This Annual Report on Form 10-K and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.
Any statement that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “believes”, “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Risk Factors and Uncertainties”, “Description of Business” and “Management’s Discussion and Analysis” of this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Pacific Sports disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
As used in this Annual Report, the terms “we,” “us,” “our,” “Pacific Sports,” and the “Company”, mean Pacific Sports Exchange, Inc., unless otherwise indicated. All dollar amounts in this Annual Report are expressed in U.S. dollars, unless otherwise indicated.
Management’s Discussion and Analysis is intended to be read in conjunction with the Company’s financial statements and the integral notes (“Notes”) thereto for the fiscal year ending August 31, 2019. The following statements may be forward-looking in nature and actual results may differ materially.
Overview
We were incorporated in Delaware on July 2, 2018, to engage in the business of re-selling new and used tennis and golf equipment. The concept is to source top-quality, in-demand equipment, and resell it to both domestic and international customers. Our Company has identified popular brands and models that retain value, in new and used condition, across the various markets in which we plan to sell.
We will operate as an on-line only entity and intend to utilize E-Bay our primary marketing channel. We will also optimize our own website for ‘global’ search terms and internally vend equipment through an expanding referral network of repeat customers.
On January 15, 2019, we issued 3,100,000 shares of common stock to 14 individuals pursuant to the provisions of Section 4(a)(2) of the Securities Act of 1933 (the "Act") and Rule 506(b) of Regulation D promulgated by the Securities and Exchange Commission ("SEC").
Our principal executive office is located at 25188 Marion Ave, Unit B108 Punta Gorda, FL 33950 and our telephone number is (877) 571-5562. Our corporate website is www.pacificsportsexchange.com.
We have not been subject to any bankruptcy, receivership or similar proceeding.
We specialize in the re-selling of new and used tennis and golf equipment. The concept is to source top-quality, in-demand equipment and resell it to both domestic and international customers. We have identified popular brands and models that retain their value in new and used condition.
To source in-demand equipment, our Company has established relationships with local Southwest Florida sports retailers to purchase their surplus end-of-season inventory and trade-ins. The Company also attends golf and tennis trade shows and monitors re-seller equipment events to pin-point trends in high-demand used equipment. Both Florida and California have been identified as premium geographic locations to search for and secure the desired supply of top-end equipment.
We will operate as an on-line only entity and utilize E-Bay as our primary marketing channel. We will also optimize our own website for ‘global’ search terms and internally vend equipment to a worldwide market. Because the Company relies on third-party websites such as E-bay to make its sales, such reliance on any third-party platform to generate revenues carries with it certain risks including but not necessarily limited to: the Company could violate the terms of service and lose its selling privileges, or the sites themselves could experience technical issues and/or fail. The Company will always strive to abide by the policies of any third-party platform and will endeavor to provide superior customer service. The Company will also look to improve the marketing and functionality of its own website, to act as a hedge against the risk of relying on third-party partners.
The principals of our Company have experience in both the sports of tennis and golf, and through this experience have identified high-value, high-margin equipment that re-sells profitably to both international and domestic customers. The goal is to create a unique supply chain that targets niche, valued products and their buyers. Serious golfers and tennis players are very particular about their equipment and will go to considerable lengths to secure what they are looking for in a quest to improve their game. This customer is our prime target market and our marketing approach will be to create a relationship (wherever possible) with this customer and become their ongoing equipment supplier through social media and electronic outreach.
Distribution Methods
Potential customers will find our equipment promoted through websites such as E-Bay and eventually through our own PacificSportsExchange.com website. E-Bay makes it relatively easy to ship goods to international destinations, and E-Bay also services the domestic US. market. Through E-Bay, our Company will be able to ship tennis racquets anywhere within the continental U.S.A. for an average flat rate of $8 per item. In addition to utilizing third-party websites such as E-Bay, our Company will develop a robust website of our own and undertake a key-word optimization effort that will globally rank the site for tennis and golf related keywords. While E-Bay allows for start-up companies such as ours to instantly reach a global audience, our longer-term strategy would be to have customers interact and purchase equipment directly from our website. Not only does this help with the margin-per-transaction, but also gives us an opportunity to create a long-term relationship and database with each customer. However, it must be cautioned that as website optimization occurs, especially on a global scale, this will take time and resources to accomplish, and initially E-Bay will be our key marketing channel.
