10-Q 1 v237126_10q.htm FORM 10-Q

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, 2011

¨
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 x     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 (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 ¨

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 the 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    ¨
(Do not check if a smaller reporting company)
Smaller reporting company  x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes ¨     No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.  As of October 5, 2011, 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
 
3
       
Item 1.
UNAUDITED FINANCIAL STATEMENTS
   
        3
 
Consolidated Balance Sheets – August 31, 2011 and February 28, 2011
   
       
 
Consolidated Statements of Operations for the three and six months Ended August 31, 2011 and 2010
 
4
       
 
Consolidated Statement of Stockholders’ Deficiency for the six months ended August 31, 2011
 
5
       
 
Consolidated Statements of Cash Flows for the six months ended August 31, 2011 and 2010
 
6
       
 
Notes to Consolidated Financial Statements
 
7
       
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operation
 
13
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
15
       
Item 4.
Controls and Procedures
 
15
       
PART II.
OTHER INFORMATION
 
15
       
Item 6.
Exhibits
 
15

 
2

 

PART I
FINANCIAL INFORMATION

ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS.

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY
 
CONSOLIDATED BALANCE SHEETS

   
August 31,
   
February 28,
 
   
2011
   
2011
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 5,822     $ 2,465  
Marketable equity securities
    254,404       244,086  
Inventory
    5,000       5,000  
Due from related parties
    17,620       7,274  
Total current assets
    282,846       258,825  
                 
PROPERTY, NET of accumulated depreciation of $42,786 and $40,190, respectively
    234,214       236,810  
Total assets
  $ 517,060     $ 495,635  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
               
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
  $ 165,677     $ 148,766  
Credit card obligations
    90,636       92,400  
Due to related parties
    1,968,733       1,872,087  
                 
Total current liabilities
    2,225,046       2,113,253  
Total Liabilities
    2,225,046       2,113,253  
                 
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
    (4,391,969 )     (4,301,601 )
Treasury stock, at cost; 39,975 shares
    (42,454 )     (42,454 )
Total stockholders’ deficiency
    (1,707,986 )     (1,617,618 )
                 
Total liabilities and stockholders’ deficiency
  $ 517,060     $ 495,635  

See notes to consolidated financial statements.

 
3

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   
Three Months Ended
   
Six Months Ended
 
   
August 31,
   
August 31,
   
August 31,
   
August 31,
 
   
2011
   
2010
   
2011
   
2010
 
                         
REVENUES:
                       
Consulting fees
  $  -     $ 20,000     $ -     $  20,000  
Total revenues
    -       20,000       -       20,000  
                                 
OPERATING EXPENSES:
                               
Consulting
    200       575       200       16,575  
Salaries
    14,042       14,710       28,422       28,578  
Travel and promotion
    4,513       12,177       11,544       19,734  
Depreciation
    1,298       1,298       2,596       2,596  
Other
    23,636       28,555       53,427       49,211  
Total operating expenses
    43,689       57,315       96,189       116,694  
                                 
Loss from operations
    (43,689 )     (37,315 )     (96,189 )     (96,694 )
                                 
OTHER INCOME (EXPENSES):
                               
Net gain (loss) from marketable equity securities
    (79,698 )     (24,595 )     22,040       (19,287 )
Interest expense
    (8,161 )     (8,238 )     (16,220 )     (16,447 )
Interest  income
    1       1       1       26  
                                 
Total other income (expenses)
    (87,849 )     (32,832 )     5,821       (35,708 )
                                 
NET LOSS
  $ (131,547 )   $ (70,147 )   $ (90,368 )   $ (132,402 )
                                 
Earnings (loss) per common share:
                               
Basic
  $  (.04 )   $  (.02 )   $  (.03 )   $  (.04 )
Diluted
  $  (.04 )   $  (.02 )   $  (.03 )   $  (.04 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                               
Basic
    3,512,527       3,512,527       3,512,527       3,501,766  
Diluted
    3,512,527       3,512,527       3,512,527       3,501,766  

See notes to consolidated financial statements.

