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EX-32.2 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18 U.S.C. SECTION 1350 - MAJOR LEAGUE FOOTBALL INCmlfb_ex32z2.htm
EX-32.1 - CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 18 U.S.C. SECTION 1350 - MAJOR LEAGUE FOOTBALL INCmlfb_ex32z1.htm
EX-31.2 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INCmlfb_ex31z2.htm
EX-31.1 - CERTIFICATION - MAJOR LEAGUE FOOTBALL INCmlfb_ex31z1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

——————————

FORM 10-K

(Mark One)

 

þ

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


For the fiscal year ended April 30, 2016

or


¨

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


For the transition period from ____________ to ____________


Commission File Number 000-51132


[mlfb_10k002.gif]


Major League Football, Inc.

(Exact name of registrant as specified in its charter)


Delaware

(State or other jurisdiction of

Incorporation or Organization)

20-1568059

(I.R.S. Employer

Identification No.)

 

 

6230 University Parkway, Suite 301, Lakewood Ranch, Florida

(Address of principal executive offices)

34240

(Zip Code)

 

Registrant’s telephone number, including area code: (774) 213-1995

 

Securities registered pursuant to Section 12(b) of the Act:


Title of each class

None

Name of each

Exchange on which registered

None

 

Securities registered pursuant to Section 12(g) of the Act:


Common Stock, par value $.001 per share

(Title of Class)


Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨  No þ


Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨  No þ


Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No ¨


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


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K þ


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


Large Accelerated Filer ¨  Accelerated Filer ¨  Non-Accelerated filer ¨  Smaller reporting company þ


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ¨  No þ


As of October 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $16,311,636. Such aggregate market value was computed by reference to the closing price of $.93 per share for the registrant’s common stock on the OTC on that date.  


The number of shares of the registrant’s common stock issued and outstanding as of July 28, 2016 was 46,515,069.




 


Table of Contents


 

 

 

Page

PART I

 

 

 

 

Item 1.

Business

1

 

Item 1A.

Risk Factors

6

 

Item 2.

Properties

11

 

Item 3.

Legal proceedings.

11

PART II

 

 

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

12

 

Item 7.

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

14

 

Item 8.

Financial Statements and Supplementary Data.

16

 

Item 9A.

Controls and Procedures

17

 

Item 9B.

Other Information

18

PART III

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

19

 

Item 11.

Executive Compensation

21

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

24

 

Item 13.

Certain Relationships and Related Transactions, Director Independence

25

 

Item 14.

Principal Accountant Fees and Services

26

PART IV

 

 

 

 

Item 15.

Exhibits, Financial Statement Schedules

28











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Forward-Looking Statements


Some of the information presented in this report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are included throughout the report, including the section titled “Risk Factors,” and relate to our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Specifically, forward-looking statements may include, among others, statements concerning:


 

·

our expectations of future results of operations or financial condition;

 

·

the timing, cost and expected impact on our market share and results of operations of our planned capital expenditures and;

 

·

expectations of the continued availability of capital resources.


Although we believe that the expectations reflected in such forward-looking statements are reasonable, they are inherently subject to risks, uncertainties and assumptions about our Company, and accordingly, our forward-looking statements are qualified in their entirety by reference to the factors described below under the section titled “Risk Factors” and in the information incorporated by reference herein.


All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report may not occur.




ii





PART I


Item 1.

Business.


Our Plan of Business


Major League Football, Inc. (the “Company”) is seeking to establish, develop and operate Major League Football ("MLFB") as a professional spring/summer football league. Our anticipated launch is March 2017. We intend to fill a void by establishing franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the NFL off-seasons, which will enable it to take a totally non-adversarial approach towards the National Football League ("NFL"). Our spring and early summer schedule ensures no direct competition with autumn/winter sports, including the 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high school and collegiate institution teams.


During April 2016, we determined to reschedule our inaugural year of professional, spring-league football from spring 2016 to spring 2017 due to a lack of adequate funding, and instead during 2016 to launch a development season to develop players, plan for staffing in cities and provide ample time for ticketing agencies and our broadcasting partner to advertise and market MLFB's formal kick-off in 2017.

Unless the context otherwise requires, all references to the “Company,” “we,” “our” or “us” and other similar terms collectively means Major League Football, Inc., a Delaware corporation. Our principal offices are presently located at 6230 University Parkway, Suite 301, Lakewood Ranch, Florida, 34240. Our telephone number is (774) 213-1995. Our Internet website is located at: www.mlfb.com.


We expect that we will need new financing over the next 12 months in order to position our Company for its anticipated launch in March 2017. Specifically, we anticipate that we will need to raise approximately $8 million prior to September 1, 2016 and subsequently, commence another offering or offerings to raise an additional $30 million to cover our operating expenses through the end of 2017.


Single Entity Structure


We intend to operate the league as a single entity owned, stand alone, dominant independent sports league. The single entity structure will be based on the design of Major League Soccer (MLS), where a single entity sports league owns and operates all of its teams. This corporate structure provides several compelling benefits, including:


·

Centralized contracting for players services that result in controlled player payrolls without violating antitrust laws

·

Greater parity among teams

·

Focus on the bottom line

·

Controlled costs


Management believes that this structure will also promote efficiency by depoliticizing decisions on league policies and allowing decisions to be made with consistency and in a timely fashion. Economies of scale will be achieved through centralizing contract negotiations and handling business affairs in the league office to ensure that individual teams are unified in their decision-making. Further, under this structure, we expect teams will operate in the best interest of the league.


MLFB Market Opportunity


Major League Football intends to establish a brand that is fan-friendly, exciting, affordable and interactive, but most importantly provides consumers real value for their sports dollars. MLFB will underscore the fans’ access to team members, coaches, league officials and other fans, something no other existing or previous football league has ever delivered to its viewing audience. Although Major League Football’s ticket pricing will be a fraction to that of the established professional leagues (NBA, MLB, NHL and NFL), its ultimate goal will be to offer its fans an incomparable value-added experience for their entertainment dollar.




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Additionally, as a result of a carefully crafted study, we will not locate teams in any established NFL cities and more importantly in any Major League Baseball cities, thus avoiding direct in-season competition with an established sports entity. By positioning teams in prime emerging and under-represented markets throughout the contiguous 48 states (including placing teams in well respected and football fan friendly metropolitan markets in the country), our research suggests that an exciting sports entity like Major League Football will be viewed in a positive light by sports fans throughout the US, many of whom are already experiencing post Super Bowl withdrawal. Of equal or greater importance to Major League Football is the fact that both established and peripheral football fans in these exciting new markets will finally be afforded the opportunity of establishing their own personal sports identity while at the same time fostering strong community pride. Lastly, although Major League Football’s long range vision is to maintain a positive working relationship with the NFL, its ultimate intent is to function as an independent, stand-alone entity that captures sports content needed during off season.


Major League Football intends to disseminate its message using a comprehensive marketing strategy that employs both traditional and new media marketing channels. MLFB’s marketing plans are anticipated to create multiple revenue streams and engage sports fans over a variety of mediums, many of which have only emerged during the past few years. Specifically, Major League Football intends to develop a far-reaching Internet and mobile strategy that will serve as the backbone of its marketing strategy. This will include developing a mobile initiative, where fans can interact with the league, its players, its coaches, and other fans using their mobile phones all while taking advantage of the player name recognition that comes with fantasy football.


Major League Football also intends to create an interactive website that includes a social networking aspect, podcasts, live video, and more. Along with this new media strategy, cross promotions will also be an important part of the MLFB’s marketing strategy. Major League Football plans to work with businesses involved in video, television, print media and the Internet to promote its business. We believe that the cumulative effect of this marketing plan will help it achieve its early objectives, which include the following:


·

Establish itself as a recognized professional football league

·

Build a base of teams and fans that is broad enough to sustain business over the critical first five years of operation

·

Generate enough revenue to expand its operations in years three through six

·

Build successful teams located in regions where there are no existing MLB franchises

·

Adopt a spring schedule to avoid competing with professional, collegiate and prep football

·

Provide year-round cash flow from multi-functioning revenue streams

·

Build a positive image for the league through year-round community relations campaigns


Professional Sports Market


The sports media market in North America was worth $60.5 billion in 2014. It is expected to reach $73.5 billion by 2019. The biggest reason for such growth is projected increases in revenue derived from media rights deals, which is predicted to surpass gate revenues as the sports industry’s largest segment. Sports media rights are projected to go from $14.6 billion in 2014 to $20.6 billion by 2019, accounting for a compound annual rate increase of 7.2%. Upon closer inspection it becomes clearly evident that professional football is far and away the leader in this prestigious space.


Major League Football recognizes the NFL is the dominant professional sports league in the United States. Although it clearly respects the success of the NFL business model, its defined objective is to position itself as an independent, non-adversarial football league. Major League Football believes that its own business model encompasses innovations that will be viewed positively by NFL officials, resulting in a strong working relationship between the two leagues.


Major League Football will endeavor to maximize ticket vendor technology and enhance its services to patrons with innovative ticketing procedures that include:


·

Average ticket prices targeted at approximately one fourth the prices of NFL, NBA, NHL & MLB tickets

·

Year-round cash flow derived from multiple revenue streams utilizing new technologies that didnt exist as recently as a few years ago



2





·

A highly developed marketing strategy that uses both traditional and new media to attract existing football fans as well as an entirely untapped market of potential new fans

·

A more interactive, informative website in professional sports using cutting edge technologies that help preserve fan loyalty

·

Proven executive staff members with considerable practical experience in professional football

·

Player and coaching costs projected at 65-80% less than those of the NFL, NBA, NHL or MLB


Initially, Major League Football teams will operate in either existing collegiate or municipal stadiums during the under-represented spring and early summer season, 19 of which are among the top fifty (50) of the Nations (366) statistical market regions. Over the past decade, none of the proposed Major League Football team cities have shown a drop in population while during the same period of time, five of the current NFL franchise cities (Pittsburgh, Cleveland, Detroit, Buffalo and New Orleans) showed significant negative change.


We believe that our business model and long range vision possesses many innovations that will be viewed in a positive light by NFL owners and league officials, and will also lend itself to the potential of establishing a strong working relationship with our venture by positioning ourselves in a 100% non-adversarial position to the established NFL.


Audience


Major League Football believes that today’s market demands a controlled deliverable to a targeted demographic viewing audience as well as controlled advertising deliverables to specific targeted demographic audiences as well. Other sports attract audiences that are only a fraction of that number, in producing the sponsor and advertiser concerns. Therefore, retaining the mass appeal needed to attract such an audience is an over-arching consideration that shapes much of what we do and what concerns us.


We believe our largest competitive advantage on television will be that our product will be offered in prime time weekend viewing time slots, through a broad array of regional telecasts, with key matchups of national interest featured as late games on Saturday, Sunday afternoons and evenings. We believe that scheduling and broadcasting our games in standard time slots will prevent potential fragmentation of our audience and commoditization our product. 


Integration of Television and Media - American Sports Network Contract


On January 7, 2016, Major League Football entered into a two-year television contract with American Sports Network (“ASN”), a division of Sinclair Networks Group, which is owned by Sinclair Broadcast Group. The agreement includes broadcasting for all regular season and post season MLFB games in both 2016 (season postponed) and 2017, along with promotional activity at the local level in each MLFB’s franchise markets. In year two, with the anticipated MLFB expansion teams growing from eight to twelve franchises, ASN and MLFB will provide MLFB fans with the ability to view every single regular season and post season game on multiple television outlets and digital media platforms for the next two MLFB seasons.


Merchandising & Licensing Overview


The thrust of our licensing and co-branding strategy is to create an increase in brand value for MLFB and the partners we align with. In order for the league to have a robust licensing and co-branding business, we have created a 3-tier approach that focuses on generating strong revenue streams for the league and initiating value based collaborative efforts that further enhance the MLFB brand.


The main benefits of the program are:


·

Fans will find quality items at more favorable price points

·

Teams will gain more profit on each item, and stop tying up money on inventory they cant properly sell through

·

More fans will be wearing and supporting the team and league branded merchandise, which is the number one way to brand outside the stadium




3





We also intend to develop private label products where we will feature products that are core fan favorites (hats, shirts, popular novelties and gifts, etc.) all manufactured at the highest level, and priced far below traditional licensed sports merchandise programs. All merchandise, when league sanctioned, will be pre-ticketed and priced.


Timeline of Significant Events


·

Acquired MLFB Business Plan.

On July 14, 2014, we acquired the business plans and related proprietary documents, trademarks and other intellectual property related to the development of MLFB. We also expanded our board of directors and management team and retained a number of league consultants.


·

Name Change. On November 24, 2014 we changed our name to Major League Football, Inc.


·

Recruited Jerry Vainisi as CEO. On December 2, 2014 we recruited Jerome R. Vainisi to serve as our Chief Executive Officer, subject to the negotiation various conditions. Although we never formalized Mr. Vainisi’s status as our Chief Executive Officer, he worked with us from December 2014 to December 2015, and during his tenure, he helped us develop MLFB. Mr. Vainisi has a level of excellence and success within multiple levels of professional football. As General Manager of the Chicago Bears in 1985, he guided the franchise to its only Championship when his team defeated the New England Patriots in Super Bowl XX. He served as Vice President of Player Personnel for the Detroit Lions, and subsequent to that time, Mr. Vainisi and former Dallas Cowboys Executive Tex Schramm guided the NFL in establishing and operating the World League of American Football, which later became NFL Europe.


·

Economic Development Package.  In May 2015 the Manatee Board of County Commissioners in Lakewood Ranch, Florida approved an economic development package to entice Major League Football to locate its headquarters and training facilities in Manatee County, Florida. All current economic development incentives remain for our 2017 season.


·

Set up Corporate Headquarters and Training Camp Facilities in Lakewood Ranch, FL.  In June 2015 we decided to locate the Companys new corporate headquarters and training facility in Lakewood Ranch, Manatee County, Florida.


·

Hired Herman Edwards as Senior Advisor. In October 2015 we hired former NFL head coach and current ESPN NFL analyst, Herm Edwards, as the Leagues and Management Teams Senior Advisor.


·

Try Out Camps. From October through December 2015, Major League Football held and completed the league's inaugural "Pro Day" tryout camps in 14 cities around the U.S., in doing so, Major League Football was able to qualify and vet over 2,000 athletes and sign over 1,400 of them to register for our inaugural draft. Upon completion of our inaugural draft from February 26-29, 2016, we then signed 560 players to player contracts with the league.


·

Launched New Website. In December 2015 we launched our new official MLFB website.


·

American Sports Network 2 Year Television Contract.  On January 7, 2016, we entered into a two-year television contract with American Sports Network (ASN), a division of Sinclair Networks Group, which is owned by Sinclair Broadcast Group. The agreement includes broadcasting for all regular season and post season MLFB games in both 2016 (season postponed) and 2017. In year two, ASN and the Company will provide MLFB fans with the ability to view every single regular season and post season game on multiple television outlets and digital media platforms for the next two MLFB seasons.  


·

Hired Rick Nichols as VP of Business Development. In January 2016 we hired Rick Nichols as Vice President of Business Development. Rick Nichols has over 27 years experience in the National Football League as a team administrator, with the Houston Oilers, (now Tennessee Titans), Denver Broncos and Arizona Cardinals. Rick will serve as lead negotiator for all our stadium leases, community development and oversea ticketing in each of our franchise cities.





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·

Held and Completed First Player Draft. During January 2016, we held and completed our first player draft. The league selected 560 players for its eight (8) team rosters to play in its 2016 inaugural season from an applicant pool of over 2,000 players. The league selected eight players that it designated as “franchise players” for the league.


·

Commenced First Free Agency Signings. During February 2016, we commenced the leagues first free agency period where each coach signed 10 additional players for their team.


·

Launched 2016 Development Season; Postponed Inaugural Season. During April 2016, we determined to reschedule our inaugural year of professional, spring-league football from spring 2016 to spring 2017 due to a lack of adequate funding, and instead during 2016 to launch a development season to develop players, plan for staffing in cities and provide ample time for ticketing agencies and our broadcasting partner to advertise and market the MLFB's formal kick-off in 2017.


·

BodyHype of Canada Contract.  In May 2016 we entered into an agreement with BodyHype of Canada as the Official Uniform Supplier of MLFB.  They will also supply us with other league merchandise.


Competition


We face significant competition within the professional sports league market and in order to attract fans and market league-related merchandise and other products and services offered by the Company and the league, we must successfully compete with 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high school and collegiate institution teams. Additionally, we must compete with other sporting and non-sporting sources of entertainment. Given the established nature of many of those competitors, there can be no guarantee that we will attract enough revenue from fans and other sources to be profitable.


Government Regulation


We expect that our business operations will be subject to minimal government regulation.


Employees


Our Company currently has 10 full-time employees. We fully expect to engage additional employees, consultants and/or independent contractors to assist with our operations as our Company grows. Our goal is to keep our corporate structure simple and small to allow for quick decision making, control, and low operating budgets.


Corporate Headquarters


We occupy a 9,496-square-foot office at 6239 University Parkway Suite No. 301, Lakewood Ranch, FL that serves as our corporate headquarters. We believe this office space is adequate to serve our present needs.


Other Information


Our Internet website is located at: www.mlfb.com. The information on our website is not incorporated herein by reference and is not part of this Form 10-K Annual Report. Also, this report includes the trade names of other companies. Unless specifically stated otherwise, the use or display by us of such other parties' names and trade names in this report is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties.




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Company History


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” (“MLFB”). 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, our Board of Directors was expanded, a new management team was appointed, and a number of league consultants were retained by our Company. On November 24, 2014, we changed our name to Major League Football, Inc. from Universal Capital Management, Inc.


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.


Item 1A.

Risk Factors.


Investing in our common stock involves significant risks relating to our business and investment objective. You should carefully consider the risks and uncertainties described below before you purchase any of our common stock. These risks and uncertainties are not the only ones we face. Unknown additional risks and uncertainties, or ones that we currently consider immaterial, may also impair our business. If any of these risks or uncertainties materializes, our business, financial condition or results of operations could be materially adversely affected. In this event, the trading price of our common stock could decline, and you could lose all or part of your investment.


