Pacific Sports Exchange 10Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: May 31, 2021

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 333-230690

PACIFIC SPORTS EXCHANGE INC.

(Exact name of registrant as specified in its charter)

Nevada		83-1189007
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2149 Rio De Janeiro Ave., Punta Gorda, FL		33983
(Address of principal executive offices)		(Zip Code)

(877) 571-5562

(Registrant’s telephone number, including area code)

2621 Southwest 10th Ave., Cape Coral, FL 33914

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No

14,375,000 shares of Common Stock issued and outstanding as of July 19, 2021.

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Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PACIFIC SPORTS EXCHANGE INC.

INTERIM CONDENSED FINANCIAL STATEMENTS

For the Nine Months Ended May 31, 2021

(Unaudited)

INDEX TO UNAUDITED FINANCIAL STATEMENTS

		Page

Balance Sheets as of May 31, 2021 and August 31, 2020 (Unaudited)		F-2

Statements of Operations for the Three and Nine Months Ended May 31, 2021 and 2020 (Unaudited)		F-3

Statement of Changes in Stockholders’ Deficit for the Nine Months Ended May 31, 2021 and 2020 (Unaudited)		F-4

Statements of Cash Flows for the Nine Months Ended May 31, 2021 and 2020 (Unaudited)		F-5

Notes to the Unaudited Financial Statements		F-6

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PACIFIC SPORTS EXCHANGE INC.

Balance Sheets

(Unaudited)

	As of			As of
	May 31,			August 31,
	2021			2020
Assets
Current Assets
Cash	$	14,907		$	22,690
Inventory		1,900			2,269
Total Current Assets		16,807			24,959
Total Assets	$	16,807		$	24,959

Liabilities and Stockholders’ Deficit
Current Liabilities
Accounts payable and accrued liabilities	$	35,559		$	24,444
Common stock payable		0			1,500
Total Current Liabilities		35,559			25,944

Stockholders’ Deficit
Common stock: 220,000,000 shares authorized; $0.001 par value; 14,375,000 and 14,100,000 shares issued and outstanding, respectively		14,375			14,100
Additional paid-in capital		62,691			57,466
Accumulated deficit		(95,818	)		(72,551	)
Total Stockholders’ Deficit		(18,752	)		(985	)

Total Liabilities and Stockholders’ Deficit	$	16,807		$	24,959

The accompanying notes are an integral part of these unaudited condensed financial statements.

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PACIFIC SPORTS EXCHANGE INC.

Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	May 31,						May 31,
	2021			2020			2021			2020

Revenues	$	4,605		$	982		$	19,358		$	2,690
Cost of goods sold		(2,019	)		(554	)		(13,400	)		(2,006	)
Gross profit		2,586			428			5,958			684
Operating Expenses
General and administrative		558			417			716			1,677
Professional fees		6,916			9,965			28,509			33,122
Total operating expenses		7,474			10,382			29,225			34,799
Operating loss		(4,888	)		(9,954	)		(23,267	)		(34,115	)
Net loss	$	(4,888	)	$	(9,954	)	$	(23,267	)	$	(34,115	)
Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Basic and diluted weighted average common shares outstanding		14,375,000			13,100,000			14,368,978			13,100,000

The accompanying notes are an integral part of these unaudited condensed financial statements.

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PACIFIC SPORTS EXCHANGE INC.

Statement of Changes in Stockholders’ Deficit

(Unaudited)

For the Nine Months Ended May 31, 2021

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance - August 31, 2020		14,100,000	$	14,100	$	57,466	$	(72,551	)	$	(985	)
Issuance of common shares		275,000		275		5,225		0			5,500
Net loss		-		0		0		(5,870	)		(5,870	)
Balance - November 30, 2020		14,375,000		14,375		62,691		(78,421	)		(1,355	)
Net loss		-		0		0		(12,509	)		(12,509	)
Balance - February 28, 2021		14,375,000		14,375		62,691		(90,930	)		(13,864	)
Net loss		-		0		0		(4,888	)		(4,888	)
Balance - May 31, 2021		14,375,000	$	14,375	$	62,691	$	(95,818	)	$	(18,752	)

For the Nine Months Ended May 31, 2020

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance - August 31, 2019		13,100,000	$	13,100	$	38,466	$	(31,978	)	$	19,588
Net loss		-		0		0		(19,300	)		(19,300	)
Balance - November 30, 2019		13,100,000		13,100		38,466		(51,278	)		288
Net loss		-		0		0		(4,861	)		(4,861	)
Balance - February 29, 2020		13,100,000		13,100		38,466		(56,139	)		(4,573	)
Net loss		-		0		0		(9,954	)		(9,954	)
Balance - May 31, 2020		13,100,000	$	13,100	$	38,466	$	(66,093	)	$	(14,527	)

The accompanying notes are an integral part of these unaudited condensed financial statements.

