely manner and the Trustee moved for a Default Judgment against the former CEO only. On May 9, 2018, the Court denied the Trustee’s Motion and dismissed the second lawsuit against both the former CEO and the Company. As to the former CEO, the Court found that since he signed the check in a clearly designated representative capacity for the Company, he had no personal liability. As to the Company, the Court found that the first lawsuit was still ongoing and that any claims for the bad check should be brought by amending the first lawsuit to make the claims rather than in a second lawsuit.

 

On May 16, 2018, the Court conducted a scheduling conference in which the Court granted leave to the Trustee to amend the pleadings to assert the bad check claims in the first lawsuit. The Court also gave the parties 90 days to conduct discovery. As of the date of this report, the Trustee has yet to file an amended pleading.

 

On August 4, 2017, Interactive Liquid LLC (Interactive”), a vendor of the Company, filed a lawsuit in the amount of $153,016 related to unpaid invoices for logo design and website development services provided. On December 18, 2017, MLFB received a settlement demand for payment of consideration with a total value of $153,016, consisting of stock valued at $26,016 and periodic cash payments to be completed on or before June 1, 2018 totaling $127,000. Further negotiations ensued and ultimately the case was settled on or about March 5, 2018. The settlement called for MLFB to make payment to Interactive in the sum of $10,000 immediately upon receipt of an initial tranche of funding. MLFB was then required to make an additional payment of $30,000 on or before June 1, 2018. MLFB’s failure to make the payments as outlined would result in the entry of a judgment in favor of Interactive against MLFB in the sum of $153,016, said sum representing the full amount of Interactive’s claimed damages. The Company has recorded accounts payable to Interactive of $153,016 in the accompanying unaudited Balance Sheet at January 31, 2018. The Company failed to make the required payment due to lack of funding and as such, on June 4, 2018, Interactive filed the stipulated judgment.

 

F-18
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES (Continued)

 

The Company previously entered into a contract with Lamnia International (“Lamnia”) for investor relations services. On December 7, 2017, the Company received a demand for payment in the sum of $153,000. Per the demand letter, the sum was to be paid on or before December 15, 2017 and if not paid, collections and or legal actions could be instituted. As of the date of this report no legal action has been taken. The Company has recorded accounts payable to Lamnia of $124,968 in the accompanying unaudited Balance Sheet at January 31, 2018. The difference in amounts is because the Company terminated the agreement in writing to the vendor whereas the vendor continued to charge for services after the date of termination for which the Company disagrees.

 

The Company retained Herm Edwards, a former NFL player and coach, as a consultant to promote the new football league. On September 19, 2017, Mr. Edwards agent contacted the Company and indicated that under the contract, Mr. Edwards was still owed the sum of $216,668. As of the date of this report no legal action has been taken. The Company has recorded accounts payable to Mr. Edwards of $191,667 in the accompanying unaudited Balance Sheet at January 31, 2018. The amount recorded by the Company is $25,000 less than the claim because services were terminated by both parties prior to amounts invoiced which the Company disputes.

 

Unpaid Taxes and Penalties

 

At January 31, 2018, the Company owed the State of Delaware $110,154 for unpaid state income taxes from the tax year ended April 30, 2007. The unpaid state income taxes are included as state income taxes payable in accompanying unaudited Balance Sheet at January 31, 2018. Additionally, the Company owes the State of Delaware for penalties and interest from the tax year ending April 30, 2007 of $195,470, which is included as accrued expenses in the accompanying unaudited Balance Sheet at October 31, 2017. The Company has an agreement with the State of Delaware to pay a minimum per month. However, due to cash flow constraints, the Company has been unable to pay the minimum monthly amounts and is in default of the agreement that may cause additional interest and penalties and lead to other collection efforts by the State of Delaware.

 

In September 2015, the Company reached an offer in compromise (“OIC”) settlement with the IRS for unpaid penalties and interest from the tax year ended April 30, 2007. The settlement was in the amount of $13,785 and was to be paid by the Company with a $1,000 payment upon the execution of settlement, then the balance of $1,757 paid in November 2015 and making up the 20% down payment of $2,757, a second installment payment of $2,208, and then four monthly payments of $2,205. The Company has made all required payments in accordance with the settlement except for the final payment of $2,205.

