NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Nature of Business
Major League Football, Inc. (the “Company” or “MLFB”) was originally incorporated as Universal Capital Management, Inc., a Delaware corporation, on August 16, 2004.
On June 5, 2014, we amended our certificate of incorporation to (i) effect a one-for-five (1:5) reverse split of our common stock; (ii) fix the number of authorized shares of common stock after the reverse split at one hundred and fifty million (150,000,000) shares of common stock; and (iii) authorize fifty million (50,000,000) shares of “blank check” preferred stock, $0.001 par value per share, to be issued in series, and all properties of the preferred stock to be determined by our board of directors. Accordingly, all share and per share amounts included in these financial statements have been retroactively adjusted to the beginning of the period to reflect the amendment to the certificate of incorporation for the reverse split.
Prior to July 13, 2014, our primary business was to identify and advise in development and market consumer products. Our strategy employed three primary channels: Direct Response Television (Infomercials), Television Shopping Networks and Retail Outlets. We sought to assist and enable entrepreneurs to introduce products to the consumer market. Entrepreneurs could leverage our experience and valuable business contacts in functions such as product selection, marketing development, media buying and direct response television production. Inventors and entrepreneurs submitted products or business concepts for our input and advice. We generated revenues from two primary sources (i) management of the entire business cycle of the consumer product and (ii) sales of consumer products, for which we received a share of net profits of consumer products sold.
On July 14, 2014, our Company entered into and closed a definitive Asset Purchase Agreement with Major League Football, LLC, a company formed in 2009, to establish, develop and operate a professional spring/summer football league to be known as Major League Football. Pursuant to the terms of the Asset Purchase Agreement, we issued Major League Football, LLC 8,000,000 shares of our common stock in exchange for assets of Major League Football, LLC primarily comprised of business plans and related proprietary documents, trademarks and other related intellectual property related to the development of the league. Also, the board of directors was expanded, a new management team was appointed, and several league consultants were retained by our Company.
Effective November 24, 2014, the Company amended its Certificate of Incorporation with the Secretary of State of the State of Delaware changing its name from Universal Capital Management, Inc.
Effective August 23, 2018, the Company filed a Certificate of Amendment to its Certificate of Incorporation. The prior authorized designated fifty million (50,000,000) shares of convertible preferred stock, par value $0.001 per share were re-designated to common stock. As a result, the Company has no authorized preferred stock.
Effective February 15, 2019, the Company amended its Articles of Incorporation to increase authorized shares of common stock from 200,000,000 to 300,000,000.See Note 8 – Commitments and Contingencies.
Effective October 30, 2019, the Company amended its Articles of Incorporation to increase authorized shares of common stock from 300,000,000 to 450,000,000. See Note 8 – Commitments and Contingencies.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For both of the amendments above, written consent in accordance with Section 228 of the General Corporation Law of the State of Delaware was not adhered to. Given the exigent circumstances of the need to raise money imminently to save the Company and fund its primary business, the holders of a majority of the outstanding common stock entitled to vote as a class, were not provided written notice of the proposed amendment to the Certificate of Incorporation and the Company did not conduct a vote of the shareholders in favor of the adoption of the amendment to the Certificate of Incorporation. As a result, there is a risk that the State of Delaware could notify the Company that the amendments were not valid.
The Company is seeking to establish, develop and operate MLFB as a professional spring/summer football league. The Company’s official launch is planned to commence with tryout camps held at multiple locations from December 2020 through March 2021, with a full training camp in April 2021. This will be followed by a planned regular season with six (6) teams and we anticipate holding one championship game following the 2021 regular season. We intend to establish franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the National Football League (“NFL”) off-seasons, which will enable us to take a totally non-adversarial approach towards the NFL. We have commenced the process of leasing playing venues and acquiring football equipment. We have obtained required workers compensation insurance for certain states where we will play games.
MLFB plans to serve as a pipeline to develop players, coaches, officials, scouts, trainers, and all other areas of the game that the NFL needs today. We will also give NFL representatives the opportunity to view our team practices, game footage, practice tapes and confer with league coaches, team officials and staff. We believe this will provide our league with recognition and demonstrate our economic model and the market’s desire for spring football.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying financial statements, the Company had a net loss of $1,510,156 and $746,292 for the years ended April 30, 2020 and 2019, respectively. Additionally, the Company had net cash used in operating activities of $456,382 and $353,608 for the years ended April 30, 2020 and 2019, respectively. At April 30, 2020, the Company has a working capital deficit of $4,661,249, an accumulated deficit of $28,807,401 and a stockholders’ deficit of $4,590,509, which could have a material impact on the Company’s financial condition and operations. At April 30, 2020, the Company does not have sufficient cash resources or current assets to pay its obligations.
In view of these matters, recoverability of asset amounts shown in the accompanying financial statements is dependent upon the Company’s ability to achieve 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 issuance date of this report. Since inception, the Company has financed its activities from the sale of equity securities and from loans. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities and debt securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. The 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.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Subsequently, the COVID-19 pandemic has continued to spread and various state and local governments have issued or extended “shelter-in-place” orders, which have impacted and restricted various aspects of the Company’s operations. The spread of the pandemic has caused severe disruptions in the global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.
During fiscal year 2020, we were planning a Demonstration Season of either a 4 team 6 game season beginning with a full training camp in early May 2020 or a 3 team 4 game season with the same dates. All games were to be played in the cities and stadiums where we have established facility arrangements in Ohio, Virginia and Arkansas in May and June 2020. However, due to the unfortunate spread of COVID-19 pandemic and the guidance from government and medical agencies, we cancelled those plans. Additionally, the COVID-19 pandemic has had a significant negative impact and delayed the Company’s ability to obtain capital for its planned football operations and for general working capital.COVID-19 could continue to have material and adverse effects on our ability to successfully commence and operate our planned football operations.
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 derivative liabilities, estimates of loss contingencies, valuation of equity-based instruments issued for other than cash and valuation allowance on deferred tax assets.
Cash and Cash Equivalents
For the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. There were no cash equivalents at April 30, 2020 and 2019.
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 April 30, 2020 and 2019, 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.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
The Company has $57,223 and $125,000 of football and office equipment at April 30, 2020 and April 30, 2019, respectively. The equipment is held in storage to be utilized in the planned league operations in 2021. For financial accounting purposes, depreciation for the football and office equipment will be computed by the straight-line method over an estimated useful life of 3 to 7 years. There was no depreciation expense for the years ended April 30, 2020 or 2019, respectively, because the equipment is held in storage and has not been put into use because football operations have not commenced. For the year ended April 30, 2020, the Company wrote off $125,000 of previously recorded football equipment from a vendor claim that the Company disputes as the product was not delivered. Additionally, the football equipment balance at April 30, 2020 excludes $135,323 of recovered and unused football equipment from a lease settlement that was previously impaired in 2017 and written off by the Company. In accordance with generally accepted accounting principles because the recovered equipment was previously impaired, the Company has recorded it at a zero-cost basis because the value cannot be increased once impaired, regardless of its fair market value.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
Convertible Promissory Notes and Related Embedded Derivatives
We account for the embedded conversion option contained in convertible instruments under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Stock”. The embedded conversion option contained in the convertible instruments are accounted for as derivative liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. The fair value of the derivatives was determined using the Binomial Option Pricing model. On the initial measurement date, the fair value was recorded as a derivative liability and 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 is recorded as a component of other income (expense) in the accompanying Statements of Operations.