Our cash expenses are large relative to our cash resources and cash flow.


As of April 30, 2016, we had cash resources of $3,799 and for the year ended April 30, 2016, we had revenues of $89,772 all of which was derived from football league tryout camps. Consequently, we have been required either to sell new shares of our common stock or convertible promissory notes to raise the cash necessary to pay ongoing expenses and to make new investments and this could lead to continuing dilution in the interest of existing Company stockholders.


We have previously had and could have future losses, deficits and deficiencies in liquidity, which could impair our ability to continue as a going concern.


Our independent registered public accounting firm has indicated that certain factors raise substantial doubt about our ability to continue as a going concern and these factors are discussed in Note 1 to our audited financial statements. Since its inception, the Company has suffered recurring losses from operations and has been dependent on existing stockholders, new investors and the sale of available-for-sale marketable equity securities to provide the cash resources to sustain its operations.


As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $6,632,267 and $1,225,181 for the year ended April 30, 2016. Additionally, at April 30, 2016, the Company has minimal cash, a working capital deficit of $1,842,888 and has an accumulated deficiency of $21,121,832, which could have a material impact on the Company’s financial condition and operations. The majority of the current assets at April 30, 2016 are prepaid consulting services and after excluding these, the Company does not have sufficient cash resources or current assets to pay its obligations. This is a significant risk to our business and stockholders and results in: (i) making it more difficult for us to satisfy our obligations; (ii) impeding us from obtaining additional financing in the future for working capital, capital expenditures and general corporate purposes; and (iii) making us more vulnerable to a downturn in our business and limits our flexibility to plan for, or react to, changes in our business.




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The time required for us to become profitable under our Major League Football business structure is highly uncertain, and we cannot assure you that we will achieve or sustain profitability or generate sufficient cash flow from operations to meet our planned capital expenditures, working capital and debt service requirements. If required, our ability to obtain additional financing from other sources also depends on many factors beyond our control, including the state of the capital markets and the prospects for our business. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.


Our Company intends on financing its future development activities and its working capital needs largely from the sale of debt and public equity securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. The accompanying 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.


We are subject to the risks frequently experienced by early stage companies.


The likelihood of our success must be considered in light of the risks frequently encountered by early stage companies. These risks include our potential inability to:


·

Establish Major League Football as a viable sports league

·

Establish product sales and marketing capabilities

·

Establish and maintain markets for our league and potential products

·

Identify, attract, retain and motivate qualified personnel, and

·

Maintain our reputation and build trust with fans


If we fail to effectively manage our growth, and effectively develop the MLFB sports league, our business will be harmed.


Failure to manage growth of operations could harm our business. To date, a large number of our activities and resources have been directed at developing our business plan and developing potential related products. The building of a sports league requires effective planning and management. In order to effectively manage growth, we must:

·

Continue to develop an effective planning and management process to implement our business strategy

·

Hire, train and integrate new personnel in all areas of our business, and

·

Increase capital investments


We cannot assure you that we will be able to accomplish these tasks effectively or otherwise effectively manage our growth.


Our plan to develop relationships with strategic partners may not be successful.


Part of our business strategy is to maintain and develop strategic relationships with various third parties, such as broadcast networks and sports arenas. For these efforts to be successful, we must successfully enter into agreements with these third parties on terms that are attractive to us, and integrate and coordinate their resources and capabilities with our own. We may be unsuccessful in entering into agreements with acceptable partners or negotiating favorable terms in these agreements. Also, we may be unsuccessful in integrating the resources or capabilities of these partners. If we are unsuccessful in our collaborative efforts, our ability to develop and market our league could be severely limited.




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We will require additional capital to fund our operations and if we do not obtain additional capital, we may be required to substantially limit our operations and/or to delay launching our league during our scheduled spring 2017 Kickoff Period.

 

Our business does not presently generate the cash needed to finance our current and anticipated operations and we need to obtain additional financing to finance our operations until such time that we can conduct profitable revenue-generating activities. Anticipated, but as yet unproven, revenue from sponsorships, television, licensing, special events, and market reservations are expected by management to provide sufficient working capital for on-going operations. Our capital requirement in connection with our growth plans is significant and we require substantial working capital to fund our business. We expect that we will need additional financing over the next 12 months in order to position our Company for its anticipated launch in March 2017. Specifically, we anticipate that we will need to raise approximately $8 million prior to September 1 and subsequently, commence another offering or offerings to raise an additional $30 million to cover our operating expenses through the end of 2017, and we cannot assure you that adequate financing will be available on acceptable terms, if at all. Our failure to raise required additional financing in a timely manner would adversely affect our ability to pursue our business plan, and could cause us to delay launching our league during our scheduled spring 2017 kickoff period. This past year, we were forced to delay launching our league during our previously scheduled 2016 kickoff period.


We intend to seek additional funding through public or private financings, including debt and equity financings. Additional financing may not be available to us, due to, among other things, our Company not having a sufficient credit history, income stream, profit level, asset base eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible debt securities, the percentage ownership of our existing stockholders may be reduced, and these securities may have rights superior to those of our common stock. If adequate funds are not available to satisfy our requisite capital requirements, or if planned revenues are not generated, we may be required to substantially limit our operations.


Our quarter-to-quarter performance may vary substantially, and this variance, as well as general market conditions, may cause our stock price to fluctuate greatly and even potentially expose us to litigation.

 

We have generated limited revenues under our MLFB business plan (all of which was derived from football league tryout camps) and we cannot accurately estimate future quarterly revenue and operating expenses based on historical performance. Our quarterly operating results may vary significantly based on many factors, including:


·

Fluctuating demand for our potential products

·

Announcements or implementation by our competitors of new products

·

Amount and timing of our costs related to our marketing efforts or other initiatives

·

Timing and amounts relating to the expansion of our operations

·

Our ability to enter into, renegotiate or renew key agreements

·

Timing and amounts relating to the expansion of our operations, or

·

Economic conditions specific to our industry, as well as general economic conditions


Our current and future expense estimates are based, in large part, on estimates of future revenue, which is difficult to predict. We expect to make significant operating and capital expenditures in connection with the development of our plan of business. We may be unable to, or may elect not to, adjust spending quickly enough to offset any unexpected revenue shortfall. If our increased expenses were not accompanied by increased revenue in the same quarter, our quarterly operating results would be harmed.


Our Company has a limited operating history under its Major League Football business structure.


Our Company’s principal business operations are comprised of its Major League Football operations. We are subject to risks and difficulties frequently encountered by early-stage companies such as our Company. Unanticipated problems, expenses and delays are frequently encountered in establishing a new business, and a new sports league, along with developing new products and services. We may not be successful in addressing some or all of those risks, in which case there could be a material negative effect on our business and the value of the Company’s common stock that could also cause our Company to reduce, curtail or cease operations. Our Company may never become profitable if revenue growth is lower and operating expenses are higher than anticipated.




8





Our Limited Operating History Makes It Difficult For You to Evaluate Our Prospects and Future Performance.


Our Company’s business operations have only a limited history upon which an evaluation of our prospects and future performance can be made. Our Company’s operations are subject to all business risks associated with development stage enterprises. The likelihood of our Company’s success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the establishment and expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions, and fan base. We believe it is likely that we will continue to sustain losses throughout 2017. We cannot assure you that our Company will ever operate profitably.


Our Limited Operating History Makes It Difficult for us to estimate correctly our future operating expenses and anticipated revenue sources, which could lead to cash shortfalls.


We have a limited operating history as Major League Football, and as a result our historical financial and other operating data may be of limited value in estimating future operating revenue, revenue sources and expenses. Our budgeted expense levels are based in part on our expectations concerning future revenue and future revenue sources. The amount and sources of these revenues will depend on the success of the league, its teams, our marketing efforts, our ability to secure new sponsorships, our perception by fans and the general public and other factors that are difficult to forecast accurately.


We encounter substantial competition from various sources.


We face significant competition within the professional sports league market and in order to attract fans and market league-related merchandise and other products and services offered by the Company and the league, we must successfully compete with 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high school and collegiate institution teams. Additionally, we must compete with other sporting and non-sporting sources of entertainment. Given the established nature of many of those competitors, there can be no guarantee that we will attract enough revenue from fans and other sources to be profitable.


We are dependent upon our key executives for future success.


Our future success to a significant extent depends on the continued services of Wesley Chandler as our President, Rick Smith as our Chief Operating Officer, Michael Queen, as our Executive Vice President of Finance and Ivory Sully as our Vice President – Licensing. Additionally, we believe that recruiting a qualified Chief Executive Officer and Chief Financial Officer is crucial to our success. The departure of any of these key executives could materially adversely affect our ability to implement our business strategy. Currently, we do not maintain for our benefit any key-man life insurance on of our key executives.


Failure to retain and attract qualified personnel could harm our business.


Our success depends on our ability to attract, train and retain qualified personnel. Competition for qualified personnel is intense and we may not be able to hire sufficient personnel to support the anticipated growth of our business. If we fail to attract and retain qualified personnel, our business will suffer.


Our financial performance may be harmed if unfavorable economic conditions adversely affect consumer spending.


Our success depends to a significant extent upon a number of factors relating to discretionary consumer spending, including economic conditions affecting disposable consumer income such as employment, business conditions, taxation and interest rates. Other events that adversely affect the economy may diminish consumer spending. There can be no assurance that consumer spending will not be affected by adverse economic conditions, thereby adversely affecting our business, financial condition and results of operations.




9





Rules related to low-priced equity securities may make it harder for you to sell our common stock.


The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks are defined by law generally as equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules place additional responsibilities on broker-dealers effecting transaction in such securities. These requirements may have the effect of reducing the level of trading activity in the secondary markets for a stock that is subject to the penny stock rules.


Our common stock trades on the OTC which may make it more difficult for you to sell your stock.


Our common stock trades over-the-counter under the symbol “MLFB,” and it has a limited trading market. Accordingly, we cannot assure you as to the liquidity of any markets that may be available for our common stock, your ability to sell your Company common stock, or the price at which you may be able to sell your Company common stock.


Our Board of Directors may grant stock options to our employees pursuant to our Company’s Employee Stock Plan. When exercised, these options may have a dilutive effect on existing stockholders.


In accordance with our Company’s 2014 Employee Stock Plan, from time to time our Board of Directors grants options and stock awards to our employees. When options are exercised, net asset value per share will decrease if the net asset value per share at the time of exercise is higher than the exercise price. Alternatively, net asset value per share will increase if the net asset value per share at the time of exercise is lower than the exercise price. Therefore, existing stockholders will be diluted if the net asset value per share at the time of exercise is higher than the exercise price of the options. Even though issuance of shares pursuant to exercises of options increases our Company’s capital, and regardless of whether such issuance results in increases or decreases in net asset value per share, such issuance results in existing stockholders owning a smaller percentage of the shares outstanding.


The exercise of options and warrants and other issuances of shares of common stock or securities convertible into common stock will dilute your interest.

 

From time to time our Company grants options and stock awards to our employees in accordance with our Company’s 2014 Employee Stock Plan. Additionally, our Company grants shares or warrants to our consultants and other service providers. The exercise of options and warrants at prices below the market price of our common stock could adversely affect the price of shares of our common stock. Additional dilution may result from the issuance of shares of our capital stock in connection with any stock awards or other purposes.

 

Any issuance of our common stock that is not made solely to then-existing stockholders proportionate to their interests, such as in the case of a stock dividend or stock split, will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase our common stock in the future and those options or warrants are exercised or we issue stock, stockholders may experience further dilution. Holders of shares of our common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of shares of any class or series.


A material weakness in internal controls may remain undetected for a longer period because of our Company’s exemption from the auditor attestation requirements under Section 404(b) of Sarbanes-Oxley.


Our annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s attestation in this annual report. As a result, a material weakness in our internal controls may remain undetected for a longer period.




10





Shares Eligible for Future Sale May Adversely Affect the Market.


From time to time, certain of the Company’s stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act, subject to certain limitations. In general, a non-affiliate stockholder who has satisfied a six-month holding period may, under certain circumstances, sell its shares, without limitation. Any substantial sale of the Company’s common stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our common stock.


Our Company’s Stock Price May Be Volatile.


The market price of our Company’s common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:


·

The timing of our products and services

·

Additions or departures of key personnel

·

Sales of our Companys common stock

·

Our Companys ability to integrate operations, technology, products and services

·

Our Companys ability to execute our business plan

·

Operating results below expectations

·

Loss of any strategic relationship

·

Industry developments

·

Economic and other external factors, and

·

Period-to-period fluctuations in our Company’s financial results.


Because we have a limited operating history, you may consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above listed factors. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Company’s common stock.


Item 2.

Properties.


Our Company leases a 9,496-square-foot office at 6239 University Parkway Suite No. 301, Lakewood Ranch, FL that serves as our corporate headquarters. We believe this office space is adequate to serve our present needs.


Item 3.

Legal Proceedings.


On June 22, 2016, TCA12, LLC (“landlord”) filed a lawsuit against the Company in the Circuit Court of the Twelfth Judicial Circuit in and for Manatee County, Florida against the Company related to the Company’s corporate office lease in Florida.  The complaint was served on July 1, 2016. The lawsuit claims that the Company is indebted to the landlord in an amount in excess of $57,857 for unpaid rent plus an additional $224,596 for accelerated rent for a total of $282,453, but the landlord does not specifically seek the additional $224,596 for accelerated rent in its complaint, although the court may later determine that the landlord is entitled to the accelerated rent amount. The Company is in discussions with the landlord to settle the lawsuit but as of the date hereof, no resolution had been reached between the parties.




11





PART II


Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


Our common stock is currently traded on the OTCQB under the symbol “MLFB”.


Market Information


The following table set forth below lists the closing high and low bids for our common stock for each fiscal quarter for the last two fiscal years. The prices in the table reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions, and the prices have been adjusted to give retroactive effect to the Company’s one-for-five (1:5) reverse split of its common stock that occurred on June 18, 2014.


 

 

 

High

 

 

Low

 

 

 

 

 

 

 

 

 

FY 2016

1st Quarter

 

$

.52

 

 

$

.25

 

 

2nd Quarter

 

$

1.72

 

 

$

.255

 

 

3rd Quarter

 

$

.97

 

 

$

.52

 

 

4th Quarter

 

$

1.17

 

 

$

.36

 

 

 

 

 

 

 

 

 

 

 

FY 2015

1st Quarter

 

$

1.65

 

 

$

.025

 

 

2nd Quarter

 

$

1.60

 

 

$

.51

 

 

3rd Quarter

 

$

.80

 

 

$

.60

 

 

4th Quarter

 

$

.78

 

 

$

.14

 


Holders


As of July 28, 2016, we have a total of 46,515,069 shares of common stock outstanding, held by approximately 480 qualified record stockholders.


Dividends


No cash dividends have been declared or paid on our common stock to date. No restrictions limit our ability to pay dividends on our common stock. The payment of cash dividends in the future, if any, will be contingent upon our Company’s revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends is within the discretion of our Board of Directors. Our board of director’s present intention is to retain all earnings, if any, for use in our business operations and, accordingly, the Board of Directors does not anticipate paying any cash dividends in the foreseeable future.



12





Securities Authorized for Issuance under Equity Compensation Plans



Equity Compensation Plans as of April 30, 2016


Equity Compensation Plan Information

Plan category

 

Number of

securities to be

issued upon

exercise of

outstanding

options,

warrants and

rights

(a)

 

Weighted-

average

exercise price

of outstanding

options,

warrants and

rights

(b)

 

Number of

securities

remaining

available for

future issuance

under equity

compensation

plans (excluding

securities

reflected in

column (a))

(c)

Equity compensation plans approved by security holders (1)

     

5,730,000

 

$.18

 

3,960,000

Equity compensation plans not approved by security holders

 

3,550,000

 

$.14

 

0

Total

 

9,280,000

 

$.16

 

3,960,000

———————

1.

Reflects the following Company Equity compensation plans for the benefit of our directors, officers, employees and consultants: (i) our 2006 Equity Incentive Plan (“2006 Plan”), for which we have reserved 400,000 shares of our common stock for such persons pursuant to that plan; and (ii) our 2014 Employee Stock Plan ("2014 Plan") for which we have reserved 10,000,000 shares of our common stock for such persons pursuant to that plan.


Penny Stock Regulations and Restrictions on Marketability


The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.


The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.


In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.


These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.



13





Recent Sales of Unregistered Securities


Our Company has sold the following securities without registering the securities under the Securities Act:


Date

 

Security

May - July 2015

 

Convertible unsecured promissory notes convertible at $.30 per share –$18,000 in the aggregate.

August 2015

 

Common Stock – 400,000 shares of common stock and warrants to purchase 1,400,000 shares of common stock at $0.35 per share issued for services.

September 2015

 

Common Stock – 100,000 shares of common stock at $0.01 per share pursuant to a warrant exercise for total proceeds of $1,000.

September 2015

 

Common Stock – 10,000 shares of common stock at $0.30 per share pursuant to a warrant exercise for total proceeds of $3,000.

October 2015

 

2,330,327 shares of common stock and warrants to purchase 2,330,327 shares of common stock at $.30 per share pursuant to the conversion of $699,098 of principal and interest on convertible unsecured promissory notes.

October 2015

 

Common Stock – 112,500 shares of common stock issued for services.

Nov 2015 to Feb 2016

 

49.945 units @ $10,000 per unit for total proceeds of $499,450. Each unit consists of 33,333 shares of common stock and a warrant to purchase 16,666 shares of common stock at $.50 per share.

December 2015

 

Common Stock – 500,000 shares of common stock issued for services.

January 2016

 

Common Stock – 350,000 shares of common stock issued for services.

March 2016

 

Common Stock – 10,674 shares of common stock at $0.30 per share pursuant to warrant exercises for total proceeds of $3,202.