 

The Company received correspondence from the IRS that because of an application fee note being paid with the original OIC, the Company was required to submit a new OIC and the required application fee. In October 2016, the Company had a telephone call with an IRS representative and were informed to offer the last payment that was due on the original OIC of $2,205 as discussed above and pay 20% of that balance. On October 5, 2016, the Company sent to the IRS by certified mail two checks in the amount of $186 (application fee for the new OIC) and $449 (20% or $441 of the $2,205 remaining original OIC payment and an $8 processing fee). The Company applied $441 against the remaining payment owed and the balance of $1,764 is included in accrued expenses in the accompanying unaudited Balance Sheet at January 31, 2018. As of the date of these financial statements, the Company has not received any further correspondence form the IRS and the Company is considered in default of the settlement agreement and the IRS could void or restructure the agreement.

 

Attorney Lien

 

On August 2, 2017, David Bovi, the Company’s former legal counsel, submitted correspondence reflecting a “charging lien” for non-payment relate to $243,034 of legal services provided to the Company. The amount included interest on unpaid invoices. The “charging lien” states that Mr. Bovi will retain all documents in his possession unless paid the amount outstanding as described above.

 

Stock Delisting

 

On September 14, 2017, the OTC Markets Group notified the Company of its delisting from the OTCQB due to its delinquency in filings, specifically with the SEC.

 

F-19
 

 

MAJOR LEAGUE FOOTBALL, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2018

 

NOTE 7 – SUBSEQUENT EVENTS

 

Convertible Promissory Note

 

On May 18, 2018, the Company received $75,000 of net proceeds for working capital purposes from the issuance of a $80,000 face value convertible secured promissory note with debt issue costs paid to or on behalf of the lender of $5,000. The terms include interest accrued at 8% annually and the principal and interest payable are payable in one year on May 18, 2019. Any amount of the principal or interest which is not paid when due shall bear Interest at the rate of Eighteen Percent (18%), from the due date thereof until the same is paid.

 

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 lowest trade of the Common Stock during the ten (10) trading Days immediately preceding a conversion date. The promissory note contains customary affirmative and negative covenants of the Company. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.

 

The Company evaluated the secured convertible promissory note in accordance with ASC 815 “ Derivatives and Hedging ” and due to the price protection in the promissory note, determined that there was a conversion option feature that should be bifurcated and accounted for as a derivative liability in the balance sheet at fair value. The initial valuation and recording of this derivative liability was $114,132 using the Binomial Lattice Option Pricing Model with the following assumptions; stock price $0.02, conversion price $0.012, expected term of 1 year, expected volatility of 263% and discount rate of 0.82%. The initial $114,132 conversion option liability assumed that 6,666,667 shares would be issued upon conversion of the promissory note.

 

On the note issue date of May 18, 2018, the Company recorded the following debt discounts as offsets to the $80,000 promissory note and will be amortized over the one-year term of the promissory note: (1) debt issue costs of $5,000 and (2) conversion option liability of $75,000. As a result, the Company recorded a $39,132 of expense for the initial fair value of conversion option liability and recorded as a separate item in other income (expense).

 

F-20

 

 

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 financial statements and the notes thereto.

 

Financial Condition

 

As reflected in the accompanying unaudited financial statements, the Company had no revenues and net cash used in operating activities of $249 for the nine months ended January 31, 2018. Although the Company had net income of $911,235, this amount included $1,176,168 of income from the waiver of two former officers accrued compensation and related payroll taxes. Without this adjustment, the Company would have had a net loss of $264,933. Additionally, at January 31, 2018, the Company has a working capital deficit of $3,216,741, an accumulated deficit of $25,286,104 and a stockholders' deficit of $3,216,741, which could have a material impact on the Company's financial condition and operations.