 
4

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders’ Deficiency
Six Months Ended August 31, 2011
(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, 2011
    3,552,502     $ 35,525       1,105,679     $ 11,057     $ 2,679,855     $ (4,301,601 )     39,975     $ (42,454 )   $ (1,617,618 )
                                                                         
Net loss
    -       -       -       -       -       (90,368 )     -       -       (90,368 )
                                                                         
Balance, August 31, 2011
    3,552,502     $ 35,525       1,105,679     $ 11,057     $ 2,679,855     $ (4,391,969 )     39,975     $ (42,454 )   $ (1,707,986 )
 
See notes to consolidated financial statements.

 
5

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Six Months Ended
 
   
August 31,
   
August 31,
 
   
2011
   
2010
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (90,368 )   $ (132,402 )
Adjustments to reconcile net loss to net cash (used in) operating activities:
               
Depreciation
    2,596       2,596  
Non-cash compensation
    -       12,000  
Changes in operating assets and liabilities:
               
Marketable equity securities
    (10,318 )     (31,418 )
Accounts payable and accrued expenses
    16,911       10,915  
Due in connection with South Korea venture
    -       (20,000 )
Credit card obligations
    (1,764 )     983  
                 
Net cash (used in) operating activities
    (82,943 )     (157,326 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
(Increase) in due from related parties
    (10,346 )     (9,884 )
Increase in due to related parties
    96,646       169,827  
                 
Net cash provided by financing activities
    86,300       159,943  
                 
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
    3,357       2,617  
                 
CASH AND CASH EQUIVALENTS, beginning of period
    2,465       661  
                 
CASH AND CASH EQUIVALENTS, end of period
  $ 5,822     $ 3,278  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
               
Interest paid
  $ 8,271     $ 8,647  
Income tax paid
  $ -     $ -  
                 
NON-CASH FINANCING ACTIVITY:
               
Transfer of amounts due from related parties to USBL president in partial satisfaction of amount due to USBL president
  $ -     $ 118,783  

See notes to consolidated financial statements.

 
6

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 2011
(Unaudited)

1.
Description of Business and Basis of Presentation

United States Basketball League, Inc. (“USBL”), incorporated in Delaware on May 29, 1984, has operated a professional summer basketball league through franchises located in the United States.  Its wholly owned subsidiary Meisenheimer Capital Real Estate Holdings, Inc. (“MCREH”) owns a commercial building in Milford, Connecticut. USBL cancelled its 2008, 2009, 2010 and 2011 seasons.

At August 31, 2011, USBL and MCREH (collectively, the “Company”) had negative working capital of $1,942,200, a stockholders’ deficiency of $1,707,986, and accumulated losses of $4,391,969.  This factor, as well as the Company’s reliance on related parties (see Notes 7 and 9), raises 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 consolidated 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 consolidated 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, 2011 may not necessarily be indicative of the results that may be expected for the year ending February 29, 2012.  The notes to the consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the year ended February 28, 2011.

2.
Summary of Significant Accounting Policies

Principles of consolidation - The accompanying consolidated financial statements include the accounts of USBL and MCREH.  All significant intercompany accounts and transactions have been eliminated.

Fair value disclosures – The carrying amounts of the Company’s financial instruments, which consist of cash and cash equivalents, marketable equity securities, due from related parties, 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.

 
7

 

Marketable equity securitiesMarketable equity securities are recorded at fair value with unrealized gains and losses included in income. The Company has classified its investment in marketable equity securities as trading securities.  The change in net unrealized holding gain (loss) included in earnings for the three months ended August 31, 2011 and 2010 and the six months ended August 31, 2011 and 2010 was $(86,599), $(6,316), $16,433, and $(1,008), respectively.

Inventory - Inventory consists of USBL trading cards, basketball uniforms, sporting equipment and printed promotional material and is stated at the lower of cost or market.  Certain inventory was obtained through barter transactions whereby the USBL granted suppliers various advertising space (print) and airtime (television) in return for the supplier’s products.  These transactions were accounted for based upon the fair values of the assets and services involved in the transactions.

Depreciation expense - Depreciation is computed using the straight-line method over the building’s estimated useful life (30 years).

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, the USBL records these revenues upon receipt of cash consideration paid or the performance of related services by the franchisee.  Franchise fees earned in nonmonetary transactions are recorded at the fair value of the franchise granted or the service received, based on which value is more readily determinable.  Upon the granting of the franchise, the Company has performed essentially all material conditions related to the sale

The Company generates advertising revenue from fees for arena signage, tickets, and program and yearbook advertising space. Advertising revenue is recognized over the period that the advertising space is made available to the user.

