10-Q 1 v390966_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, 2014

 

¨ 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 x 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  o Accelerated filer                   o

Non-accelerated filer o
(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 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 October __, 2014, 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  
     
  Consolidated Balance Sheets – August 31, 2014 and February 28, 2014 3
     
  Consolidated Statements of Operations for the three and six months ended August 31, 2014 and 2013 4
     
  Consolidated Statement of Stockholders’ Deficiency for the six months ended August 31, 2014 5
     
  Consolidated Statements of Cash Flows for the six months ended August 31, 2014 and 2013 6
     
  Notes to Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 11
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
     
Item 4. Controls and Procedures 13
     
PART II. OTHER INFORMATION 14
     
Item 6. Exhibits 14

 

2
 

 

PART I

FINANCIAL INFORMATION

 

Item 1.Consolidated Financial Statements.

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

  August 31,
2014
   February 28,
2014
 
   (Unaudited)     
ASSETS       
         
CURRENT ASSETS:          
Cash and cash equivalents  $29,714   $10,978 
Prepaid expenses   -    3,409 
Total current assets   29,714    14,387 
           
           
PROPERTY, NET of accumulated depreciation of $0 and $55,766, respectively   -    221,234 
Total assets  $29,714   $235,621 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
           
CURRENT LIABILITIES:          
Accounts payable and accrued expenses  $118,634   $176,232 
Credit card obligations   10,495    11,655 
Due to related parties   1,966,687    2,261,316 
           
Total current liabilities   2,095,816    2,449,203 
Total Liabilities   2,095,816    2,449,203 
           
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   (4,750,085)   (4,897,565)
Treasury stock, at cost; 39,975 shares   (42,454)   (42,454)
Total stockholders’ deficiency   (2,066,102)   (2,213,582)
           
Total liabilities and stockholders’ deficiency  $29,714   $235,621 

 

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, 2014   August 31, 2013   August 31, 2014   August 31, 2013 
REVENUES:                    
Rental income  $1,995   $11,946   $13,941   $23,892 
                     
OPERATING EXPENSES:                    
Salaries   -    8,206    -    19,990 
Professional fees   16,942    25,180    25,396    28,860 
Transfer agent and EDGAR agent fees   10,687    6,491    11,981    10,555 
Rent   3,000    3,000    6,000    6,000 
Travel and promotion   1,064    1,651    1,378    3,692 
Depreciation   270    1,298    1,568    2,596 
Other   2,469    1,013    8,167    7,105 
Total operating expenses   34,432    46,839    54,490    78,798 
                     
Loss from operations   (32,437)   (34,893)   (40,549)   (54,906)
                     
OTHER INCOME (EXPENSES):                    
Gain on sale of property   192,931    -    192,931    - 
Net gain (loss) from marketable equity securities   -    -    -    2,239 
Interest expense   (488)   (5,318)   (4,902)   (11,038)
                     
Total other income (expenses), net   192,443    (5,318)   188,029    (8,799)
                     
NET INCOME (LOSS)  $160,006   $(40,211)  $147,480   $(63,705)
                     
Earnings (loss) per common share:                    
Basic  $.05   $(.01)  $.04   $(.02)
Diluted  $.03   $(.01)  $.03   $(.02)
                     
WEIGHTED AVERAGE NUMBER OF  COMMON SHARES OUTSTANDING                    
Basic   3,512,527    3,512,527    3,512,527    3,512,527 
Diluted   4,618,206    3,512,527    4,618,206    3,512,527 

 

see notes to consolidated financial statements.

 

4
 

 

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY

Consolidated Statement of Stockholders’ Deficiency

Six Months Ended August 31, 2014

(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, 2014   3,552,502   $35,525    1,105,679   $11,057   $2,679,855   $(4,897,565)   39,975   $(42,454)  $(2,213,582)
                                              
Net income (Unaudited)   -    -    -    -    -    147,480    -    -    147,480 
                                              
Balance, August 31, 2014 (Unaudited)   3,552,502   $35,525    1,105,679   $11,057   $2,679,855   $(4,750,085)   39,975   $(42,454)  $(2,066,102)

 

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,
2014
   August 31,
2013
 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income (loss)  $147,480   $(63,705)
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Gain of sale of property   (192,931)   - 
Depreciation   1,568    2,596 
Changes in operating assets and liabilities:          
Marketable equity securities   -    4,106 
Prepaid expenses   3,409    - 
Accounts payable and accrued expenses   (57,598)   (7,736)
Credit card obligations   (1,160)   (30,653)
           
Net cash used in operating activities   (99,232)   (95,392)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Proceeds from sale of property   412,597    - 
Net cash provided by investing activities   412,597    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Decrease (increase) in due from related parties   -    35,450 
Increase (decrease)  in due to related parties   (294,629)   60,954 
           
Net cash provided by (used in) financing activities   (294,629)   96,404 
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   18,736    1,012 
           
CASH AND CASH EQUIVALENTS, beginning of period   10,978    11,642 
           
CASH AND CASH EQUIVALENTS, end of period  $29,714   $12,654 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Interest paid  $66,180   $7,038 
Income tax paid  $-   $- 

 

See notes to consolidated financial statements.