 

Results of Operations

 

Three months ending January 31, 2018, compared to the three months ended January 31, 2017

 

For the three months ended January 31, 2018 and 2017, we had no revenue. The Company is working through its business plan whereby it is seeking to establish, develop and operate MLFB as a professional spring football league with an anticipated launch date in July/August 2018 of a training camp and shortened 2018 Developmental Season.

 

Total operating expenses for the three months ended January 31, 2018 were $27,380 as compared to total operating expenses for the three months ended January 31, 2017 of $503,604, or a decrease of $476,224. The decrease in expense from 2017 to 2018 was primarily from a $234,452 decrease in salaries and wages, a $144,727 decrease in general and administrative and a $88,817 decrease in professional fees. The $234,452 decrease in salaries and wages from 2017 to 2018 was primarily from the following with no comparable amount in 2018 (1) $225,000 for accrued officer compensation, (2) $66,235 for amortization of employee stock options, (3) $9,452 for amortization of common stock over vesting period and (4) $6,053 for accrued officer payroll taxes. The decrease in general and administrative was from the Company reducing expenses across the board because of no cash and the decrease was primarily from no office rental expense in 2018 as compared to 2017. The decrease in professional fees from 2017 to 2018 was primarily from (1) $19,025 for the amortization of prepaid consulting services with no comparable amount in 2018 and a reduction of professional services required because of having no cash.

 

Other income (expense) for the three months ended January 31, 2018 was $1,164,797 of income compared to $521,424 of expense for the three months ended January 31, 2017, or an increase in income of $1,686,221. The increase in income from 2017 to 2018 was primarily from $1,176,168 of gain from waiver of accrued officer compensation with no comparable amount in 2018. Additionally, the increase in income was from 2017 to 2018 was from a $159,120 decrease in interest expense and $351,196 of expense from the change in fair value of a conversion option liability for 2017 with no comparable amount in 2018. The decrease in interest expense was primarily from a $147,031 decrease for the amortization of debt discounts related to a convertible secured promissory note.

 

3
 

 

Because of the above, we had net income of $1,137,417 for the three months ended January 31, 2018 and a net loss of $1,025,028 for the three months ended January 31, 2017.

 

Nine months ending January 31, 2018, compared to the nine months ended January 31, 2017

 

For the nine months ended January 31, 2018 and 2017, we had no revenue. The Company is working through its business plan whereby it is seeking to establish, develop and operate MLFB as a professional spring football league with an anticipated launch date in July/August 2018 of a training camp and shortened 2018 Developmental Season.

 

Total operating expenses for the nine months ended January 31, 2018 were $234,092 as compared to total operating expenses for the nine months ended January 31, 2017 of $3,592,811, or a decrease of $3,358,719. The decrease in expense from 2017 to 2018 was primarily from a $1,541,436 decrease in professional fees and a $1,409,913 decrease in salaries and wages. The decrease in professional fees from 2017 to 2018 was primarily from $828,549 for the issuance of stock warrants for prior consulting services with no comparable amount in 2018 and (2) $639,864 for the amortization of prepaid consulting services with no comparable amount in 2018. The $1,409,913 decrease in salaries and wages from 2017 to 2018 was primarily from the following with no comparable amount in 2018 (1) $709,121 for amortization of employee stock options, (2) $675,000 for accrued officer compensation, (3) $138,494 for amortization of common stock over vesting period, (4) $72,002 for common stock issued for employee services and (5) $40,198 for accrued officer payroll taxes.

 

Other income (expense) for the nine months ended January 31, 2018 was $1,145,327 of income compared to $793,765 of expense for the nine months ended January 31, 2017, or an increase in income of $1,939,092. The increase in income from 2017 to 2018 was primarily from $1,176,168 of gain from waiver of accrued officer compensation with no comparable amount in 2017, a $445,767 decrease in interest expense and a $285,435 from the change in fair value of a conversion option liability related to a convertible secured promissory note. The decrease in interest expense was primarily from a $416,883 decrease for the amortization of debt discounts related to a convertible secured promissory note.