March 2016

 

5.5 units @ $10,000 per unit for total proceeds of $555,000. Each unit consists of 33,333 shares of common stock and a one-year warrant to purchase 16,666 shares of common stock at $.50 per share.

March 2016

 

$550,000 face value convertible secured promissory note with $445,000 of net proceeds convertible at a conversion price per share equal to seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) trading days immediately preceding a conversion date, along with a Series A warrant to acquire 250,000 shares of common stock at an exercise price of $1.02 per share and a Series B warrant to acquire 250,000 shares of common stock of the Company at an exercise price of $1.19 per share.

April 2016

 

Convertible unsecured promissory note convertible at $.30 per share –$50,000 in the aggregate.

April 2016

 

Warrants – right to buy 1,300,000 shares of common stock at $0.1 per share issued for services.


These persons were the only offerees in connection with these transactions. We relied on Section 4(a)(2), 4(a)(5) and Regulation D of the Securities Act since the transactions do not involve any public offering. No underwriters were utilized and no commissions or fees were paid with respect to any of the above transactions, except with respect to the $550,000 face value convertible secured promissory note offering whereby the placement agent received a placement fee equal to 10% cash and warrants equal to 10% of the stock issued (on an as converted basis) in this Note offering with a strike price of 120% ($.85 x 120% = $1.02). 


Item 7.

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


Introduction


The following discussion contains forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “will,” “could,” “may” and similar expressions are intended to identify forward-looking statements. Such statements reflect our Company’s current views with respect to future events and financial performance and involve risks and uncertainties. Should one or more risks or uncertainties occur, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those anticipated, believed, expected, planned, intended, estimated, projected or otherwise indicated. Readers should not place undue reliance on these forward-looking statements.




14





The following discussion is qualified by reference to, and should be read in conjunction with our Company’s financial statements and the notes thereto.


We seeking to establish, develop and operate Major League Football ("MLFB") as a professional spring football league.  We have launched a “Development Season” for 2016 and our inaugural year of professional, spring-league football will commence in March of 2017. We intend to fill a void by establishing franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the NFL off-seasons, which will enable it to take a totally non-adversarial approach towards the National Football League ("NFL"). Our spring and early summer schedule ensures no direct competition with autumn/winter sports, including the 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high school and collegiate institution teams.


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” (“MLFB”). 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, our Board of Directors was expanded, a new management team was appointed, and a number of league consultants were retained by our Company. On November 24, 2014, we changed our name to Major League Football, Inc. from Universal Capital Management, Inc.


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.


Financial Condition


As reflected in the accompanying financial statements, the Company had a net loss and net cash used in operations of $6,632,267 and $1,225,181 for the year ended April 30, 2016. Additionally, at April 30, 2016, the Company has minimal cash, and a working capital deficit of $1,842,888 and has an accumulated deficiency of $21,121,832, which could have a material impact on the Company’s financial condition and operations. The majority of the current assets at April 30, 2016 are prepaid consulting services and after excluding these, the Company does not have sufficient cash resources or current assets to pay its obligations.


Results of Operations


Year ended April 30, 2016 compared to the year ended April 30, 2015


For the year ended April 30, 2016, we had $89,772 of revenue as compared to $20,000 for the year ended April 30, 2015. For 2016, all of our revenue was from football league tryout camps whereby the Company is seeking to establish, develop and operate MLFB as a professional spring football league with an anticipated launch date in 2017. For 2015, all of our revenue was comprised of management services provided to customers under our previous business plan.




15





Total operating expenses for the year ended April 30, 2016 were $5,221,131 as compared to total operating expenses for the year ended April 30, 2015 of $3,793,816. The increase from 2015 to 2016 was primarily from a $1,328,655 increase in professional fees which is primarily for (1) an increase of $1,049,380 related to amortization of prepaid consulting over the service period, (2) an increase of $115,562 related to the amortization of stock options for consulting services over the service period and (3) offset by a decrease of $575,121 from the amortization of stock warrants for consulting services over the service period.  The 2016 increase also included a $122,945 increase in salaries and wages, of which $82,412 related to stock issued to employees related to a Form S-8 registration. Additionally, the 2016 increase related to $128,650 of expense for football league tryout camps with no comparable amount in 2015. The increase was offset by $400,000 of asset purchase expense related to the acquisition of Major League Football assets in 2015. Since there were no future cash flows for the acquired tangible and intangible assets, the $400,000 amount was recorded as an asset purchase expense.


Other income (expense) for the year ended April 30, 2016 was $1,500,908 of expense compared to $63,141 of income for the year ended April 30, 2015. The change from 2015 to 2016 was primarily from an increase in interest expense of $1,130,831, of which $1,037,561 was for a beneficial conversion feature for the convertible notes payable.  The increase from 2015 to 2016 included $175,000 of bad debt expense in 2016 with no comparable amount in 2015 related to an allowance for a doubtful other receivable and a doubtful collateral deposit.  The increase from 2015 to 2016 included $723,646 of expense for the initial fair value of an embedded derivative liability on a convertible promissory note, offset by a $467,046 income from the change in the fair value of the embedded derivative liability at April 30, 2016.  There was no comparable embedded liability amount in 2015.


Additionally, from 2015 to 2016, there was an $84,580 increase for a gain from an adjustment related to an offer in compromise agreement 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 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 2015 amount consisted primarily of $62,073 of gain from the issuance of common stock for the exchange of debt and $21,894 of gain from the sale of marketable securities with no comparable amount for 2016.


As a result of the above, we had a net loss of $6,632,267 and $3,710,675 for the year ended April 30, 2016 and 2015, respectively.


Liquidity and Capital Resources


From inception, our Company has relied upon the infusion of capital through equity transaction, the issuance of debt and the sale of available-for-sale marketable equity securities to obtain liquidity. We had only $3,799 of cash at April 30, 2016 and consequently, payment of operating expenses will have to come similarly from either equity capital to be raised from investors or from borrowed funds. There is no assurance that we will be successful in raising such additional equity capital or additional borrowings or if we can, that we can do so at a cost that management believes to be appropriate.


Critical Accounting Policies


Our Company’s accounting policies are more fully described in Note 1 of Notes to Financial Statements. As disclosed in Note 1 of Notes to Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on our management’s best knowledge of current events and actions our Company may undertake in the future, actual results could differ from the estimates.


Item 8.

Financial Statements and Supplementary Data.


See attached Appendix A.




16






Item 9A.

Controls and Procedures.


Evaluation of Disclosure Controls and Procedures


As of the end of the period covered by this report, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of April 30, 2016 and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involving internal controls over financial reporting constituted a material weakness as discussed below.


Management’s Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).


Based on its evaluation, our management concluded that our internal control over financial reporting as of the end of our most recent fiscal year is not effective because there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.


The material weakness(s) identified are:


Our Company does not have a full time Controller or Chief Financial Officer and utilizes a part time consultant to perform these critical responsibilities. This lack of full time accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.


Additionally, management determined during its internal control assessment the following weakness(s), while not considered material, are items that should be considered by the Board of Directors for resolution in the near future: (i) our Company IT process should be strengthened as there is no disaster recovery plan, no server, and the company accounting records are maintained through a consultant accountant. The Company should consider the purchase and implementation of a server and proper back-ups off site to ensure that accounting information is safeguarded; and (ii) our Company should take steps to implement a policies and procedures manual.


In order to mitigate the above weaknesses(s), to the fullest extent possible, our Company has engaged a financial consultant with significant accounting and reporting experience to assist our Company in becoming and remaining current with its reporting responsibilities. Additionally, as soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures to mitigate the weaknesses discussed above.


Additionally, the Company plans on hiring a fulltime Controller or Chief Financial Officer when funds are sufficient.


Our Company’s internal control over financial reporting should include policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.




17





Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s attestation in this annual report.


Changes in Company Internal Controls


No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.

Other Information.


On June 2, 2016, the Company received a notice of default letter related to the corporate office lease in Florida from TCA12, LLC (“landlord”).  The letter demanded payment for the full amount outstanding within seven days or the landlord threatened to pursue all legal remedies including termination of the lease.  On June 22, 2016, the landlord filed a lawsuit against the Company in the Circuit Court of the Twelfth Judicial Circuit in and for Manatee County, Florida against the Company related to the Company’s corporate office lease in Florida.  The complaint was served on July 1, 2016. The lawsuit claims that the Company is indebted to the landlord in an amount in excess of $57,857 for unpaid rent plus an additional $224,596 for accelerated rent for a total of $282,453, but the landlord does not specifically seek the additional $224,596 for accelerated rent in its complaint, although the court may later determine that the landlord is entitled to the accelerated rent amount. The Company is in discussions with the landlord to settle the lawsuit but as of the date hereof, no resolution had been reached between the parties.







18





PART III


Item 10.

Directors, Executive Officers and Corporate Governance.


(a) Identity of directors, executive officers and significant employees.


Name

 

Age

 

Position

 

Term/

Period Served

Wesley Chandler

 

58

 

President and Secretary

 

Since July 14, 2014

Richard Smith

 

49

 

Chief Operating Officer/Director

 

1 yr/Since July 14, 2014

Michael D. Queen

 

59

 

Director, Exec. VP- Finance/Director

 

1 yr./Since 2004

Ivory Sully

 

58

 

Vice President - Licensing

 

Since July 14, 2014


(b) Business experience of directors, executive officers, and significant employees.


Wesley Chandler. Mr. Chandler has served as our President and Secretary since July 14, 2014. Presently, Mr. Chandler also serves as Lead Football Instructor at Football University and Under Armour since February 2013. Prior to that, from January 2012 to February 2013 he served as the wide receiver football coach at the University of California - Berkley, and from October 2009 to October 2010, he served as the offensive coordinator football coach for the New York Sentinels - United Football League. Mr. Chandler was a two-time consensus football and academic All-America selection in 1976 and 1977 at the University of Florida and is widely considered to be one of the top receivers in both collegiate and professional football history with 4 pro bowl selections. He was drafted by the New Orleans Saints as the third overall selection in the 1978 NFL Draft and has over thirty years of professional playing, coaching and administrative experience. Mr. Chandler is the current NFL record holder in receiving per game (129 in 1982) and was inducted into the San Diego Chargers Hall of Fame in 2001, the SEC Hall of Fame in 2013 and the College Football Hall of Fame in 2015.. Mr. Chandler has coaching experience at every level of play including 7 years in NFL Europe (coach of the Berlin Thunder in 1999), Dallas Cowboys, Minnesota Vikings and Cleveland Browns.


Richard Smith. Mr. Smith has served as our Chief Operating Officer since July 14, 2014 and as a member of our Board of Directors since November 11, 2014. Presently, since March 1996, Mr. Smith also serves as the founder and CEO of Mainframe Communications, Inc. where he plans, develops, and establishes policies of business organization in accordance with broad directives and company charter. Mainframe provides nationwide telecommunications sales, service, integration and installation to Fortune 2000 enterprise accounts with multiple branch locations throughout the nation. In 1998, Mr. Smith was named the MetroSouth Entrepreneur of the Year sponsored by Fleet Bank. Mr. Smith is an Advisory Board Member of NAII, North Atlantic Internet Networks, and he has also served the federal government market and many branches of the US Military including the U.S. Air Force, the Air National Guard, the Navy’s nuclear submarine division and the Marine Corps nationwide recruiting centers. Mr. Smith’s qualifications to serve on our Board of Directors include his knowledge of our Company and his many years of experience as an executive and entrepreneur.


Michael D. Queen. Mr. Queen has served as our Executive Vice President - Finance since July 14, 2014. Prior to that, since 2004, he served as our Company’s the Chief Executive Officer and since December 2011, he has served as our Principal Financial Officer. He served as our Company’s President from 2004 through February 2009; and as a director of our Company since 2004. Since founding our Company, Mr. Queen has worked with eighteen startup companies. He assisted these companies with their funding and was responsible for helping seven of those companies enter the public marketplace. Mr. Queen is considered an expert in the microcap arena with extensive knowledge of how these markets operate and has been extensively involved in the start-up businesses and initial capitalization plans. Prior to founding our company, Mr. Queen was the President, CEO and a director at Pennexx Foods, Inc., a publicly traded company. From 1994 to 1998, Mr. Queen was the President of Ocean King Enterprises, a start-up specialty food manufacturer. From 1978 to 1999, Mr. Queen was an executive in the supermarket industry serving the greater New York, New Jersey and Delaware region. Mr. Queens’s qualifications to serve on our Company’s Board of Directors include his strong background and skill set which provides the Board of Directors with competence and experience in diverse areas, including corporate governance and board service, finance and management experience.




19





Ivory Sully. Mr. Sully has served as our Vice President - Licensing since July 14, 2014. Since April 2011 to present, Mr. Sully has served as the founder of Sully Executive Services, where he has engaged in independent licensing and contract negotiations for fashion brands; consulting at the executive level for brand extension and corporate development; mentor leadership of operational management and team building; and process analysis and implementation. Also since 2000 to present, Mr. Sully has worked for Pelle Pelle, Inc. where from 2000 to 2010 he served as Vice President of Licensing and International Business and from 2011 to present, where he serves as West Coast Sales Manager. Also, from 2010 to 2011, Mr. Sully served as the Director of Licensing for English Laundry, Inc. In 1979, Mr. Sully was signed as a free agent by the Los Angeles Rams where he was a 1984 Pro Bowl alternate as a special teams player and where he was named the Outstanding Special Teams Player of the Year five times (1979, 1980, 1982, 1983, and 1984). He was a member of the 1979 NFC Champions, Los Angeles Rams and played in Super Bowl XIV. He was a co-captain of the 1981 and 1982 Los Angeles Rams. Mr. Sully played with the Tampa Bay Buccaneers during the 1985 and 1986 seasons and he played with the 1987 Detroit Lions. Mr. Sully is a member of the University of Delaware Sports Hall of Fame.


Each Director of the Company holds such position until the next annual meeting of stockholders and until his successor is duly elected and qualified. The officers hold office until the first meeting of the Board of Directors following the annual meeting of stockholders and until their successors are chosen and qualified, subject to early removal by the Board of Directors. The Board of Directors believes that each of the Directors named above has the necessary qualifications to be a member of the Board of Directors. Each Director has exhibited during his prior service as a director the ability to operate cohesively with the other members of the Board of Directors. Moreover, the Board of Directors believes that each director brings a strong background and skill set to the Board of Directors, giving the Board of Directors as a whole competence and experience in diverse areas, including corporate governance and board service, finance, management and industry experience.


Section 16(a) Beneficial Ownership Reporting Compliance


Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file. To the best of our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to our Company during its most recent fiscal year and Forms 5 and amendments thereto furnished to our Company with respect to its most recent fiscal year, and any written representation referred to in paragraph (b)(1) of Item 405 of Regulation S-K, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements.


Audit Committee


Our Company does not have a separately designated standing audit committee in place; our Company’s entire Board of Directors has served, and currently serves, in that capacity. This is due to the small number of executive officers involved with the Company and the fact that the Company operates with few employees. Our Board of Directors will continue to evaluate, from time to time, whether a separately designated standing audit committee should be put in place. We do not have an audit committee financial expert as that term is defined by the rules promulgated by the Securities and Exchange Commission. We currently have limited working capital and limited revenues. Management does not believe that it would be in our best interests at this time to retain independent directors to sit on an audit committee. If we are able to generate sufficient revenues in the future, then we will likely seek out and retain independent directors and form an audit, compensation committee and other applicable committees.


Nominating Committee


Our Board of Directors does not have a nominating committee. This is due to the small number of executive officers involved with the Company, and the fact that the Company operates with few employees. Instead of having such a committee, our Board of Directors historically has searched for and evaluated qualified individuals to become nominees for membership on our Board of Directors. The directors recommend candidates for nomination for election or reelection for each annual meeting of stockholders and, as necessary, to fill vacancies and newly created directorships.




20





Code of Business Conduct


The Company has adopted a Code of Business Conduct that also applies to its principle executive officer and principal financial officer. The text of the Code of Business Conduct is available on the Company’s website at www.mlfb.com. Upon the written request to the Company mailed to the Company’s principal office, the Company shall provide to any person without charge a copy of our Code of Business Conduct.


Item 11.

Executive Compensation.


The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers for the fiscal years ended April 30, 2016 and 2015.


Summary Compensation Table


Name and Principal Position

 

(a)

Year

 

(b)

Salary

($)

(c)

Bonus

($)

(d)

Stock Awards

($)

(e)

Option

Awards

($)

(f)

All Other

Compensation

($)

(i)

Total

($)

(j)

 

 

 

 

 

 

 

 

Jerome R. Vainisi

2016

0

0

0

0

0

0

CEO (1)

2015

0

0

0

1,410,000

0

1,410,000

 

 

 

 

 

 

 

 

Wesley Chandler

2016

0

0

0

0

0

0

President (2)

2015

0

0

300,000

0

0

300,000

 

 

 

 

 

 

 

 

Michael D. Queen

2016

0

0

0

0

0

0

EVP - Finance, Director (3)

2015

0

0

150,000

0

13,732

163,732

 

 

 

 

 

 

 

 

Richard Smith

2016

0

0

0

0

0

0

COO, Director (4)

2015

0

0

300,000

0

0

300,000

 

 

 

 

 

 

 

 

Ivory Sully

2016

0

0

0

0

0

0

VP - Licensing (5)

2015

0

0

50,000

0

0

50,000


1.

On December 2, 2014 our Board of Directors elected Jerome R. Vainisi to serve as our Chief Executive Officer commencing in January 2015 upon such date that our Company and Mr. Vainisi finalize Mr. Vainisi’s employee agreement. Mr. Vainisi and the Company never finalized or entered into an employee agreement. On December 11, 2015, Mr. Vainisi ended the process of finalizing his contract with the Company and removed himself from consideration to serve as the Company’s Chief Executive Officer. In exchange for his services, on December 2, 2014 Mr. Vainisi was granted an option to purchase up to 3,000,000 shares of our common stock at the strike price of $0.90 per share. On February 24, 2015, our Company cancelled the option it granted to Mr. Vainisi to purchase up to 3,000,000 shares of our common stock at the strike price of $0.90 per share and granted him an option to purchase up to 3,000,000 shares of our common stock at the strike price of $0.30 per share. The options vest over a period of 2 years as follows: 250,000 options shall vest on the date of grant and the remaining options vest in eight (8) equal installments of 343,750 per quarter commencing on the 1st day of the next fiscal quarter occurring after the date of grant.

