The following discussion contains forward-looking statements. The words
"anticipate," "believe," "expect," "plan," "intend," "estimate," "project,"
"will," "could," "may" and similar expressions are intended to identify
forward-looking statements. Such statements reflect our Company's current views
with respect to future events and financial performance and involve risks and
uncertainties. Should one or more risks or uncertainties occur, or should
underlying assumptions prove incorrect, actual results may vary materially and
adversely from those anticipated, believed, expected, planned, intended,
estimated, projected, or otherwise indicated. Readers should not place undue
reliance on these forward-looking statements.
The following discussion is qualified by reference to and should be read in
conjunction with our Company's unaudited financial statements and the notes
thereto.
Plan of Operation
The Company plans to establish, develop, and operate Major League Football
("MLFB") as a professional Spring/Summer football League with 4 initial
Franchises located in cities overlooked in large part by existing professional
sports leagues and provide fans with high quality players and competition in the
NFL's off-season. Major League Football, Inc. (the "Company," "we," "us" or
"our") plans to establish, develop, and operate Major League Football ("MLFB")
as a professional Spring football League with 4 initial Franchises located in
cities overlooked in large part by existing professional sports leagues and
provide fans with high quality players and competition in the NFL's off-season.
Our plan that was initiated in June 2022 was that the initial teams would be
located in Ohio, Virginia, Arkansas, and Alabama. Our proposed spring playing
schedule avoids all competition with the NFL and colleges and these initial
cities have both a passion for sports and football as well as stadium venues
whose size will provide our fans an excellent viewing experience at a reasonable
rental expense to MLFB. All potential venues are equipped for high quality
multi-platform media transmission allowing us the broadcast all our games in
multi-levels of today's technology.
We commenced football training camp operations in June 2022 with a camp start
date of July 18, 2022, which was located at Ladd-Peebles Stadium in Mobile,
Alabama. The training camp was comprised of the four initial teams and included
over 260 potential players and coaches. The camp included transportation of
certain football equipment from a Texas warehouse along with the purchase of new
equipment. However, due a significant delay in negotiating the stadium lease,
the Company was delayed in obtaining additional funding from a planned
registration statement. The Company was funding the training camp operations
from the sale of convertible promissory notes and the sale of common stock from
an existing Regulation A offering. Because of a delay in funding, the Company
suffered a significant cash flow issue with the payment of hotels and other
training camp operating expenses. As a result, the Company shut down the
training camp on July 29, 2022. As a result of the shutdown of the training
camp, the Company has a significant outstanding accounts payable balance from
the training camp activities at January 31, 2023 that the Company is committed
to paying in full.
We have commenced planning for a full spring football season in 2023 tentatively
commencing with training camp in May 2023 and games from June through July 2023
and a championship game held in July 2023. This schedule is being developed with
our broadcaster's input as to what dates are compatible with their preferred
broadcast schedule.
MLFB plans to serve as a pipeline to develop players, coaches, officials,
scouts, trainers, and all other areas of the game that the NFL needs today. We
will also give NFL representatives the opportunity to view our team practices,
game footage, practice tapes and confer with league coaches, team officials and
staff. We believe this will provide our league with recognition and demonstrate
our economic model and the market's desire for spring football.
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In March 2020, the World Health Organization declared the novel strain of
coronavirus (COVID-19) a global pandemic and recommended containment and
mitigation measures worldwide. Subsequently, the COVID-19 pandemic has continued
to spread and various state and local governments have issued or extended
"shelter-in-place" orders. The spread of the pandemic has caused severe
disruptions in the global economy and financial markets and could potentially
create widespread business continuity issues of an unknown magnitude and
duration.
The future operational and financial impact of the COVID-19 pandemic is
difficult to determine, and it is not possible to predict the duration and
severity of the economic disruption, government restrictions and stimulus,
social distancing and phased re-opening of economies, nor estimate the impact
that this may have on the Company, its financial condition, and its results of
operations. While we believe that the coronavirus pandemic has not had a
significant impact on our financial condition and results of operations at this
time, the potential economic impact brought by the coronavirus pandemic, which
may be exacerbated by the global macroeconomic uncertainty from the ongoing
conflict between Russia and Ukraine, is difficult to assess or predict. There
may be developments outside of our control that require us to adjust our
operating plans. Given the nature of the situation, we cannot reasonably
estimate the impact of the coronavirus pandemic on our financial condition,
results of operations or cash flows in the future.
Inflation has increased during the period covered by this report and is expected
to continue to remain at elevated levels or even increase for the near future.
Inflation generally affects us by increasing our cost of our football operating
expenses including the costs of professional fees for services provided. We do
not believe inflation has had a material effect on our results of operations
during the three and nine months ended January 31, 2023.