 

Because of the above items, we had net income of $911,235 and a net loss of $4,386,576 for the nine months ended January 31, 2018 and 2017, 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 zero cash at January 31, 2018 and our bank accounts had been closed. 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.

 

Significant Accounting Policies and Estimates

 

Our Company’s accounting policies are more fully described in Note 1 to the Financial Statements. As disclosed in Note 1 to the 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.

 

Related Party Transactions

 

See Note 5 to the Financial Statements included herein for additional description of related party transactions.

 

4
 

 

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 as of January 31, 2018 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.

 

 

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 Board of Director 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 take steps to 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 third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Plan of Operation

 

Unless the context otherwise requires, all references to the “ Company ,” “ we ,” “ our ” or “ us ” and other similar terms collectively means Major League Football, Inc., a Delaware corporation. Our principal offices are presently located at 7319 Riviera Cove #7, Lakewood Ranch, Florida, 34202. Our telephone number is (847) 924-4332. Our Internet website, currently under construction, will be located at: www.mlfb.com.

 

Major League Football, Inc. (the “ Company ”) is seeking to establish, develop and operate Major League Football (" MLFB ") as a professional spring/summer football league. Our anticipated launch is July/August 2018, consisting of training camp and abbreviated 2018 Developmental Season.. We anticipate a full season with training camp in March of 2019 with a regular eight team season commencing in late April of 2019 with playoffs and a championship game in July of 2019. In conjunction with the 2019 season, we intend to fill a void by establishing franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the NFL off-seasons, which will enable it to take a totally non-adversarial approach towards the National Football League ("NFL"). Our spring and early summer schedule ensures no direct competition with autumn/winter sports, including the 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high school and collegiate institution teams.

 

During July of 2017, we determined to reschedule our inaugural year of professional, spring-league football from spring of 2017 to spring 2019 due to a lack of adequate funding,

 

5
 

 

We expect we will need additional short-term financing as well as financing over the next 12 months in order to position our Company for its anticipated launch in July/August 2018 of a training camp and abbreviated 2018 Developmental Season. Specifically, we will need to raise approximately $3 million between June and August 2018 and a subsequent raise and offerings of $20 million between September 2018 and March 2019, to cover our operating expenses for our 2019 full training camp and playing season in our designated cities.

 

Single Entity Structure

 

We intend to operate the league as a single entity owned, stand alone, dominant 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 that result in controlled player 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

 

Major League Football 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, something no other existing or previous football league has ever delivered to its viewing audience. Although Major League Football’s ticket pricing will be a fraction to 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.

 

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, many of whom are already experiencing post Super Bowl withdrawal. 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 Major League Football’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.

 

Major League Football 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, many of which have only emerged during the past few years. Specifically, Major League Football 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.

 

6
 

 

Major League Football 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. Major League Football plans to work with businesses involved in video, television, print media and the Internet to promote its business. We believe that the cumulative effect of this marketing plan 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 that is 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 professional, 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
 

Timeline of Significant Events

 

 

· On November 1, 2017, following termination of Mr. Craig’s positions within the Company on October 13, 2017, it was determined that Mr. Craig’s attempted termination of Frank Murtha was void, and he returned to MLFB in his prior position as Senior Executive Vice President. Pursuant to the Company’s Bylaws, in the absence of the President, Frank Murtha, as the Senior Executive Vice President, was authorized to perform the duties of the president. In his capacity as Senior Executive Vice President, Murtha retained JJ Coyne and Michael McCarthy as Director of Services and Procurement and Director of Football Operations, respectively. Richard Nichols was retained as Operations Consultant, Robert Rose as a Public Relations Consultant, Scott Miller as a technology and Information consultant, and Leonard Frischer as Acting General Counsel. Each of these individuals was retained as a volunteer without compensation.

