USBL to be off pinks in ~ 3 weeks:
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB 12B/A
Amendment No. 2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) or the Securities Exchange Act of 1934
UNITED STATES BASKETBALL LEAGUE, INC.
(Name of Small Business Issuer in its charter)
Delaware 06-1120072
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
46 Quirk Road, Milford, Connecticut 06460
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (203) 877-9508
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common Stock $.01 par value per share
(Title of class)
RISK FACTORS
Prospective investors as well as Shareholders should be aware that an investment in USBL
involves a high degree of risk. Accordingly, you are urged to carefully consider the following Risk
Factors as well as all of the other information contained in this Registration Statement and the
information contained in the Financial Statements and the notes thereto.
Forward Looking Statements
When used in this Registration Statement, the words "may", "will", "expect", "anticipate", "estimate"
and "intend" and similar expressions are intended to identify forward looking statement within the
meaning of Section 21 E of the Securities Exchange Act of 1934 regarding events, conditions, and
financial trends that may affect our future plan of operations, business strategy, operating results
and financial position. Prospective investors are forewarned and cautioned that any forward
looking statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results may differ materially from those included within any such
forward looking statements.
Our Operating History Does Not Reflect Profitable Operations
Our operating history does not reflect a history of profitable operations. Since our inception we
have been attempting to develop the League. Our operations have not been profitable and unless
and until we can increase the sale of franchises and at the same time attract franchisees who are
able or willing to incur start-up costs to develop their respective franchises, we may continue to
operate at a loss. There can be no assurance that we will be successful.
We May Not Be Able to Continue as a Going Concern
Because of our historically poor revenues and earnings, our auditors have for at least the last four
years qualified their opinions and expressed their concern as to our ability to continue to operate as
a going concern. Shareholders and prospective shareholders should weigh this factor carefully in
considering the merits of our company as an investment vehicle.
We Have Not Been Able to Realize the Full Sales Value of a Franchise
Generally speaking, we have not been able to collect what we perceive to be true value for a
franchise because of the League's overall poor performance. As such we have sold franchises for
less than we believe the true value to be and additionally have extended terms for payment as an
additional inducement to the franchisees to purchase the franchise. As a result, our revenues have
been affected and will continue to be affected until such time as we are able to realize the full value
for franchises.
We Have Not Established Adequate Guidelines in Connection with the Sale of Franchises
Historically in our dealings with prospective franchisees and in our desire to sell franchises, we did
not establish adequate guidelines to insure that prospective franchisees have sufficient capital to
properly finance a franchise and to be able to absorb losses until such time as the franchise would
become profitable. Starting with the 1999 season, we have established rigorous standards to
ensure the viability of the franchise over the long term; however, there is still no assurance that in
view of our historical dealings we will be able to attract qualified franchisees.
We Have Been Dependent on Loans and Revenues from Affiliates to Sustain Our Operations
Because our revenues from third parties have been insufficient to sustain our operations, we have
been historically dependent on revenues, loans and advances from the Meisenheimer family to
assist in financing. If members of the Meisenheimer family elected not to continue to advance loans
to us, our operations could be drastically impaired.
We Are Dependent on Corporate Sponsorships Which Have Been Negligible
The financial success of the individual franchises is dependent to a large degree on corporate
sponsorship to help defray costs. To date, corporate sponsorship in some cities has been negligible
and as a result, some of the franchises have had to absorb expenses which would otherwise have
been supported by corporate sponsorship. As a result, profits of some of the franchises have been
affected and in many instances some of the franchises have been operating at a small loss. Until
such time as the League can attract meaningful sponsorship, earnings, if any, of the individual
franchises will be impacted.
Our Basketball Season Competes with Other Professional Sporting Events
Our season from May to early July is designed to afford players with the opportunity to showcase
their professional ability to the teams comprising the National Basketball Association ("NBA") and
to be possibly selected to participate in NBA teams' summer camps in the latter part of July and
August. As such, our schedule competes with outdoor sporting events such as baseball, golf and
tennis and our season comes at a time when spectators might normally prefer to be outdoors rather
than indoors in an arena. These factors have had some impact on the League's overall attendance,
although attendance has continued to improve.
