UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended August 31, 2017

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 

For the transition period from                    to                   

 

Commission File Number 1-15913

 

UNITED STATES BASKETBALL LEAGUE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		06-1120072
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

 

183 Plains Road, Suite 2, Milford, Connecticut 06461

(Address of Principal Executive Offices)

 

(203) 877-9508

(Registrant’s Telephone Number, Including Area Code)

 

 

(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

 

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

 

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

 

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

 

Large accelerated filer  ¨		Accelerated filer  ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company  x
Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. As of February 28, 2018, there were 3,512,527 shares of Common Stock, $.01 par value per share, outstanding.

 

 

UNITED STATES BASKETBALL LEAGUE, INC.

 

INDEX

  

		PAGE
PART I.	FINANCIAL INFORMATION	4
Item 1.	Unaudited Financial Statements	4
	Balance Sheets – August 31, 2017 and February 28, 2017	4
	Statements of Operations for the three and six months ended August 31, 2017 and 2016	5
	Statement of Stockholders’ Deficiency for the six months ended August 31, 2017	6
	Statements of Cash Flows for the six months ended August 31, 2017 and 2016	7
	Notes to Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4.	Controls and Procedures	12
PART II.	OTHER INFORMATION	13
Item 6.	Exhibits	13

  

 

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

  

UNITED STATES BASKETBALL LEAGUE, INC.

 

BALANCE SHEETS

 

		August 31, 2017				February 28, 2017
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	949			$	280
Total current assets			949				280
Total assets		$	949			$	280
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	202,315			$	191,792
Credit card obligations			5,304				6,741
Due to related parties			2,063,879				2,056,044
Total current liabilities			2,271,498				2,254,577
Total liabilities			2,271,498				2,254,577
STOCKHOLDERS’ DEFICIENCY
Common stock, $0.01 par value; 30,000,000 shares authorized; issued and outstanding 3,552,502 and 3,552,502 shares, respectively			35,525				35,525
Preferred stock, $0.01 par value; 2,000,000 shares authorized; 1,105,679 shares issued and outstanding			11,057				11,057
Additional paid-in-capital			2,679,855				2,679,855
Deficit			(4,954,532	)			(4,938,280	)
Treasury stock, at cost; 39,975 shares			(42,454	)			(42,454	)
Total stockholders’ deficiency			(2,270,549	)			(2,254,297	)
Total liabilities and stockholders’ deficiency		$	949			$	280

 

See notes to financial statements.

 

 

UNITED STATES BASKETBALL LEAGUE, INC.

 

STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended								Six Months Ended
		August 31, 2017				August 31, 2016				August 31, 2017				August 31, 2016
REVENUES:		$	-			$	-			$	-			$	-
OPERATING EXPENSES:
Professional fees			2,500				4,521				3,550				17,378
Transfer agent and EDGAR agent fees			3,962				6,968				5,718				11,040
Rent			3,000				3,000				6,000				6,000
Travel and promotion			(12	)			(39	)			-				2,195
Depreciation			-				-				-				-
Other			96				821				521				1,450
Total operating expenses			9,546				15,271				15,789				38,063
Loss from operations			(9,546	)			(15,271	)			(15,789	)			(38,063	)
OTHER INCOME (EXPENSES):
Interest expense			(166	)			(330	)			(463	)			(640	)
Total other income (expenses), net			(166	)			(330	)			(463	)			(640	)
Loss before income taxes			(9,712	)			(15,601	)			(16,252	)			(38,703	)
Income taxes			-				-				-				-
NET LOSS		$	(9,712	)		$	(15,601	)		$	(16,252	)		$	(38,703	)
Earnings (loss) per common share:
Basic		$	(.00	)		$	(.00	)		$	(.00	)		$	(.01	)
Diluted		$	(.00	)		$	(.00	)		$	(.00	)		$	(.01	)
WEIGHTED AVERAGE NUMBER OF  COMMON SHARES OUTSTANDING
Basic			3,512,527				3,512,527				3,512,527				3,512,527
Diluted			3,512,527				3,512,527				3,512,527				3,512,527

 

See notes to financial statements.

 

 

UNITED STATES BASKETBALL LEAGUE, INC.