In July 2017, the FASB issued ASU 2017-11 “Earnings Per Share (Topic 260)”. Topic 260 changes the classification of certain equity-linked financial instruments (or embedded features) with down round features and clarifies existing disclosure requirements for equity-classified instruments. For freestanding equity-classified financial instruments, entities that present earnings per share (“EPS”) in accordance with Topic 260, to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related guidance in Topic 260. For public business entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company early adopted this standard effective April 30, 2017.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Convertible Notes With Variable Conversion Options
The Company has entered into convertible promissory notes, some of which contain variable conversion options, whereby the outstanding principal and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock at the time of conversion. The Company treats these convertible promissory notes as stock settled debt under ASC 480, “Distinguishing Liabilities from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount at the time of conversion and records the put premium as accretion to interest expense to the date of first conversion.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels to be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities with quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, football equipment, accounts payable, unsecured convertible notes payable, secured convertible notes payable, notes payable, notes payable – related party and an embedded conversion option liability. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the Company believes that the recorded values of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Assets and liabilities measured at fair value on a recurring/non-recurring basis and the carrying value consist of the following at April 30, 2020:
|
|
April 30,
|
|
|
Fair Value Measurements at April 30, 2020
|
|
|
|
2020
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Conversion option liability
|
|
$
|
645,055
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
645,055
|
|
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following is a summary of activity of Level 3 assets and liabilities for the year ended April 30:
Embedded Conversion Option Liability
|
|
|
|
Balance – April 30, 2019
|
|
$
|
78,005
|
|
Initial value of conversion option liability
|
|
|
350,072
|
|
Initial value of debt discount of conversion option liability
|
|
|
96,790
|
|
Loss from change in the fair value of conversion option liability
|
|
|
198,193
|
|
Reclass of conversion option liability to debt premium
|
|
|
(78,005
|
)
|
Balance – April 30, 2020
|
|
$
|
645,055
|
|
Changes in fair value of the conversion option liability are included as a separate Other Income (Expense) item in the accompanying Statement of Operations.
Leases
In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02: “Lease(Topic 842)” whereby lessees need to recognize leases on their balance sheet as a right of use asset and a corresponding lease liability. The Company adopted this standard as of May 1, 2019 using the effective date method. As a part of our policy, we have chosen to exclude leases with a lease term of one year or less. Accordingly, we have no leases over one year and thus the adoption of this standard did not have any effect on the accompanying financial statements.
Revenue Recognition
The Company adopted ASC 606 “Revenues from Contracts with Customers” on May 1, 2018. There was no cumulative effect upon this adoption.
League Tryout Camps
The Company recognizes league tryout camp revenue on the dates that the tryout camps were held. There were no tryout camps during the year ended April 30, 2020.From March 1, 2019 through March 30, 2019, the Company held four tryout camps resulting in $2,100 of revenue recorded for the year ended April 30, 2019.
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. The Company football operations had not commenced as of April 30, 2020.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce the deferred tax assets to the amount expected to be realized.
The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. At April 30, 2020 and 2019, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.
Stock Based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of adoption. There was no cumulative effect of adoption on May 1, 2019.
Net Loss per Share of Common Stock
The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.”, which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period and diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Securities that could potentially dilute earnings per share in the future at April 30, are as follows:
|
|
2020
|
|
|
2019
|
|
Warrants to purchase common stock
|
|
|
1,800,000
|
|
|
|
2,450,000
|
|
Options to purchase common stock
|
|
|
1,200,000
|
|
|
|
1,200,000
|
|
Conversion of convertible unsecure promissory notes
|
|
|
428,982,756
|
|
|
|
166,667
|
|
Conversion of convertible secured promissory notes
|
|
|
102,124,456
|
|
|
|
16,445,540
|
|
Total
|
|
|
534,107,212
|
|
|
|
20,262,207
|
|
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Contingencies
Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed. The Company does not include legal costs in its estimates of amounts to accrue.
Related Parties
Parties are 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.
New Accounting Pronouncements
In July 2019, the FASB issued ASU 2019-07, "Codification Updates to SEC Sections", to codify the SEC releases that clarify and improve the disclosure and presentation requirements of a variety of codification topics, thereby eliminating certain disclosure requirements that were redundant, duplicative, overlapping, outdated, or superseded. The Company determined that the adoption of this new accounting guidance did not have a material impact on its financial statements and footnote disclosures.
In October 2019, the FASB issued ASU 2019-12, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company believes that the adoption of this new accounting guidance will not have a material impact on its financial statements and footnote disclosures.
The Company has evaluated other recent accounting pronouncements and their adoption, and has not had, and is not expected to have, a material impact on the Company’s financial position or results of operations. Other new pronouncements issued but not yet effective until after April 30, 2020 are not expected to have a significant effect on the Company’s financial position or results of operations.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 2 – ACCRUED EXPENSES
The Company has recorded accrued expenses that consisted of the following:
|
|
April 30,
2020
|
|
|
April 30,
2019
|
|
Penalties and interest - unpaid state income tax
|
|
$
|
239,522
|
|
|
$
|
219,209
|
|
Unpaid federal income tax
|
|
|
1,764
|
|
|
|
1,764
|
|
Legal settlement (See Note 8 – Commitments and Contingencies)
|
|
|
70,000
|
|
|
|
70,000
|
|
Late charges on unpaid promissory note
|
|
|
5,400
|
|
|
|
5,400
|
|
Total Accrued Expenses
|
|
$
|
316,686
|
|
|
$
|
296,373
|
|
NOTE 3 – DEBT
|
|
April 30,
2020
|
|
|
April 30,
2019
|
|
Notes Payable:
|
|
|
|
|
|
|
Nov.18, 2015. Interest at 8% and principal payable on demand. In Default
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
June. 6, 2016. Interest at 4% and principal payable on demand.
|
|
|
10,000
|
|
|
|
10,000
|
|
Aug. 4, 2016. Interest at 8% and principal payable on demand.
|
|
|
35,000
|
|
|
|
35,000
|
|
Sep. 27, 2016. Interest at 4% and principal payable on demand.
|
|
|
30,000
|
|
|
|
30,000
|
|
Sep. 29, 2016. Interest at 4% and principal payable on demand.
|
|
|
5,000
|
|
|
|
5,000
|
|
Sept. 29, 2016. Interest at 4% and principal payable on demand.
|
|
|
30,000
|
|
|
|
30,000
|
|
Oct. 3, 2016. Interest at 4% and principal payable on demand.
|
|
|
20,000
|
|
|
|
20,000
|
|
Sep. 25, 2019. Interest at 8% and principal and interest due Mar. 25, 2020
In Default with interest recorded at 22% default rate
|
|
|
70,000
|
|
|
|
-
|
|
Apr. 9, 2020.Interest at 8% and principal due Oct. 9, 2020
|
|
|
30,000
|
|
|
|
-
|
|
Total Notes Payable
|
|
$
|
330,000
|
|
|
$
|
230,000
|
|
At April 30, 2020 and April 30, 2019, the Company has recorded $330,000 and $230,000 of Notes Payable, respectively. Of these amounts, $230,000 is from seven third parties and the principal and interest are payable on demand with an interest rate from 4% to 8% annually. Included in the $230,000 balance is a $100,000 Note Payable dated November 18, 2015 that is in default and the Company has recorded a $5,400 late fee as accrued expense in the accompanying Balance Sheet at April 30, 2020. See Note 2 – Accrued Expenses.
On September 25, 2019, the Company received $55,284 of net proceeds from the issuance of a $70,000 face value note payable with debt issue costs paid to or on behalf of the lender of $5,500 and an original issue discount of $9,216. Additionally, the lender directly paid $11,000 to a third party for the purchase for the Company of office equipment that is recorded as property and equipment at April 30, 2020. The terms include interest accrued at 8% annually and the principal and accrued interest were payable on March 25, 2020. The principal and accrued interest were not paid on the due date of March 25, 2020 and as a result, the note payable is in default and default interest at 22% is being utilized as of the due date. At April 30, 2020, the Company had not received an extension of the due date. See Note 8 – Commitments and Contingencies.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
On the note issue date of September 25, 2019, the Company recorded the following debt discounts as offsets to the $70,000 Note Payable and will be amortized over the six-month term: (1) original issue discount of $9,216 and (2) debt issue costs of $5,500. For the period from the note issue date of September 25, 2019 to April 30, 2020, the Company recorded $14,716 for the full amortization of the debt discounts discussed above and recorded to interest expense in the accompanying Statement of Operations.
The promissory note specifies that in the event that the Company completes any offering or sale of securities after the date of the promissory note, the proceeds of each such offering shall first be applied to the repayment of the promissory note until the same shall have been paid and satisfied in full. The promissory note also specifies that on or before December 31, 2019, the Company shall have had a special meeting of the stockholders of the Company for the purpose of electing a duly elected and constituted board of directors. See Note 8 – Commitments and Contingencies.