Competitive Business Conditions and Strategy; Position in the Industry
Our Company will compete with other vendors of golf and tennis equipment. We will compete with a wide assortment of vendors from small local golf and tennis shops, to larger established vendors such as Dick’s Sporting Goods and Amazon. There is also an assortment of successful on-line vendors such as Tennis Warehouse, Midwest Sports, Holabird Sports, and Puetz Golf, among others. At first glance the retail industry appears challenging, especially when you factor in direct sales from the equipment manufacturers themselves, however, a competitive advantage could lie in the specialized nature of both our target customer and our targeted products. While we will sell to local domestic customers, our primary target market will be foreign buyers from Asia and Europe that have a penchant for specific brands and product models not available in their local markets. We have identified select new and classic equipment that is in high demand to foreign buyers, and we have identified a reliable method to source the desired equipment. Our source of in-demand equipment comes from a network of local tennis and golf shops. Located throughout Southwest Florida, these local shops and their owners are embedded within their communities and have great relationships with the local playing public; season in and season out they receive a steady supply of trade-in equipment. Our Company has found that these vendors are happy to sell this old equipment to us at a discount. Hence, our niche strategy within the larger mass market will be to service the specialized and under-served international demand with a supply of equipment that is sourced from a network of local Florida sport shops. Our Company believes that this sourcing strategy can be duplicated on the East Coast of Florida and in other warm weather states such as California and Arizona.
Talent Sources and Names of Principal Suppliers
The key to our success will be in the quality of our leadership, and their ability to share industry knowledge and secure a reliable supply chain. Our Company will be headed by Timothy Conte, a retired educator and life-long tennis and golf enthusiast. Mr. Conte is passionate about both sports and carries a Florida United States Tennis Association (USTA) tennis ranking, as well as and a 9.2 United States Golf Association (USGA) golf handicap. At both a professional and volunteer level, Mr. Conte has made key Florida vendor/industry contacts and is thoroughly versed on the latest equipment technology. He is also aware and appreciative of classic tennis and golf equipment that stands the test of time and is still widely sought-after today. Mr. Conte is well traveled and has played both sports in Europe and in Asia. Mr. Conte is currently devoting 20 hours per week to our Company.
Our Company also benefits from the services of Jennifer Whitesides. Mrs. Whitesides is also a golf and tennis enthusiast and is involved in Florida USTA tennis instruction and carries a USGA golf handicap. Mrs. Whitesides’ main responsibility will be to secure a reliable supply chain. Golf and tennis shops, trade shows, and re-seller events of South Florida will be the initial source of equipment, followed by a structured buying campaign in California. Mrs. Whitesides will work side-by-side with Mr. Conte, leverage her existing industry contacts and ensure that the supply of equipment meets any pending demand. Mrs. Whitesides is working a total of 8 hours per week for our Company.
Both officers also monitor E-Bay for underpriced listings of tennis and golf equipment. These listings do appear from time to time and offer upside resell opportunity.
Research and Development
Since inception, no funds have been expensed on research and development. There are no extra research or development costs as the principals are donating their time and energy in this start-up phase.
Employees
We have no employees. Initially, our officers and directors furnish their time to the development of our Company at no cost. We do not foresee hiring any employees in the near future. We will engage independent contractors to help design and develop our website and marketing efforts as may be required.
Government Regulation
There are no industry specific governmental controls or licensing requirements needed to do business.
Available Information
We make available, free of charge, or through our Internet website, at www.pacificsportsexchange.com, our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. Our Internet website and the information contained therein or connected thereto are not intended to be, and are not, incorporated into this Annual Report.
Our reports, registration statements and other information can be inspected on the SEC’s website at www.sec.gov.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012. An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
· | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes- Oxley Act of 2002, or Sarbanes-Oxley Act; | |
· | reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and | |
· | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved. |
We may take advantage of these provisions through November 30, 2023. If certain events occur prior to November 30, 2023, including if we become a “large accelerated filer,” our annual gross revenues exceed $1 billion or we issue more than $1 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to November 30, 2023.