We Lack Sufficient Capital to Promote the League
In order for the League to become successful, we have to promote the League. Historically and up
to the present time, we have lacked sufficient capital to develop a national promotion for the
League. Promotion will achieve two objectives: (i) create more fan interest, and (ii) franchise
interest. Until such time that we can properly promote the League we do not anticipate any
significant change in the overall fan interest. While attendance has recently improved, it still only
averages 1300 attendees per game. Additionally, interest in franchises has increased, but without
real promotional efforts, we do not anticipate any significant increase in franchise sales.
The Meisenheimer Family Exercises Significant Control over Us
The Meisenheimer family, consisting of Daniel T. Meisenheimer III, Richard C. Meisenheimer and
Mary Ellen Meisenheimer, and companies they control own approximately 85% of our outstanding
stock and as such control the daily affairs of the business as well as significant corporate actions.
Additionally, the Meisenheimer family controls the Board of Directors and as such shareholders
have little or no influence over the affairs of the Company.
Dependence upon Key Individual
Our success is dependent upon the activities of Daniel T. Meisenheimer III, Chief Executive
Officer. The loss of Mr. Meisenheimer through death, disability or resignation would have a
material and adverse effect on our business.
We Have a Limited Public Market for Our Stock
There are approximately 450,000 shares held by approximately 140 public shareholders and as
such there is a limited public market for our stock. As such, sellers of our stock may have difficulty
in selling their stock. In addition, and until such time as we can list our Common Stock on the
NASDAQ Electronic Bulletin Board, our stock will continue to trade in the over-the- counter
market and this will make it even more difficult for individuals to sell their stock.
Penny Stock Regulation
Broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain
penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities exchanges or quoted
on the NASDAQ System). The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information regarding penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its salesperson must
disclose this fact and the broker-dealer's presumed control over the market, and monthly account
statements showing the market value of each penny stock held in the customer's account. In
addition, broker-dealers who sell such securities to persons other than established customers and
accredited investors, the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's written agreement to
the transaction. Consequently, these requirements may have the effect of reducing the level of
activity, if any, in the market for the Common Stock.
ITEM I DESCRIPTION OF BUSINESS
The United States Basketball League ("USBL", "we" or the "Company") was incorporated in
Delaware in May, 1984 as a wholly-owned subsidiary of Meisenheimer Capital , Inc. ("MCI").
MCI was and is a publicly owned company having made a registered public offering of its
Common Stock in 1984. Since 1984, MCI has been under the control of the Meisenheimer family
consisting of Daniel T. Meisenheimer III, his brother, Richard Meisenheimer, and their father and
mother, Daniel Meisenheimer, Jr. and Mary Ellen Meisenheimer. Daniel Meisenheimer, Jr. died in
September, 1999.
(a) Operations
We were incorporated by MCI for the purpose of developing and managing a professional
basketball league, the United States Basketball League (the "League"). The League was primarily
conceived to provide a vehicle for college graduates interested in going professional with an
opportunity to improve their skills and to showcase their skills in a professional environment and
perhaps be selected by one of the teams comprising the National Basketball Association ("NBA")
to attend summer camp sponsored by that team. Today, players also consist of free agents seeking
to join an NBA team. USBL's season (May through July of each year) was specifically designed to
afford League players with the chance to participate in the various summer camps run by the teams
in the NBA. Since 1984 and up to the present time there have been 125 players from the League
who also have been selected to play for teams in the NBA. Approximately forty-five players each
year are selected to play in the Continental Basketball Association ("CBA"), the official
developmental league of the NBA.
Since the inception of the League, USBL has been engaged in selling franchises and managing the
League. From 1985 and up to the present time, USBL has sold a total of thirty-five active
franchises (teams), a vast majority of which were terminated for non-payment of franchise
obligations. For the 1999 season (ending in August, 1999) we had thirteen active franchises and
two inactive franchises. After the 1999 season, two franchises were canceled for their failure to
meet franchise obligations. For our 2000 season, which began in May, 2000, we had eleven active
franchises.
As the League is presently constituted, each team within the League maintains an active roster of
twelve players during the season and each team plays thirty games per season. We have playoffs at
the conclusion of the regular season. Under the terms of our Franchise Agreements, each franchise
is limited to a $47,500 salary cap for all players for each season. No player receives more than
$1,000 a week as salary.