The promissory note specifies that in the event that the Company completes any offering or sale of securities after the date of the promissory note, the proceeds of each such offering shall first be applied to the repayment of the promissory note until the same shall have been paid and satisfied in full. The promissory note also specifies that on or before December 31, 2019, the Company shall have had a special meeting of the stockholders of the Company for the purpose of electing a duly elected and constituted board of directors. See Note 8 – Commitments and Contingencies.
On April 9, 2020, the Company received $30,000 of proceeds from the issuance of a note payable with terms including interest accrued at 8% annually and the principal and interest were payable in six months on October 9, 2020. See Note 8 – Commitments and Contingencies.
For the year ended April 30, 2020, the Company recorded $19,227 of interest expense for Notes Payable in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $65,748 of interest related to the Notes Payable as accrued interest in the accompanying Balance Sheet.
|
|
April 30,
2020
|
|
|
April 30,
2019
|
|
Notes Payable, Related Party:
|
|
|
|
|
|
|
Aug. 28, 2015. No stated interest and principal payable on demand.
|
|
$
|
2,300
|
|
|
$
|
2,300
|
|
Mar. 5, 2020.Interest at 10% and principal due Jun. 5, 2020
|
|
|
25,000
|
|
|
|
-
|
|
Total Notes Payable – Related Party
|
|
$
|
27,300
|
|
|
$
|
2,300
|
|
At April 30, 2019, the Company has previously recorded $2,300 of Notes Payable, Related Party from a former officer of the Company. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand.
On March 5, 2020, the Company received $25,000 of proceeds from the issuance of a note payable with a director of the Company. The terms including interest accrued at 10% annually and the principal and interest were payable in three months on June 5, 2020. See Note 7 – Related Parties and Note 9 – Subsequent Events.
For the year ended April 30, 2020, the Company recorded $384 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $384 of accrued interest, related party in the accompanying Balance Sheet.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
|
|
April 30,
2020
|
|
|
April 30,
2019
|
|
Convertible Unsecured Promissory Notes:
|
|
|
|
|
|
|
April 14, 2016 - Interest at 5% - principal and interest due 12 months from issuance date. In Default
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
May 2, 2019 - Interest at 10% - principal and interest due May 2, 2020.
|
|
|
51,350
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
May 8, 2019 - Interest at 12% - principal and interest due February 8, 2020.
In Default with interest recorded at default rate of 24%
|
|
|
145,916
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
December 5, 2019, Interest at 10% - principal and interest due December 5, 2020
|
|
|
63,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
January 21, 2020, Interest at 10% - principal and interest due January 21, 2021
|
|
|
38,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Plus: put premium
|
|
|
154,066
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Less: debt discount
|
|
|
(4,010
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Convertible Unsecured Notes Payable, net of debt discount and put premium
|
|
$
|
498,322
|
|
|
$
|
50,000
|
|
At April 30, 2019, the Company has previously recorded a $50,000 of convertible unsecured promissory note. The terms include interest at 5% annually and the principal and interest were payable in one year on April 14, 2017. The unsecured convertible promissory note is in default at April 30, 2020 and the note holder has several remedies including calling the principal amount and accrued interest due and payable immediately. 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, or 200,410 shares of common stock at April 30, 2020.
For the year ended April 30, 2020, the Company recorded $2,507 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $10,123 of interest related to the convertible unsecured promissory note as accrued interest in the accompanying Balance Sheet.
Convertible Unsecured Promissory Note – May 2, 2019
On May 2, 2019, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of two 10% convertible promissory notes in the aggregate principal amount of $200,000, comprised of a First Note of $100,000 and a Back-End Note of $100,000, convertible into shares of common stock of the Company.
The First Note shall be paid for by the Company as detailed below. The Back-End Note shall be paid for by the issuance of an offsetting secured promissory note issued by the investor to the Company (“Buyer Note”), provided that prior to conversion of the Back-End Note, the Investor must have paid of the Buyer Note in cash such that the Back-End Note may not be converted until it has been paid for in cash by the Investor.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
The Company may reject the Back-End Note by giving thirty (30) day prior written notice. Such notice must be given 30 days prior to the six (6) month anniversary of the Back-End Note. The cash funding of the Back-End Note is contingent on the Company maintaining a closing bid price at all times in excess of $0.008 per share.
On May 2, 2019 (the Original Issue Date (OID), the Company received $85,450 of net proceeds for working capital purposes from the issuance of a $100,000 face value convertible redeemable promissory note (First Note”) with debt issue costs paid to or on behalf of the lender of $12,400 and an original issue discount of $2,150. The terms include interest accrued at 10% annually and the principal and interest payable are payable in one year on May 2, 2020. All interest will be paid in common stock of the Company. Any amount of the principal or interest on this First Note which is not paid when due shall bear Interest at the rate of the lower of Twenty-four Percent (24%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid. The First Note is exchangeable for an equal principal amount of notes of different denominations, as requested by the lender surrounding the same. The First Note is due and payable on May 2, 2020.
The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to Sixty Percent (60%) of the of the average of the two lowest trades of the Common Stock during the fifteen (15) trading Days immediately preceding a conversion date (“Conversion Price”). The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.
The principal amount of the First Note, initially $100,000, may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs. Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount.
Date of Note Satisfaction
|
|
Payment Amount
|
0 to 60 days after the OID
|
|
112% of principal amount plus accrued interest
|
61 to 120 days after the OID
|
|
124% of principal amount plus accrued interest
|
121 to 180 days after the OID
|
|
136% of principal amount plus accrued interest
|
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the First Note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $166,667 ($100,000 principal divided by the Conversion Price).
Regardless of changes in the fair value of the Company’s Common Stock, the lender will receive $166,667 of value at settlement because the monetary value of the obligation does not change. The lender does not benefit if the fair value of the Company’s Common Stock increases and does not bear the risk that the fair value of the Company’s Common Stock might decrease. In accordance with ASC 480, the First Note was classified as stock settled debt and on the note issue date of May 2, 2019, the Company recorded a $66,667 put premium liability with an offset to interest expense in the accompanying Statement of Operations.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
On May 2, 2019, the Company recorded the following as offsets to the First Note to be amortized over the 1-year term: (1) original issue discount of $2,150 and (2) debt issue costs of $12,400.
From November 18, 2019 to April 15, 2020, the lender converted $48,650 of the principal amount of the First Note and $3,444 of accrued interest into 22,167,880 shares of the Company’s common stock. At April 30, 2020, the principal balance of the First Note is $51,350. As a result of the partial conversions, the Company reclassified $32,434 of the put premium liability as an offset to Additional Paid in Capital and the put premium liability balance is $34,233 at April 30, 2020. See Note 6 – Stock and Note 9 – Subsequent Events.
For the period from May 2, 2019 to April 30, 2020, the Company recorded $8,773 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $5,329 of interest (net of $3,444 converted above) related to the convertible unsecured promissory note as accrued interest in the accompanying Balance Sheet.
For the period from May 2, 2019 to April 30, 2020, the Company recorded $14,510 for amortization of the debt discounts to interest expense in the accompanying Statement of Operations.
Convertible Unsecured Promissory Note – May 8, 2019
On May 8, 2019, the Company signed a SPA with an Investor that provides for the issuance of a 12% convertible promissory note in the principal amount of $150,000. In connection with the issuance of the promissory note, the Company issued a common stock purchase warrant to purchase 1,500,000 shares of the Company common stock as a commitment fee to the Investor.
On May 8, 2019, the Company received $121,750 of net proceeds for working capital purposes from the issuance of a $150,000 face value convertible promissory note with debt issue costs paid to or on behalf of the lender of $28,250. The terms include interest accrued at 12% annually and the principal and any amount of the principal or interest on the promissory note which is not paid when due shall bear interest at the rate of the lower of twenty-four percent (24%) per annum, or the highest rate permitted by law, from the due date thereof until the same is paid. The promissory note was due and payable on February 8, 2020.