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PACIFIC SPORTS EXCHANGE INC.
Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	May 31,
	2021			2020

Cash Flows from Operating Activities
Net loss	$	(23,267	)	$	(34,115	)
Changes in operating assets and liabilities:
Inventory		369			1,298
Accounts payable and accrued liabilities		11,115			14,550
Net cash used in operating activities		(11,783	)		(18,267	)

Cash Flows from Financing Activities
Proceeds from issuance of common stock		4,000			0
Proceeds from common stock payable		0			3,000
Net cash provided by financing activities		4,000			3,000

Net change in cash for the period		(7,783	)		(15,267	)
Cash at beginning of period		22,690			22,085
Cash at end of period	$	14,907		$	6,818

Supplemental Cash Flow Information
Cash paid for income taxes	$	0		$	0
Cash paid for interest	$	0		$	0

Non-Cash Investing and Financing Activities
Issuance of common stock for common stock payable	$	1,500		$	0

The accompanying notes are an integral part of these unaudited condensed financial statements.

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PACIFIC SPORTS EXCHANGE INC.

Notes to the Unaudited Financial Statements

May 31, 2021

NOTE 1 – GOING CONCERN AND LIQUIDITY CONSIDERATIONS

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of May 31, 2021, the Company has an accumulated deficit and has earned nominal operating revenues.

The ability of the Company to obtain profitability is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional operating funds through equity and/or debt financing. However, there can be no assurance management will be successful in its endeavours.

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, the 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 the Company. If adequate working capital is not available to the Company, it may be required to curtail or cease its operations.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world and as a result of the outbreak, many companies have experienced disruptions in their operations and in markets served.

The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and procure materials and supplies.

As an online-only re-seller of new and used sports equipment we do not have employees or a physical retail location where customers shop. Those factors somewhat mitigate against the negative effects of COVID-19 on our operations. To the extent that we hold any inventory in any sporting equipment we intend to resell, such equipment is thoroughly cleaned and sanitized upon our receipt thereof and will be again immediately prior to shipping such equipment to any buyer. For any equipment sold through us, but not held as inventory by us, we request the originating source of such equipment to thoroughly clean and sanitize all equipment prior to shipping the equipment to a buyer, and we also caution all buyers (whether buying inventory directly from us, or equipment from third-parties through us) to thoroughly clean and sanitize all equipment upon receipt of the same.

Although being an online only reseller of sports equipment with no physical “brick and mortar” retail site mitigates against the effects of COVID-19 on our operations, the previous and any current or future government issued “stay at home” orders, and the previous and any current or future closure, or limitations on the use, of gyms, athletic clubs, golf courses and other recreational facilities has had and will continue to have negative impacts our operations and ability to generate revenues from operations. The result of such orders and closures is that fewer people, both in the U.S. and around the World, are able (and/or willing) to engage in physical activities, and recreation, whether indoors or outdoors. While governmental restrictions continue to be lifted and more and more people are able to return to recreational activities, the potential still exists for future restrictions and closures due to different strains, or variants, of COVID-19, and the potential for the spread, and or resurgence, of the virus. Fewer people engaging in physical activities, and recreation, likely will mean fewer people in the market to purchase new and/or used sporting equipment which will have a materially negative affect on our ability to generate revenues from operations.

If we are unable to generate sufficient revenues from operations to grow our business, or even sustain operations, we will be forced to rely on raising capital through debt and/or equity financing. There are no guarantees we will be able to raise additional capital through debt and/or equity financing.

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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of May 31, 2021 and the results of operations and cash flows for the periods presented. The results of operations for the period ended May 31, 2021 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020 filed with the SEC on December 14, 2020.

Revenue Recognition

Revenue is earned from the reselling of new and used sports equipment. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfils its obligations pursuant to each of its equipment sales transactions:

	·	identify the contract with a customer;

	·	identify the performance obligations in the contract;

	·	determine the transaction price;

	·	allocate the transaction price to performance obligations in the contract; and

	·	recognize revenue as the performance obligation is satisfied.