Fees charged to teams to allow them to relocate are recognized as revenue upon collection of the fee.  Souvenir sales, which are generated on the Company’s web site, are recorded upon shipment of the order.  Essentially all orders are paid by credit card.

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 $805,000) attributable to the USBL net operating loss carryforward.

As of February 28, 2011, USBL had a net operating loss carryforward of approximately $2,300,000 available to offset future taxable income.  The carryforward expires in varying amounts from 2019 to 2031.  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.

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 reporting period.  Actual results could differ from those estimates.

 
8

 

Advertising costs - Advertising costs are expensed as incurred.

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 during 2011 and 2010 and none are outstanding at August 31, 2011.
 
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, 2011 and 2010 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’ deficiency.  Comprehensive income (loss) was equivalent to net income (loss) for all periods presented.

3.
Marketable Equity Securities

At August 31, 2011 (unaudited), marketable equity securities consisted of:

               
Fair
 
               
Value and
 
               
Carrying
 
Security
 
Shares
   
Cost
   
Value
 
Seafarer Exploration Corp. (SFRX)
    7,252,064     $ 97,642     $ 108,781  
Pacific Rim Mining Corp. (PFRMF)
    350,000       83,458       51,520  
Caledonia Mining Corp. (CALVF)
    410,000       34,099       32,800  
Apex Resources Group Inc. (APXR)
    439,900       16,287       21,995  
Other
            61,402       39,308  
                         
Total
          $ 292,888     $ 254,404  

 
9

 

At February 28, 2011, marketable equity securities consisted of:

               
Fair
 
               
Value and
 
               
Carrying
 
Security
 
Shares
   
Cost
   
Value
 
Pacific Rim Mining Corp. (PMV)
    385,360     $ 91,889     $ 87,901  
Caledonia Mining Corp. (CALVF)
    505,000       42,000       66,660  
Apex Resources Group, Inc. (APXR)
    480,000       17,385       31,200  
Seafarer Exploration Corp. (SFRX)
    6,937,064       92,980       30,767  
Other
            54,749       27,558  
                         
Total
          $ 299,003     $ 244,086  

As discussed in Note 2, the Company has classified its investment in marketable equity securities as trading securities.  All fair value measurements are based on Level 1 inputs (i.e., closing trading prices of respective marketable equity securities).

Gain (loss) on marketable equity securities consisted of:

   
Six Months Ended August 31,
 
   
(Unaudited)
 
   
2011
   
2010
 
Realized net gain (loss)
  $ 5,607     $ (18,279 )
Unrealized net gain (loss)
    16,433       ( 1,008 )
                 
Net gain (loss)
  $ 22,040     $ (19,287 )

4.
Due from Related Parties

Due from related parties consist of:

   
August 31,
   
February 28,
 
   
2011
   
2011
 
   
(Unaudited)
       
USBL receivable from Meisenheimer Capital, Inc. (“MCI”) controlling stockholder of USBL, non-interest bearing, due on demand
  $ 17,620     $ 7,274  
                 
Total
  $ 17,620     $ 7,274  

 
10

 

Effective May 31, 2010, the president of USBL was transferred the then $118,783 balance due from related parties in satisfaction of $118,783 loans payable due to him from the Company.

5.
Property, Net

Property, net, consists of:

   
August 31,
   
February 28,
 
   
2011
   
2011
 
   
(Unaudited)
       
             
Land
  $ 121,253     $ 121,253  
Building
    155,747       155,747  
Total
    277,000       277,000  
                 
Less accumulated depreciation
    (42,786 )     (40,190 )
                 
Property, net
  $ 234,214     $ 236,810  

Since June 2008, MCREH has had no tenants at the property.

6.
Credit Card Obligations

USBL uses credit cards of related parties to pay for certain travel and promotion expenses.  USBL has agreed to pay the credit card balances, including related interest.  The credit card obligations bear interest at rates ranging up to 30% and are due in monthly installments of principal and interest.