The lender has the right at any time after the effective date, to convert all or part of the outstanding principal, accrued interest and $750 of conversion fees 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 the lower of (1) the lowest trade during the previous twenty-five (25) trading days or (2) Sixty-One Percent (61%) of the of the lowest trade during the twenty-five (25) trading days immediately preceding a conversion date. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections. The promissory note contains customary affirmative and negative covenants of the Company.
The Company issued the lender a common stock purchase warrant with a three (3) year term to acquire 1,500,000 shares of common stock at an exercise price of $0.10 per share. See Note 6 – Stock Based Compensation for the warrant valuation.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
The principal amount of the promissory note, initially $150,000, may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs, as follows:
Date of Note Satisfaction
|
|
Payment Amount
|
|
|
|
0 to 90 days after the Issue Date
|
|
125% of principal amount plus accrued interest
|
91 to 180 days after the Issue Date
|
|
135% of principal amount plus accrued interest
|
Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount and the Company did not prepay the promissory note within the allowed timeframe.
The Company evaluated the 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 conversion option liability in the balance sheet at fair value. The initial valuation and recording of the conversion option liability was $446,862, using the Binomial Lattice Option Pricing Model with the following assumptions: stock price $0.02, conversion price $0.0067, expected term of 9 months, expected volatility of 383% and discount rate of 2.38%. The initial $446,862 conversion option liability assumed that 22,354,694 shares would be issued upon conversion of the promissory note.
The Company evaluated the warrant and determined that there was no embedded conversion feature as the warrant contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings, and pro-rata distributions. The Company calculated the relative fair value between the note and the warrant on the issue date utilizing the Black Scholes Pricing Model for the warrant. As a result, the Company allocated $24,960 to the warrant and recorded as debt discount with an offset to additional paid in capital. The warrant calculation used the following assumptions: stock price $0.02, warrant exercise price $0.10, expected term of 3 years, expected volatility of 383% and discount rate of 2.38%.
On the note issue date of May 8, 2019, the Company recorded the following debt discounts as offsets to the $150,000 promissory note and will be amortized over the nine-month term of the note: (1) debt issue costs of $28,250, (2) warrant fair value of $24,960 and (3) conversion option liability of $96,790. As a result, the Company recorded a $326,275 expense for the initial fair value of the conversion option liability, recorded as a separate item in Other Income (Expense).
As a result of the Company not paying the promissory note and accrued interest on the due date of February 8, 2020, the promissory note is in default at April 30, 2020.However, the lender has not notified the Company of the default in writing but, the lender has several remedies including calling the principal amount and accrued interest due and payable immediately. The promissory note includes customary affirmative and negative covenants of the Company.
From November 15, 2019 to April 23, 2020, the lender converted $4,084 of principal, $16,609 of accrued interest and $3,000 of conversion fees into 19,888,880 shares of the Company’s common stock. At April 30, 2020, the principal balance of the promissory note remains at $150,000. See Note 6 – Stock.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
For the period from May 8, 2019 to April 30, 2020, the Company recorded $21,826 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $5,217 of interest (net of $16,609 converted above) related to the convertible unsecured promissory note as accrued interest in the accompanying Balance Sheet.
For the period from the note issue date of May 8, 2019 to April 30, 2020, the Company recorded $150,000 for the full amortization of the debt discounts discussed above and recorded to interest expense in the accompanying Statement of Operations.
The Company performed a revaluation of the conversion option liability using the Binomial Lattice Pricing Model at April 30, 2020 that resulted in a value of $645,055 with the following assumptions; stock price $0.0030, conversion price $0.0007, expected term of 0.25 years, expected volatility of 437% and discount rate of 0.09%. The term of the promissory note ended on February 8, 2020, the due date. As a result, the Company utilized an expected term of 90 days or 0.25 years to perform the calculation above. As a result, the Company recorded $453,722 of a loss from the change in the fair value of conversion option liability, recorded in Other Income (Expense) in in the accompanying Statement of Operations for the year ended April 30, 2020.
The change in the conversion option liability assumed that 217,460,507 shares would be issued upon conversion of the promissory note at April 30, 2020.
Convertible Unsecured Promissory Note – December 5, 2019
On December 5, 2019, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a 10% convertible promissory note in the principal amount of $63,000, convertible into shares of common stock of the Company. The Company received $60,000 of net proceeds for working capital purposes from the issuance of the convertible promissory note with debt issue costs paid to or on behalf of the lender of $3,000. 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. The convertible promissory note is due in one (1) year from the date of issuance or December 5, 2020.
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to Forty Percent (40%) of the of the average of the two lowest trades of the Common Stock during the fifteen (15) trading Days immediately preceding a conversion date (“Conversion Price”). The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.
The principal amount and unpaid accrued interest may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs. Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
Date of Note Satisfaction
|
|
Payment Amount
|
0 to 30 days
|
|
115% of principal amount plus accrued interest
|
31 to 60 days
|
|
120% of principal amount plus accrued interest
|
61 to 90 days
|
|
125% of principal amount plus accrued interest
|
91 to 120 days
|
|
130% of principal amount plus accrued interest
|
121 to 150 days
|
|
135% of principal amount plus accrued interest
|
151 to 180 days
|
|
140% of principal amount plus accrued interest
|
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $94,500.
Regardless of changes in the fair value of the Company’s Common Stock, the lender will receive $94,500 of value at settlement because the monetary value of the obligation does not change. The lender does not benefit if the fair value of the Company’s Common Stock increases and does not bear the risk that the fair value of the Company’s Common Stock might decrease. In accordance with ASC 480, the promissory note was recorded as stock settled debt on the note issue date, and the Company recorded a $94,500 put premium liability with an offset to interest expense.
On December 5, 2019, the Company recorded debt issue costs of $3,000 as an offset to the promissory note to be amortized over the 1-year term. For the period from December 5, 2019 to April 30, 2020, the Company recorded $1,208 for amortization of the debt discounts to interest expense in the accompanying Statement of Operations.
For the period from December 5, 2019 to April 30, 2020, the Company recorded $2,537 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $2,537 of interest related to the convertible unsecured promissory note as accrued interest in the accompanying Balance Sheet. See Note 9 – Subsequent Events.
Convertible Unsecured Promissory Note – January 21, 2020
On January 21, 2020, the Company signed a Securities Purchase Agreement (“SPA”) with an investor that provides for the issuance of a 10% convertible promissory note in the aggregate principal amount of $38,000, convertible into shares of common stock of the Company. The Company received $35,000 of net proceeds for working capital purposes from the issuance of the convertible promissory note with debt issue costs paid to or on behalf of the lender of $3,000. 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. The convertible promissory note is due in one (1) year from the date of issuance or January 31, 2021.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
The lender from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this convertible promissory note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, has the right, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the convertible promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to Sixty Percent (60%) of the of the average of the two lowest trades of the Common Stock during the fifteen (15) trading Days immediately preceding a conversion date (“Conversion Price”). The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.
The principal amount and unpaid accrued interest may be prepaid in full solely during the dates set forth below, which shall be subject to the following upward adjustments, subject to the payment period upon which the date all amounts hereunder are paid in full by the Borrower occurs. Subsequent to 180 days after the Issue Date, the Company has no right or option to prepay the principal amount.
Date of Note Satisfaction
|
|
Payment Amount
|
0 to 30 days
|
|
115% of principal amount plus accrued interest
|
31 to 60 days
|
|
120% of principal amount plus accrued interest
|
61 to 90 days
|
|
125% of principal amount plus accrued interest
|
91 to 120 days
|
|
130% of principal amount plus accrued interest
|
121 to 150 days
|
|
135% of principal amount plus accrued interest
|
151 to 180 days
|
|
140% of principal amount plus accrued interest
|
The Company evaluated the First Note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the convertible promissory note (1) embodies an unconditional obligation, (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based solely on a fixed monetary amount known at inception as the lender will receive $25,333.
Regardless of changes in the fair value of the Company’s Common Stock, the lender will receive $25,333 of value at settlement because the monetary value of the obligation does not change. The lender does not benefit if the fair value of the Company’s Common Stock increases and does not bear the risk that the fair value of the Company’s Common Stock might decrease. In accordance with ASC 480, the convertible promissory note was recorded as stock settled debt on the note issue date of January 21, 2020, and the Company recorded a $25,333 put premium liability with an offset to interest expense.