Statement of Stockholders’ Deficiency

Six Months Ended August 31, 2017

(Unaudited)

 

		Common Stock								Preferred Stock								Additional																Total
		Shares								Shares								Paid-in								Treasury Stock								Stockholders’
		Outstanding				Amount				Outstanding				Amount				Capital				Deficit				Shares				Amount				Deficiency
Balance, February 28, 2017			3,552,502			$	35,525				1,105,679			$	11,057			$	2,679,855			$	(4,938,280	)			39,975			$	(42,454	)		$	(2,254,297	)
Net (loss) (Unaudited)			-				-				-				-				-				(16,252	)			-				-				(16,252	)
Balance, August 31, 2017 (Unaudited)			3,552,502			$	35,525				1,105,679			$	11,057			$	2,679,855			$	(4,954,532	)			39,975			$	(42,454	)		$	(2,270,549	)

 

See notes to financial statements.

 

 

UNITED STATES BASKETBALL LEAGUE, INC.

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Six Months Ended
		August 31, 2017				August 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(16,252	)		$	(38,703	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Accounts payable and accrued expenses			10,523				9,794
Credit card obligations			(1,437	)			866
Net cash used in operating activities			(7,166	)			(28,043	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease)  in due to related parties			7,835				27,916
Net cash provided by financing activities			7,835				27,916
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			669				(127	)
CASH, beginning of period			280				416
CASH, end of period		$	949			$	289
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid		$	463			$	330
Income tax paid		$	-			$	4,290

 

See notes to financial statements.

 

 

UNITED STATES BASKETBALL LEAGUE, INC.

 

NOTES TO FINANCIAL STATEMENTS

SIX MONTHS ENDED AUGUST 31, 2017

(Unaudited)

 

1.

Description of Business and Basis of Presentation

 

United States Basketball League, Inc. (“USBL”) was incorporated in Delaware on May 29, 1984 as a wholly owned subsidiary of Meiseheimer Capital, Inc. (“MCI”) for the purpose of developing and managing a professional basketball league, the United States Basketball League (the “League”). Since the inception of the League, USBL has been primarily engaged in selling franchises and managing the League. From 1985 and up to the present time, USBL has sold a total of approximately forty active franchises (teams), a vast majority of which were terminated for non-payment of their respective franchise obligations. Seasons from 2008 through 2018, inclusive, have been cancelled. At the present time, USBL does not have any definitive plans as to the scheduling of a new season. USBL is currently in the process of exploring certain strategic alternatives, including the possible sale of the League.

 

On October 30, 2014, USBL dissolved its wholly-owned subsidiary, Meisenheimer Capital Real Estate Holdings, Inc. (“MCREH”). MCREH owned a commercial building in Milford, Connecticut until June 19, 2014.

 

At August 31, 2017, USBL had negative working capital of $2,270,549, and accumulated losses of $4,954,532. These factors, as well as the Company’s reliance on related parties (see Notes 3 and 4), raise substantial doubt as to the Company’s ability to continue as a going concern.

 

The Company is making efforts to raise equity capital, revitalize the league and market new franchises. However, there can be no assurance that the Company will be successful in accomplishing its objectives. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

 

The accompanying unaudited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, the unaudited financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation. Operating results for the six-month period ended August 31, 2017 may not necessarily be indicative of the results that may be expected for the year ending February 28, 2018. The notes to the financial statements should be read in conjunction with the notes to the financial statements contained in the Company’s Form 10-K for the year ended February 28, 2017.

 

2.

Summary of Significant Accounting Policies

 

Fair value disclosures – The carrying amounts of the Company’s financial instruments, which consist of cash, accounts payable and accrued expenses, credit card obligations, and due to related parties, approximate their fair value due to their short term nature or based upon values of comparable instruments.

 

Cash and cash equivalents - The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

 

Revenue recognition - The Company generally uses the accrual method of accounting in these financial statements. However, due to the uncertainty of collecting royalty and franchise fees from the franchisees, USBL recorded these revenues upon receipt of cash consideration paid or the performance of related services by the franchisee. Franchise fees earned in nonmonetary transactions were recorded at the fair value of the franchise granted or the service received, based on which value was more readily determinable. Upon the granting of the franchise, the Company had performed essentially all material conditions related to the sale.

 

 

Income taxes - Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance has been fully provided for the deferred tax asset (approximately $1,015,000 at February 28, 2017) attributable to the USBL net operating loss carryforward.