2.

On July 14, 2014, Mr. Chandler was elected by our Board of Directors to serve as our President and Secretary. On that same date, Mr. Chandler entered into an employee agreement with our Company that provides for an annual salary of $250,000 and 6,000,000 shares of restricted common stock. The shares vest over a period of four years as follows: 2,000,000 shares vest immediately and the remaining shares vest on an equal annual basis thereafter. As a result of our lack of capital, Mr. Chandler has agreed to waive all amounts of his accrued salary due prior to January 1, 2015, and he is owed accrued salary of $320,000 as of April 30, 2016. The values described in column (c) reflect cash payments made pursuant to his employee agreement and the values described in column (e) reflect the grant of 6,000,000 shares of common stock made pursuant to his employee agreement.



21





3.

On July 14, 2014, Mr. Queen was elected by our Board of Directors to serve as our Executive Vice President – Finance. On that same date Mr. Queen resigned as our Chief Executive Officer, President, Treasurer and Secretary. Prior to July 14, 2014, since 2004, he served as our Company’s Chief Executive Officer and since December 2011, he has served as our Principal Financial Officer. He serves and has served as a director of our Company since 2004. On July 14, 2014, Mr. Queen entered into an employee agreement with our Company that provides for an annual salary of $200,000 and 3,000,000 shares of restricted common stock, all of which vested immediately. As a result of our lack of capital, Mr. Queen has agreed to waive all amounts of his accrued salary due prior to January 1, 2015, and he is owed accrued salary of $320,000 as of April 30, 2016. The values described in column (c) reflect cash payments made pursuant to his employee agreement, the values described in column (e) reflect the grant of 3,000,000 shares of common stock made pursuant to his employee agreement and the values described in column (i) reflect the issuance of 274,642 shares of common stock made in connection with past services rendered to the Company.

4.

On July 14, 2014, Mr. Smith was elected by our Board of Directors to serve as our Chief Operating Officer. On that same date, Mr. Smith entered into an employee agreement with our Company that provides for an annual salary of $250,000 and 6,000,000 shares of restricted common stock, all of which shares vest immediately. As a result of our lack of capital, Mr. Smith has agreed to waive all amounts of his accrued salary due prior to January 1, 2015, and he is owed accrued salary of $320,000 as of April 30, 2016. The values described in column (c) reflect cash payments made pursuant to his employee agreement and the values described in column (e) reflect the grant of 6,000,000 shares of common stock made pursuant to his employee agreement.

5.

On July 14, 2014, Mr. Sully was elected by our Board of Directors to serve as our VP Licensing. On that same date, Mr. Sully entered into an employee agreement with our Company that provides for an annual salary of $180,000 and 1,000,000 shares of restricted common stock. The shares vest over a period of four (4) years as follows: 25% of the shares vest on the first anniversary of the date of the grant of the shares and the remaining shares vest on an equal annual basis thereafter. As a result of our lack of capital, Mr. Sully has agreed to waive all amounts of his accrued salary due prior to April 30, 2016. The values described in column (c) reflect cash payments made pursuant to his employee agreement and the values described in column (e) reflect the grant of 1,000,000 shares of common stock made pursuant to his employee agreement.


Other than as described in Note (1) above, at no time during the last fiscal year was any outstanding option otherwise modified or re-priced, and there was no tandem feature, reload feature, or tax-reimbursement feature associated with any of the stock options we granted to our executive officers or otherwise.


We grant stock awards and stock options to our executive officers based on their level of experience and contributions to our Company. The aggregate fair value of awards and options are computed in accordance with FASB ASC 718 and are reported in the Summary Compensation Table above in the columns (e) and (f).



22






The table below summarizes all of the outstanding equity awards for our named executive officers as of April 30, 2016, our latest fiscal year end.


Outstanding Equity Awards At Fiscal Year-End


 

Option Awards

Stock Awards

Name

 

   (a)

Number of
securities
underlying
unexercised
options(#) exercisable

 

(b)

Number of
securities
underlying unexercised
options(#) unexercisable

 

(c)

Equity incentive plan awards: number of
securities
underlying
unexercised
unearned
options

(#)

(d)

Option

exercise

price

($)

(e)

Option

expiration

date

 

(f)

Number of shares or units of stock that have not

vested

(#)

(g)

Market value of  shares of units of stock that have not

vested

($)

(h)

Equity incentive plan awards: number of unearned shares, units or other rights that have not

vested

(#)

(i)

Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not

vested

($)

(j)

 

 

 

 

 

 

 

 

 

 

Jerome R. Vainisi

CEO (1)

 

 

 

 

 

 

 

 

 

Wesley Chandler

2,000,000

100,000

President (2)

 

 

 

 

 

 

 

 

 

Michael D. Queen

EVP-Finance, Director

 

 

 

 

 

 

 

 

 

Richard Smith

COO, Director

 

 

 

 

 

 

 

 

 

Ivory Sully

750,000

37,500

VP - Licensing (3)

 

 

 

 

 

 

 

 

 


(1)

On February 24, 2015, Mr. Vainisi received an option to purchase up to 3,000,000 shares of our common stock at the strike price of $0.30 per share. The options vested over a period of 2 years as follows: 250,000 options vested on the date of grant and the remaining options vested in eight (8) equal installments of 343,750 per quarter commencing on the 1st day of the next fiscal quarter occurring after the date of grant. On December 11, 2015, Mr. Vainisi notified the Company that he would not finalize his employment agreement and is no longer the Company’s Chief Executive Officer.  As a result, he retained all vested options and the unvested options would be forfeited. At January 31, 2016, 1,281,250 (250,000 that vested immediately and 1,031,250 that vested as per above) of the options were vested and the remaining 1,718,750 were forfeited.  In accordance with the Company’s 2014 Employee Stock Plan, Mr. Vainisi had 90 days from the separation date of December 11, 2015, or March 10, 2016 to exercise the vested options or they expire. Mr. Vainisi did not exercise his 1,281,250 vested options on March 10, 2016 and they expired.

(2)

On July 14, 2014, Mr. Chandler received 6,000,000 shares of restricted common stock. The shares vest over a period of four years as follows: 2,000,000 shares vest immediately and the remaining shares vest on an equal annual basis thereafter.

(3)

On July 14, 2014, Mr. Sully received 1,000,000 shares of restricted common stock. The shares vest over a period of four (4) years as follows: 25% of the shares vest on the first anniversary of the date of the grant of the shares and the remaining shares vest on an equal annual basis thereafter.



23





Compensation of Directors


Set forth below is a summary of the compensation of our directors during our April 30, 2016 fiscal year.


Name

Fees Earned or Paid in Cash
($)

Stock Awards

($)

Option Awards

($)

Non-Equity Incentive
Plan Compensation
($)

Non-Qualified Deferred Compensation Earnings
($)

All
Other Compensation

($)

Total

($)

Michael D. Queen (1)

Richard Smith (1)


(1)

Serves as an executive officer and a director, but receives no additional compensation for serving as a director.


Compensation Committee


Our Board of Directors currently has no standing compensation committee or committee performing similar functions. This is due to the Company’s development stage, lack of business operations, the small number of executive officers involved with the Company, and the fact that the Company operates with few employees. The Company’s entire Board of Directors currently participates in the consideration of executive officer and director compensation. Our Board of Directors will continue to evaluate, from time to time, whether it should appoint standing compensation committee.


Compensation Policies and Practices As They Relate To Our Risk Management


No risks arise from our Company’s compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on our Company.


Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.


Security Ownership of Certain Beneficial Owners


The following table sets forth, as of July 28, 2016, the names, addresses, amount and nature of beneficial ownership and percent of such ownership of each person or group known to our Company to be the beneficial owner of more than five percent (5%) of our common stock. The address of each person in the table is c/o Major League Football, Inc., 6230 University Parkway, Suite 301, Lakewood Ranch, Florida, 34240.


Name of Beneficial Owner

 

Amount and

Nature of

Beneficial Ownership (1)

 

 

Percent of Class

Owned (1)(2)

 

Major League Football, LLC (3)

 

 

8,000,000

 

 

 

17.19

%

Wesley Chandler (4)

 

 

5,405,000

 

 

 

11.61

%

Richard Smith (4)

 

 

5,500,000

 

 

 

11.82

%

Michael D. Queen (4)(5)

 

 

5,005,616

 

 

 

10.76

%

———————

(1)

This table is based on information supplied by officers, directors and principal stockholders of the Company and on any Schedules 13D or 13G filed with the SEC. On that basis, the Company believes that each of the stockholders named in this table has sole voting and dispositive power with respect to the shares indicated as beneficially owned and except as otherwise indicated in the footnotes to this table. Includes the person's right to obtain additional shares of common stock within 60 days from July 28, 2016.

(2)

Applicable percentages are based on 46,515,069 shares outstanding on July 28, 2016. Does not include shares underlying: (i) options to purchase shares of our common stock under any employee stock plan; and (ii) outstanding warrants to purchase shares of our common stock.

(3)

To the knowledge of the Company, Thomas J. Marino is the manager of Major League Football, LLC.

(4)

Includes an option to purchase up to 500,000 shares of common stock exercisable within 60 days from July 28, 2016.

(5)

Includes 110,100 shares held directly and indirectly by Mr. Queen’s wife, as to which he disclaims beneficial ownership.




24





Security Ownership of Management


The following table sets forth, as of July 28, 2016, the names, addresses, amount and nature of beneficial ownership and percent of such ownership of our common stock of each of our officers and directors, and officers and directors as a group. The address of each person in the table is c/o Major League Football, Inc., 6230 University Parkway, Suite 301, Lakewood Ranch, Florida, 34240.


Name of Beneficial Owner

 

Amount and

Nature of
Beneficial Ownership (1)

 

 

Percent of Class
Owned (1)(2)

 

Wesley Chandler (3)

 

 

5,405,000

 

 

 

11.61

%

Richard Smith (3)

 

 

5,500,000

 

 

 

11.82

%

Michael D. Queen (3)(4)

 

 

5,005,616

 

 

 

10.76

%

Ivory Sully

 

 

1,000,000

 

 

 

2.14

%

All executive officers and directors as a group (4 persons)

 

 

16,910,616

 

 

 

36.35

%

———————

(1)

This table is based on information supplied by officers, directors and principal stockholders of the Company and on any Schedules 13D or 13G filed with the SEC. On that basis, the Company believes that each of the stockholders named in this table has sole voting and dispositive power with respect to the shares indicated as beneficially owned and except as otherwise indicated in the footnotes to this table. Includes the person's right to obtain additional shares of common stock within 60 days from July 28, 2016.

(2)

Applicable percentages are based on 46,515,069 shares outstanding on July 28, 2016. Does not include shares underlying: (i) options to purchase shares of our common stock under any employee stock plan; and (ii) outstanding warrants to purchase shares of our common stock.

(3)

Includes an option to purchase up to 500,000 shares of common stock exercisable within 60 days from July 28, 2016.

(4)

Includes 110,100 shares held directly and indirectly by Mr. Queen’s wife, as to which he disclaims beneficial ownership.


We are not aware of any arrangements that could result in a change of control.


Securities Authorized for Issuance under Equity Compensation Plans


Information regarding our compensation plans under which our equity securities are authorized for issuance can be found in Part II –Item 5 of this report.


Item 13.

Certain Relationships and Related Transactions, Director Independence.


Related Transactions


On November 1, 2008 the Company entered into a promissory note with Barbara Queen, Michael Queen’s wife, in the amount of $294,000. This amount was the total that was loaned to the Company over a period of two years prior, beginning in November 2006, on behalf of Mrs. Queen to fund Company operations. The promissory note calls for interest of eight percent (8%) annum beginning on November 2008. Subsequent loans were made by Mrs. Queen. The principal balance outstanding as of April 30, 2013 was $168,379 and was partially repaid in the amount of $35,085 during the fiscal year ended April 30, 2014. The outstanding balance as of April 30, 2014 is $133,294. Effective July 14, 2014, the outstanding balance and accrued interest was converted into 1,457,874 shares of common stock.


During August 2014 to December 2014 we paid Sully Executive Services, a company owned and operated by Ivory Sully, our VP -Licensing, a total of $71,000 for website design, branding and other related services.


From February to April 2015, Michael Queen provided $15,300 of funds to the Company for working capital requirements. During the three months ending October 31, 2015, the Company repaid $15,000 of these funds, resulting in an outstanding balance of $300. Additionally, on August 28, 2015, Michael Queen personally repaid $20,000 of notes payable. As a result, the outstanding balance owed to the officer is $20,300 at April 30, 2016, recorded as Notes Payable – Related Parties in the accompanying financial statements at April 30, 2016.




25





Review and Approval of Transactions with Related Persons


We do not have a formal, written policy solely for the review and approval of transactions with related parties. However, our Code of Ethics provides guidelines for reviewing and handling conflict of interest transactions with our directors, officers and employees. The entire Board of Directors is responsible for reviewing all related party transactions. Before approving any such transaction, the Board of Directors would take into account all relevant facts and circumstances that it deems appropriate, including, but not limited to, the risks, costs and benefits to the Company, the terms of the transaction, the availability of other sources for comparable services or products, and if applicable, the impact on a director’s independence. Only those transactions that, in light of known circumstances, are fair as to, and in the best interests of the Company and its stockholders, as the Board of Directors determines in the good faith exercise of its discretion, shall be approved.


Director Independence


Although we currently trade on the Over-the-Counter quotation system, our Board of Directors has reviewed each of the directors’ relationships with our Company in conjunction with Section 121 of the listing standards of the NYSE Amex and has affirmatively determined that none of our directors are independent directors in that they are independent of management and free of any relationship that would interfere with their independent judgment as members of our Board of Directors.


We do not have a separately designated audit, nominating or compensation committee or committee performing similar functions. Our entire Board of Directors serves in such capacities and none of the members of our Board of Directors is independent as defined herein. We do not currently have an audit committee financial expert as that term is defined by the rules promulgated by the Securities and Exchange Commission.


Item 14.

Principal Accountant Fees and Services.


Audit and Related Fees


Salberg & Company, P.A. is the independent registered public accounting firm and has audited the financial statements of the Company for the fiscal year ended April 30, 2016 and 2015.


The following table shows the aggregate fees billed to the Company by Salberg & Company, P.A. for professional services rendered relating to the fiscal years ended April 30:


 

 

For the Year Ended

 

 

 

April 30,

 

Description of Fees

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Audit Fees

 

$

43,000

 

 

$

37,000

 

Audit-Related Fees

 

 

2,700

 

 

 

 

Tax Fees

 

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

45,700

 

 

$

37,000

 


Audit Fees


Represents fees for professional services provided for the audit of the Company’s annual financial statements and review of the Company’s financial statements included in the Company’s quarterly reports.


Audit-Related Fees


Represents fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements.




26





Tax Fees


Represents fees related to tax audit and other advisory services, tax compliance and tax return preparation.


Audit Committee Pre-Approval Policies


The Audit Committee pre-approves all work done by its outside independent registered public accounting firm.




27





PART IV


Item 15.

Exhibits and Financial Statement Schedules.


(a)

(1)

The following financial statements are filed as part of this Form 10-K Report:


·

Balance Sheets as of April 30, 2016 and April 30, 2015

·

Statements of Operations and Comprehensive Loss for the years ended April 30, 2016 and April 30, 2015

·

Statements of Changes in Stockholders’ Deficiency for the years ended April 30, 2016 and 2015

·

Statements of Cash Flows for the years ended April 30, 2016 and 2015

·

Notes to Financial Statements


 

(2)

Schedules   None required.

 

 

 

 

(3)

Exhibits


The exhibits to this Annual Report on Form 10-K are listed on the accompanying Index to Exhibits and are incorporated herein by reference or are filed as part of this Annual Report on Form 10-K.


Number

 

Description of Documents

3.1

 

Certificate of Incorporation (incorporated by reference to the Registrant’s Form 10 filed on January 21, 2005).

3.2

 

Certificate of Amendment to Certificate of Incorporation (incorporated by reference to the Registrant’s Form 8-K filed on June 6, 2014).

3.3

 

Certificate of Amendment to Certificate of Incorporation (incorporated by reference to the Registrant’s Form 8-K filed on November 12, 2014).

3.4

 

Amended and Restated By-Laws (incorporated by reference to the Registrant’s Form 8-K filed on November 14, 2014).

3.5

 

Amendment to Amended and Restated By-Laws (incorporated by reference to the Registrant’s Form 8-K filed on February 2, 2015).

3.6

 

Certificate of Designation and Terms of Series A Preferred Stock (incorporated by reference to the Registrant’s Form 8-K filed on October 6, 2015).

4.1

 

Convertible Promissory Note dated March 9, 2016 (incorporated by reference to the Registrant’s Form 8-K filed on March 15, 2016).

10.1

 

Securities Purchase Agreement dated September 8, 2015 with Clairemont Private Investment Group, LLC (incorporated by reference to the Registrant’s Form 8-K filed on September 8, 2015).

10.2

 

Amended and Restated Securities Purchase Agreement with Clairemont Private Investment Group, LLC (incorporated by reference to the Registrant’s Form 8-K filed on October 22, 2015).

10.3

 

American Sports Network Television Contract (incorporated by reference to the Registrant’s Form 8-K filed on January 12, 2016).

10.4

 

Securities Purchase Agreement dated March 9, 2016 (incorporated by reference to the Registrant’s Form 8-K filed on March 15, 2016).

10.5

 

Series A Common Stock Warrant dated March 9, 2016 (incorporated by reference to the Registrant’s Form 8-K filed on March 15, 2016).

10.6

 

Series B Common Stock Warrant dated March 9, 2016 (incorporated by reference to the Registrant’s Form 8-K filed on March 15, 2016).