Since the inception of the League to the present time, the number of active franchises has fluctuated
from seven to a high for the 1999 season of 13 franchises. The current active franchises, divided
into the Southern, Mid-Atlantic and Northern Divisions, are located in Sarasota, Florida (the Gulf
Coast SunDogs); Dodge City, Kansas (the Dodge City Legend); Enid, Oklahoma (the Oklahoma
Storm); Fort Myers, Florida (the Florida Sea Dragons);Salina, Kansas (the Kansas Cagerz);
Washington, DC (the Washington DC Congressionals); Atlantic City, New Jersey (the Atlantic
City Seagulls);Oyster Bay, New York (the Long Island Surf); Lehigh, Pennsylvania (the
Pennsylvania ValleyDawgs); Ocean, New Jersey (the New Jersey Shorecats); and Brooklyn, New
York (the Brooklyn Kings). In addition, MCI owns two inactive franchises which pay annual
royalty fees.
Since 1984 and up to the present time our franchises have been sold at various prices ranging from
a low of $25,000 to a high of $300,000. The price varies depending on the location of the
franchise and the prior history of the franchise if the particular franchise had previously been active.
Because historically our franchises have not operated profitably, we decided to accept less than
our asking price for new franchises at the time of sale. It is our intention to terminate this practice in
the future. However, each franchisee is required to pay the full sales price over time and in the
event full payment is not made, we reserve the right to cancel the franchise and have done so. At
least twenty-two of the thirty-five total franchises previously sold have been terminated for
non-payment of annual franchises fees and/or the full sales price. The termination of the franchises
has been primarily due to the fact that most of the franchises have not operated profitably and as a
result could not meet their contractual commitments. At the present time only two active franchises
are marginally profitable.
During the fiscal year ended February 29, 1996 (fiscal 1996), we sold five franchises in a barter
transaction, receiving in exchange 2,000,000 units of negotiable television advertising due bills.
During the first quarter of fiscal 1997, we also entered into an agreement with the same party to
receive an additional 2,000,000 units of negotiable television advertising due bills in exchange for
five additional franchises. The 4,000,000 units of advertising time are with American Independent
Network ("AIN") which employs satellite transmissions to certain affiliated television stations in
approximately 90 cities throughout the United States. Management had originally valued the
advertising due bills received in fiscal 1996 and the first quarter of fiscal 1997 at $500,000. For
Fiscal 1998 the due bills were valued at $684,062. During Fiscal 1999, we acquired 2,000,000
additional units from AIN in exchange for five more franchises. We subsequently concluded that a
more conservative estimate of the cumulative value of the total of all units as of the end of Fiscal
1999 is approximately $484,000. See "Financial Information." We have already used
approximately 300,000 units to broadcast certain selective League games. During fiscal 1999,
USBL did not use any of the units. USBL may use the remainder of the available time to broadcast
our games or, in the alternative, sell off the available television time assuming that USBL can locate
buyers. The barter transaction requires that the 15 franchise teams must be established within ten
years from the date of the transactions. We have no assurance that any of the franchises will ever
be established. In addition, we retain the right to approve or disapprove the ultimate franchisee.
None of the prospective franchisees are currently obligated to pay us any fees.
Under our standard franchise agreements, the term of the franchise is for ten (10) years with a right
to renew for a similar period. In addition to the initial purchase price of the franchises, franchisees
are required to pay an annual royalty fee of $20,000 per year. Currently three of our active
franchises are in arrears in their annual royalty fees: one owes two years of royalties and the other
two are in arrears for one year. We have the right to terminate these franchises for failure to pay
the annual royalty fee, but in an effort to assist the teams have elected not to do so. In addition and
because of our desire to have the League expand, historically, we have from time to time adjusted
annual royalty fees in certain situations where the individual franchise has not been operating
profitably.
The franchise agreement employed by us also entitles us to receive television revenues on a sharing
basis with the teams in connection with the broadcasting of regional or national games. While we
have broadcasted on a regional basis, we have not received any significant revenues. We are also
entitled to receive a percentage from the sale of team and league merchandise which is directly sold
by us, primarily over the Internet. Revenues earned by us have been negligible. Revenues from the
sale by a team of its own merchandise is retained by the selling team. These sales have contributed
to the individual team's revenues.
The franchises agreements state that we will use our best efforts to obtain sponsorships for each
team and the League. Such sponsorships are generally from local or national corporations. The
sponsorships which for the last few years have been negligible generally take the form of free
basketballs, uniforms, airline tickets and discount accommodations for teams when they travel. The
sponsorships generated by us are shared by all of the teams in the League. The individual teams
comprising the league are also free to seek sponsorship for their own individual franchise. Some of
the teams have been successful in attracting sponsorships in the form of merchandise and cash and
it is these sponsorships that have helped support the ongoing operations of the individual teams.