On September 7, 2022, the Company announced that it had signed two Common Stock
Purchase Agreements in the amount of $2,500,000 each or $5,000,000 combined that
were contingent on the Company filing and approval from the Securities and
Exchange Commission ("SEC") of a Form S-1 Registration Statement. The Company
filed a Form S-1 Registration Statement with the SEC, and it was declared
effective on December 28, 2022. As a result, the Company commenced funding from
the Common Stock Purchase Agreements in January 2023. As previously announced,
the Company continues to move forward with plans to pay all obligations incurred
while preparing for a full season of spring football in 2023. The key management
team of the Company remains intact and dedicated to this goal. In addition to
these two agreements, the Company continues to have discussions with other
parties for potential funding. The Common Stock Purchase Agreements are
contingent on certain stock trading volume requirements and amounts, which may
not occur in a timely fashion, as it is dependent on the market pricing of our
stock. As a result, we may not be able to achieve these capital-raising
objectives and if the required capital is not obtained in the proposed
timeframe, the Company's planned 2023 spring football season could be delayed or
not occur.
Single Entity Structure
We intend to operate the league as a single entity owned, stand alone,
independent sports league. The 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 for controlled 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.
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MLFB Market Opportunity
MLFB 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. Although MLFB's ticket pricing will be a
fraction of that of the established professional leagues (NBA, MLB, NHL, and
NFL), its ultimate goal will be to offer its fans an incomparable value-added
experience for their entertainment dollar.
Additionally, as a result of a carefully crafted study, we will not locate teams
in any established NFL cities and more importantly in any Major League Baseball
cities, thus avoiding direct in-season competition with an established sports
entity. By positioning teams in prime emerging and under-represented markets
throughout the contiguous 48 states (including placing teams in well respected
and football fan friendly metropolitan markets in the country), our research
suggests that an exciting sports entity like Major League Football will be
viewed in a positive light by sports fans throughout the US. 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 MLFB'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.
Although its economic model was, we believe, flawed, the professional Alliance
of American Football teams drew a League wide average attendance of 15,000 fans
per game and television ratings comparable to the NBA. The XFL had similar
positive attendance in its five-game season.
MLFB 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. Specifically, MLFB 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's name recognition that
comes with fantasy football.
MLFB 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. MLFB plans to work with businesses involved in video,
television, print media and the Internet to promote its business. Much of the
necessary preliminary work to meet this new strategy has already been performed
by our previously announced external contractors, BDB Entertainment Group, Inc.,
and Red Moon Marketing.
Professional Sports Market
MLFB recognizes the NFL is the dominant professional sports league in the United
States. Although it respects the success of the NFL business model, MLFB's
objective is to position itself as an independent, non-adversarial football
league. MLFB 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. MLFB staff have held meetings with
high-ranking NFL officials to discuss our plans.
MLFB intends to maximize ticket vendor technology and enhance its services to
patrons with innovative ticketing procedures that include:
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· Average ticket prices targeted at approximately 25% of the prices of NFL,
NBA, NHL & MLB tickets.
· Year-round cash flow from multiple revenue streams utilizing new
technologies.
· 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 website in professional sports using cutting edge
technologies to preserve fan loyalty.
· Proven executive staff members with considerable practical experience in
professional football.
· Player and coaching costs projected significantly less than those of the
NFL, NBA, NHL, or MLB.
Initially, teams will operate in either existing collegiate or municipal
stadiums during the spring and early summer season. We believe that our business
model and long-range vision possess 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
MLFB believes that today's market demands a controlled deliverable to a targeted
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 the Company.
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 have higher profit on items and stop tying up money on
inventory they cannot' properly sell.
· More fans will be wearing and supporting the team and league branded
merchandise.
We plan to develop private label products where we will feature
products that are fan favorites (hats, shirts, popular novelties, and gifts,
etc.) all manufactured at the highest level, and priced below traditional
licensed sports merchandise programs. All merchandise, when league sanctioned,
will be pre- ticketed and priced.
Financial Condition
As reflected in the unaudited financial statements, the Company had limited
revenues and had a net income (loss) of $372,904 and $(1,794,096) for the three
and nine months ended January 31, 2023, respectively. Additionally, the Company
had net cash used in operating activities of $2,039,660 for the nine months
ended January 31, 2023. At January 31, 2023, the Company has a working capital
deficit of $11,983,783, an accumulated deficit of $39,098,523 and a
stockholders' deficit of $11,494,436, which could have a material impact on the
Company's financial condition and operations.