10.7

 

Pledge Agreement dated March 9 2016 (incorporated by reference to the Registrant’s Form 8-K filed on March 15, 2016).

31.1#

 

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 executed by the Principal Executive Officer of the Company.

31.2#

 

Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 executed by the Principal Financial Officer of the Company.

32.1#

 

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

32.2#

 

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

101

 

XBRL data files of Financial Statements and Notes contained in this Annual Report on Form 10-K

———————

#

Filed herewith




28





SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 

Major League Football, Inc.

 

(Registrant)

 

 

July 29, 2016

 

 

By:

/s/ Wesley Chandler

 

 

Wesley Chandler, President

 

 

(Principal Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature

 

Title

 

Date

 

 

 

 

 

/s/ Wesley Chandler

 

President; Principal Executive Officer

 

July 29, 2016

Wesley Chandler

 

 

 

 

 

 

 

 

/s/ Michael D. Queen

Michael D. Queen

 

Director, Executive Vice President of Finance; Principal Financial Officer

 

July 29, 2016

 

 

 

 

 

/s/ Richard Smith

Richard Smith

 

Director, Chief Operating Officer

 

July 29, 2016








29





MAJOR LEAGUE FOOTBALL, INC.


FINANCIAL STATEMENTS


APRIL 30, 2016 and 2015




CONTENTS


 

PAGE

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-2

 

 

BALANCE SHEETS

F-3

 

 

STATEMENTS OF OPERATIONS

F-4

 

 

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

F-5

 

 

STATEMENTS OF CASH FLOWS

F-7

 

 

NOTES TO FINANCIAL STATEMENTS

F-9 – F-33








F-1





[mlfb_10k003.jpg]



Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of:

Major League Football, Inc.


We have audited the accompanying balance sheets of Major League Football, Inc as of April 30, 2016 and 2015 and the related statements of operations, changes in stockholders’ deficiency, and cash flows for each of the two years in the period ended April 30, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Major League Football, Inc. as of April 30, 2016 and 2015 and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2016 in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had a net loss and net cash used in operations of $6,632,267 and $1,225,181, respectively, in 2016, has an accumulated deficiency of $21,121,832 at April 30, 2016 and has minimal revenues. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Salberg & Company, P.A.


SALBERG & COMPANY, P.A.

Boca Raton, Florida

July 29, 2016







2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality





F-2





MAJOR LEAGUE FOOTBALL, INC.

BALANCE SHEETS


 

 

April 30,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash

 

$

3,799

 

 

$

29,583

 

Equipment deposit

 

 

260,323

 

 

 

 

Prepaid consulting

 

 

650,853

 

 

 

114,513

 

TOTAL CURRENT ASSETS

 

 

914,975

 

 

 

144,096

 

 

 

 

 

 

 

 

 

 

Furniture, fixtures and equipment, net

 

 

2,958

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

Prepaid consulting

 

 

 

 

 

66,986

 

Rent deposit

 

 

11,918

 

 

 

 

TOTAL OTHER ASSETS

 

 

11,918

 

 

 

66,986

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

929,851

 

 

$

211,082

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

736,411

 

 

$

355,296

 

Accrued officer compensation

 

 

960,000

 

 

 

240,000

 

Accrued expenses

 

 

212,287

 

 

 

293,536

 

State income taxes payable

 

 

110,154

 

 

 

110,154

 

Convertible unsecured promissory notes, net of debt discount

 

 

18,220

 

 

 

463,560

 

Convertible secured promissory note, net of debt discount

 

 

78,356

 

 

 

 

Derivative liability

 

 

462,531

 

 

 

 

Notes payable

 

 

100,000

 

 

 

 

Notes payable, related parties

 

 

20,300

 

 

 

14,000

 

Accrued officer payroll taxes

 

 

50,841

 

 

 

 

Accrued interest

 

 

8,763

 

 

 

10,620

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

 

2,757,863

 

 

 

1,487,166

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIENCY

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

No shares issued and outstanding at

 

 

 

 

 

 

 

 

April 30, 2016 and April 30, 2015, respectively

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

41,013,077 and 33,450,009 shares issued and outstanding at

 

 

 

 

 

 

 

 

April 30, 2016 and April 30, 2015, respectively

 

 

41,013

 

 

 

33,450

 

Additional paid-in capital

 

 

19,252,807

 

 

 

13,180,031

 

Accumulated deficiency

 

 

(21,121,832

)

 

 

(14,489,565

)

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDERS' DEFICIENCY

 

 

(1,828,012

)

 

 

(1,276,084

)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

 

$

929,851

 

 

$

211,082

 


The accompanying notes are an integral part of these financial statements.



F-3





MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF OPERATIONS


 

 

For the Year Ended April 30,

 

 

 

2016

 

 

2015

 

Revenue

 

 

 

 

 

 

Management services

 

$

 

 

$

20,000

 

League tryout camp fees

 

 

89,772

 

 

 

 

Total Revenue

 

 

89,772

 

 

 

20,000

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

Salaries and wages

 

 

1,807,070

 

 

 

1,684,125

 

League tryout camp expense

 

 

128,650

 

 

 

 

Professional fees

 

 

2,621,184

 

 

 

1,292,529

 

Insurance

 

 

31,359

 

 

 

20,857

 

Asset purchase expense

 

 

 

 

 

400,000

 

General and administrative

 

 

632,868

 

 

 

396,305

 

Total Operating Expenses

 

 

5,221,131

 

 

 

3,793,816

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(5,131,359

)

 

 

(3,773,816

)

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

Tax penalties and interest

 

 

(15,937

)

 

 

(17,670

)

Gain on settlement of unpaid taxes

 

 

84,580

 

 

 

 

Other income

 

 

3,500

 

 

 

7,464

 

Interest expense

 

 

(1,141,451

)

 

 

(10,620

)

Provision for loan receivable

 

 

(125,000

)

 

 

 

Provision for collateral deposit

 

 

(50,000

)

 

 

 

Initial fair value of an embedded derivative liability

 

 

(723,646

)

 

 

 

Change in fair value of an embedded derivative liability

 

 

467,046

 

 

 

 

Gain on sale of available-for-sale marketable equity securities

 

 

 

 

 

21,894

 

Gain on issuance of common stock in settlement of debt

 

 

 

 

 

62,073

 

Total Other Income (Expense)

 

 

(1,500,908

)

 

 

63,141

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$

(6,632,267

)

 

$

(3,710,675

)

 

 

 

 

 

 

 

 

 

Basic and Diluted Net Loss Per Share

 

$

(0.19

)

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

Weighted Average Shares - Basic and Diluted

 

 

34,831,621

 

 

 

26,763,397

 



The accompanying notes are an integral part of these financial statements.





F-4





MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED APRIL 30, 2016 AND 2015


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficiency

 

 

Income (Loss)

 

 

Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2014

 

 

6,062,495

 

 

$

6,062

 

 

$

9,858,186

 

 

$

(10,778,890

)

 

$

20,306

 

 

$

(894,336

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for employee services - $0.05 per share

 

 

12,000,000

 

 

 

12,000

 

 

 

588,000

 

 

 

 

 

 

 

 

 

600,000

 

Issuance of common stock for exchange of debt - $0.05 per share

 

 

529,998

 

 

 

530

 

 

 

25,970

 

 

 

 

 

 

 

 

 

26,500

 

Issuance of common stock to acquire Major League Football assets -$0.05 per share

 

 

8,000,000

 

 

 

8,000

 

 

 

392,000

 

 

 

 

 

 

 

 

 

400,000

 

Issuance of common stock to related party for exchange of debt -$0.05 per share

 

 

1,457,874

 

 

 

1,458

 

 

 

241,522

 

 

 

 

 

 

 

 

 

242,980

 

Issuance of common stock for professional services -$0.05 per share

 

 

2,375,000

 

 

 

2,375

 

 

 

116,375

 

 

 

 

 

 

 

 

 

118,750

 

Issuance of common stock for employee services - $0.05 per share

 

 

274,642

 

 

 

275

 

 

 

13,457

 

 

 

 

 

 

 

 

 

13,732

 

Issuance of common stock pursuant to 2014 Stock Plan -$0.05 per share

 

 

1,000,000

 

 

 

1,000

 

 

 

49,000

 

 

 

 

 

 

 

 

 

50,000

 

Reclassification from accumulated other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,306

)

 

 

(20,306

)

Issuance of common stock from exercise of stock options - $0.05 per share

 

 

300,000

 

 

 

300

 

 

 

14,700

 

 

 

 

 

 

 

 

 

15,000

 

Issuance of common stock for professional services - $0.01 per share

 

 

250,000

 

 

 

250

 

 

 

225,000

 

 

 

 

 

 

 

 

 

225,250

 

Issuance of common stock for consulting services - $0.30 per share

 

 

500,000

 

 

 

500

 

 

 

149,500

 

 

 

 

 

 

 

 

 

 

150,000

 

Issuance of common stock from exercise of stock warrants - $0.01 per share

 

 

700,000

 

 

 

700

 

 

 

6,300

 

 

 

 

 

 

 

 

 

7,000

 

Amortization of stock options issued for consulting services over vesting period

 

 

 

 

 

 

 

 

157,952

 

 

 

 

 

 

 

 

 

157,952

 

Amortization of stock options issued for employee services over vesting period

 

 

 

 

 

 

 

 

547,920

 

 

 

 

 

 

 

 

 

547,920

 

Amortization of common stock issued for employee services over vesting period

 

 

 

 

 

 

 

 

69,520

 

 

 

 

 

 

 

 

 

69,520

 

Stock warrants issued for consulting services vested immediately

 

 

 

 

 

 

 

 

724,629

 

 

 

 

 

 

 

 

 

724,629

 

Net loss, year ended April 30, 2015

 

 

 

 

 

 

 

 

 

 

 

(3,710,675

)

 

 

 

 

 

(3,710,675

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2015

 

 

33,450,009

 

 

$

33,450

 

 

$

13,180,031

 

 

$

(14,489,565

)

 

$

 

 

$

(1,276,084

)


The accompanying notes are an integral part of these financial statements.





F-5





MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY (Continued)

FOR THE YEARS ENDED APRIL 30, 2016 AND 2015


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficiency

 

 

Income (Loss)

 

 

Deficiency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2015

 

 

33,450,009

 

 

$

33,450

 

 

$

13,180,031

 

 

$

(14,489,565

)

 

$

 

 

$

(1,276,084

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of common stock issued for employee services over vesting period

 

 

 

 

 

 

 

 

87,740

 

 

 

 

 

 

 

 

 

87,740

 

Amortization of stock options issued for employee services over vesting period

 

 

 

 

 

 

 

 

643,504

 

 

 

 

 

 

 

 

 

643,504

 

Amortization of stock options issued for consulting services over vesting period

 

 

 

 

 

 

 

 

273,514

 

 

 

 

 

 

 

 

 

273,514

 

Beneficial conversion feature on convertible notes payable

 

 

 

 

 

 

 

 

1,037,561

 

 

 

 

 

 

 

 

 

1,037,561

 

Cancellation of common stock for services issued erroneously

 

 

(10,000

)

 

 

(10

)

 

 

(3,490

)

 

 

 

 

 

 

 

 

 

(3,500

)

Conversion of convertible unsecured promissory notes and accrued interest

 

 

2,330,327

 

 

 

2,330

 

 

 

696,768

 

 

 

 

 

 

 

 

 

699,098

 

Exercise of stock warrants - $0.01 per share

 

 

100,000

 

 

 

100

 

 

 

900

 

 

 

 

 

 

 

 

 

1,000

 

Exercise of stock warrants - $0.30 per share

 

 

10,674

 

 

 

11

 

 

 

3,191

 

 

 

 

 

 

 

 

 

3,202

 

Exercise of stock options - $0.30 per share

 

 

10,000

 

 

 

10

 

 

 

2,990

 

 

 

 

 

 

 

 

 

3,000

 

Issuance of common stock previously unvested

 

 

1,750,000

 

 

 

1,750

 

 

 

(1,750

)

 

 

 

 

 

 

 

 

 

Re-valuation of unvested stock warrants

 

 

 

 

 

 

 

 

36,119

 

 

 

 

 

 

 

 

 

36,119

 

Issuance of stock warrants for consulting services

 

 

 

 

 

 

 

 

1,582,436

 

 

 

 

 

 

 

 

 

1,582,436

 

Issuance for sale of common stock - $0.30 per share

 

 

1,848,171

 

 

 

1,848

 

 

 

552,602

 

 

 

 

 

 

 

 

 

554,450

 

Issuance of common stock to employees for services - $0.51 per share

 

 

161,396

 

 

 

161

 

 

 

82,151

 

 

 

 

 

 

 

 

 

82,312

 

Issuance of stock warrants with convertible secured promissory note

 

 

 

 

 

 

 

 

239,069

 

 

 

 

 

 

 

 

 

239,069

 

Issuance of common stock for consulting services

 

 

1,362,500

 

 

 

1,363

 

 

 

806,138

 

 

 

 

 

 

 

 

 

807,501

 

Beneficial conversion feature on convertible unsecured notes payable

 

 

 

 

 

 

 

 

33,333

 

 

 

 

 

 

 

 

 

33,333

 

Net loss, year ended April 30, 2016

 

 

 

 

 

 

 

 

 

 

 

(6,632,267

)

 

 

 

 

 

(6,632,267

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2016

 

 

41,013,077

 

 

$

41,013

 

 

$

19,252,807

 

 

$

(21,121,832

)

 

$

 

 

$

(1,828,012

)


The accompanying notes are an integral part of these financial statements.





F-6





MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CASH FLOWS


 

 

For the Year Ended April 30,

 

 

 

2016

 

 

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(6,632,267

)

 

$

(3,710,675

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

297

 

 

 

 

Provision for loan receivable

 

 

125,000

 

 

 

 

Provision for collateral deposit

 

 

50,000

 

 

 

 

Gain on sale of available—for—sale marketable equity securities

 

 

 

 

 

(21,894

)

Gain on issuance of common stock for exchange of debt

 

 

 

 

 

(62,073

)

Amortization of prepaid consulting over service period

 

 

1,244,894

 

 

 

195,514

 

Issuance of common stock to employees for services

 

 

82,312

 

 

 

 

Cancellation of common stock issued erroneously for services

 

 

(3,500

)

 

 

 

Amortization of common stock issued for employee services over vesting period

 

 

87,740

 

 

 

69,521

 

Amortization of stock options issued for employee services over vesting period

 

 

643,504

 

 

 

547,920

 

Amortization of stock options issued for consulting services over service period

 

 

273,514

 

 

 

157,952

 

Issuance of stock warrants for consulting services

 

 

647,867

 

 

 

724,629

 

Amortization of debt discount on convertible secured promissory note

 

 

78,356

 

 

 

 

Amortization of debt discount on convertible unsecured promissory note

 

 

1,553

 

 

 

 

Initial fair value of embedded conversion derivative

 

 

723,646

 

 

 

 

Change in fair value of embedded conversion derivative

 

 

(467,046

)

 

 

 

Issuance of common stock for acquisition of Major League Football assets

 

 

 

 

 

400,000

 

Stock based compensation expense

 

 

 

 

 

782,482

 

Write off of rent deposit

 

 

 

 

 

1,100

 

Amortization of debt discount related to beneficial conversion feature on conversion of notes payable

 

 

1,037,561

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

63,941

 

 

 

(1,930

)

Rent deposit

 

 

(11,918

)

 

 

 

Equipment deposit

 

 

(260,323

)

 

 

 

Accounts payable

 

 

381,115

 

 

 

111,472

 

Accrued officer compensation

 

 

720,000

 

 

 

240,000

 

State income taxes payable

 

 

 

 

 

500

 

Accrued expenses

 

 

(81,249

)

 

 

61,372

 

Accrued officer payroll taxes

 

 

50,841

 

 

 

 

Accrued interest

 

 

18,981

 

 

 

10,620

 

Net cash used in operating activities

 

 

(1,225,181

)

 

 

(493,490

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(3,255

)

 

 

 

Disbursement for loan receivable

 

 

(125,000

)

 

 

 

Disbursement for collateral deposit

 

 

(50,000

)

 

 

 

Proceeds from sale of available—for—sale marketable equity securities

 

 

 

 

 

21,894

 

Net cash provided by (used in) investing activities

 

 

(178,255

)

 

 

21,894

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible unsecured promissory notes

 

 

264,700

 

 

 

463,560

 

Proceeds from issuance of convertible secured promissory notes

 

 

445,000

 

 

 

 

 

Proceeds from issuance of note payable

 

 

100,000

 

 

 

 

Proceeds from issuance of notes payable — related parties

 

 

21,300

 

 

 

14,000

 

Repayment of notes payable to related parties

 

 

(15,000

)

 

 

 

Proceeds from issuance of common stock

 

 

554,450

 

 

 

250

 

Proceeds from exercise of stock warrants

 

 

4,202

 

 

 

22,000

 

Proceeds from exercise of stock options

 

 

3,000

 

 

 

 

Net cash provided by financing activities

 

 

1,377,652

 

 

 

499,810

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

(25,784

)

 

 

28,214

 

CASH — BEGINNING OF YEAR

 

 

29,583

 

 

 

1,369

 

CASH — END OF YEAR

 

$

3,799

 

 

$

29,583

 


The accompanying notes are an integral part of these financial statements.



F-7





MAJOR LEAGUE FOOTBALL, INC.

STATEMENTS OF CASH FLOWS (Continued)


 

 

Year Ended April 30,

 

 

 

2016

 

 

2015

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

 

 

 

 

 

 

CASH PAID FOR INCOME TAXES

 

$

10,580

 

 

$

1,000

 

CASH PAID FOR INTEREST

 

$

5,000

 

 

$

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Reclassification of accumulated other comprehensive income

 

$

 

 

$

20,306

 

Issuance of common stock for exchange of debt

 

$

 

 

$

88,573

 

Issuance of common stock to related party for exchange of debt

 

$

 

 

$

242,980

 

Issuance of warrants for consulting services

 

$

970,688

 

 

$

 

Conversion of convertible unsecured promissory notes and accrued interest

 

$

699,098

 

 

$

 

Issuance of common stock to consultant for services

 

$

807,501

 

 

$

375,000

 

Issuance of stock warrant with convertible secured promissory note

 

$

239,069

 

 

$

 

Repayment of note payable by officer on behalf of Company

 

$

20,000

 

 

$

 

Beneficial conversion feature on convertible notes payable

 

$

33,333

 

 

$

 


The accompanying notes are an integral part of these financial statements.