7.
Due to Related Parties

Due to related parties consists of:

   
August 31,
2011
   
February 28,
2011
 
   
(Unaudited)
       
USBL loans payable to Spectrum Associates, Inc. (“Spectrum”), a corporation controlled by the two officers of USBL, interest at 6%, due on demand
  $ 1,196,289     $ 1,152,957  
USBL loans payable to the two officers of USBL, interest at 6%, due on demand
    439,844       386,530  
USBL loan payable to Genvest, LLC (“Genvest”), an organization controlled by the two officers of USBL
    20,000       20,000  
USBL loans 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 the two officers of USBL, interest at 6%, due December 31, 2011
    50,000       50,000  
MCREH note payable to Spectrum, interest at 7%, due on demand, secured by MCREH property
    25,000       25,000  
                 
MCREH note payable to president of USBL, interest at 7%, due on demand, secured by MCREH property
      45,000         45,000  
MCREH note payable to the two officers of USBL, interest at 7%, due on demand, secured by MCREH property
    70,000       70,000  
                 
MCREH note payable to the two officers of USBL, interest at 4%, due October 22, 2009, secured by MCREH property
      70,000         70,000  
MCREH loan payable to president of 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  
Total
    1,968,733       1,872,087  
Less current portion
    (1,968,733 )     (1,872,087 )
                 
Non current portion
  $ -     $ -  

 
11

 

For the six months ended August 31, 2011 and 2010, interest due under the USBL loans were waived by the respective lenders.

At August 31, 2011 and February 28, 2011, accounts payable and accrued expenses included accrued interest payable on MCREH notes payable to related parties totaling $59,387 and $51,587, respectively.
 
8.
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.
 
On May 6, 2010, the Company issued 30,000 restricted shares of Company common stock (valued at $12,000) to a consultant for services rendered.
 
9.
Related Party Transactions
 
In the three months ended August 31, 2011 and 2010 and the six months ended August 31, 2011 and 2010, USBL included in other operating expenses, rent to Genvest, LLC of $3,000, $3,000, $6,000, and $6,000, respectively.

10.
Commitments and Contingencies

Occupancy Agreement

In September 2007, the Company moved its office from the MCREH building 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, 2011 and February 28, 2011, accounts payable and accrued expenses included accrued rent payable to Genvest totaling $42,000 and $36,000, respectively.

Cancellation of 2008, 2009, 2010, and 2011 Seasons

USBL cancelled its 2008, 2009, 2010 and 2011 seasons.  These cancellations may result in claims and legal actions from franchisees.

 
12

 

Litigation

On June 30, 2008, a legal action was commenced by Albany Patroons, Inc., a franchisee of USBL, against the Company in the United States District Court for the Northern District of New York.  The complaint alleges breach of contract by USBL due to the suspension of the 2008 season and seeks total damages of $285,000.  On September 5, 2008, the Company answered the complaint and asserted a counter-claim against plaintiff for breach of franchise agreement and/or memorandum of agreement.  This action was discontinued and the parties agreed to proceed with binding arbitration.  The Company believes that it has a meritorious defense to the action and does not expect the ultimate resolution of this matter to have a material adverse effect on its consolidated financial condition or results of operations.

11.
Subsequent Events

In September 2011, the fair value of the Company’s marketable equity securities decreased $42,481 from $254,404 at August 31, 2011 to $211,923 at September 30, 2011.

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

It is anticipated that the Company will continue to rely on financial assistance from affiliates.  The Meisenheimer family is fully committed to making the Company a profitable operation and also making the League a viable one.  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 additional sales and promotional personnel.  As a result, the Company is currently dependent on the efforts of Daniel T. Meisenheimer, III and two other employees for all marketing efforts.  Their efforts have not resulted in any substantial increase in the number of franchises.  The NBA has established a developmental basketball league known as the National Basketball Developmental League (“NBDL”).  The Company believes that the establishment of this league, consisting of eight teams, will have no effect on the Company’s season, since the NBDL season as presently constituted runs from November through March.  Further, nothing prohibits a NBDL player from playing in the USBL.  Accordingly, and as of the present time, the Company does not perceive the NBDL as a competitor.  However, with the establishment of the NBDL, it is unlikely that, at least for the present time, the Company can develop any meaningful relationship with the NBA.

THREE MONTHS ENDED AUGUST 31, 2011 AS COMPARED TO AUGUST 31, 2010

For the three months ended August 31, 2011 and 2010, the Company had no franchise fees or advertising revenues as a result of the cancellation of the 2008, 2009, 2010, and 2011 seasons.  Consulting fees revenues decreased $20,000 from $20,000 in 2010 to $0 in 2011 as a result of the termination of the South Korea venture in 2010.