On January 21, 2020, the Company recorded debt issue costs of $3,000 as an offset to the promissory note to be amortized over the 1-year term. For the period from January 21, 2020 to April 30, 2020, the Company recorded $822 for amortization of the debt discounts to interest expense in the accompanying Statement of Operations.
For the period from January 21, 2020 to April 30, 2020, the Company recorded $1,041 of interest expense in the accompanying Statement of Operations and at April 30, 2020, the Company has recorded $1,041 of interest related to the convertible unsecured promissory note as accrued interest in the accompanying Balance Sheet.See Note 9 – Subsequent Events.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
|
|
April 30,
2020
|
|
|
April 30,
2019
|
|
Convertible Secured Note Payable:
|
|
|
|
|
|
|
Mar. 9, 2016 - Principal and interest at 10% due June 9, 2017. IN DEFAULT with interest recorded at default rate of 22%.
|
|
$
|
30,000
|
|
|
$
|
85,000
|
|
|
|
|
|
|
|
|
|
|
May 17, 2018 - Principal and interest at 8% due May 17, 2019. IN DEFAULT with interest recorded at default rate of 18%.
|
|
|
80,000
|
|
|
|
80,000
|
|
|
|
|
|
|
|
|
|
|
Less: debt discount
|
|
|
-
|
|
|
|
(10,083
|
)
|
|
|
|
|
|
|
|
|
|
Plus: put premium
|
|
|
65,372
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Convertible Secured Notes Payable
|
|
$
|
175,372
|
|
|
$
|
154,917
|
|
Convertible Secured Note Payable - #1
At April 30, 2020, the Company has recorded a remaining balance of $30,000 from an original $550,000 face value convertible secured promissory note, which had a balance of $85,000 at April 30, 2019. From June 18, 2019 to February 7, 2020, the lender elected to convert $55,000 of the principal amount of the promissory note into 9,310,025 shares of common stock. As a result of these conversions, the promissory note balance is $30,000 at April 30, 2020. See Note 6 – Stock. The Company calculated a conversion price of $0.0013 per share for the promissory note balance of $30,000 that would convert into 23,693,084 shares of common stock at April 30, 2020.
The promissory note was due and payable on June 9, 2017 and as a result, is in default at April 30, 2020. However, the lender has not notified the Company of the default in writing but, the lender has several remedies including calling the principal amount and accrued interest due and payable immediately. The promissory note includes customary affirmative and negative covenants of the Company.
The Company reevaluated the promissory note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the promissory note (1) embodies an unconditional obligation and (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based on a monetary amount known as the lender will receive $107,143 ($75,000 principal divided by the Conversion Price). In accordance with ASC 480, the promissory note was classified as stock settled debt and the Company recorded a $32,143 put premium liability.
As a result of the partial conversions discussed above, the Company reclassified $20,104 of the put premium liability as an offset to Additional Paid in Capital and the put premium liability balance is $12,039 at April 30, 2020.
The Company is accruing interest at the default rate of twenty-two percent (22%) per annum from the due date thereof until paid. During the year ended April 30, 2020, the Company recorded $13,037 of interest expense in the accompanying Statement of Operations and at April 30, 2020, $103,429 of accrued interest was recorded in the accompanying Balance Sheet.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 3 – DEBT (CONTINUED)
Convertible Secured Note Payable - #2
At April 30, 2020 and April 30, 2019, the Company has recorded $80,000 from the issuance of a convertible secured promissory note dated May 17, 2018 with terms including interest accrued at 10% annually and the principal and interest payable on May 17, 2019. The promissory note is in default at April 30, 2020. However, the lender has not notified the Company of the default in writing but, the lender has several remedies including calling the principal amount and accrued interest due and payable immediately. The promissory note includes customary affirmative and negative covenants of the Company. The Company calculated a conversion price of $0.0010 per share for the promissory note balance of $80,000 that would convert into 78,431,373 shares of common stock at April 30, 2020.
The Company evaluated the promissory note in accordance with ASC 480 “Distinguishing Liabilities From Equity” because the promissory note (1) embodies an unconditional obligation and (2) requires the Company to settle the unconditional obligation by issuing a variable number of its common shares, and (3) is based on a monetary amount known as the lender will receive $133,333 ($80,000 principal divided by the Conversion Price). In accordance with ASC 480, the promissory note has been classified as stock settled debt and the Company recorded a $53,333 put premium liability.
Effective May 17, 2019, the Company is accruing interest at the default rate of eighteen percent (18%) per annum from the due date thereof until paid. During the year ended April 30, 2020, the Company recorded $17,600 of interest expense in the accompanying Statement of Operations and at April 30, 2020, $23,719 of accrued interest was recorded in the accompanying Balance Sheet.
NOTE 4 – INCOME TAXES
The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets at April 30, 2020 and 2019 consist of net operating loss carryforwards and differences in the book and tax basis assets.
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the “Act”), a tax reform bill which, among other items, reduces the current federal income tax rate to 21% from 34%. The rate reduction is effective January 1, 2018 and is permanent.
The Act has caused the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Since the Company has provided a full valuation allowance against its deferred tax assets, the revaluation of the deferred tax assets did not have a material impact on any period presented. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 4 – INCOME TAXES (CONTINUED)
The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended April 30, 2020 and 2019 were as follows:
|
|
For the Year Ended April 30,
|
|
|
|
2020
|
|
|
2019
|
|
Statutory federal rate
|
|
|
(21.00
|
)%
|
|
|
(21.00
|
)%
|
State tax rate, net of federal effect
|
|
|
(5.75
|
)%
|
|
|
(5.75
|
)%
|
Change in federal tax rates
|
|
|
0
|
%
|
|
|
0
|
%
|
Change in valuation allowance
|
|
|
26.75
|
%
|
|
|
26.75
|
%
|
Total provision for income taxes
|
|
|
0
|
%
|
|
|
0
|
%
|
The Company’s income tax benefit differs from the “expected” income tax benefit for federal income tax purposes as follows:
|
|
For the Year Ended April 30,
|
|
|
|
2020
|
|
|
2019
|
|
Income tax benefit at U.S. Federal Income Tax rate
|
|
$
|
(313,000
|
)
|
|
$
|
(152,000
|
)
|
State income taxes, net of federal benefit
|
|
|
(86,000
|
)
|
|
|
(41,000
|
)
|
Effect of change in federal statutory rate
|
|
|
-
|
|
|
|
-
|
|
Change in valuation allowance
|
|
|
399,000
|
|
|
|
193,000
|
|
|
|
|
|
|
|
|
|
|
Net Income tax benefit
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company’s approximate net deferred tax assets are as follows:
|
|
April 30,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
$
|
5,137,000
|
|
|
$
|
4,738,000
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
5,137,000
|
|
|
$
|
4,738,000
|
|
Less: deferred tax asset valuation allowance
|
|
|
(5,137,000
|
)
|
|
|
(4,738,000
|
)
|
Total Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The net operating loss carryforward was approximately $19,201,000 and $17,711,000 at April 30, 2020 and 2019, respectively. The Company provided a valuation allowance equal to the deferred income tax assets for the years ended April 30, 2020 and 2019 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward and other deferred tax assets. The increase in the valuation allowance was $399,000 in 2020.
The potential tax benefit arising from the net operating loss carryforward of $16,656,000 from the period prior to Act’s effective date will expire in 2038. The potential tax benefit arising from the net operating loss carryforward of $2,545,000 from the period following to the Act’s effective date can be carried forward indefinitely within the annual usage limitations.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 4 – INCOME TAXES (CONTINUED)
Additionally, the future utilization of the net operating loss carryforward to offset future taxable income is subject to an annual limitation as a result of ownership or business changes that may occur in the future. The Company has not conducted a study to determine the limitations on the utilization of these net operating loss carryforwards. If necessary, the deferred tax assets will be reduced by any carryforward that may not be utilized or expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.