F-8



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


History and Nature of Business


Major League Football, Inc. (the "Company") 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” (“MLFB”). 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, our board of directors was expanded, a new management team was appointed, and a number of league consultants were retained by our Company.


On November 12, 2014, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to change its name to Major League Football, Inc. from Universal Capital Management, Inc. The Certificate of Amendment became effective at 5:00 p.m. EST on November 24, 2014.


Major League Football, Inc. is seeking to establish, develop and operate Major League Football ("MLFB") as a professional spring football league. We have launched a “Development Season” for 2016 and our inaugural year of professional, spring-league football is anticipated to commence in March of 2017. We intend to fill a void by establishing franchises in cities overlooked by existing professional sports leagues and provide fans with professional football in the NFL off-seasons, which will enable it to take a totally non-adversarial approach towards the National Football League ("NFL"). Our spring and early summer schedule ensures no direct competition with autumn/winter sports, including the 32 NFL, 9 Canadian Football League, 627 NCAA, 91 NAIA, 142 JUCO's, 27 Canadian Universities, and thousands of high schools and other collegiate institutions.




F-9



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


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 and net cash used in operations of $6,632,267 and $1,225,181 for the year ended April 30, 2016. Additionally, at April 30, 2016, the Company has minimal cash, a working capital deficit of $1,842,888 and has an accumulated deficiency of $21,121,832, which could have a material impact on the Company’s financial condition and operations. The majority of the current assets at April 30, 2016 are prepaid consulting services and after excluding these, the Company does not have sufficient cash resources or current assets to pay its obligations.


In view of these matters, recoverability of any asset amounts shown in the accompanying financial statements is dependent upon the Company’s ability to achieve a level of profitability. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Since inception, the Company has financed its activities from the sale of equity securities and from loans. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities and convertible debt securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements. 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.


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


Cash and Cash Equivalents

For the purpose of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.  There were no cash equivalents at April 30, 2016 and 2015.


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, 2016 and 2015 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.


Concentration of Revenues

Innovation Industries accounted for 100% of our revenue for the year ended April 30, 2015. All of the revenue recorded related to our prior business plan.  All revenue for the year ended April 30, 2016 was from league tryout camps held between October and December 2015 under the Company’s new business plan.




F-10



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


Furniture, Fixtures and Equipment

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


Furniture and fixtures

 

5 to 7 years

Computer and office equipment

 

3 to 7 years


For the year ended April 30, 2016, the Company recorded $297 of depreciation expense and at April 30, 2016, the accumulated depreciation balance was $297.


Provision for Loan Receivable and Collateral Deposit


In March 2016, the Company loaned $125,000 to a third party for the purpose of the third party making an investment that was expected to provide an additional return to the Company.  Due to significant uncertainties regarding the collectability of the original principal amount and/or any additional return, the Company recorded an allowance for the full amount of the Loan Receivable and classified as Provision for Loan Receivable in the accompanying financial statements.


In April 2016, the Company disbursed $50,000 of cash related to a collateral deposit with a third party that required additional deposits before a proposed transaction could be consummated.  At April 30, 2016, no further deposits had been made and as a result, the Company recorded an allowance for the full amount of the Collateral Deposit and classified as Provision for Collateral Deposit in the accompanying financial statements.


Convertible Promissory Notes and Related Embedded Derivatives


We account for the embedded conversion option contained in convertible instruments under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”.  The embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date.  The fair value of the embedded conversion option derivatives was determined using the Binomial Option Pricing model.  On the initial measurement date, the fair value of the embedded conversion option derivative was recorded as a derivative liability and was allocated as debt discount up to the proceeds of the notes with the remainder charged to current period operations as initial derivative expense.  Any gains and losses recorded from changes in the fair value of the liability for derivative contract was recorded as a component of other income (expense) in the accompanying statements of operations.


Fair Value of Financial Instruments


ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.




F-11



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


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, amounts receivable, 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 and non-recurring basis consist of the following at April 30, 2016:


 

 

Carrying Value

 

 

Fair Value Measurements at

 

 

 

at

 

 

April 30, 2016

 

 

 

April 30, 2016

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Embedded conversion option derivative liability

 

$

462,531

 

 

$

 

 

$

 

 

$

462,531

 


The following is a summary of activity of Level 3 assets and liabilities for the year ended April 30, 2016:


Embedded Conversion Option Liability

 

 

 

Balance – April 30, 2015

 

$

 

Initial value of derivative liabilities attributable to conversion feature

 

 

929,577

 

Gain from change in the fair value of derivative liabilities

 

 

(467,046

)

Balance – April 30, 2016

 

$

462,531

 


Changes in fair value of the embedded conversion option liability are included in other income (expense) in the accompanying financial statements.




F-12



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


Revenue Recognition


Management Services for Equity Investments

The Company recognizes management services revenue for equity investments received as payment in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 505-50-05, Accounting by a Grantee for an Equity Instrument to be Received in Conjunction with Providing Goods or Services. The Company enters into a management service agreement with a portfolio company to provide services defined in a contract for equity instruments in the form of the portfolio company’s common stock or warrants to purchase common stock. The fair value of the common stock is the portfolio company’s current fair market value and the fair value of the warrant is determined using the Black-Scholes method of valuation. The fair value of the equity instruments is also the Company’s cost basis in the portfolio company’s securities and the income that is recognized for management services. The Company recognizes management services revenue for which payment is to be received in cash as services are provided and in accordance with the revenue recognition criteria of the Securities and Exchange Commission. If persuasive evidence of an arrangement exists, the price is fixed or determinable and collectability is reasonably assured, revenue is deferred and recognized evenly as services are provided over the life of the contract unless otherwise stated in the contract.


League Tryout Camps

The Company recognizes league tryout camp revenue on the dates that the tryout camps were held.


Stock Based Compensation


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


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


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.  As of April 30, 2016 and 2015, the Company does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.  




F-13



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


Net Loss per Share of Common Stock


The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.”  ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement.  Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted EPS gives effect to all dilutive potential common shares outstanding during the period.  The Company’s diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.  At April 30, 2016, there were options to purchase 5,730,000 shares of the Company’s common stock, 7,193,746 warrants to purchase shares of the Company's common stock, 96,154 shares of the Company’s common stock reserved for issuance related to convertible unsecured notes payable and 1,187,050 shares of the Company’s common stock reserved for issuance related to convertible secured notes payable which may dilute future earnings per share.


Related Parties


Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.  Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.  The Company discloses all related party transactions.  All transactions are recorded at fair value of the goods or services exchanged.


New Accounting Pronouncements


In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements­ Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management's plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.


In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which changes the presentation of debt issuance costs in financial statements. Under this guidance such costs would be presented as a direct deduction from the related debt liability rather than as an asset. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. This ASU did not have a material impact on its financial statements.




F-14



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



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


ln May 2015, the FASB issued ASU 2015-08, "Business Combinations (Topic 805) Pushdown Accounting," which conforms the FASB's guidance on pushdown accounting with the SEC's guidance. ASU 2015-08 is effective for annual periods beginning after December 15, 2015. This ASU did not have a material impact on its financial statements.


The Company has evaluated other recent accounting pronouncements and their adoption, and has not had, and is not expected to have, a material impact on the Company's financial position or results of operations. Other new pronouncements issued but not yet effective until after April 30, 2016 are not expected to have a significant effect on the Company's financial position or results of operations.


NOTE 2 – DEBT


Effective July 14, 2014, the Company issued 1,987,872 shares of its common stock based on the settlement of $331,553 in debt (principal and accrued interest). The shares of common stock were valued at $0.05 per share, the quoted market price on the date of grant and resulted in a gain on the settlement of debt in the amount of $232,159. 1,457,874 shares of common stock were granted to a related party and as a result, $170,086 was charged to additional paid in capital instead of a gain on the settlement of debt. The remaining gain in the amount of $62,073 was recorded in Other Income (Expense) in the accompanying financial statements.


 

 

April 30, 2016

 

 

April 30, 2015

 

Notes Payable:

 

 

 

 

 

 

 

 

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

 

$

100,000

 

 

$

 

Total Notes payable

 

$

100,000

 

 

$

 


On January 6, 2016, the Company received $100,000 of proceeds from the issuance of a promissory note and recorded as Note Payable at April 30, 2016.  The terms of the promissory note include interest accrued at 8% annually and the principal and interest payable on demand.  Through April 30, 2016, the Company has accrued $660 of interest related to the promissory note and included in accrued interest in the accompanying financial statements.


 

 

April 30, 2016

 

 

April 30, 2015

 

Notes Payable, Related Party:

 

 

 

 

 

 

 

 

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

 

$

20,300

 

 

$

14,000

 

 

 

 

 

 

 

 

 

 

Total Notes payable, related party

 

$

20,300

 

 

$

14,000

 


From February to July 2015, an officer of the Company provided $15,300 of funds for working capital requirements. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand. During the three months ending October 31, 2015, the Company repaid $15,000 of these funds leaving a balance outstanding of $300. Additionally, on August 28, 2015, the officer personally repaid $20,000 of notes payable (see below). As a result, the outstanding balance owed to the officer is $20,300 at April 30, 2016, recorded as Notes Payable – Related Parties in the accompanying financial statements. See Note 6 – Related Party Transactions.




F-15



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 2 – DEBT (CONTINUED)


On July 31, 2015, an existing investor of the Company provided $20,000 of funds for working capital requirements structured as an unsecured promissory note. The terms of the promissory note required a $25,000 balloon repayment including principal and interest on August 31, 2015. The Company recorded the Note Payable at the gross amount of $25,000 less $5,000 of original issue discount to be amortized to interest expense upon repayment. On October 28, 2015, an officer of the Company personally repaid the note holder $20,000, representing the principal amount of the note payable (see above). In September 2015, the Company repaid the note holder $5,000 representing the interest component of the note and recorded the payment as interest expense against the original issue discount. As a result of the above repayments, the note payable has been paid in full.


 

 

April 30,

2016

 

 

April 30,

2015

 

Convertible Unsecured Notes Payable:

 

 

 

 

 

 

 

 

Unsecured convertible promissory notes payable – Interest accrued at 4% and principal and interest due 9 months from the issuance date. All principal and accrued interest has been converted to common stock on October 31, 2015.

 

$

 

 

$

463,560

 

 

 

 

 

 

 

 

 

 

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

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Debt discount

 

 

(31,780

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Unsecured Notes Payable, net of debt discount

 

$

18,220

 

 

$

463,560

 


In July 2014, the Company commenced a debt offering of up to $3,000,000 of convertible unsecured promissory notes to provide working capital for the Company. The terms include a four percent (4%) per annum interest rate, payable in full with interest nine (9) months from the issuance date, convertible into common stock of the Company at a 30% discounted rate to the offering price of an anticipated future private offering of common stock of the Company for 30 days after the Company delivers the offering documents to the lender and a one (1) year warrant to purchase up to 35% of the number of shares obtained upon conversion of the note as described above. Due to the contingency on the conversion, accounting for the beneficial conversion feature will not be recognized until the contingency is resolved.


During the six months ended October 31, 2015, the Company received $214,700 of gross proceeds from this debt offering and at October 31, 2015, had received a total of $678,260 of gross proceeds. At October 31, 2015, the Company had recorded $20,838 of accrued interest related to the convertible unsecured promissory notes.


Effective October 31, 2015, the Company and the note holders agreed to the modification of the conversion provisions in these convertible unsecured promissory notes. The modified conversion terms provide the (i) the right to convert the principal, along with all interest thereon, into shares of the Company’s common stock at the conversion price of $0.30 per share, and (ii) receive a one-year warrant to purchase up to 100% of the number of shares obtained upon conversion of the note at an exercise price of $0.30 per share.


These modifications are considered debt extinguishments for accounting purposes due to the increase in the fair value of the embedded conversion options. The old notes with accrued interest were removed and the new notes recorded at fair value. The Company determined that there was $699,098 of debt discount related to the beneficial conversion feature of these new notes.




F-16



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 2 – DEBT (CONTINUED)


In accordance with the conversion provisions discussed above, the note-holders requested conversion effective on October 31, 2015. The Company issued 2,330,327 shares of its common stock and warrants for the conversion of the outstanding principal balances (which included accrued interest of $20,838) aggregating $699,098 at the conversion price of $0.30 per share. See Note 4 – Stock Based Compensation.  The $699,098 of debt discount related to the beneficial conversion feature of these notes was written off to interest expense. The relative fair value of the warrants issued with the common stock during these conversions totaled $338,463 and was recorded as additional interest expense.


On April 14, 2016, the Company received $50,000 of proceeds from the issuance of an unsecured convertible promissory note for working capital purposes.  The terms include interest accrued at 5% annually and the principal and interest payable in one year on April 14, 2017.  The note holder at its sole discretion, has the right to convert the principal amount, along with all accrued interest, into shares of the Company’s common stock at the conversion price of $0.30 per share.  Through April 30, 2016, the Company accrued $116 of interest related to the unsecured convertible promissory note and included in accrued interest in the accompanying financial statements.


In accordance with ASC 470-20, the Company determined that a beneficial conversion feature (BCF) existed and utilizing the Black-Scholes Pricing Model, determined that the BCF fair value was $33,333 and recorded the $33,333 BCF as a debt discount with an offset to additional paid in capital.  The initial $33,333 BCF assumed that 50,000 shares would be issued upon conversion of the promissory note. The debt discount is being accreted as additional interest expense ratably over the one-year term of the note and at April 30, 2016, the Company recorded $1,553 of interest expense with a corresponding reduction to the debt discount


The Company used the following assumptions in the calculation:


Stock Price (issue date)

 

$

0.50

 

Conversion Price

 

$

0.30

 

Expected Remaining Term

 

1 year

 

Volatility

 

 

247

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.22

%


 

 

 

April 30, 2016

 

 

 

April 30, 2015

 

Convertible Secured Note Payable:

 

 

 

 

 

 

 

 

Secured convertible promissory note payable – issued March 9, 2016 - Interest accrued at 10% and principal and interest due one year from the issuance date.

 

$

550,000

 

 

$

 

 

 

 

 

 

 

 

 

 

Less: debt discount

 

 

(471,644

)

 

 

 

 

 

 

 

 

 

 

 

 

Total Convertible Secured Notes Payable, net of debt discount

 

$

78,356

 

 

$

 


On March 9, 2016 (the Original Issue Date (OID), the Company received $445,000 of net proceeds for working capital purposes from the issuance of a $550,000 face value convertible secured promissory note with debt issue costs paid to or on behalf of the lender of $55,000.  The terms include interest accrued at 10% annually and the principal and interest payable is payable in one year on March 9, 2017.  Any amount of the principal or interest on this Note 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. Through April 30, 2016, $7,986 of accrued interest was recorded in the accompanying financial statements.




F-17



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 2 – DEBT (CONTINUED)


The lender has the right at any time after the effective date, at its election, to convert all or part of the outstanding and unpaid principal sum and accrued interest into shares of common stock of the Company, subject to certain conversion limitations set forth in the promissory note and certain price protection described below, as per the conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount divided by the Conversion Price. The Conversion Price is equal to seventy percent (70%) of the average of the lowest three VWAPs of the Common Stock during the twenty (20) Trading Days immediately preceding a Conversion Date.


The promissory note contains customary affirmative and negative covenants of the Company. The Conversion Price is subject to “full ratchet” and other customary anti-dilution protections.


In relation to the convertible secured promissory note, the Company issued the lender two warrants, a Series A warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.02 per share and a Series B warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.19 per share.


The principal amount of the promissory note, initially $550,000, 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

 

Principal Amount of this Note

 

 

 

 

 

0 to 30 days after the OID

 

$

605,000

 

31 to 60 days after the OID

 

$

632,500

 

61 to 90 days after the OID

 

$

660,000

 

91 - 120 days after the OID

 

$

687,500

 


Subsequent to 120 days after the Issue Date, the Company has no right or option to prepay the principal amount of the promissory note.


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


The Company evaluated the secured convertible promissory note and the related warrants in accordance with ASC 815 “Derivatives and Hedging” and due to the price protection in the promissory note, determined that there was an embedded conversion feature that should be bifurcated and accounted for as a derivative liability in the balance sheet at fair value. The initial valuation and recording of this derivative liability was $929,577 using the Binomial Lattice Option Pricing Model with the following assumptions; stock price $0.93, conversion price $0.47, expected term of 1 year, expected volatility of 247% and discount rate of 0.30%, accordance with ASC 815 “Derivatives and Hedging”.  The initial $929,577 derivative liability assumed that 1,161,972 shares would be issued upon conversion of the promissory note.




F-18



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 2 – DEBT (CONTINUED)


The Company evaluated the warrants and determined that there was no embedded conversion feature as the warrants contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent rights offerings and pro rate distributions. The Company calculated the relative fair value between the note and the warrants on the issue date utilizing the Black Scholes Pricing Model for the warrants.  As a result, the Company allocated $239,069 to the warrants and was recorded as a debt discount with an offset to additional paid in capital in the accompanying financial statements.  The warrant calculation used the following assumptions; stock price $0.93, Class A warrant exercise price $1.02, Class B warrant exercise $1.19, expected term of 3 years, expected volatility of 287% and discount rate of 0.30%.


On the note issue date of March 9, 2016, the Company recorded the following debt discounts as offsets to the $550,000 note payable and will be amortized over the one-year term of the note: (1) OID of $50,000, (2) debt issue costs of $55,000, (3) warrant fair value of $239,069 and (4) embedded conversion option liability of $205,931. As a result, the Company recorded a $723,646 expense for the initial fair value of embedded conversion derivative, recorded as a separate item in other income (expense) in the accompanying financial statements.