 

 

 

 

· On November 30, 2017, the Court in TCA12, LLC, a Florida limited liability company v. Major League Football, Inc . heard oral argument on TCA12’s October 25, 2017 Motion for Summary Judgment. The Court granted the Plaintiff’s motion on the issue of whether the Company was liable for past due rent. It denied the Motion on the issues of the amount of past due rent owed, foreclosure of the landlord lien, and an award of attorney fees. Plaintiff was granted leave to file a second Motion for Summary Judgment on those issues and did so. Before the matter was heard, On February 5, 2018, the parties reached a settlement in which MLFB agreed to immediately conveyed all right title and interest in office furniture located on the premises to the Plaintiff and MLFB released all right title and interest in its security deposit in the sum of $11,918 to the Plaintiff. Moreover, on or before June 1, 2018, MLFB was to pay Plaintiff an additional $40,000. If it failed to do so, the failure was deemed a conveyance of MLFB’s right, title, and interest in football equipment currently in Plaintiff’s possession.

 

 

 

 

Effective May 31, 2018, the parties agreed to amend the Settlement Agreement. Pursuant to the amendment, the Company paid the sum of $5,503 on June 4, 2018. That figure represents a good faith deposit of $5,000 and payment of an additional month’s storage charge of $503. An additional payment of $35,000 is to be made on or before June 30, 2018. As before, failure to make the payment shall be deemed a conveyance of MLFB’s right, title, and interest in football equipment currently in Plaintiff’s possession.

 

 

 

 

· The Company entered into a contract with Lamnia International for the provision of investor relations services. On December 7, 2017, the Company received a demand for payment in the sum of $153,000. Per the demand letter, the sum was to be paid on or before December 15, 2017 and if not paid, collections and or legal actions would be instituted. At the date of this report, no legal actions have been taken.

 

7
 

 

 

·

On December 18, 2017, in the Interactive Liquid, LLC v. Major League Football, Inc. , litigation, MLFB received a settlement demand for payment of consideration with a total value of $153,016, consisting of stock valued at $26,016 and periodic cash payments to be completed on or before June 1, 2018 totaling $127,000. Further negotiations ensued and ultimately the case was settled on or about March 5, 2018. The settlement calls for MLFB to make payment to the Plaintiff in the sum of $10,000 immediately upon receipt of an initial tranche of funding. MLFB must then make an additional payment of $30,000 on or before June 1, 2018. MLFB’s failure to make the payments as outlined will result in the entry of a judgment in favor of the plaintiff and against MLFB in the sum of $153,016 (less payment of $10,000 if made before June 1.), said sum representing the full amount of Plaintiff’s claimed damages. The Company failed to make the payment on June 1, 2018 due to lack of funding and Interactive filed the stipulated judgment on June 4, 2018.

 

 

 

 

· On December 29, 2017, the trustee for H&J filed a second lawsuit against the Company and Jerry Craig, individually. The lawsuit requested damages for not consummating the settlement described in prior filings and for submission of an invalid $50,000 payment which was returned for insufficient funds. The Company has properly responded to the lawsuit in a timely manner. However, Jerry Craig did not respond in a timely manner and the Trustee moved for a Default Judgment against Craig only. On May 9 th , 2018, the Court denied the Trustee’s Motion and dismissed the second lawsuit against both Craig and the Company. As to Craig, the Court found that since he signed the check in a clearly designated representative capacity for the Company, he had no personal liability. As to the Company, the Court found that the first lawsuit was still ongoing and that any claims for the bad check should be brought by amending the first lawsuit to make the claims rather than in a second lawsuit. To date, the Trustee has yet to file amendments to the pleadings.
 

8
 

 

PART II – OTHER INFORMATION

 

Item I. Legal Proceedings.

 

TCA12, LLC, a Florida limited liability company v. Major League Football, Inc. On November 30, 2017, the Court heard oral argument on TCA12’s October 25, 2017 Motion for Summary Judgment. The Court granted the Plaintiff’s motion on the issue of whether the Company was liable for past due rent. It denied the Motion on the issues of the amount of past due rent owed, foreclosure of the landlord lien, and an award of attorney fees. Plaintiff was granted leave to file a second Motion for Summary Judgment on those issues and did so. Before the matter was heard, On February 5, 2018, the parties reached a settlement in which MLFB agreed to immediately conveyed all right title and interest in office furniture located on the premises to the Plaintiff and MLFB released all right title and interest in its security deposit in the sum of $11,918 to the Plaintiff. Moreover, on or before June 1, 2018, MLFB was to pay Plaintiff an additional $40,000. If it failed to do so, the failure was deemed a conveyance of MLFB’s right, title, and interest in football equipment currently in Plaintiff’s possession.