Other teams have not been successful. The success of obtaining sponsorship is generally a function
of good attendance and good media exposure. In some instances particular franchises cannot
generate any meaningful attendance because of a lack of media exposure.
The Franchise Agreement requires us to provide scheduling of all games and officiating for all
games. We also print a full roster book as well as a weekly newsletter which provides information
regarding the League as well as individual players and their personal statistics.
As previously stated, very few of our franchises have operated profitably. This is primarily due to
the fact that attendance and sponsorship has not been sufficient to sustain a team's expenses. We
estimate that at the current time annual expenses for each team average about $220,000. At the
present time only two franchises are operating profitably. The general lack of marketing by the
League and the teams is primarily due to insufficient capital to properly promote and market the
League, which has resulted in our inability and the individual team's inability to attract any
meaningful sponsorships. As a result, the sale of additional franchises either to maintain a constant
number of franchises or to expand the League has historically proven difficult for USBL.
From the inception of the League, USBL has generally operated at a loss. This has been due to the
poor sale of franchises and the inability of most of the franchises to generate sufficient revenues to
pay their respective annual royalty fees. Because of the poor historical record, USBL has been
dependent on loans from the principals and affiliated companies to defray the cost of operations.
See "Related Transactions." Additionally and because of our poor performance for at least the last
four years, our auditors have rendered qualified opinions based on their concerns as to the ability
to continue as a going concern.
We believe that the current mix of franchises are beginning to realize some increase in sponsorship
and attendance. There has been approximately a 50% increase in attendance for the first half of the
2000 season (late April and the month of May) as compared to the first half of the 1999 season.
This may eventually result in more teams realizing increased gate attendance and corresponding
revenues. This would increase the value of the individual franchises and also the League. As a
consequence we believe this would enable us to sell additional franchises where new teams might
be successful.
(c) Employees
We currently have a staff in excess of 50 people. USBL has four full-time employees consisting of
the chairman and League commissioner, Daniel Meisenheimer III, a director of administration, a
director of public relations and a director of operations. The balance, 46 in number, are employed
as referees and statisticians who are paid on a per game basis. From time to time we have also
used independent contractors for consulting work.
(d) Future Plans of USBL
We have, as an ultimate goal, the establishment of at least forty (40) franchises throughout the
United States, consisting of ten (10) teams in four regional divisions. This would result in regional
play-off games and then a final championship series. We are also attempting to develop a formal
association with the NBA. During fiscal 1998, the NBA selected us to handle a pre-draft camp for
the Korean Basketball League for which we received a nominal fee. At present time, the
Continental Basketball Association (the "CBA"), a league consisting of nine teams, is regarded as
the semi-official minor league of the NBA, and as such, receives financial support from the NBA.
We believe that a formal association with the NBA would enhance the value of the franchises and
attract more significant gate attendance, but to date we have not been able to promote a formal
relationship with the NBA. Likewise, we intend to use some of the television time available to us to
broadcast more games, which we believe might create additional fan interest and possibly serve to
attract additional franchisees. However, given the difficulties encountered by us to date in the sale
of additional franchises, it is doubtful that we will achieve our long-range goals unless we can raise
additional capital to properly promote the League. While gate attendance has been poor
historically, there has been some growth over the past four seasons. For fiscal 1999, there was an
increase in attendance of 16% over fiscal 1998, and fiscal 1998 reflected a 14% increase over
fiscal 1997. More significantly, gate attendance for the first half of the 2000 season is
approximately 50% higher than the corresponding period in the 1999 season. However, there can
be no assurance that the increase in attendance will continue. If gate attendance continues to
increase, this may make it easier to interest third parties to invest in new franchises, but there can
be no assurance that we will be successful.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999
Six Months Ended August 31, 2000 as Compared to August 31, 1999
Results of Operations
Net revenues for the six months ended August 31, 2000 and 1999 approximated $251,000 and
$150,000, respectively. Approximately $105,000 and $12,000 of the 2000 and 1999 revenues,
respectively, were derived from various related parties. The increase of $101,000 (67%) reflects
higher initial franchise fees resulting from the sale of new franchises.