 

6
 

  

UNITED STATES BASKETBALL LEAGUE, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED AUGUST 31, 2014

(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. The 2008, 2009, 2010, 2011, 2012, 2013, and 2014 seasons 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.

 

Meisenheimer Capital Real Estate Holdings, Inc. (“MCREH”) a wholly owned subsidiary of USBL, owned a commercial building in Milford, Connecticut until June 19, 2014 (see Note 4).

 

At August 31, 2014, USBL and its wholly-owned subsidiary, Meisenheimer Capital Real Estate Holdings, Inc. (“MCREH” and collectively with the USBL, the “Company”) had negative working capital of $2,066,102, a stockholders’ deficiency of $2,066,102, and accumulated losses of $4,750,085. These factors, as well as the Company’s reliance on related parties (see Notes 6 and 8), 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 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, 2014 may not necessarily be indicative of the results that may be expected for the year ending February 28, 2015. 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, 2014.

 

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, 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.

 

7
 

  

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.

 

Marketable equity securities Marketable equity securities are recorded at fair value with unrealized gains and losses included in income. The Company 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, 2014 and 2013 and the six months ended August 31, 2014 and 2013 was $0, $0, $0, and $(2,059), respectively.

 

Depreciation expense – Until the sale of the property on June 19, 2014, depreciation was 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, 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 $980,000 at February 28, 2014) attributable to the USBL net operating loss carryforward.

 

As of February 28, 2014, USBL had a net operating loss carryforward of approximately $2,800,000 available to offset future taxable income. The carryforward expires in varying amounts from 2019 to 2034. 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 and MCREH file consolidated Federal and combined separate Connecticut income tax returns. The last returns filed were for the year ended December 31, 2012.

 

Estimates – The preparation of financial statements in conformity with generally accepted accounting principles 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 during 2014 and 2013 and none are outstanding at August 31, 2014.

 

8
 

 

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, 2013 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.

 

Reclassifications – Certain prior year expenses have been reclassified to conform to the current period’s presentation.

  

3.Marketable Equity Securities

 

For the six months ended August 31, 2013 (unaudited), net gain (loss) from marketable equity securities consisted of:

 

   2013 
     
Realized net gain (loss)  $4,298 
Unrealized net gain (loss)   (2,059)
      
Net gain (loss)  $2,239 

 

4.Property, Net

 

At February 28, 2014, property net, consisted of:

 

   February 28, 
   2014 
     
Land  $121,253 
Building   155,747 
Total   277,000 
      
Less accumulated depreciation   (55,766)
      
Property, net  $221,234 

 

The property was a commercial building owned by MCREH located in Milford, Connecticut. From June 2008 to December 2010, MCREH had no tenants at the property.

 

On February 1, 2012, MCREH executed a Lease Agreement with an unrelated entity (the “Tenant”) to rent the property (on a Net Lease basis) for a term of 11 months from February 1, 2012 to December 31, 2012 at a monthly rent of $3,000. The lease also provided the Tenant an option to renew the lease for two additional periods of one year each at monthly rents of $3,150 (for the year ended December 31, 2013), and $3,300 (for the year ended December 31, 2014).

 

On June 19, 2014, the property was sold to two individuals affiliated with the Tenant for $420,000 cash. The gain on sale of the property was $192,931, as follows:

  

9
 

 

Sale Price  $420,000 
Selling Costs   (7,403)
Net proceeds   412,597 
      
Cost of property, net of accumulated depreciation of $57,334   (219,666)
      
Gain on sale of property  $192,931 

 

5.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.

 

6.Due to Related Parties

 

Due to related parties consists of:

 

   August 31,
2014
   February 28,
2014
 
   (Unaudited)     
USBL loans payable to Spectrum Associates, Inc. (“Spectrum”), a corporation controlled by the two officers of USBL, interest at 6%, due on demand  $1,178,289   $1,239,289 
USBL loans payable to the two officers of USBL, interest at 6%, due on demand   526,011    527,041 
USBL loan payable to Genvest, LLC (“Genvest”), an entity controlled by the two officers of USBL   -    20,000 
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 trusts for the benefit of the two officers of USBL, interest at 6%, due December 31, 2011   -    50,000 
MCREH note payable to Spectrum, interest at 7%, due on demand, secured by MCREH property   -    25,000 
MCREH note payable to president of USBL, interest at 7%, due on demand   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 
MCREH note payable to a trust for the benefit of the two officers of USBL, interest at 4%, due October 22, 2009, secured by MCREH property   -    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 
MCREH loan payable to Meisenheimer Capital, Inc. (“MCI”), non-interest bearing, due on demand   164,787    162,386 
Total   1,966,687    2,261,316 
Less current portion   (1,966,687)   (2,261,316)
           
Non current portion  $-   $- 

 

On June 27, 2014, USBL repaid the $20,000 loan payable to Genvest and repaid $61,000 of the $1,239,289 loans payable to Spectrum at May 31, 2014.