The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s Corporate Income tax returns for tax years from 2005 (initial tax year) through 2019 remain subject to Internal Revenue Service (“IRS”) examination because the Company has not filed tax returns for these years. Because the Company has not had taxable income for the unfiled tax returns, the IRS charges a non-filing penalty of $210 for each return at 60 days after the date due. The Company has calculated that the estimated penalty for the unfiled returns would be approximately $2,940 at April 30, 2020.
At April 30, 2020 and 2019, 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 the accompanying Balance Sheets. Additionally, the Company owes the State of Delaware for assessed penalties and interest from the tax year ending April 30, 2007 of $239,522 and $219,209, which is included as accrued expenses in the accompanying Balance Sheets at April 30, 2020 and 2019, respectively. 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.
NOTE 5 – STOCK
Common Stock
The Company is authorized to issue up to 450,000,000 shares of common stock at $0.001 par value per share. Effective October 30, 2019, the Company amended its Articles of Incorporation to increase authorized shares of common stock from 300,000,000 to 450,000,000. See Note 8 – Commitments and Contingencies for discussion related to authorized securities. At April 30, 2020, 153,359,858 shares were issued, and 151,859,858 shares were outstanding. 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 and excluded from the shares issued at April 30, 2020. 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 Company plans to pursue the return of the 1,500,000 unvested shares held by two former employees.
Common Stock Issued
From June 18, 2019 to February 7, 2020, the lender of an original $550,000 face value convertible secured promissory note elected to convert $55,000 of the principal amount of the promissory note into 9,310,025 shares of common stock. See Note 3 – Debt.
On July 15, 2019, the Company received $50,000 of proceeds from a private placement offering, representing 2,500,000 shares of stock at $0.02 per share from a related party investor. See Note 6 Related Party Transactions.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 5 – STOCK (Continued)
On October 31, 2019, the Company received $50,000 of proceeds from a private placement offering, representing 5,000,000 shares of stock at $0.01 per share from a related party investor. See Note 6 - Related Party Transactions
From November 18, 2019 to April 15, 2020, the lender of an original $100,000 face value convertible unsecured promissory note converted $48,650 of the principal amount and $3,444 of accrued interest into 22,167,880 shares of the Company’s common stock. See Note 3 – Debt.
From November 15, 2019 to April 23, 2020, the lender of an original $150,000 face value convertible unsecured promissory note converted $4,084 of principal, $16,609 of accrued interest and $3,000 of conversion fees into 19,888,880 shares of the Company’s common stock. See Note 3 – Debt.
See Note 9 – Subsequent Events.
NOTE 6 – 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. At April 30, 2020, only 1,200,000 of these options were outstanding and are held by the Contract President and CEO of the Company as the other stock options were either forfeited or terminated since being granted. For the 1,200,000 stock options held by the Contract President and CEO of the Company, 450,000 vested on the grant date of July 14, 2014 and the remaining 750,000 had a four (4) year vesting period through July 14, 2018.
The following table summarizes stock option activity of the Company for the year ended April 30, 2020:
|
|
Stock Options Outstanding
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2019
|
|
|
1,200,000
|
|
|
$
|
0.05
|
|
|
|
5.21
|
|
|
$
|
-
|
|
No activity
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding, April 30, 2020
|
|
|
1,200,000
|
|
|
$
|
0.05
|
|
|
|
4.21
|
|
|
$
|
-
|
|
Exercisable, April 30, 2020
|
|
|
1,200,000
|
|
|
$
|
0.05
|
|
|
|
4.21
|
|
|
$
|
-
|
|
Stock Warrants
On May 8, 2019, in relation to a $150,000 convertible unsecured promissory note, the Company issued the lender a common stock purchase warrant with a three (3) year term to acquire 1,500,000 shares of common stock of the Company at an exercise price of $0.10 per share. See Note 3 – Debt.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 6 – STOCK BASED COMPENSATION (Continued)
The Company evaluated the warrant and determined that there was no embedded conversion feature as the warrant contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings, and pro-rata distributions. The Company calculated the relative fair value between the note and the warrant on the issue date utilizing the Black Scholes Pricing Model for the warrant. As a result, the Company allocated $24,960 to the warrant and recorded as debt discount with an offset to additional paid in capital. The warrant calculation used the following assumptions: stock price $0.02, warrant exercise price $0.10, expected term of 3 years, expected volatility of 383% and discount rate of 2.38%.
From June 2019 to February 2020, 2,150,000 warrants expired as they were not exercised before the end of the exercise period.
The following table summarizes stock warrant activity of the Company for the year ended April 30, 2020:
|
|
Stock Warrants Outstanding
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Warrants
|
|
|
Price
|
|
|
Life (Years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2019
|
|
|
2,450,000
|
|
|
$
|
0.05
|
|
|
|
0.50
|
|
|
$
|
14,513
|
|
Granted May 2019
|
|
|
1,500,000
|
|
|
$
|
0.10
|
|
|
|
2.52
|
|
|
$
|
-
|
|
Expired June 2019 and February 2020
|
|
|
(2,150,000
|
)
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding, April 30, 2020
|
|
|
1,800,000
|
|
|
$
|
0.13
|
|
|
|
1.77
|
|
|
$
|
-
|
|
Exercisable, April 30, 2020
|
|
|
1,800,000
|
|
|
$
|
0.13
|
|
|
|
1.77
|
|
|
$
|
-
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company has previously accrued $740,000 for unpaid former officer compensation and $37,111 for the employer’s share of payroll taxes related to the unpaid former officer compensation in the accompanying Balance Sheet at April 30, 2020. 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.
At April 30, 2020, the Company has a $2,300 remaining unpaid balance on a promissory note due to a former officer that originally was $15,300 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 classified the promissory note as Notes Payable – Related Parties in the accompanying Balance Sheet at April 30, 2020. See Note 3 – Debt.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)
Effective November 16, 2018, the Company entered into a Master Business Agreement (“Master Agreement”) with a consulting firm to provide the following services related to the Company’s planned 2019 football season: (1) marketing and communications, (2) sponsorship development and sales, (3) distribution and broadcasts and (4) production and show creation. The consulting firm is owned by the Chief Marketing Officer and a member of the Company’s Board of Directors. See Note 9 – Subsequent Events. The Master Agreement has a term through November 30, 2020, by virtue of an executed amendment, and provides for both cash and common stock payments for each of the above four service areas. The services to be provided are contingent on the Company obtaining a minimum $3,000,000 of investor funding by August 31, 2020, by virtue of an executed amendment. From January 30, 2019 to November 7, 2019, the Company paid the consulting firm $52,500 as a good faith payment and recorded the payment as prepaid consulting, related party in the accompanying Balance Sheet at April 30, 2020.
Additionally, the Master Agreement specified that the Company would reimburse the consulting firm for out of pocket expenses and at April 30, 2019, the Company had recorded $18,131 of expenses as accounts payable. In May 2019, the Company paid the $18,131 of accounts payable to the consulting firm.
At April 30, 2020, the Company has recorded $68,618 of accounts payable – related parties for Company related expenses. This includes $61,850 to the contract President, CEO, and member of the Board of Directors on behalf of the Company, which includes $48,300 of expenses related to a consulting agreement with the Company, $11,000 of expenses related to an office in home and $2,550 of advances made to the Company. Additionally, the balance at April 30, 2020 includes $6,768 paid by the contract Executive Vice President and a member of the Board of Directors on behalf of the Company.
Between October 5, 2018 and October 31, 2019, a member of the Board of Directors, purchased 33,500,000 shares of the Company’s $0.001 par value common stock at purchase prices of $0.01 to $0.02 per share. At April 30, 2020, the 33,500,000 shares represent approximately 21.8% of the Company’s issued shares of common stock. See Note 9 – Subsequent Events
On March 5, 2020, the same member of the Board of Directors that purchased the shares of the Company’s common stock discussed above, provided $25,000 of proceeds to the Company through the issuance of a Note Payable. The Note Payable terms include an annual interest rate of 10% and is due and payable on June 5, 2020. At April 30, 2020, the Company has recorded the proceeds as note payable, related party and $384 of accrued interest, related party in the accompanying Balance Sheet. See Note 3 Debt and Note 9 – Subsequent Events.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Office Lease
At April 30, 2019, the Company had a remaining balance owed of $10,000 from a settlement agreement dated February 5, 2018 related to a lease agreement for its former corporate headquarters and training facility in Lakewood Ranch, Florida. The terms included that the Company gave up all right, title and interest to business equipment and office furniture in the premises until paid.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
From May 8, 2019 to May 29, 2019, the Company paid the remaining balance of $10,000 related to the settlement discussed above and as a result, the Company has right, title and interest to the remaining unused football equipment that was under the control of the landlord prior to the final payment. The Company had previously impaired $135,323 value of unused football equipment at April 30, 2017 that was recovered in relation to the office lease settlement. In accordance with generally accepted accounting principles because the recovered football equipment was previously impaired, the Company has recorded it at a zero-cost basis because the value cannot be increased once impaired, regardless of its fair market value.