Operating expenses for the six months ended August 31, 2000 and 1999 approximated $314,000
and $211,000, respectively. The increase of $103,000 is principally attributable to a $90,000
increase in consulting fees, which consists of consulting fees paid to Meisenheimer Capital Inc.
Other operating expenses remained relatively consistent as a result of the Company's efforts to
control costs.
Net income for the six months ended August 31, 2000 and 1999 approximated $93,000 and
$10,000, respectively. The increase reflects the increase in revenues combined with relatively
stable operating costs.
Liquidity and Capital Resources
The Company had a working capital deficit of approximately $290,000 at August 31, 2000.
The Company's statement of cash flows reflects cash provided by operations of approximately
$129,000, consisting principally of net income of $93,000 and an increase in accounts payable and
accrued expenses of $33,000. Net cash used in financing activities approximated $131,000,
consisting of an increase in net amounts due from affiliates of $82,000 and a decrease in
stockholders' loans of $49,000.
Results of operations
Revenues for the fiscal year ended February 29, 2000 ("Fiscal 00") were $553,021 as compared
to revenues of $806,552 for the fiscal year ended February 28, 1999 ("Fiscal 99"). Revenues from
initial franchise fees decreased $103,754 or 24%, primarily from the lack of sales of franchises.
Continuing franchise fees, however, increased $62,225 or 59% as a result of the increased success
of some of the USBL franchisees. Advertising income amounted to $30,603 in Fiscal 00
compared to advertising revenue of $112,500 in Fiscal 99. The advertising income received in
Fiscal 99 was from a related party.
Operating expenses for Fiscal 00 decreased by approximately $479,000 to $486,000 compared
to $965,000 in Fiscal 1999. In Fiscal 99, management recorded an allowance of $450,000 for the
impairment of its investment in the advertising due bills that have been received in recent years in
exchange for franchises. The slight decrease in the remaining operating expenses of approximately
$29,000 represent management's continued pressure to reduce its operating overhead.
The Company recorded a loss on the impairment of certain investments it has held in common
stocks in the amount of approximately $20,000. This represents management's recognition of a
permanent impairment in the value of these investments.
The net income for Fiscal 00 amounted to $44,888, as compared to net loss of $160,965 for
Fiscal 99. The change from the previous year's loss is primarily attributable to the allowance for the
impairment in the value of the advertising credits amounting to $450,000 in Fiscal 99. This
reduction was partially offset by decreased total revenue of $253,531, in Fiscal 99 as compared to
Fiscal 00.
Liquidity and Capital Resources
The United States Basketball League's working capital deficiency decreased by approximately
$16,000 to $290,000 at February 29, 2000, as compared to $306,000 at February 28, 1999.
This decrease was caused primarily by the decrease in cash of approximately $37,000, the
impairment of its investments of $20,000, the decrease in franchise fees receivable of $15,000, the
decrease in accounts payable and accrued expenses of approximately $84,000 and the net
decrease in amounts due to affiliates and stockholders which amounted to $22,000.
The Company continues to make efforts to resolve its working capital deficiency by seeking
additional equity capital, It is anticipated that there is potential for growth in the USBL.
Management is endeavoring to capitalize on its investment in the advertising credits to expand the
recognition of the USBL and generate advertising income in the future.
The Company's statement of cash flows for Fiscal 00 reflects cash used in operations of
approximately $326, reflecting the net income of $45,000 increased by non-cash losses such as
impairment of the stock investments amounting to $20,000. Net cash amounting to $22,333 was
utilized to reduce loans from stockholders and affiliates. The Company also expended $14,323 to
acquire additional fixed assets.
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Results of Operations
Revenues for the fiscal year ended February 28, 1999 ("Fiscal 99") were $806,552 as compared
to revenues of $638,676 for the fiscal year ended February 28, 1998 ("Fiscal 98"). Revenues from
initial franchise fees increased $33,754 or 8 percent, primarily from the sale of a franchise.
Continuing franchise fees increased $20,389 or 24 percent as a result of the increased success of
some of the USBL franchisees. Advertising income amounted to $112,500. There was no
advertising income in Fiscal 98. The advertising income was received from a related party.
Operating expenses for Fiscal 99 increased by approximately $397,000 to $965,000 compared to
$568,000 in Fiscal 1998. Management recorded an allowance of $450,000 for the impairment of
its investment in the advertising due bills that have been received i |
