NOTES TO FINANCIAL STATEMENTS
MAY 31, 2021
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
United States Basketball League, Inc. (“USBL”)
is a holding company currently evaluating and assessing new business opportunities. The Company was incorporated in Delaware on May 29,
1984 as a wholly owned subsidiary of Meisenheimer 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 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.
On April 7, 2021, through a series of Stock Purchase
Agreements (the “Purchase Agreements”), the majority owners of the Company, Richard C. Meisenheimer, Daniel T. Meisenheimer,
III, James Meisenheimer, Meisenheimer Capital, Inc. and Spectrum Associates, Inc. (the “Sellers”) sold 2,704,007 common shares
and 1,105,679 Series A Preferred Shares which it held to a new investor group. In addition, the new investor group invested an additional
$ 240,000 and received 2,400,000 shares of restricted common stock. As a result of the sale of common and preferred stock by the Sellers,
the Company experienced a change in control.
World Equity Markets acted in the capacity of
a broker/dealer for the Purchase Agreements and was issued 125,000 shares of common stock for its services, and Verde Capital was issued
150,000 shares for Consulting Services. Effective April 7, 2021, the Board of Directors accepted the resignation of Daniel T. Meisenheimer,
III as Chairman of the Board of Directors and President of the Company. Effective April 7, 2021, Saeb Jannoun was appointed to fill the
vacancy following the resignation of Daniel T. Meisenheimer, III as Chairman of the Board of Directors and President of the Company. Mr.
Michael Pruitt also joined the Board.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial
statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in the Company's latest Annual Report on Form 10-K filed with the SEC. In the opinion of management,
all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the interim
periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of operations
for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial
statements for the most recent fiscal year, as reported in the Form 10-K for the fiscal year ended February 28, 2021, have been omitted.
Use of Estimates
The preparation of the unaudited 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 liabilities, and the disclosure of contingent liabilities at the date of the financial
statements, and the reported amounts of expenses during the reporting periods. Management makes these estimates using the best information
available at the time; however, actual results could differ materially from those estimates.
Recently issued accounting pronouncements
In
November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivative and Hedging (Topic 815,
and Leases (Topic 841). This new guidance will be effective for annual reporting periods beginning after December 15, 2019, including
interim periods within those annual reporting periods. The adoption of ASU 2019-10 does not have a material effect on its financial statements.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying unaudited financial
stat have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company
has an accumulated deficit of $5,138,472, liabilities of $38,950 and no source of revenue. Due to these conditions, it raises substantial
doubt about the Company’s ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification
of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 4 –ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of:
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May 31, 2021
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February 28, 2021
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Legal and accounting services’ vendors
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$
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18,025
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$
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101,424
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Transfer agent and EDGAR agent
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1,000
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8,660
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Rent due Genvest, LLC (an entity controlled by the
two officers of USBL)
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—
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144,000
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Accrued interest on MCREH note payable to
president of USBL
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—
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13,562
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Security deposit due CADCOM (an entity controlled by
the two officers of USBL)
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—
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2,725
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Other
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—
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777
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Total
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$
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19,025
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$
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271,158
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NOTE 5 – DUE TO PRIOR RELATED PARTIES
Due to related parties consist of:
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May 31, 2021
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February 28, 2021
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USBL loans payable to Spectrum Associates, Inc. (“Spectrum”),
a corporation controlled by the two officers of USBL,
interest at 6%, due on demand
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$
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—
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$
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1,324,689
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USBL loans payable to the two officers of USBL,
interest at 6%, due on demand
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—
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|
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569,317
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USBL loans payable to Daniel T. Meisenheimer, Jr. Trust, a trust
controlled by the two officers of USBL, non-interest bearing,
due on demand
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—
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48,850
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MCREH note payable to president of USBL, interest at 7%, due
on demand
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—
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|
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48,000
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MCREH loan payable to Spectrum, non-interest bearing, due
on demand
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|
—
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|
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4,500
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MCREH loan payable to president of USBL, non-interest
bearing, due on demand
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—
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|
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5,000
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MCREH loan payable to Meisenheimer Capital, Inc.,
non-interest bearing, due on demand
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—
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159,275
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Total
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$
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—
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$
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2,159,631
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On April 7, 2021, as part of the purchase and
sale agreement, the principals of MCI consisting of Daniel Meisenheimer III, Richard Meisenheimer and their affiliated entities have agreed
to cancel previously issued and outstanding loans made to the Company.
Spectrum Associates agreed to cancel indebtedness
in the amount of $1,318,789 and the principals (D. Meisenheimer III and R. Meisenheimer) and their other affiliates agreed to cancel indebtedness
in the amount of $815,590.
As a result of the debt cancellation the Company
recognized a gain on the forgiveness of debt of $66,747 and credited $2,335,493 to additional paid in capital.
NOTE 6 – RELATED PARTY TRANSACTIONS
During the three months ended May 31, 2021, Saeb
Jannoun, CEO, advanced the Company $3,000 for general operating expense. The advance is non-interest bearing and due on demand.
During the three months ended May 31, 2021, EROP
Enterprises LLC (“EROP”), a significant shareholder, advanced the Company $13,344 for general operating expense. The advance
is non-interest bearing and due on demand.
On
April 7, 2021, the Company issued 200,000 restricted shares of common stock each to two of
its directors for services. The shares were valued at $0.12, the closing stock price on the date of grant, for total non-cash expense
of $48,000. As of May 31, 2021, the shares have not yet been issued by the transfer agent and have been credited to and disclosed as common
stock to be issued.