 

On June 27, 2014, MCREH repaid the $25,000 note payable to Spectrum, repaid the $70,000 note payable to the two officers of USBL (and $14,998 accrued interest thereon), repaid the $50,000 notes payable to trusts for the benefit of the two officers of USBL (and $18,000 accrued interest thereon), and repaid the $70,000 note payable to a trust for the benefit of the two officers of USBL (and $32,694 accrued interest thereon).

 

On June 30, 2014, MCREH paid legal fees on behalf of MCI of $10,000 which was charged against the loan payable to MCI.

 

10
 

 

For the six months ended August 31, 2014 and 2013, interest due under the USBL loans were waived by the respective lenders.

 

At August 31, 2014 and February 28, 2014, accounts payable and accrued expenses included accrued interest payable on MCREH notes payable to related parties totaling $13,562 and $77,887, respectively.

  

7.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.

 

8.Related Party Transactions

 

For the three months ended August 31, 2014 and 2013 and the six months ended August 31, 2014 and 2013, USBL included in other operating expenses, rent incurred to Genvest, LLC totaling $3,000, $3,000, $6,000, and $6,000, respectively.

 

9.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, 2014 and February 28, 2014, accounts payable and accrued expenses included accrued rent payable to Genvest totaling $78,000 and $72,000, respectively.

 

Cancellation of 2008, 2009, 2010, 2011, 2012, 2013, and 2014 Seasons

 

USBL cancelled its seasons from 2008 through 2014. These cancellations may result in claims and legal actions from franchisees.

 

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.

 

  Item 2. Management’s Discussion and Analysis of financial condition and results of operations.

 

OVERVIEW

 

Exclusive of the $192,931 gain on sale of the MCREH property in June 2014 (see Note 4 to consolidated financial statements), it is anticipated that the Company will continue to operate at a loss for the next twelve months. 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 Daniel T. Meisenheimer, III and one other employee for all marketing efforts. Their efforts have not resulted in any franchises.

 

11
 

 

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, the 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, 2014 AS COMPARED TO AUGUST 31, 2013

 

For the three months ended August 31, 2014 and 2013, the Company had no franchise fees or advertising revenues as a result of the cancellation of its seasons. Rental income decreased $9,951 from $11,946 in 2013 to $1,995 in 2014. The decrease in rental income was due to the June 19, 2014 sale of the MCREH property to two individuals affiliated with the Tenant.

 

Operating expenses decreased $12,407 from $46,839 for the three months ended August 31, 2013 to $34,432 for the three months ended August 31, 2014. The decrease in operating expenses was primarily due to the absence of salaries for 2014 ($8,206 in 2013) and the $8,238 decrease in professional fees, offset by a $4,196 increase in transfer agent and EDGAR agent fees.

 

Other income (expenses), net, was $192,443 in 2014 compared to ($5,318) in 2013. In 2014, the Company recognized a $192,931 gain on sale of its MCREH property.

 

Net income for the three months ended August 31, 2014 was $160,006 as compared to net loss of $40,211 for the three months ended August 31, 2013. The $200,217 improvement in 2014 was due primarily to the $192,931 gain recognized on the June 19, 2014 sale of the MCREH property.

 

SIX MONTHS ENDED AUGUST 31, 2014 AS COMPARED TO AUGUST 31, 2013

 

For the six months ended August 31, 2014 and 2013, the Company had no franchise fees or advertising revenues as a result of the cancellation of the its seasons. Rental income decreased $9,951 from $23,892 in 2013 to $13,941 in 2014. The decrease in rental income was due to the June 19, 2014 sale of the MCREH property to two individuals affiliated with the Tenant.

 

Operating expenses decreased $24,308 from $78,798 for the six months ended August 31, 2013 to $54,490 for the six months ended August 31, 2014. The decrease in operating expenses was primarily due to the absence of salaries in 2014 ($19,990 in 2013) and the $3,464 decrease in professional fees.

 

Other income (expenses), net, was $188,029 in 2014 compared to ($8,799) in 2013. In 2014, the Company recognized a $192,931 gain on the sale of its MCREH property.

 

Net income for the six months ended August 31, 2014 was $147,480 as compared to net loss of $63,705 for the six months ended August 31, 2013. The $211,185 improvement in 2014 was due primarily to the $192,931 gain recognized on the June 19, 2014 sale of the MCREH property.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company had cash and cash equivalents of $2,066,10 and a working capital deficit of $2,066,102 at August 31, 2014. The Company's statement of cash flows for the six months ended August 31, 2014 reflects cash used in operating activities of $99,232, which results primarily from the $40,549 loss from operations as well as the $57,598 decrease in accounts payable and accrued expenses. Cash provided by investing activities was $412,597 in 2014, which resulted from the June 19, 2014 sale of the MCREH property. Net cash used in financing activities was $294,629 in 2014, which resulted from the retirement of amounts due to related parties in connection with the sale of the MCREH property, compared to $96,404 provided by financing activities in 2013.

 

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The Company expects it will continue to 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 USBL and 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 2015 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, 2014 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, 2014 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.

 

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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.

 

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SIGNATURES

 

ursuant 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 15th day of October, 2014.

 

  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)

 

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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
   
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.

 

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