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 to pay legal fees owed in the amount of $166,129. The Company negotiated with Stradley and in July 2014, issued 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. 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 in the accompanying Balance Sheet at April 30, 2020. The Company has received no further correspondence related to this judgment.
Attorney Lien
On August 2, 2017, David Bovi, the Company’s former legal counsel, submitted correspondence reflecting a “charging lien” for non-payment related to $243,034 of legal services provided to the Company, which included $19,453 of interest on unpaid invoices. The retainer agreement with Mr. Bovi specified that interest will be charged at 1% per month for unpaid amounts. The Company recorded $26,880 of interest expense related to the unpaid invoices during the year ended April 30, 2020 resulting in a total amount owed of $321,281 classified as accounts payable in the accompanying Balance Sheet at April 30, 2020. The “charging lien” states that Mr. Bovi will retain all Company documents in his possession unless paid the amount outstanding as described above. The Company disputes the claim made by Mr. Bovi.
BodyHype:
In 2016, the Company entered an agreement with BodyHype of Canada to be the Company’s official uniform supplier. BodyHype has made a claim for a $140,000 payment, which the Company disputes and the Company has recorded $140,000 of accounts payable for the claim in the accompanying Balance Sheet at April 30, 2020. The Company disputes the charge with BodyHype.
Vendor Lawsuits
H&J Ventures, LLC
H&J Ventures, LLC (“H&J”) is a debtor in a chapter 7 bankruptcy proceeding. The chapter 7 trustee (the “Trustee”) made a claim in 2016 against the Company relating to an October 1, 2014 agreement between the Company and H&J.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
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. On August 13, 2018, the Company and the Trustee executed a Stipulation and Consent Order specifying that the Company would pay the Trustee $50,000 by August 31, 2018. If payment were not made timely by the Company and was not cured within three (3) days of the August 31, 2018 date, a consent judgment in the amount of $70,000 would be entered against the Company. The Company did not make the required payment within the timeframe and as a result, a judgment in the amount of $70,000 was entered against the Company. The Company has previously recorded $70,000 for the potential settlement as accrued expenses in the accompanying Balance Sheet at April 30, 2020. The Company received notice on December 18, 2019 that the judgement had been purchased by Pier House Capital, LLC, who extended a 10-day offer to compromise and settle the judgment debt for $25,000. The Company rejected the offer and the judgment remains unpaid. See Note 2 – Accrued Expenses.
Interactive Liquid LLC:
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 failed to make the required payment due to lack of funding and as such, on June 4, 2018, Interactive filed the stipulated judgment. The Company has recorded accounts payable to Interactive of $153,016 in the accompanying Balance Sheet at April 30, 2020 as the judgment remains unpaid.
Lamnia International:
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. The Company has recorded $124,968 of accounts payable to Lamnia in the accompanying Balance Sheet at April 30, 2020. The difference in amounts is that the Company terminated the agreement in writing whereas the vendor continued to charge for services after the date of termination for which the Company disagrees.
Cancellation of Accounts Payable
The Company canceled $291,667 and $90,796 of previously recorded accounts payable during the years ended April 30, 2020 and 2019, respectively. The cancelations are included as a separate line item in the accompanying Statement of Operations for the years ended April 30, 2020 and 2019, respectively. The $291,667 for 2020 was composed of (1) $216,667 related to Herm Edwards, a former NFL player and coach, as a consultant to promote the new football league and (2) $75,000 related to Mazon Sports Management, LLC (“Mazon”). Effective April 30, 2020, the Company and Mr. Edwards executed a Memorandum of Understanding and Mutual Release (“Release”) that released the Company from any further cash payments to be made to Mr. Edwards. Effective April 24, 2020, the Company executed a Release with Mazon that released the Company from any further payments to be made to Mazon.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
The $90,796 for the year ended April 30, 2019 related to alleged expenses incurred by Jerry Craig, the former CEO of the Company. The Company requested and never received supporting documentation from Mr. Craig and received correspondence that Mr. Craig would not pursue a reimbursement of the incurred expenses. Additionally, the Company requested and received a legal opinion that Mr. Craig has abandoned his claim and as a result, the Company cancelled the $90,796 of accounts payable. Additionally, because Mr. Craig was a former officer of the Company, the $90,796 was classified as a non-cash transaction in the accompanying Statement of Cash Flows for the year ended April 30, 2019.
Unpaid Taxes and Penalties
At April 30, 2020, the Company owed the State of Delaware $110,154 for unpaid state income taxes from the tax year ended April 30, 2007. The Company does not owe income taxes for any other year than 2007.The unpaid state income taxes are included as state income taxes payable in accompanying Balance Sheet at April 30, 2020. Additionally, the Company owes the State of Delaware for penalties and interest from the tax year ending April 30, 2007 of $239,522, which is included as accrued expenses in the accompanying Balance Sheet at April 30, 2020. 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 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 not 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 Balance Sheet at April 30, 2020 (See Note 2 – Accrued Expenses). 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.
SEC Correspondence
On April 19, 2018, the Company received correspondence from the SEC Division of Corporate Finance related to non-compliance with the reporting requirements under Section 13(a) of the Securities Act of 1934. The Company responded to the SEC on April 30, 2018 providing information that its past due April 30, 2017 Form 10-K was filed on April 25, 2018 and that it was actively preparing past due 10-Q filings for the periods ended July 31, 2017, October 31, 2017 and January 31, 2018. The Company requested a sixty (60) day extension to file the past due 10-Q reports. The Company filed the past due 10-Q reports with the SEC on June 11, 2018.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
The Company filed its Form 10-K and the financial statements for the year ended April 30, 2018 on November 19, 2018 but, were not timely filed. As the Company had not timely filed its Form 10-K for the year ended April 30, 2018, the Company may be subject, without further notice, to an administrative proceeding to revoke its registration under the Securities Act of 1934. Additionally, the Company had not timely filed various other filings in 2018 and 2019.
Master Services Agreement
Effective February 5, 2019, the Company entered into a Master Services Agreement (“Master Services”) with a third-party consulting firm to provide social and digital consulting services. The Master Services included an initial Statement of Work (“SOW”) in the amount of $167,500 for services through October 31, 2019. The SOW provided for an initial signing payment of $25,000 and $15,000 payments to be made through October 31, 2019 for services provided. The Company made the $25,000 signing payment on February 21, 2019.
The parties disputed the services provided and terminated the agreement in July 2019. A legal firm representing the consulting firm contacted the Company and claimed that the Company owes $90,000 for services, which the Company disputes. The Company completed an analysis of services provided and believes that the $90,000 claim is significantly overstated. Based upon invoices that were provided by the consulting firm later, the Company recorded $60,000 of accounts payable in the accompanying Balance Sheet at April 30, 2020, which the Company disputes.
Lease Agreements and Use Permit
Effective February 21, 2019, the Company entered into a lease agreement for the Virginia Beach, Virginia Sportsplex for the 2019 football season at a price of $7,500 per event. The Company paid a $30,000 deposit with the execution of the lease agreement and recorded as an other asset. Additionally, the Company entered into a Use Permit Agreement for locker room rental and turf rental for practice time at a weekly rate of $1,200 or $12,000 in total.
The Company has been in discussions with Virginia Beach Sportsplex related to transferring the deposit to the 2021 football season. While the Company believes some form of credit will be eventually applied, no formal written agreement has been completed and as a result, the $30,000 lease deposit has been written off to operating expense in the accompanying Statements of Operations for the year ended April 30, 2020.