During the three months ended May 31, 2021, EROP
purchased 1,475,000 shares of common stock for $147,500. As of May 31, 2021, the shares have not
yet been issued by the transfer agent and have been credited to and disclosed as common stock to be issued.
NOTE 7 – LOAN PAYABLE
During the three months ended May 31, 2021, an
individual, advanced the Company $3,581 for general operating expenses. The advance is non-interest bearing and due on demand.
NOTE 8 – PREFERRED STOCK
On May 18, 2021, the Company increased its authorized shares of Preferred
Stock to 10,000,000 shares.
Each share of preferred stock has five votes,
is entitled to a 2% cumulative annual dividend, and is convertible at any time into one share of common stock. On May 18, 2021, the Company
increased the authorized shares of Preferred from 2,000,000 to 10,000,000. There are 1,105,679 Series A Preferred outstanding. As
of May 31, 2021, the Company has not declared any dividends on its preferred stock.
NOTE
9 – COMMON STOCK TRANSACTIONS
On
April 29, 2021, the Company issued 125,000 shares of common stock to World Equity Markets
who acted in the capacity of a broker/dealer for the Purchase Agreements (Note 1). The shares were valued at $0.71, the closing stock
price on the date of grant, for total non-cash expense of $88,750. The expense is being amortized over the six month term of the service
agreement with World Equity Markets. As of May 31, 2021, the Company recognized $14,792 of the expense. In addition, as of May 31, 2021,
the shares have not yet been issued by the transfer agent and have been credited to and disclosed as common stock to be issued.
On
April 6, 2021, the Company issued 150,000 shares of common stock to Verde Capital, LLC for
consulting services. The shares were valued at $0.15, the closing stock price on the date of grant, for total non-cash expense of $22,500.
The expense is being amortized over the one year term of the service agreement with Verde Capital, LLC. As of May 31, 2021, the Company
recognized $3,750 of the expense. In addition, as of May 31, 2021, the shares have not yet been issued by the transfer agent and have
been credited to and disclosed as common stock to be issued.
During the three months ended May 31, 2021, the
Company sold 925,000 shares of common stock for total cash proceeds of $92,500. As of May 31, 2021,
the shares have not yet been issued by the transfer agent and have been credited to and disclosed as common stock to be issued.
On May 18, 2021, the Company increased its authorized shares of Common
Stock to 100,000,000 shares.
Refer to
Note 6 for common stock issued to related parties.
NOTE 10 – SUBSEQUENT EVENTS
Subsequent
to May 31, 2021, the Company’s transfer agent issued 3,075,000 shares that were disclosed as common stock to be issued as of May
31, 2021.
Subsequent
to May 31, 2021, the Company granted 200,000 shares of common stock to EROP for services per the terms of a consulting agreement.
Item
2. Management’s Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS of Operation.
Forward-looking Statements
There are “forward-looking statements”
contained in this quarterly report. All statements that express expectations, estimates, forecasts or projections are forward-looking
statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf.
Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,”
“estimate,” “project,” “forecast,” “may,” “should,” and variations of such
words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation
to update or revise any of the forward-looking statements after the date of this quarterly report to conform forward-looking statements
to actual results. Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited
to, uncertainties associated with the following:
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Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
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Our failure to earn revenues or profits;
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Inadequate capital to continue business;
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Volatility or decline of our stock price;
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Potential fluctuation in quarterly results;
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Rapid and significant changes in markets;
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Litigation with or legal claims and allegations by outside parties; and
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Insufficient revenues to cover operating costs.
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The following discussion should be read in conjunction
with the financial statements and the notes thereto which are included in this quarterly report. This discussion contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any
forward-looking statements included in this discussion as a result of various factors.
OVERVIEW
The Company anticipates continued 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.
Results of Operations
The three months ended May 31, 2021compared to the three months
ended May 31, 2020
Revenue
The Company recognized no revenue for the three
months ended May 31, 2021 and 2020.
Professional Fees
For the three months ended May 31, 2021, the company
incurred $12,025 of professional fees compared to $2,000 for the three months ended May 31, 2020, an increase of $10,025. Professional
fees generally consist of audit, legal and accounting expense. The increase in the current period is primarily the result of increased
legal fees.
General and Administrative Expense
For the three months ended May 31, 2021, the company
incurred $25,370 of general and administrative expense compared to $4,391 for the three months ended May 31, 2020 an increase of $20,979.
The increase in the current period is primarily the result of stock compensation of $18,542 as well as an increase of transfer agent fees.
Director Compensation
For the three months ended May 31, 2021, the company
incurred $48,000 of director compensation expense compared to $0 for the three months ended May 31, 2020. During the current period we
issued common stock to two of our directors for total non-cash stock compensation of $48,000.
Other Income
During the three months ended May 31, 2021, the
recognized a gain of forgiveness of debt of $66,747 (Note 5).
Net Loss
For the three months ended May 31, 2021, we had
a note loss of $18,648 compared to $6,391 for the three months ended May 31, 2020.
Liquidity and Capital Resources
Operating Activities
For the three months ended May 31, 2021, the company
used $52,277 in operating activities compared to $94 for the three months ended May 31, 2020.
Financing Activities
During the three months ended May 31, 2021, we
received $240,000 from the sale of common stock. The funds were being held in a trust account until they were transferred to the Company
in June 2021. We received a cash advances from our CEO of $3,000 and $39,994 from members of the prior management. We also received $3,581
from another party to assist with general operating expenses.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Note 2 to the Financial Statements describes
the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited
to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies
are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
Recent Accounting Pronouncements
We have reviewed other recently issued accounting
pronouncements and plan to adopt those that are applicable to us. We do not expect the adoption of any other pronouncements to have an
impact on our results of operations or financial position.