Operating expenses decreased $13,626 from $57,315 for the three months ended August 31, 2010 to $43,689 for the three months ended August 31, 2011.  The decrease in operating expenses was primarily due to lower travel and promotion and other operating expenses.

Net gain (loss) from marketable equity securities decreased $55,103 in 2011, from $(24,595) in 2010 to $(79,698) in 2011.  The decrease was due primarily to price depreciation in the Company’s holding of Seafarer Exploration Corp. (SFRX) shares in 2011.

 
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Interest expense decreased to $8,161 in 2011, as compared to $8,238 in 2010.

Net loss for the three months ended August 31, 2011 was $131,547 as compared to the net loss of $70,147 for the three months ended August 31, 2010.  The increase is due mainly to the $55,103 decrease in net gain (loss) from marketable securities (from $(24,595) in 2010 to $(79,698) in 2011) and the $20,000 decrease in consulting fees revenues, offset partially by the $13,626 decrease in operating expenses described above.

SIX MONTHS ENDED AUGUST 31, 2011 AS COMPARED TO AUGUST 31, 2010

For the six months ended August 31, 2011 and 2010, the Company had no franchise fees or advertising revenues as a result of the cancellation of the 2008, 2009, 2010, and 2011 seasons.  Consulting fees revenues decreased $20,000 from $20,000 in 2010 to $0 in 2011 as a result of the termination of the South Korea venture in 2010.

Operating expenses decreased $20,505 from $116,694 for the six months ended August 31, 2010 to $96,189 for the six months ended August 31, 2011.  The decrease in operating expenses was primarily due to the reduction of stock-based compensation from $12,000 in 2010 to $0 in 2011.

Net gain (loss) from marketable equity securities increased $41,327 from $(19,287) in 2010 to $22,404 in 2011.  The increase was due to price appreciation in the Company’s holding of Seafarer Exploration Corp. (SFRX) shares in 2011.

Interest expense decreased to $16,220 in 2011, as compared to $16,447 in 2010.

Net loss for the six months ended August 31, 2011 was $90,368 as compared to net loss of $132,402 for the six months ended August 31, 2010.  The improvement is due mainly to the $41,327 increase in net gain (loss) from marketable securities (from $(19,287) in 2010 to $22,040 in 2011) and the $20,505 decrease in operating expenses described above, offset partially by the $20,000 decrease in consulting fees revenues.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash of $5,822 and a working capital deficit of $1,942,200 at August 31, 2011.  The Company's statement of cash flows for the six months ended August 31, 2011 reflects cash used in operating activities of $82,943, which results primarily from the $90,368 net loss. Net cash provided by financing activities was $86,300 in 2011 compared to $159,943 in 2010.

The Company's ability to generate cash flow from franchise royalty fees is dependent on scheduling of a 2012 season and the financial stability of the individual franchises constituting the League. Each franchise is confronted with meeting its own fixed costs and expenses, which are primarily paid from revenues generated from attendance.  Experience has shown that USBL is generally the last creditor to be paid by the franchise.  If attendance has been poor, USBL has from time to time only received partial payment and, in some cases, no payments at all.  The Company estimates that it requires approximately $300,000 of working capital to sustain operations over a 12-month period.  Accordingly, if the Company is unable to generate additional sales of franchises and schedule a 2012 season within the next three months it will again have to rely on affiliates for loans and revenues to assist it in meeting its current obligations.  With respect to long term needs, the Company recognizes that in order for the League and USBL 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 ability of the Company 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 2012 season.

 
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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, 2011 and, based on such evaluation, our principal executive and financial officers have concluded that these controls and procedures are effective.  There were no significant changes in our internal control over financial reporting that occurred during the quarter ended August 31, 2011 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

 
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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 17th day of November, 2011.

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

Pursuant to the requirement 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.

Name
 
Capacity
 
Date
         
/s/ Daniel T. Meisenheimer III
       
Daniel T. Meisenheimer III
 
Director and President (principal executive officer)
 
November 17, 2011
         
/s/ Richard C. Meisenheimer
       
Richard C. Meisenheimer
 
Director and Chief Financial Officer  (principal financial and accounting officer)
 
November 17, 2011

 
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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

 
17