Effective March 12, 2019, the Company entered into a lease agreement for the War Memorial Stadium in Little Rock, Arkansas for a minimum of four and a maximum of five football games for the 2019 football season. The payment for each event was $10,000 plus additional expenses including security and expenses for a total of $14,225 per event. Additionally, the Company paid a $5,000 non-refundable deposit with the execution of the lease agreement and is recorded as an other asset in the accompanying Balance Sheet at April 30, 2020. The Company has received correspondence that the $5,000 lease deposit will be transferred successfully to the 2021 football season.
Purchase of Football and Office Equipment
On July 18, 2019, the Company completed an agreement to purchase the bulk of the football equipment, helmets, pads, electronics, office equipment and supplies of the bankrupt Alliance of American Football Spring League. This agreement was through the bankruptcy court with a third party for $400,000 that was scheduled on the bankruptcy petition with a valuation in excess of $3,000,000. The Company funded an initial deposit of $25,000 on July 22, 2019 that was recorded as an other asset and the remaining balance of $375,000 was due by September 30, 2019, by virtue of an executed extension (See discussion below). Additionally, the Company agreed to share equally the storage warehouse rent for August 2019 of $10,000 and paid $5,010 in July 2019.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
Additionally, the Company structured an agreement with a third-party in bankruptcy to purchase computer and office equipment for $11,000 (including $1,000 for storage material) with a market valuation of approximately $80,000.
The Company was not going to meet the September 30, 2019 deadline to purchase the equipment described above. However, on September 25, 2019, the Company structured a $70,000 face value promissory note with the Lender that is the same party as discussed previously under Secured Convertible Notes Payable #1 and #2 – see Note 3 – Debt.
On September 25, 2019, the Company received $55,284 of net proceeds from the issuance of a $70,000 face value promissory note with an original issue discount of $9,216 and debt issue costs paid to or on behalf of the lender of $5,500.
The Company had previously funded a $25,000 deposit on July 25, 2019 (see above discussion) with a third-party related to the football equipment and as a result of the new agreement with the Lender, the $25,000 deposit was no longer valid and was recorded as other expense in the accompanying Statement of Operations for the year ended April 30, 2020.
As a component of the closing of the $70,000 face value promissory note, the Lender paid the $11,000 of funds for the computer and office equipment discussed above directly to the third party in bankruptcy and as a result, the Company has recorded the $11,000 payment as Office Equipment in accompanying Balance Sheet at April 30, 2020. See Note 1- Property and Equipment.
The $70,000 promissory note included a covenant of the Company including that on or before January 31, 2020, for an aggregate purchase price equal to $400,000, the Company shall take all necessary action to purchase from the Lender the football equipment that the Lender acquired from a third party that the Company had previously structured a $400,000 agreement to purchase – see above. Prior to January 31, 2020, the Lender agreed not to sell the football equipment unless there occurs an Event of Default or any breach or default under any other agreement by and between the Company and the Lender; provided that, if the Company has not purchased the football equipment by January 31, 2020, the parties agree that the Lender may sell such football equipment to any third party without limitation.
Additionally, the promissory note includes a covenant that specifies that on or before December 31, 2019, the Company shall have had a special meeting of the stockholders of the Company for the purpose of electing a duly elected and constituted board of directors. The Company did not have such a meeting and was in technical default of the covenant. However, the Company was in constant discussions with the lender and on February 20, 2020, the technical default was cured by the Company appointing three additional members to the Board of Directors.
Effective February 18, 2020, the Company and the Lender executed a Forbearance Agreement related to the Company not purchasing the football equipment above by the deadline of January 31, 2020. The non-payment of the football equipment constituted an Event of Default under the promissory note. The Forbearance Agreement extended the purchase date of the football equipment by the Company to March 25, 2020 (“Forbearance Termination Date”). On or before the Forbearance Termination Date, the Company shall purchase from the Lender the football equipment for (i) a purchase price equal to $435,000.00, if purchased prior to February 29, 2020, or (ii) a purchase price equal to $470,000.00, if purchased between March 1, 2020 and the Forbearance Termination Date. See discussion below related to Forbearance Termination Date.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 8 – COMMITMENTS AND CONTINGENCIES (Continued)
The Lender requested that Company should move the football equipment and pay for the storage and insurance in full. Effective March 6, 2020, the Company executed a one-year lease in San Antonio, Texas for the storage and insurance coverage of the football equipment.
On April 9, 2020, the Company received $30,000 of proceeds from the issuance of a note payable from the same lender described above with terms including interest accrued at 8% annually and the principal and interest were payable in six months on October 9, 2020. The note payable specified that on or before May 15, 2020, for an aggregate purchase price equal to $475,000, the Company shall, and shall take all necessary action to, purchase the football equipment described above. The Lender agreed not to sell the football equipment to a third party unless there occurs an Event of Default or any breach or default under any other agreement by and between the Company and the Lender. However, the note payable specified that if the Company did not purchase the stored football equipment by May 15, 2020, the parties agree that the Lender may sell the football equipment to any third-party without limitation.
On July 21, 2020, the Company received correspondence from the Lender that forbears on any defaults or default implications until August 30, 2020, as they relate to the $70,000 and $30,000 promissory notes. See Note 3 – Debt.
Failure to Reserve Sufficient Shares of Common Stock.
The Company has existing convertible promissory notes with a covenant to reserve sufficient shares of common stock for the potential conversion of these securities. See Note 3 – Debt and Note 5 - Stock. At April 30, 2020, the calculated shares issuable under the assumed conversion of the promissory notes is greater than the amount of shares that the Company has authorized. As a result, the lenders of the convertible promissory notes could declare an event of default and the principal and accrued interest would become immediately due and payable. Additionally, the lenders have additional remedies including penalties against the Company.
NOTE 9 – SUBSEQUENT EVENTS
On May 2, 2020, the Company and the lender of an original $100,000 face value convertible unsecured promissory note executed an extension of the due date ninety (90) days from May 2, 2020 to August 2, 2020. This note payable is currently in default as of the date of these financial statements. See Note 3 – Debt and discussion below on conversion of principal and accrued interest.
On May 5, 2020, the Company, and a member of the Board of Directors of an original $25,000 note payable, executed an agreement extending the due date of the note payable to August 5, 2020. This note payable is currently in default as of the date of these financial statements. See Note 3 - Debt and Note 7 – Related Party Transactions.
From May 7, 2020 to June 23, 2020, a lender of an original $100,000 face value convertible unsecured promissory note, elected to convert $36,800 of the principal amount and $3,949 of accrued interest into 41,622,179 shares of common stock resulting in a note balance of $14,550 after the conversion. See Note 3 – Debt.
Effective May 20, 2020, the Company sold 100,000 shares of common stock to an investor for $400 received at a purchase price of $0.004 per share.
Effective May 25, 2020, the Company sold 1,000,000 shares of common stock to an investor for $40,000 received between May 14, 2020 and May 20, 2020, at a purchase price of $0.04 per share.
From June 8, 2020 to June 18, 2020, a lender of an original $63,000 face value convertible unsecured promissory note, elected to convert the entire principal amount and $3,150 of accrued interest into 65,492,425 shares of common stock. See Note 3 – Debt.
MAJOR LEAGUE FOOTBALL, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 2020 AND 2019
NOTE 9 – SUBSEQUENT EVENTS (Continued)
From June 15, 2020 to June 23, 2020, a lender of an original $150,000 face value unsecured promissory note, elected to convert $7,433 of principal, $10,416 of accrued interest and $3,750 of conversion fees into 59,995,579 shares of common stock resulting in a note balance of $138,483 after the conversions. See Note 3 – Debt.
From July 23, 2020 to July 27, 2020, a lender of an original $38,000 face value unsecured promissory note, elected to convert the entire principal amount and $1,900 of accrued interest into 30,692,309 shares of common stock. See Note 3 – Debt.
On August 12, 2020, the Company received $30,000 of proceeds from the issuance of a note payable with a director of the Company. The terms including interest accrued at 10% annually and the principal and interest are payable in three months on November 12, 2020. See Note 3 - Debt and Note 7 – Related Parties.