The Company performed a revaluation of the embedded conversion liability using the Binomial Lattice Pricing Model at April 30, 2016 that resulted in a calculated value of $462,531.  As a result, the Company recorded $467,046 of income for the change in the fair value of compound embedded derivative, recorded as a separate item in other income (expense) in the accompanying financial statements.  


The revaluation of the embedded conversion liability at April 30, 2016 was calculated using the Binomial Lattice option pricing model with the following assumptions; stock price $0.52, conversion price $0.46, expected term of 0.86 years, expected volatility of 240% and discount rate of 0.22%.   The change in the derivative liability assumed that 1,161,972 shares would be issued upon conversion of the promissory note at April 30, 2016.


For the period from the note issue date of March 9, 2016 to April 30, 2016, the Company recorded $78,356 for amortization of the four debt discounts discussed above and recorded to interest expense in the accompanying financial statements.


NOTE 3 – INCOME TAXES


The Company utilizes the assets and liability method of accounting for income taxes in accordance with ASC 740-10 and ASC 740-30, Accounting for Income Taxes.


Under the provisions of ASC 740-10, Accounting for Income Taxes, the unrecognized tax provisions consisting of interest and penalties at April 30, 2016 was $0. There was no change in unrecognized tax provisions during the year ending April 30, 2016 and the accrual at April 30, 2016 amounted to $0. The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense. Tax years from 2005 (initial tax year) through 2015 remain subject to examination by major tax jurisdictions.




F-19



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 3 – INCOME TAXES (CONTINIUED)


The income tax benefit for the years ending April 30, 2016 and 2015 have been included in the accompanying financial statements on the basis of an estimated annual federal and state of Delaware effective rate of 34.0% and 5.75%, respectively, resulting in a blended effective rate of 39.75%. 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,

 

 

 

2016

 

 

2015

 

Income tax benefit at U.S. Federal Income Tax rate

 

$

2,254,000

 

 

$

1,261,000

 

State income taxes, net of federal benefit

 

 

375,000

 

 

 

216,000

 

Realized gains (losses)

 

 

 

 

 

8,000

 

Change in valuation allowance

 

 

(2,629,000

)

 

 

(1,485,000

)

 

 

 

 

 

 

 

 

 

Net Income tax (provision) benefit

 

$

 

 

$

 


The components of deferred tax assets (liabilities) are as follows:


 

 

April 30,

 

 

 

2016

 

 

2015

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating loss carry forward

 

3,996,000

 

 

1,525,000

 

Capital loss carry forward

 

 

785,000

 

 

 

774,000

 

Stock-based compensation

 

 

1,676,000

 

 

 

1,676,000

 

Change in fair value of embedded conversion derivative

 

 

102,000

 

 

 

 

Bad debt

 

 

288,000

 

 

 

218,000

 

Other

 

 

363,000

 

 

 

388,000

 

 

 

 

 

 

 

 

 

 

Total gross deferred tax assets

 

$

7,210,000

 

 

$

4,581,000

 

Less: deferred tax asset valuation allowance

 

 

(6,933,500

)

 

 

(4,304,500

)

Total net deferred tax assets

 

 

276,500

 

 

 

276,500

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Future exercise of  warrants

 

$

(276,000

)

 

$

(276,000

)

Other

 

 

(500

)

 

 

(500

)

 

 

 

 

 

 

 

 

 

Total net deferred tax liabilities

 

$

(276,500

)

 

$

(276,500

)

 

 

 

 

 

 

 

 

 

Total net deferred taxes

 

$

 

 

$

 


In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The valuation allowance has been increased by $2,629,000 and $1,485,000 for the years ended April 30, 2016 and 2015, respectively.  Net operating loss carry-forwards aggregate approximately $10,054,000 and capital loss carry-forwards aggregate approximately $1,976,000 and expire in years through 2036. The Company’s net operating loss carry forwards may be subject to annual limitations, which could eliminate, reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. The Company’s federal tax returns for 2005 and beyond remain subject to examination by the IRS because the Company has not filed the tax returns for these years.




F-20



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 3 – INCOME TAXES (CONTINIUED)


At April 30, 2016, the Company owed the State of Delaware $110,154 for unpaid state income taxes from the tax year ended April 30, 2007. The unpaid state income taxes are included as state income taxes payable in accompanying financial statements. Additionally, the Company owes the State of Delaware for penalties and interest from the tax year ending April 30, 2007 of $165,082 and $149,094, which is included as accrued expenses in the accompanying financial statements at April 30, 2016 and 2015, 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 4 – STOCK BASED COMPENSATION


Stock Options


In May 8, 2006, the Company approved the 2006 Equity Incentive Plan ("2006 Plan") for the benefit of our directors, officers, employees and consultants, and which reserved 400,000 shares of our common stock for such persons pursuant to the 2006 Plan. The 2006 Plan has a term of 10 years and no option shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the award agreement. If for any reason other than death or disability, an Optionee of the 2006 Plan who at time of the grant of an Option under the 2006 Plan was an employee ceases to be an employee (such event being called a "Termination"), options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within three months of the date of such Termination; provided, however, that if such exercise of the option would result in liability for the optionee under Section 16(b) of the Securities Exchange Act of 1934, then such three-month period automatically shall be extended until the tenth day following the last date upon which optionee has any liability under Section 16(b) (but in no event after the expiration date of such Option). There are 40,000 options outstanding under this plan at April 30, 2016.


On July 14, 2014, the Company's board of directors approved the 2014 Employee Stock Plan ("2014 Plan") and authorized 10,000,000 shares of its common stock that shall be set aside and reserved for issuance pursuant to the 2014 Plan, subject to adjustments as may be required in accordance with the terms of the 2014 Plan. The 2014 Plan was subsequently approved by the Company's stockholders on November 11, 2014. The 2014 Plan has a term of 10 years and no option shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the award agreement. If for any reason other than death or disability, an optionee of the 2014 Plan who at time of the grant of an option under the 2014 Plan was an employee ceases to be an employee (such event being called a "Termination"), options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within three months of the date of such Termination; provided, however, that if such exercise of the option would result in liability for the optionee under Section 16(b) of the Securities Exchange Act of 1934, then such three-month period automatically shall be extended until the tenth day following the last date upon which optionee has any liability under Section 16(b) (but in no event after the expiration date of such option).


Stock Options to Consultants


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


Of the 4,150,000 stock options, 1,100,000 vested immediately on the grant date of July 14, 2014 and the remaining 3,050,000 vest over a period of three to four years based upon the specific consulting agreements. The Company valued the stock options in accordance with ASC 505, Stock Compensation – Non Employees, by using the Black Scholes Pricing Model.




F-21



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


The 1,100,000 stock options that vested immediately on the grant date of July 14, 2014 were valued at $55,000 and expensed to consulting expense. In January 2015, 300,000 of the vested stock options were exercised leaving a balance of 800,000 unexercised vested stock options at July 31, 2015.


The remaining 3,050,000 unvested stock options are being re-measured by the Company each reporting period and the resulting fair value is used to determine the new remaining consulting expense to be recorded over the vesting period of three to four years. Effective in December 2014, 1,050,000 of the unvested stock options were canceled due to the termination of the underlying consulting agreements. As a result, the consulting expense for the remaining 2,000,000 unvested stock options was $273,514 for the year ended April 30, 2016 and $157,952 for the period from July 14, 2014 to April 30, 2015.


The Company used the following assumptions in estimating fair value:


Stock Price (re-measurement date of April 30, 2016)

 

$

0.52

 

Exercise Price

 

$

0.05

 

Expected Remaining Term

 

8.46 years

 

Volatility

 

 

240

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.008

%


Stock Options to Employees


On February 24, 2015, pursuant to the terms of the 2014 Employee Stock Plan the Company issued to its employees, options to purchase up to 2,900,000 shares of common stock at an exercise price of $0.30 per share. The options vest over a period of 4 years, with 580,000 options vesting immediately. All of these options expire on February 23, 2025.


In addition, on February 24, 2015, the Company granted Jerome Vainisi, the Company’s acting Chief Executive Officer, an option to purchase up to 3,000,000 shares of common stock at an exercise price of $0.30 per share. These vest over a two-year period, with 250,000 options vesting immediately and the remaining 2,750,000 options vesting in eight equal quarterly installments of 343,750 options. Effective December 11, 2015, Mr. Vainisi notified the Company that he would not finalize his employment agreement and is no longer the Company’s Chief Executive Officer.  As a result, he retained all vested options and the unvested options would be forfeited. At January 31, 2016, 1,281,250 (250,000 that vested immediately and 1,031,250 that vested as per above) of the options were vested and the remaining 1,718,750 were forfeited.  In accordance with the Company’s 2014 Employee Stock Plan, Mr. Vainisi has 90 days from the separation date of December 11, 2015, or March 10, 2016 to exercise the vested options or they expire. Mr. Vainisi did not exercise his 1,281,250 vested option on March 10, 2016 and they expired.


As a result, a total of 5,900,000 stock options were granted on February 24, 2015. Of the 5,900,000 stock options, 830,000 vested immediately on the grant date of February 24, 2015 and the remaining 5,070,000 would vest over a period of two to four years based upon the specific agreement. As discussed above, 1,718,750 of Mr. Vainisi’s unvested options were forfeited on December 11, 2015 and 1,281,250 of Mr. Vainisi’s vested options expired on March 10, 2016.  As a result, 2,070,000 unvested options are outstanding at April 30, 2016.


The Company valued the 2,070,000 unvested stock options in accordance with ASC 718, Stock Compensation, using the Black Scholes Pricing Model to estimate fair value. The Company used the 'simplified method' for estimating the ‘remaining expected contractual term' because it does not have sufficient information to make more accurate estimates of the remaining expected term or employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies).




F-22



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


The 830,000 stock options that vested immediately (including 250,000 for Mr. Vainisi) on the grant date were valued at $390,100 and recorded to stock based compensation expense. Effective September 30, 2015, 10,000 of the vested stock options were exercised at $0.30 per share resulting in $3,000 of proceeds to the Company – See Note 5 – Common Stock.


The remaining 2,070,000 unvested stock options (excluding Mr. Vainisi) had a fair value of $1,090,400 on the grant date and are being amortized ratably over the vesting periods. Mr. Vainisi’s remaining 1,090,250 vested options that expired were included in stock based compensation expense through the expiration date of March 10, 2016.  For the year ended April 30, 2016, the Company recorded $643,504 in stock based compensation expense.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.47

 

Exercise Price

 

$

0.30

 

Expected Remaining Term

 

5 years

 

Volatility

 

 

246

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.11

%


The following table summarizes employee and consultant stock option activity of the Company for the year ended April 30, 2016:


 

 

Employee and Consultant Stock Options Outstanding

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Options

 

 

Price

 

 

Life (Years)

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2015

 

 

8,740,000

 

 

$

0.22

 

 

 

9.60

 

 

$

616,000

 

Exercised September 30, 2015

 

 

(10,000

)

 

$

0.30

 

 

 

 

 

 

 

Forfeited December 11, 2015

 

 

(1,718,750

)

 

$

0.30

 

 

 

 

 

 

 

Expired March 10, 2016

 

 

(1,281,250

)

 

$

0.30

 

 

 

 

 

 

 

Outstanding, April 30, 2016

 

 

5,730,000

 

 

$

0.18

 

 

 

8.48

 

 

$

1,951,800

 

Exercisable, April 30, 2016

 

 

2,425,000

 

 

$

0.18

 

 

 

8.48

 

 

$

830,950

 


Stock Warrants


Effective July 14, 2014, the Company granted 2,000,000 warrants to purchase common stock, exercisable at $0.01 per share, to a consultant for services to be provided over a one-year period. The warrant vested immediately and have an exercise period of one year. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for these stock warrants was $81,624, which was being amortized to consulting expense over the term of the agreement.




F-23



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.05

 

Exercise Price

 

$

0.01

 

Expected Remaining Term

 

0.5 years

 

Volatility

 

 

161

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.11

%


On January 1, 2015 the Company executed a rescission agreement with the Consultant terminating the consulting agreement and canceling the warrant issuance, effective retroactively to July 14, 2014. Therefore, the Company reversed $24,376 of consulting expense related to this agreement.


Effective August 28, 2015, the Company granted 1,400,000 warrants to purchase common stock, exercisable at $0.35 per share, to a consultant for services to be provided over a one-year period. Additionally, the Company issued 400,000 shares of stock to the Consultant as compensation for the services. Of the 1,400,000 stock warrants, 700,000 vested immediately on the grant date of August 28, 2015 and the remaining 700,000 vest six (6) months from the grant date on February 28, 2016. The warrant has an exercise period of thirty (30) months through August 28, 2018. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value.


According to ASC 505-50, a measurement date was reached at the date of grant, or August 28, 2015 for the 700,000 warrants which vested on the grant date. For the 700,000 warrants that vest in six (6) months, the fair value was re-valued at each reporting date until the vesting date of February 28, 2016.


The 700,000 stock warrants that vested immediately on the grant date were valued at $289,867, recorded to prepaid expense and will be amortized ratably to consulting expense over the twelve (12) month service period. The Company recorded $195,362 of consulting expense for the 700,000 vested stock warrants for the year ended April 30, 2016. As a result, the prepaid balance is $94,505 at April 30, 2016.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.42

 

Exercise Price

 

$

0.35

 

Expected Remaining Term

 

2.33 years

 

Volatility

 

 

317

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.30

%


The remaining 700,000 unvested stock warrants had a fair value of $289,867 on the grant date and will also be amortized ratably to consulting expense over the twelve (12) month service period, however these warrants were re-valued through the vesting date of February 28, 2016, and the adjusted valuation, less the amounts amortized through the vesting date, have been amortized over the remaining service period of six (6) months. As a result of the final re-measurement at February 28, 2016, the valuation was adjusted to $680,821 and the Company has recorded $458,855 of consulting expense for these stock options for the year ended April 30, 2016. As a result, the prepaid expense balance is $221,966 at April 30, 2016.




F-24



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


The Company used the following assumptions in estimating fair value:


Stock Price (re-measurement date of February 28, 2016)

 

 

 

$

1.00

 

Exercise Price

 

 

 

$

0.35

 

Expected Remaining Term

 

 

 

1.83 years

 

Volatility

 

 

 

 

293

%

Annual Rate of Quarterly Dividends

 

 

 

 

0.00

%

Risk Free Interest Rate

 

 

 

 

0.32

%


In relation to the 400,000 shares issued on the grant date, the Company valued the stock based upon the quoted market price of $0.42 on the date of grant, or $168,000. The $168,000 is being amortized to consulting expense over the one-month term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $113,227 of consulting expense and the remaining unamortized amount of $54,773 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.See Note 5 – Common Stock.


Effective September 30, 2015, 100,000 stock warrants were exercised at $0.01 per share resulting in $1,000 of proceeds to the Company – See Note 5 – Common Stock.


In November 2015, the Company commenced a $500,000 private placement offering 50 units at $10,000 per unit. Each unit represents 33,333 shares of common stock at $0.30 per share and a one-year warrant to purchase 16,667 shares of common stock at an exercise price of $0.50 per share. From November 2, 2015 through February 16, 2016, the Company received $499,450 of proceeds from the offering representing 1,664,840 shares of stock and 832,426 warrants.


The $499,450 of proceeds from the issuance of the units was allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance. The fair value for the warrants was determined utilizing the Black Scholes Pricing Model based upon the various issuance dates of the warrants during the period.  As a result, the Company allocated $343,910 to the shares of stock and $155,540 to the warrants.  The value allocated to the warrants was classified as additional paid in capital in the accompanying financial statements.  The November 2015 offering was terminated at the end of February 2016.


In March 2016, the Company commenced a $500,000 private placement offering 50 units at $10,000 per unit. Each unit represents 33,333 shares of common stock at $0.30 per share and a one-year warrant to purchase 16,667 shares of common stock at an exercise price of $0.50 per share. From March 3, 2016 through March 22, 2016, the Company received $55,000 of proceeds from the offering representing 183,333 shares of stock and 91,667 warrants.


The $55,000 of proceeds from the issuance of the units was allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance. The fair value for the warrants was determined utilizing the Black Scholes Pricing Model based upon the various issuance dates of the warrants during the period.  As a result, the Company allocated $40,317 to the shares of stock and $17,885 to the warrants.  The value allocated to the warrants was classified as additional paid in capital in the accompanying financial statements.


As discussed above in Note 2 – Debt, in relation to a convertible secured promissory note, the Company issued the lender two warrants, a Series A warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.02 per share and a Series B warrant with a three (3) year term to acquire 250,000 shares of common stock of the Company at an exercise price of $1.19 per share.




F-25



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


Effective April 27, 2016, the Company granted 300,000 warrants to purchase common stock, exercisable at $0.01 per share, to a consultant for prior services provided. The warrant vested immediately and has an exercise period of three years. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for this stock warrant was $149,508, which was recorded to consulting expense immediately.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.50

 

Exercise Price

 

$

0.01

 

Expected Remaining Term

 

3 years

 

Volatility

 

 

248

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.24

%


Effective March 8, 2016, an investor that received warrants from the conversion of debt (See Note 2 – Debt and Note 5 – Common Stock) elected to exercise 4,007 warrants at an exercise price of $0.30 a share and the Company received $1,202 of cash proceeds.


Effective March 22, 2016, an investor that received warrants from the conversion of debt (See Note 2 – Debt and Note 5 – Common Stock) elected to exercise 6,667 warrants at an exercise price of $0.30 a share and the Company received $2,000 of cash proceeds.