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Results of Operations
Three months ending January 31, 2023, compared to the three months ended January
31, 2022
During the three months ended January 31, 2023, the Company recorded $0
of revenue and $0 of cost of goods sold related to the sale of MLFB on-line
digital media merchandise
Total operating expenses for the three months ended January 31, 2023, were
$526,069 as compared to total operating expenses for the three months ended
January 31, 2022, of $104,150 or an increase of $421,919. The increase in
expense from 2022 to 2023 was primarily from a $370,412 increase in compensation
related to accrued and unpaid payroll for the Company and its head coaches. The
increase also included a $44,503 increase in depreciation expense with no
comparable amounts in 2022.
Other income (expense) for the three months ended January 31, 2023, was $898,973
of income compared to $377,489 of expense for the three months ended January 31,
2022, or an increase in income of $1,276,462. The increase in income from 2022
to 2023 was primarily from a $1,074,684 increase in gain from the change in fair
value of a conversion option liability and a $326,952 gain from the change in
fair value of a warrant derivative liability. This was offset by a $116,069
increase in interest expense. The increase in interest expense was primarily
from $109,478 of amortization of debt issue costs.
Based on the above discussion, we had a net income of $372,904 as compared to a
net loss of $481,639 for the three months ended January 31, 2023 and 2022,
respectively.
Effective January 26, 2023, the Company sold common stock at a price of $0.00045
per share and as a result, this triggered down round protection of the total
number of warrants outstanding from convertible secured promissory notes dated
November 24, 2021, April 18, 2022, May 23, 2022, and September 1, 2022 and they
were adjusted. The Company evaluated the change in accordance with ASU 2017-11,
Subtopic 470-20, Debt-Debt with Conversion and Other Options. The Company
calculated a deemed dividend at January 26, 2023 related to the triggering of
the full ratchet anti-dilution provision of its outstanding warrants at
incremental fair value in the amount of $1,253,479 which was recorded to
retained earnings with an offset to additional paid in capital. There was no
comparable deemed dividend for the three months ended January 31, 2022.
As a result of the deemed dividend discussed above, the Company had a net loss
available to common shareholders of $880,575 as compared to a net loss available
to common shareholders of $481,639 for the three months ended January 31, 2022,
respectively.
Nine months ending January 31, 2023, compared to the nine months ended January
31, 2022
During the nine months ended January 31, 2023, the Company recorded $9,180 of
revenue and $7,365 of cost of goods sold related to the sale of MLFB on-line
digital media merchandise. As a result, the Company realized a gross margin of
$1,815 related to the sale of MLFB-on-line digital merchandise with no
comparable amounts in 2022.
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Total operating expenses for the nine months ended January 31, 2023, were
$4,447,207 as compared to total operating expenses for the nine months ended
January 31, 2022, of $620,652 or an increase of $3,826,555. The increase in
expense from 2022 to 2023 was primarily from a $2,281,434 increase in football
camp expense, an $1,587,407 increase in compensation, a $114,161 increase in
depreciation expense and a $52,500 increase in write off of prepaid investor
relation fees, offset by a $271,480 decrease in general and administrative
expense. The increase in football camp expense was related to the Company's
training camp in Mobile Alabama with no comparable amount in 2022. The increase
in compensation is related to payroll for corporate and coaches with no
comparable amount in 2022. The increase in depreciation expense was related to
the Company commencing training camp and depreciation of certain football
equipment with no comparable amount in 2022. The increase in write off of
prepaid investor relation fees was because the services were provided and
expensed with no comparable amount in 2022. The decrease in general and
administrative expense was primarily related to $290,031 of stock compensation
expense in 2022 with no comparable amount in 2023. The 2022 stock compensation
expense was comprised of $191,250 for stock issued and $98,781 for warrants
issued to key consultants.
Other income (expense) for the nine months ended January 31, 2023, was
$2,651,296 of income compared to $604,976 of expense for the nine months ended
January 31, 2022, or an increase in income of $3,256,272. The increase in income
from 2022 to 2023 was primarily from a $1,898,594 gain from the change in fair
value of a conversion option liability, a $1,932,624 gain from the change in
fair value of a warrant derivative liability and $38,200 in settlement income.
This was offset by a $865,236 increase in interest expense. The increase in
interest expense was primarily from $608,460 of amortization of debt issue costs
and original issue discount on convertible promissory notes, $81,205 from put
premium liability on convertible unsecured promissory notes and $175,830 for
interest on other debt. The increase in settlement income was primarily from
$38,200 of income from the settlement of outstanding judgments against the
Company as compared to a $55,000 settlement expense in 2022 from the issuance of
a note payable.
Based on the above discussion, we had a net loss of $1,794,096 as compared to a
net loss of $1,225,628 for the nine months ended January 31, 2023, and 2022,
respectively.