The Company operates as an online-only retailer and utilizes eBay Inc. (“eBay”) as its prime marketing channel. The Company currently relies on eBay, a third-party marketplace, to facilitate 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 always strives to abide by the policies of any third-party platform and endeavours to provide superior customer service.

Typical sales transactions are usually fulfilled within twenty-four (24) hours of completing the transaction online. Contracts stating the transaction price and our performance obligation to deliver the ordered products are deemed to be entered into via eBay at the time the customer submits payment, which is conducted through the PayPal payment platform. Due to the instantaneous nature of a customer submitting an order online at a stated price and the same or next business day shipment of product, the Company does not anticipate that variable consideration or contract assets or liabilities will arise in the normal course of business.

Revenues are recognized based on the sales contract price, net of sales taxes, when control of the promised goods are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. Our contracted prices primarily include cost of inventory, shipping and handling, eBay commission fee and our margin, which varies depending on each item. We may provide incentives to our customers from time to time, including discounts, coupons and rewards, which are treated as a reduction in revenue. We may provide sales under a consignment for a client. When acting as an agent, where we do not take delivery of the inventory, we record all costs of sales as a reduction in revenue. The Company does not accept returns and clearly indicates this in our listings. However, if a customer receives an item that is not as described in the eBay listing, we must follow the eBay moneyback guarantee policy which obligates us to issue a full refund within three (3) business days. We do not provide an estimate for returns as we do not anticipate any returns in the normal course of business.

Consignment Sales

The Company, as a consignee, provides a service to sell tennis racquets through its online marketplace with eBay. The Company retains a percentage of the proceeds received as payment for its consignment items, which the Company refers to as its ‘‘take rate.’’ The Company recognizes consignment revenue upon shipment of the consigned good to a customer as its performance obligation of providing consignment services to the consignor is satisfied at that point. The Company reports consignment revenue on a net basis as an agent and not the gross amount collected from a customer. Title to the consigned goods remain with the consignor until transferred to a customer subsequent to purchase of the consigned goods. In any event of damage or loss of consignment items, the Company will recognize an expense and will pay all related disbursements. The Company does not take title of consigned goods at any time.

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Other Sales

The Company purchases used golf carts as their own inventory for resale. The Company reports revenue on a gross basis from amounts collected from the customer upon transferring the product to the buyer.

Cost of Goods Sold

Cost of goods sold includes inventory costs and expenses related to eBay fees, repair and shipping services.

Recent Accounting Pronouncements

The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.

NOTE 3 – EQUITY

Common Stock

The Company has authorized 220,000,000 shares of Common Stock with a par value of $0.001 per share. Each Common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.

On September 6, 2020, pursuant to our S-1 Registration Statement declared effective on September 30, 2019, the Company issued 275,000 shares of Common Stock to unaffiliated individuals, for total proceeds of $5,500, of which $1,500 was received prior to year-end and reported as Common Stock payable in the August 31, 2020 balance sheet.

As of May 31, 2021 and August 31, 2020, the Company had 14,375,000 and 14,100,000 shares of Common Stock issued and outstanding, respectively.

NOTE 4 - SUBSEQUENT EVENTS

The Company has evaluated events occurring subsequent to May 31, 2021 through the issuance of the financials and determined that there are no additional events requiring disclosure.

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Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (USD) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

Unless otherwise specified in this quarterly report, all dollar amounts are expressed in USD and all references to “Common Stock” refer to shares of our Common Stock.

As used in this quarterly report, the terms “we,” “us,” “our,” “Pacific Sports,” and the “Company”, mean Pacific Sports Exchange, Inc., unless otherwise indicated.

General 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. We have since added used golf carts to our resale inventory and have begun engaging in consignment sales of tennis rackets. 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 operate as an on-line only entity and utilize eBay Inc. (“eBay”) as 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”).

On June 19, 2020, we issued 1,000,000 shares of Common Stock for $20,000 to 7 individuals pursuant to our S-1 Registration Statement declared effective on September 30, 2019.

On September 6, 2020, pursuant to our S-1 Registration Statement declared effective on September 30, 2019, the Company issued 275,000 shares of Common Stock to unaffiliated 10 individuals, for total proceeds of $5,500.

Our principal executive office is located at 2149 Rio De Janeiro Ave., Punta Gorda, FL 33983, 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 do not have any subsidiaries.