Effective April 27, 2016, the Company granted 1,000,000 warrants to purchase common stock, exercisable at $0.01 per share, to a consultant for prior services provided. The warrant vested immediately and has an exercise period of three years. The Company valued the stock warrant in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for this stock warrant was $498,359, which was recorded to consulting expense immediately.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.50

 

Exercise Price

 

$

0.01

 

Expected Remaining Term

 

3 years

 

Volatility

 

 

248

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.24

%




F-26



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 4 – STOCK BASED COMPENSATION (CONTINUED)


The following table summarizes stock warrant activity of the Company for the year ended April 30, 2016:


 

 

Consultant Stock Warrants Outstanding

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Life (Years)

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, April 30, 2015

 

 

850,000

 

 

$

0.01

 

 

 

4.82

 

 

$

690,000

 

Issued August 28, 2015

 

 

1,400,000

 

 

$

0.35

 

 

 

1.83

 

 

 

238,000

 

Exercised September 16, 2015

 

 

(100,000

)

 

$

0.01

 

 

 

 

 

 

 

Issued October 31, 2015 from conversion of debt

 

 

2,330,327

 

 

$

0.30

 

 

 

0.50

 

 

 

510,324

 

Issued November 2, 2016 through February 16, 2016

 

 

832,426

 

 

$

0.50

 

 

 

0.67

 

 

 

16,245

 

Issued March 3, 2016 through March 22, 2016

 

 

91,667

 

 

$

0.50

 

 

 

0.84

 

 

 

1,833

 

Issued March 9, 2016

 

 

500,000

 

 

$

0.46

 

 

 

2.85

 

 

 

30,000

 

Exercised March 8, 2016

 

 

(4,007

)

 

$

0.30

 

 

 

 

 

 

 

Exercised Mach 22, 2016

 

 

(6,667

)

 

$

0.30

 

 

 

 

 

 

 

Issued April 27, 2016

 

 

1,300,000

 

 

$

0.01

 

 

 

2.99

 

 

 

663,000

 

Outstanding, April 30, 2016

 

 

7,193,746

 

 

$

0.26

 

 

 

1.74

 

 

$

1,842,306

 

Exercisable, April 30, 2016

 

 

7,193,746

 

 

$

0.26

 

 

 

1.74

 

 

$

1,842,306

 


NOTE 5 – COMMON STOCK


Capital Structure


The Company is authorized to issue up to 150,000,000 shares of common stock at $0.001 par value per share. As of April 30, 2016, 41,013,077 shares were issued and outstanding. Additionally, there are 5,250,000 shares of unvested common stock to be issued to employees over the vesting period of four years through July 14, 2018. The 5,250,000 unvested shares of common stock are not included in the 41,013,077 shares reported but are considered legally issued and outstanding as they have all rights of ownership, other than the right to receive dividends, and in the case of 1,500,000 of the shares, the right to vote.


Common Stock Issued


On July 14, 2014, the Company granted 19,000,000 shares of its common stock to the new MLFB management team. Of the 19,000,000 shares, 12,000,000 vested immediately and the remaining 7,000,000 vest in equal annual installments over a 4-year employment period commencing July 2015. During the three months ended July 31, 2015, 1,750,000 of the 7,000,000 shares vested leaving a balance of 5,250,000 unvested shares and the Company recorded the issuance of the 1,750,000 shares at its par value of $1,750 with an offset to additional paid in capital. The unvested shares were valued at $0.05 per share or $350,000 and are being amortized to compensation expense over the vesting period. During the year ended April 30, 2016, the Company recorded $87,740 of compensation expense related to vesting of the shares.




F-27



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 5 – COMMON STOCK (CONTINUED)


On July 14, 2014, the Company granted 2,649,642 shares of its common stock for prior professional and employee services provided to the Company. The shares of common stock were granted at a contractually agreed value of $0.01 per share and were vested immediately. The shares of common stock were valued for accounting purposes at $0.05 per share, the quoted market price on the date of grant and resulted in $132,482 of stock based compensation expense as all of the shares were vested on the date of grant. The 2,649,642 shares issued included 100,000 shares to Stradley, Ronon Stevens & Young, LLP ("Stradley"), a law firm that has a judgment against the Company in the amount of $166,129. The Company is in discussion with the law firm to resolve the Judgment and anticipates a resolution in the near future. (See Note 7 – Commitments and Contingencies).


On July 14, 2014, the Company granted 1,457,874 shares of its common stock in exchange for canceling $242,980 in debt, including principal and accrued interest. The shares of common stock were valued at $0.05 per share, the quoted market price on the date of grant and resulted in a gain on the settlement of debt in the amount of $170,086 and this amount was charged to additional paid in capital in the accompanying financial statements.


Effective November 28, 2014, the Company engaged an investor relations firm as a consultant to provide services related to shareholder information and public relations. The term of the agreement is for six (6) months. As compensation for the services, the Company issued the consultant 250,000 shares of common stock and will pay the consultant a monthly cash fee of $2,500. The Company valued the stock based upon the quoted market price of $0.90 on the date of grant, or $225,000. The $225,000 is being amortized to consulting expense over the 6-month term of the consulting agreement. At April 30, 2015, $37,500 of this amount (final month of the agreement) was recorded as prepaid consulting and during the year ended April 30, 2016, was amortized to consulting expense in the accompanying financial statements.


Effective March 23, 2015, the Company engaged a consultant to provide services primarily related to strategic planning, business development and strategic advisory services. The term of the agreement is two (2) years and as compensation for the agreement, the Company issued the consultant 500,000 shares of common stock. The Company valued the stock based upon the quoted market price of $0.30 on the date of grant, or $150,000. The $150,000 is being amortized to consulting expense over the two-year term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $75,000 of consulting expense and the remaining unamortized amount of $66,986 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.


Effective August 28, 2015, the Company issued 400,000 shares of common stock and 1,400,000 warrants to purchase common stock as compensation to a consultant.  See Note 4 – Stock based Compensation for further discussion related to this transaction.


Effective September 16, 2015, 100,000 shares of common stock were issued for the exercise of a stock warrant at $.01 per share resulting in $1,000 of proceeds to the Company – See Note 4 – Stock Based Compensation.


Effective September 30, 2015, 10,000 shares of common stock were issued for the exercise of a stock option at $0.30 per share resulting in $3,000 of proceeds to the Company – See Note 4 – Stock Based Compensation.


Effective October 15, 2015, the Company engaged a consultant to provide services primarily related to media services. The term of the agreement is one (1) year and as compensation for the agreement, the Company issued the consultant 112,500 shares of common stock. The Company valued the stock based upon the quoted market price of $1.00 on the date of grant, or $112,500. The $112,500 is being amortized to consulting expense over the one-year term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $61,389 of consulting expense and the remaining unamortized amount of $51,111 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.




F-28



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 5 – COMMON STOCK (CONTINUED)


Effective October 31, 2015, 2,330,327 shares of common stock and warrants were issued for the conversion of convertible notes payable at a price of $0.30 per share. See Note 2- Debt.


Effective December 8, 2015, the Company engaged a consultant to provide services primarily related to public relations services. The term of the agreement is six (6) months and as compensation for the agreement, the Company issued the consultant 500,000 shares of common stock. The Company valued the stock based upon the quoted market price of $0.72 on the date of grant, or $275,000. The $275,000 is being amortized to consulting expense over the six-month term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $219,093 of consulting expense and the remaining unamortized amount of $55,907 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.


Effective January 1, 2016, the Company engaged three consultants to provide services primarily related to corporate strategies. The term for each of the three agreements is six (6) months and as compensation for the agreement, the Company issued the three consultants an aggregate 150,000 shares of common stock. The Company valued the stock based upon the quoted market price of $0.72 on the date of grant, or $108,000. The $108,000 is being amortized to consulting expense over the six-month term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $36,000 of consulting expense and the remaining unamortized amount of $72,000 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.


Effective January 8, 2016, the Company amended a previous consulting agreement dated April 23, 2015.  As a result of the amendment, the Company issued the consultant 100,000 shares of common stock for prior services provided. The Company valued the stock based upon the quoted market price of $0.72 on the date of grant, or $72,000. The $72,000 was recorded as consulting expense in the accompanying financial statements at April 30, 2016.


Effective January 14, 2016, the Company engaged a consultant to provide services primarily related to corporate strategies. The term of the agreement is six (6) months and as compensation for the agreement, the Company issued the consultant 100,000 shares of common stock. The Company valued the stock based upon the quoted market price of $0.80 on the date of grant, or $80,000. The $80,000 is being amortized to consulting expense over the six-month term of the consulting agreement. During the year ended April 30, 2016, the Company recorded $47,473 of consulting expense and the remaining unamortized amount of $32,527 is recorded as prepaid consulting – current in the accompanying financial statements at April 30, 2016.


From November 2, 2015 to February 16, 2016, the Company received $499,450 of proceeds from a private placement offering, representing 1,664,840 shares of stock and 832,426 warrants (see Note 4 – Stock Based Compensation).  The $499,450 of proceeds from the issuance of the units was allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance.  As a result, the Company allocated $323,095 to the shares of stock and $146,355 to the warrants.  The value allocated to the warrants was classified as additional paid in accompanying balance sheet.


From March 3, 2016 to March 22, 2016, the Company received $55,000 of proceeds from a private placement representing 183,333 shares of common stock. The $55,000 of proceeds from the issuance of the units was allocated between the shares of common stock and the warrants based on their relative fair values on the date of issuance. The fair value for the warrants was determined utilizing the Black Scholes Pricing Model based upon the various issuance dates of the warrants during the period.  As a result, the Company allocated $38,083 to the shares of stock and $16,917 to the warrants.  The value allocated to the warrants was classified as additional paid in capital in the accompanying financial statements.


Effective March 8, 2016, an investor that received warrants from the conversion of debt (See Note 2 – Debt and Note 4 – Stock Based Compensation) elected to exercise 4,007 warrants at an exercise price of $0.30 a share and the Company received $1,202 of cash proceeds. Accordingly, the Company issued the warrant holder 4,007 shares of common stock.




F-29



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 5 – COMMON STOCK (CONTINUED)


Effective March 22, 2016, an investor that received warrants from the conversion of debt (See Note 2 – Debt and Note 4 – Stock Based Compensation) elected to exercise 6,667 warrants at an exercise price of $0.30 a share and the Company received $2,000 of cash proceeds.  Accordingly, the Company issued the warrant holder 6,667 shares of common stock.


Effective April 21, 2016, the Company issued 161,396 shares of common stock to employees as a component of a Registration Statement on Form S-8 for an aggregate of 8,690,000 shares of the Company’s common stock.  The shares were per the Company’s 2014 Employee Stock Plan. The Company valued the stock based upon the quoted market price of $0.51 on the date of grant, or $82,312 and was classified as stock compensation expense in the accompanying financial statements at April 30, 2016.


NOTE 6 – RELATED PARTY TRANSACTIONS


During the year ended April 30, 2016, the Company recorded $720,000 of compensation for its management in accordance with executed management service agreements. At April 30, 2016, a total of $960,000 (including $240,000 of compensation at April 30, 2015) was unpaid and is recorded as accrued officer compensation in the accompanying financial statements.  Additionally, the Company recorded $50,841 of accrued employers share of payroll taxes related to the unpaid officer compensation at April 30, 2016.


From February to August 2015, an officer of the Company provided $15,300 of funds for working capital requirements. There is no formal agreement and no interest is being accrued by the Company with the principal due on demand. During the three months ending October 31, 2015, the Company repaid $15,000 of these funds, resulting in an outstanding balance of $300. Additionally, on August 28, 2015, the officer personally repaid $20,000 of notes payable. As a result, the outstanding balance owed to the officer is $20,300 at April 30, 2016, recorded as Notes Payable – Related Parties in the accompanying financial statements at April 30, 2016. See Note 2 - Debt.


NOTE 7 – COMMITMENTS AND CONTINGENCIES


On July 31, 2015, the Company executed a lease agreement for its new corporate headquarters and training facility in Lakewood Ranch, Manatee County, Florida. The term of the lease is two (2) years at a monthly rental rate of $11,918. At closing, the Company paid an $11,918 security deposit, which is recorded in other assets in the accompanying financial statements at April 30, 2016. The Company has an option to extend the terms and conditions of the lease for an additional three (3) years by giving notice at least six (6) months before the expiration of the term. See Note 8 – Subsequent Events.


As of April 30, 2016, the Company had not paid the landlord for the Florida corporate offices approximately $28,000 of lease payments.  As a result, the Company is in default of the lease agreement and subject to eviction, acceleration of the entire lease amount and other legal remedies that the landlord may pursue.


At April 30, 2016, subject to the outcome of the litigation noted in Note 8 – Subsequent Events, the total future minimum lease payments under operating leases in respect of leased premises are payable as follows:


Year ended April 30,

 

 

 

2017

 

 

$

143,016

 

2018

 

 

 

35,754

 

Total

 

 

$

178,770

 




F-30



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 7 – COMMITMENTS AND CONTINGENCIES (CONTINUED)


Stradley Ronon Stevens & Young, LLP


On May 9, 2009, Stradley filed a lawsuit against the Company in the U.S. District Court for the District of Delaware for failure of the Company to pay legal fees owed in the amount of $166,129. On April 2, 2009, in order to avoid the cost of litigation, the Company agreed to a Consent of Judgment against it in the amount of $166,129 and the Company continues to carry this amount as accounts payable at April 30, 2016. The Company negotiated with Stradley and in July 2014, agreed to issue 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 in regards to a resolution. The Company is still in discussions with the law firm in regard to this Judgment and anticipates a resolution in the near future.


Unpaid Taxes and Penalties


At April 30, 2016, the Company owed the State of Delaware $110,154 for unpaid state income taxes from the tax year ended April 30, 2007. The unpaid state income taxes are included as state income taxes payable in accompanying financial statements. Additionally, the Company owes the State of Delaware for penalties and interest from the tax year ending April 30, 2007 of $165,082, which is included as accrued expenses in the accompanying financial statements at April 30, 2016. 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 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. Through April 30, 2016, the Company had made all required payments in accordance with the settlement except for the final payment of $2,205.   As a result, the Company is in default of the settlement agreement and the IRS could void or restructure the agreement.  


The Company recognized an $84,580 gain on the offer in compromise settlement with the IRS and is included in Other Income in the accompanying financial statements at April 30, 2016.


On February 5, 2016, the Company disclosed that the previously executed $20,000,000 sale and purchase of common stock with Clairemont Private Investment Group, LLC (“Clairemont”), scheduled to close on February 1, 2016 was in default. The Company disclosed that Clairemont breached the Amended Purchase Agreement by not providing to the Company the $20,000,000 purchase price for the common stock as required by the terms of the Amended Purchase Agreement. The Company intends to pursue legal remedies against Clairemont.


NOTE 8 – SUBSEQUENT EVENTS


In May and June 2016, the Company issued a total of 160,132 shares of common stock to employees as a component of a previously filed Registration Statement on Form S-8.  The shares were per the Company’s 2014 Employee Stock Plan. The Company will value the stock based upon the quoted market price on the various grant dates and will be classified as stock compensation expense.


On May 4, 2016, the Company issued 91,860 shares to a consultant to settle a dispute related to the price of a cashless exercise warrant in an agreement dated August 12, 2012.  The Company valued the stock based upon the quoted market price of $0.45 on the date of grant, or $41,337 and will be recorded as consulting expense.





F-31



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 8 – SUBSEQUENT EVENTS (CONTINUED)


On June 2, 2016, the Company received a notice of default letter related to the corporate office lease in Florida (See Note 7 – Commitments and Contingencies).  The letter demanded payment for the full amount outstanding within seven days or the Landlord may pursue all legal remedies including termination of the lease.  On June 22, 2016, the Company received a complaint notice as the defendant in a lawsuit filed related to the corporate office lease in Florida.  The lawsuit claims that the Company is indebted to the landlord in an amount in excess of $57,857 for unpaid rent plus an additional $224,596 for accelerated rent for a total of $282,453, but the landlord does not specifically seek the additional $224,596 for accelerated rent in its complaint, although the court may later determine that the landlord is entitled to the accelerated rent amount. The Company is in discussions with the landlord to settle the lawsuit but as of the date of these financial statements, no resolution had been reached between the parties.


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


The Company valued the stock options in accordance with ASC 718, Stock Compensation, using the Black Scholes Pricing Model to estimate fair value. The Company used the 'simplified method' for estimating the ‘remaining expected contractual term' because it does not have sufficient information to make more accurate estimates of the remaining expected term or employee exercise behavior (e.g., employee exercise patterns by industry and/or other categories of companies).


The 102,500 stock options that vested immediately on the grant date were valued at $32,717 and will be recorded to stock based compensation expense.  The remaining 1,807,500 unvested stock options had a fair value of $576,944 on the grant date and will be amortized ratably over the vesting periods.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

0.32

 

Exercise Price

 

$

0.31

 

Expected Remaining Term

 

10 years

 

Volatility

 

 

191

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.27

%


Effective June 10, 2016, the Company granted 2,400,000 warrants to purchase common stock, exercisable at $0.01 per share, to six (6) consultants for prior services provided. The warrants vested immediately and have an exercise period of three years. The Company valued the stock warrants in accordance with ASC 505-50, Equity Based Payments to Non-Employees, using the Black Scholes Pricing Model to determine the fair value. The fair value for these stock warrants was $758,808, which will be recorded to consulting expense immediately.


The Company used the following assumptions in estimating fair value:


Stock Price (grant date)

 

$

32

 

Exercise Price

 

$

0.01

 

Expected Remaining Term

 

3 years

 

Volatility

 

 

191

%

Annual Rate of Quarterly Dividends

 

 

0.00

%

Risk Free Interest Rate

 

 

0.27

%




F-32



MAJOR LEAGUE FOOTBALL, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 30, 2016 AND 2015



NOTE 8 – SUBSEQUENT EVENTS (CONTINUED)


Effective July 21, 2016, the Company commenced an offering to sell up to 6,000,000 shares of common stock at $0.30 per share or up to $1,800,000 of gross proceeds.  The offering includes a one half stock warrant or up to 3,000,000 warrants to purchase common stock at $0.30 per share and a up to 2,900,000 warrants to purchase common stock at $.01 per share.  As of the date of these financial statements, no sales of common stock had occurred under this offering.







F-33