 

As of February 28, 2017, USBL had a net operating loss carryforward of approximately $2,900,000 available to offset future taxable income. The carryforward expires in varying amounts from 2019 to 2037. Current United States income tax laws limit the amount of loss available to offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

 

USBL files Federal and Connecticut income tax returns using a December 31 fiscal year. The last returns were filed for the year ended December 31, 2015.

 

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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

 

Stock-based compensation – Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” No stock options were granted for the periods presented and none are outstanding at August 31, 2017.

 

Earnings (loss) per share – ASC 260, “Earnings Per Share”, establishes standards for computing and presenting earnings (loss) per share (EPS). ASC 260 requires dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or convertible securities were exercised or converted into common stock. The Company did not include the 1,105,679 shares of convertible preferred stock in its calculation of diluted loss per share for the three and six months ended August 31, 2017 and 2016 as the result would have been antidilutive.

 

Comprehensive income – Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. Comprehensive income (loss) was equivalent to net income (loss) for all periods presented.

 

 

3.

Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consisted of:

 

		August 31, 2017				February 28, 2017
			(Unaudited)
Legal and accounting services’ vendors		$	55,630			$	54,580
Transfer agent and EDGAR agent			11,986				8,143
Rent due Genvest, LLC (an entity controlled by the two officers of USBL)			114,000				108,000
Connecticut income taxes			3,664				3,664
Accrued interest on MCREH note payable to president of USBL			13,562				13,562
Security deposit due CADCOM (an entity controlled by the two officers of USBL)			2,725				2,725
Other			748				1,118
Total		$	202,315			$	191,792

 

4.

Due to Related Parties

 

Due to related parties consists of:

 

		August 31, 2017				February 28, 2017
		(Unaudited)
USBL loans payable to Spectrum Associates, Inc. (“Spectrum”), a corporation controlled by the two officers of USBL, interest at 6%, due on demand		$	1,278,289			$1,270,289
USBL loans payable to the two officers of USBL, interest at 6%, due on demand			528,017			528,017
USBL loans payable to Daniel T. Meisenheimer, Jr. Trust, a trust controlled by the two officers of USBL, non-interest bearing, due on demand			44,100			44,100
MCREH note payable to president of USBL, interest at 7%, due on demand			45,000			45,000
MCREH loan payable to Spectrum, non-interest bearing, due on demand			4,500			4,500
MCREH loan payable to president of USBL, non-interest bearing, due on demand			4,000			4,000
MCREH loan payable to Meisenheimer Capital, Inc. (“MCI”), non-interest bearing, due on demand			159,973			160,138
Total			2,063,879			2,056,044

 

  For the six months ended August 31, 2017 and 2016, interest due under the related party loans was waived by the respective lenders.

           

 

5.	Stockholders’ Equity
	Each share of common stock has one vote.  Each share of preferred stock has five votes, is entitled to a 2% non-cumulative annual dividend, and is convertible at any time into one share of common stock.

 

6.	Related Party Transactions
	For the three months ended August 31, 2017 and 2016 and the six months ended August 31, 2017 and 2016, USBL included in operating expenses, rent incurred to Genvest, LLC (an entity controlled by the two officers of USBL) totaling $3,000, $3,000, $6,000, and $6,000, respectively.
7.	Commitments and Contingencies
	Occupancy Agreement   In September 2007, the Company moved its office to a building owned by Genvest LLC, an organization controlled by the two officers of USBL. Improvements to the Company’s space there were completed in February 2008. Pursuant to a verbal agreement, the Company is to pay Genvest monthly rentals of $1,000 commencing March 2008. At August 31, 2017 and February 28, 2017, accounts payable and accrued expenses included accrued rent payable to Genvest totaling $114,000 and $108,000, respectively.

 

Item 2.

Management’s Discussion and Analysis of financial condition and results of operations.

 

OVERVIEW

 

The Company anticipates continue reliance on financial assistance from affiliates. Given the current lack of capital, the Company has not been able to develop any new programs to revitalize the League, nor has it been able to hire sales and promotional personnel or schedule a season. As a result, the Company is currently dependent on the efforts of its officers for all marketing efforts. Their efforts have not resulted in any franchises.

 

CRITICAL ACCOUNTING POLICIES

 

Revenue Recognition

 

The Company generally uses the accrual method of accounting. However, due to the uncertainty of collecting royalty and franchise fees from the franchisees, USBL recorded these revenues upon receipt of cash consideration paid or the performance of related services by the franchisee. Franchise fees earned in nonmonetary transactions were recorded at the fair value of the franchise granted or the service received, based on which value was more readily determinable. Upon the granting of the franchise, the Company had performed essentially all material conditions related to the sale.