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Our Current Business

We specialize in the re-selling of new and used tennis and golf equipment, including reselling used golf carts and engaging in consignment sales of tennis rackets. 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 currently operate as an on-line only entity and utilize eBay 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 eBay 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 endeavour 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.

COVID-19

The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on business operations and financial results of the Company, including the timing and ability of the Company to collect accounts receivable and procure materials and supplies.

As an online-only re-seller of new and used sports equipment we do not have employees or a physical retail location where customers shop. Those factors mitigate against the negative effects of COVID-19 on our operations. To the extent that we hold any inventory in any sporting equipment we intend to resell, such equipment is thoroughly cleaned and sanitized upon our receipt thereof and will be thoroughly cleaned and sanitized again immediately prior to shipping such equipment to any buyer. For any equipment sold through us, but not held as inventory by us, we request the originating source of such equipment to thoroughly clean and sanitize all equipment prior to shipping the equipment to a buyer, and we also caution all buyers (whether buying inventory directly from us, or equipment from third-parties through us) to thoroughly clean and sanitize all equipment upon receipt of the same.

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Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the three and nine months ended May 31, 2021 and 2020, which are included herein.

Three months ended May 31, 2021, compared to three months ended May 31, 2020.

	Three Months Ended
	May 31,				Increase
	2021		2020		(Decrease)
Revenue	$	4,605	$	982	$	3,623
Cost of goods sold		2,019		554		1,465
Gross profit		2,586		428		2,158
Operating expenses		7,474		10,382		(2,908	)
Net loss	$	4,888	$	9,954	$	(5,066	)

The decrease in net loss was primarily due to increased revenue and decrease in operating expenses.

The increase in revenue during the three months ended May 31, 2021 was primarily due to golf cart sales of $4,440.

Operating expenses during the three months ended May 31, 2021 and 2020 were primarily attributed to general and administration expenses of $558 and $417 and professional fees of $6,916 and $9,965, respectively. The decrease in operating expenses during the three months ended May 31, 2021, is primarily due to decrease in accounting, legal and regulatory fees.

Nine months ended May 31, 2021, compared to nine months ended May 31, 2020.

	Nine Months Ended
	May 31,				Increase
	2021		2020		(Decrease)
Revenue	$	19,358	$	2,690	$	16,668
Cost of goods sold		13,400		2,006		11,394
Gross profit		5,958		684		5,274
Operating expenses		29,225		34,799		(5,574	)
Net loss	$	23,267	$	34,115	$	(10,848	)

The decrease in net loss was primarily due to increased revenue and decrease in operating expenses.

The increase in revenue during the nine months ended May 31, 2021 was primarily due to golf cart sales of $18,840.

Operating expenses during the nine months ended May 31, 2021 and 2020 were primarily attributed to general and administration expenses of $716 and $1,677 and professional fees of $28,509 and $33,122, respectively.

Liquidity and 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 debt financing necessary to support its working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or debt 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.

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As of May 31, 2021 and August 31, 2020, we had the following balance sheet amounts:

	May 31,			August 31,			Increase
	2021			2020			(Decrease)
Cash	$	14,907		$	22,690		$	(7,783	)
Total Assets		16,807			24,959			(8,152	)
Total Liabilities		35,559			25,944			9,615
Working Capital (Deficiency)	$	(18,752	)	$	(985	)	$	(17,767	)

As of May 31, 2021, our current and total assets were $16,807, consisting of cash of $14,907 and inventory of $1,900. As of August 31, 2020, our current and total assets were $24,959, consisting of cash of $22,690 and inventory of $2,269.

As of May 31, 2021, our total liabilities of $35,559 were all current liabilities, which consisted of accounts payable and accrued liabilities. As of August 31, 2020, liabilities consisted of $24,444 accounts payable and accrued liabilities and $1,500 common stock payable.

Working Capital

The following table presents our working capital (deficiency) position as at May 31, 2021 and August 31, 2020:

	May 31,			August 31,
	2021			2020
Current Assets	$	16,807		$	24,959
Current Liabilities		35,559			25,944
Working Capital (Deficiency)	$	(18,752	)	$	(985	)

As of May 31, 2021, we had a working capital deficiency of $18,752 compared to working capital deficiency of $985 as of August 31, 2020. As of May 31, 2021, we had current assets of $16,807 (August 31, 2020 - $24,959) and current liabilities of $35,559 (August 31, 2020 - $25,944). The decrease in working capital is primarily due to the decrease in cash to fund operating expenses and increase in accounts payable and accrued liabilities as of May 31, 2021.