 

Effective May 31, 2018, the parties agreed to amend the Settlement Agreement. Pursuant to the amendment, the Company paid the sum of $5,503 on June 4, 2018. That figure represents a good faith deposit of $5,000 and payment of an additional month’s storage charge of $503. An additional payment of $35,000 is to be made on or before June 30, 2018. As before, failure to make the payment shall be deemed a conveyance of MLFB’s right, title, and interest in football equipment currently in Plaintiff’s possession.

 

Interactive Liquid, LLC v. Major League Football, Inc. On December 18, 2017, MLFB received a settlement demand for payment of consideration with a total value of $153,016, consisting of stock valued at $26,016 and periodic cash payments to be completed on or before June 1, 2018 totaling $127,000. Further negotiations ensued and ultimately the case was settled on or about March 5, 2018. The settlement called for MLFB to make payment to the Plaintiff in the sum of $10,000 immediately upon receipt of an initial tranche of funding. MLFB was to then make an additional payment of $30,000 on or before June 1, 2018. MLFB’s failure to make the payments as outlined resulted in the entry of a judgment in favor of the plaintiff and against MLFB in the sum of $153,016.(less payment of $10,000 if made before June 1.), said sum representing the full amount of Plaintiff’s claimed damages. The Company failed to make the payment on June 1, 2018 due to lack of funding and effective June 2, 2018, Interactive was free to file the stipulated judgment. On June 4, 2018, Interactive filed the stipulated judgment with the court.

 

9
 

 

John M. McDonnell, as Chapter 7 Trustee for the Estate of H&J Ventures, LLC v. Major League Football On December 29. 2017 the Trustee in Bankruptcy in the John M. McDonnell, as Chapter 7 Trustee for the Estate of H&J Ventures, LLC v. Major League Football filed a second suit against MLFB and Jerry Craig, Case number 17- 1709-MBK. This second suit arose out of the aforementioned bad check issued by Mr. Craig. The suit seeks payment of the outstanding debt represented by the $50,000 settlement, and damages under New Jersey state statute 2A:32-1 pertaining to bad checks. The statute allows for a judgment in the amount of the check, $500 in statutory damages, and attorney’s fees and costs. MLFB filed a timely answer to the second lawsuit. Jerry Craig did not and the Trustee moved for a default judgment against Craig only. On May 9 th , 2018, the Court denied the Trustee’s Motion and dismissed the second lawsuit against both Craig and the Company. As to Craig, the Court found that since he signed the check in a clearly designated representative capacity for the Company, he had no personal liability. As to the Company, the Court found that the first lawsuit was still ongoing and that any claims for the bad check should be brought by amending the first lawsuit to make the claims rather than in a second lawsuit.

 

On May 16, 2018, the Court conducted a scheduling conference in which the Court granted leave to the Trustee to amend the pleadings to assert the bad check claims in the first lawsuit. The Court also gave the parties 90 days to conduct discovery. As of the date of this report, the Trustee has yet to file an amended pleading.

 

See Note 6 to the Financial Statements, “Commitments and Contingencies,” included herein for additional description of legal matters.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

Our Company issued securities during this period without registering the securities under the Securities Act:

 

Date

Security

January 2, 2018

Cashless exercise of warrants for 1,000,000 shares of 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:

 

10.1

Compensation Waiver of Richard Smith

10.2

Compensation Waiver of Wes Chandler

10.3

SMR Settlement Agreement Amendment

31

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Sole Senior Executive Officer of the Company.

32

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Sole Senior Executive Officer of the Company.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

 

10
 

 

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.

 

 

June 11, 2018

By:

/s/ Francis J. Murtha

 

Francis J. Murtha, Senior Executive Vice President

Principal Executive Officer

 

 

 

11

 

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