Effective July 29, 2022, and again at September 15, 2022, a warrant holder
provided notice of a cashless exercise of the warrants at a reduced price of
$0.0058 and $0.0007 per share, respectively based upon the Company issuing
securities at $0.0058 per share and the exercise price of a new warrant at
$0.0007 per share issued with debt. As a result, this triggered down round
protection of the warrant exercise price and number of warrants issued. The
Company evaluated the change in accordance with ASU 2017-11, Subtopic 470-20,
Debt-Debt with Conversion and Other Options). The Company calculated a deemed
dividend at September 15, 2022 related to the triggering of the full ratchet
anti-dilution provision of its outstanding warrants at incremental fair value in
the amount of $5,388,467 which was recorded to retained earnings with an offset
to additional paid in capital during the nine months ended January 31, 2023.
Effective January 26, 2023, the Company sold common stock at a price of $0.00045
per share and as a result, this triggered down round protection of the total
number of warrants outstanding from convertible secured promissory notes dated
November 24, 2021, April 18, 2022, May 23, 2022, and September 1, 2022 and they
were adjusted. The Company evaluated the change in accordance with ASU 2017-11,
Subtopic 470-20, Debt-Debt with Conversion and Other Options. The Company
calculated a deemed dividend at January 26, 2023 related to the triggering of
the full ratchet anti-dilution provision of its outstanding warrants at
incremental fair value in the amount of $1,253,479 which was recorded to
retained earnings with an offset to additional paid in capital. There was no
comparable deemed dividend for the nine months ended January 31, 2022.
In total, the Company recorded $6,641,946 of deemed dividend for the nine months
ended January 31, 2023, with no comparable amount for the nine months ended
January 31, 2022.
As a result of the deemed dividend discussed above, the Company had a net loss
available to common shareholders of $8,436,042 as compared to a net loss
available to common shareholders of $1,225,628 for the nine months ended January
31, 2023, and 2022, respectively.
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Liquidity and Capital Resources
From inception, our Company has relied upon the infusion of capital through
equity transactions and the issuance of debt to obtain liquidity. We had only
$5,520 of cash at January 31, 2023. Consequently, the 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. See Significant Events for additional discussion.
Condensed Cash Flow Activity
The following table summarizes selected items from our condensed unaudited
Statements of Cash Flows for the nine months ended January 31, 2023, and 2022,
respectively:
For the Nine Months Ended,
January 31, January
2023 31, 2022
Net cash used in operating activities $ (2,039,660 ) $ (318,920 )
Net cash used in investing activities
(76,268 ) (500 )
Net cash provided by financing activities 1,448,267 317,920
Net decrease in cash $ (667,661 ) $ (1,500 )
Net Cash Used in Operating Activities
Net cash used in operating activities was $2,039,660 during the nine months
ended January 31, 2023, compared to $318,920 used during the nine months ended
January 31, 2022, or an increase in cash used of $1,720,740. After adjusting for
non-cash expense items of $794,691 in 2023 and non-cash income items of $740,656
in 2022, adjusted net cash used in operations would be $2,834,351 in 2023 and
adjusted non-cash provided by operations would be $421,736 in 2022.
Net Cash Used in Investing Activities
Net cash used in investing activities was $76,268 during the nine months ended
January 31, 2023, compared to $500 during the nine months ended January 31,
2022, or an increase of $75,768. The $76,268 during the nine months ended
January 31, 2023, was for the purchase of football equipment. The $500 during
the nine months ended January 31, 2022, was for the payment of trademark legal
fees.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $1,448,267 of net cash during the
nine months ended January 31, 2023, as compared to $317,920 provided during the
nine months ended January 31, 2022, or an increase of $1,130,347. The increase
in net cash provided from 2022 to 2023 was primarily from (1) $574,174 of
proceeds from the sale of common stock in 2023 with no comparable amount in 2022
with no comparable amount in 2022, (2) a $106,370 increase in proceeds from the
issuance of convertible secured promissory notes, (3) a $55,000 increase in
proceeds from the issuance of convertible unsecured promissory notes and (4)
$173,800 of proceeds from the issuance of notes payable in 2023 with no
comparable amount in 2022. This was offset by the repayment of $235,000 of
convertible secured promissory notes in 2022 with no comparable amount in 2023
and $5,000 of repayment of note payable and a repayment of $8,997 of convertible
unsecured promissory note in 2023 with no comparable amount in 2022.
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Off-Balance Sheet Arrangements
At January 31, 2023, we did not have any off-balance sheet arrangements that we
believe have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenue or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
Critical Accounting Policies
Our Company's accounting policies are more fully described in Note 1 of Notes to
unaudited Condensed Financial Statements. As disclosed in Note 1 of the
unaudited Condensed 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.
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