Cash Flow

We fund our operations with cash generated from sales, capital contributions, debt, and issuances of shares of our Common Stock.

The following table presents our cash flow for the nine months ended May 31, 2021 and 2020:

	Nine Months Ended
	May 31,
	2021			2020
Cash used in operating activities	$	(11,783	)	$	(18,267	)
Cash provided by financing activities		4,000			3,000
Net Change in Cash for the period	$	(7,783	)	$	(15,267	)

Cash Flows from Operating Activities

For the nine months ended May 31, 2021, net cash used in operating activities was $11,783 compared to $18,267 used during the nine months ended May 31, 2020. For the nine months ended May 31, 2021 we had a net loss of $23,267, which was reduced by a change in working capital of $11,484. For the nine months ended May 31, 2020, we had a net loss of $34,115, which was reduced by a change in working capital of $15,848.

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Cash Flows from Financing Activities

For the nine months ended May 31, 2021 and 2020, we received $4,000 and $3,000, respectively, from the issuance of Common Stock and advance for Common Stock payable, respectively.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies

We prepare our financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) of the United States, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.

While we believe that the historical experience, current trends and other factors considered support the preparation of our financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

Revenue recognition

Revenue is earned from the re-selling of new and used sports equipment. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfils its obligations pursuant to each of its equipment sales transactions:

	·	identify the contract with a customer;

	·	identify the performance obligations in the contract;

	·	determine the transaction price;

	·	allocate the transaction price to performance obligations in the contract; and

	·	recognize revenue as the performance obligation is satisfied.

The Company operates as an on-line only retailer and utilizes eBay as its prime marketing channel. The Company currently relies on eBay, a third-party marketplace, to facilitate 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 always strives to abide by the policies of any third-party platform and endeavours to provide superior customer service.

Typical sales transactions are usually fulfilled within twenty-four (24) hours of completing the transaction online. Contracts stating the transaction price and our performance obligation to deliver the ordered products are deemed to be entered into on eBay at the time the customer submits payment, which is conducted through the PayPal payment platform. Due to the instantaneous nature of a customer submitting an order online at a stated price and the same (or next)-day shipment of product, the Company does not anticipate that variable consideration or contract assets or liabilities will arise in the normal course of business.

Revenues are recognized based on the sales contract price, net of sales taxes, when control of the promised goods are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods. Our contracted prices primarily include cost of inventory, shipping and handling, eBay commission fee and our margin, which varies depending on each item. We may provide incentives to our customers from time-to-time, including discounts, coupons and rewards, which are treated as a reduction in revenue. The Company does not accept returns and clearly indicates this in our listings. However, if a customer receives an item that is not as described in the eBay listing, we must follow the eBay money-back guarantee policy which obligates us to issue a full refund within three (3) business days. We do not provide an estimate for returns as we do not anticipate any returns in the normal course of business.

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Consignment Sales

Other Sales

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is 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 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 an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2021. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such officer also confirmed that there was no change in our internal control over financial reporting during the period ended May 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The specific material weakness identified by our management was ineffective controls over certain aspects of the financial reporting process because of a lack of a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements and inadequate segregation of duties. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our Company’s annual or interim financial statements would not be prevented or detected on a timely basis.

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We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended May 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on us.

Item 1A. Risk Factors

As a “smaller reporting company,” we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit		INCORPORATED BY REFERENCE		Filing
Number	Exhibit Description	Form	Exhibit	Date

3.1	Articles of Incorporation, incorporated by reference to our Registration Statement on Form S-1/A filed on September 30, 2019	S-1/A	3.1	September 30, 2019
3.2	Bylaws, incorporated by reference to our Registration Statement on Form S-1/A filed on September 30, 2019	S-1/A	3.2	September 30, 2019
3.3	Amended and Restated Certificate of Incorporation	POS AM	3.3	December 11, 2019
3.4	Amended and Restated Bylaws	POS AM	3.4	December 11, 2019
31.1*	Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

_____________

* Filed herewith

** Furnished herewith

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SIGNATURES

Pursuant to the requirements 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.

		PACIFIC SPORTS EXCHANGE INC.
		(Registrant)

Dated: July 20, 2021		/s/ Timothy Conte
		Timothy Conte
		Chief Executive Officer, President, Chief Financial Officer and Director
		(Principal Executive Officer and Principal Financial Officer)

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Pacific Sports Exchange (PSPX) 10-Q2021 Q3 Quarterly report

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