We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of certain of the reduced disclosure obligations regarding executive compensation in this registration statement and may elect to take advantage of other reduced burdens in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have irrevocably elected not to avail ourselves of this extended transition period for complying with new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of the scaled disclosure available to smaller reporting companies.
Smaller reporting companies are not required to provide the information required by this item.
None.
Our principal executive office is located at 25188 Marion Ave, Unit B108 Punta Gorda, FL 33950. This property is provided to our Company by our President/CEO, free of charge.
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business, including actions related to our intellectual property. Although the outcomes of these legal proceedings cannot be predicted with certainty, we are currently not aware of any such legal proceedings or claims that we believe, either individually or in the aggregate, will have a material adverse effect on our business, financial condition or results of operations.
Not applicable.
Our Common Stock is not yet quoted on any markets or exchanges.
Shares of our Common Stock are issued in registered form. Action Stock Transfer Corp. at 2469 E. Fort Union Blvd., Suite 214, Salt Lake City, UT 84121, is the registrar and transfer agent for our common shares.
As of the date of this report there were 16 holders of record of our Common Stock.
Dividend Policy
We have never declared or paid dividends on our capital stock. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. We do not anticipate paying any dividends on our capital stock in the foreseeable future. Investors should not purchase our securities with the expectation of receiving cash dividends. Any future determination related to our dividend policy will be made at the discretion of our board of directors, subject to limitations imposed by Nevada law regarding the ability of corporations to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.
Equity Compensation Plan Information
We do not have any equity compensation plans.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On January 15, 2019, we issued 3,100,000 shares of common stock to 14 individuals pursuant to the provisions of Section 4(a)(2) of the Securities Act of 1933 and Rule 506(b) of Regulation D promulgated by the SEC. The Shares of Common Stock issued on January 15, 2019 were later registered via our S-1 Registration Statement which was declared effective by the SEC on September 30, 2019.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of Common Stock or other securities during our fourth quarter of our fiscal year ended August 31, 2019.
The following summary of our results of operations should be read in conjunction with our financial statements for the year ended August 31, 2019 and for the period of July 2, 2018 (inception) to August 31, 2018, which are included herein.
Our operating results for the year ended August 31, 2019 and the period ended August 31, 2018, and the changes between those periods for the respective items are summarized as follows:
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| July 2, 2018 |
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| Year Ended |
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| (Inception) to |
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| August 31, 2019 |
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| August 31, 2018 |
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| Change |
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Revenue |
| $ | 7,438 |
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| $ | 2,602 |
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| $ | 4,836 |
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Cost of goods sold |
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| (6,413 | ) |
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| (2,148 | ) |
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| (4,265 | ) |
Operating expenses |
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| (31,963 | ) |
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| (1,494 | ) |
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| (30,469 | ) |
Net loss |
| $ | (30,938 | ) |
| $ | (1,040 | ) |
| $ | (29,898 | ) |
Net loss was $30,938 for the year ended August 31, 2019, and $1,040 for the period ended August 31, 2018. The increase in net loss was primarily due to increased operating expenses.
Cost of goods sold for the year ended August 31, 2019 and the period ended August 31, 2018 was $6,413 and $2,148, respectively. Operating expenses for the year ended August 31, 2019 and the period ended August 31, 2018 were $31,963 and $1,494, respectively. Operating expenses during the year ended August 31, 2019 and the period ended August 31, 2018 were primarily attributed to general and administration expenses of $5,613 and $546 and professional fees of $26,350 and $948, respectively. The increase in professional fees paid during the year ended August 31, 2019, is primarily due to audit and accounting fees.
Liquidity and Capital
As of August 31, 2019, we had $22,085 in cash, $25,919 in total assets, $6,331 in liabilities and $19,588 in working capital.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business for the foreseeable future. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, our company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to our company. If adequate working capital is not available to our company, it may be required to curtail or cease its operations.