 

THREE MONTHS ENDED AUGUST 31, 2017 AS COMPARED TO AUGUST 31, 2016

 

For the three months ended August 31, 2017 and 2016, the Company had no franchise fees or advertising revenues as a result of the cancellation of its seasons from 2008 through 2018.

 

Operating expenses decreased $5,725 from $15,271 for the three months ended August 31, 2016 to $9,546 for the three months ended August 31, 2017. The decrease in operating expenses was primarily due to lower professional fees ($2,021) and lower transfer agent and EDGAR agent fees ($3,006) in 2017 as compared to 2016.

 

 

Other expenses, net, was $166 for the three months ended August 31, 2017 as compared to $330 for the three months ended August 31, 2016.

 

Net loss for the three months ended August 31, 2017 was $9,712 as compared to net loss of $15,601 for the three months ended August 31, 2016. The $5,889 decrease in net loss was due to the $5,725 decrease in operating expenses and the $164 decrease in other expenses, net.

 

SIX MONTHS ENDED AUGUST 31, 2017 AS COMPARED TO AUGUST 31, 2016

 

For the six months ended August 31, 2017 and 2016, the Company had no franchise fees or advertising revenues as a result of the cancellation of its seasons from 2008 through 2018.

 

Operating expenses decreased $22,274 from $38,063 for the six months ended August 31, 2016 to $15,789 for the six months ended August 31, 2017. The decrease in operating expenses was primarily due to lower professional fees ($13,828) and lower transfer agent and EDGAR agent fees ($5,322) in 2017 as compared to 2016. The February 29, 2016 Form 10-K was filed on April 7, 2016 whereas the February 28, 2017 Form 10-K was not filed until November 8, 2017.

 

Other expenses, net, was $463 in 2017 compared to $640 in 2016.

 

Net loss for the six months ended August 31, 2017 was $16,252 as compared to net loss of $38,703 for the six months ended August 31, 2016. The $22,451 decrease in net loss was due to the $22,274 decrease in operating expenses and the $177 decrease in other expenses, net.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company had cash of $949 and a working capital deficit of $2,270,549 at August 31, 2017. The Company's statement of cash flows for the six months ended August 31, 2017 reflects cash used in operating activities of $7,166, which results primarily from the $16,252 net loss offset by the $10,523 increase in accounts payable and accrued expenses. Net cash provided by financing activities was $7,835 in 2017 compared to $27,916 in 2016.

 

The Company expects it will continue to have to rely on affiliates for loans to assist it in meeting its current obligations. With respect to long term needs, the Company recognizes that in order for USBL and the League to be successful, USBL has to develop a meaningful sales and promotional program. This will require an investment of additional capital. Given the Company’s current financial condition, the Company’s ability to raise additional capital other than from affiliates is questionable. At the current time, the Company has no definitive plan as to how to raise additional capital and schedule a 2019 season.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable.

 

Item 4.

Controls and Procedures.

 

Under the supervision and with the participation of our management, including our principal executive and financial officers, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2017 and, based on such evaluation, our principal executive and financial officers have concluded that these controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosures.

 

PART II

OTHER INFORMATION

 

Item 6.

Exhibits.

 

31.1*

Certification of principal executive officer

 

31.2*

Certification of principal financial officer

 

32*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definitions Document
101.LAB	XBRL Taxonomy Extension Labels Document
101.PRE	XBRL Taxonomy Extension Presentations Document

 

*

Filed herewith.

 

 

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 on the 28^th day of February, 2018.

 

	UNITED STATES BASKETBALL LEAGUE, INC.
	By:	/s/ Daniel T. Meisenheimer, III
		Daniel T. Meisenheimer III
		Chairman and President
		(Principal executive officer)
	By:	/s/ Richard C. Meisenheimer
		Richard C. Meisenheimer
		Chief Financial Officer and
		Director
		(Principal financial officer)

 

 

EXHIBIT INDEX

 

31.1*

Certification of principal executive officer

 

31.2*

Certification of principal financial officer

 

32*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Document
101.DEF	XBRL Taxonomy Extension Definitions Document
101.LAB	XBRL Taxonomy Extension Labels Document
101.PRE	XBRL Taxonomy Extension Presentations Document

 

*

Filed herewith.