Pacific Sports Exchange Inc. 2024 10-K Review

Introduction

Pacific Sports Exchange Inc. (PSE) is a Delaware-based company specializing in the resale of new and used tennis and golf equipment. The company operates primarily through online platforms, with eBay being its main sales channel. This review will delve into the company's 2024 10-K filing, examining its business model, financial performance, risk factors, and overall investment potential.

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Business Overview

PSE was incorporated in 2018 and has since focused on reselling high-demand sports equipment. The company sources its inventory from local sports retailers in Florida and California, targeting both domestic and international customers. PSE's business model relies heavily on third-party platforms like eBay, which presents both opportunities and risks.

The company has identified a niche market in international buyers, particularly from Asia and Europe, who seek specific brands and models not available locally. PSE's strategy involves leveraging its relationships with local retailers to acquire surplus inventory at discounted prices.

Financial Performance

Revenue and Profitability

For the fiscal year ending August 31, 2024, PSE reported revenues of $5,400, a significant decrease from $18,794 in 2023. Despite the drop in revenue, the company achieved a net income of $9,928, compared to a net loss of $26,033 in the previous year. This turnaround was primarily due to a gain on debt forgiveness amounting to $40,957.

Operating Expenses

Operating expenses increased slightly to $32,159 in 2024 from $29,538 in 2023. The primary components of these expenses were general and administrative costs and professional fees.

Cash Flow and Liquidity

PSE's cash flow from operations was negative, with a cash outflow of $1,156 in 2024. The company had a working capital deficit of $79,155 as of August 31, 2024, indicating liquidity challenges. The company's ability to continue as a going concern is contingent upon securing additional financing or increasing revenue.

Risk Factors

PSE's reliance on third-party platforms like eBay poses significant risks, including potential loss of selling privileges and technical issues. The company's financial health is also a concern, with a substantial working capital deficit and minimal cash reserves.

Additionally, PSE's customer and supplier base is highly concentrated, with a few customers and suppliers accounting for the majority of its transactions. This concentration risk could impact the company's stability if any of these relationships were to change.

Management and Governance

In September 2024, PSE underwent a change in control, with Alpine Elite Holdings Ltd. acquiring a 70% stake in the company. This change led to the appointment of Huang Hua Shang as the new CEO, CFO, and sole director. The company's management team is small, with no formal employment agreements or compensation plans in place.

Conclusion

Pacific Sports Exchange Inc. presents a mixed investment opportunity. While the company has a unique niche in the sports equipment resale market, its financial performance and reliance on third-party platforms pose significant risks. The recent change in control and management could bring new strategic directions, but also adds uncertainty.

Investors should weigh the potential for growth in the niche market against the company's financial challenges and operational risks. Overall, PSE's investment potential is moderate, with a score of 5.5 out of 10.