Interview Transcript
Tom Allinder of HotStockChat interviews Bruce Caldwell, Chief Executive Officer of EssxSport Corp.
(Pink Sheets-ESXS)
Tom: Hello and welcome to HotStockChat. My name is Tom Allinder. Today our guest is Bruce Caldwell. Mr. Caldwell is the President and Chief Executive Officer of EssxSport Corporation. EssxSport Corporation is traded on the pink sheets under ticker symbol ESXS.
Hello, Bruce. How are you doing?
Bruce Caldwell: Just fine, how are you doing today sir?
Tom: I’m doing just fine. Could you give us a brief overview of the business of EssxSport Corporation?
Bruce Caldwell: We’re just some former athletes and Olympians who have designed products to enhance performances and now what we’re doing is we’re taking these products available to the public and making them available to everyone. That’s really our goal is to build products that enhance athlete’s performances.
Tom: All right. I wanted to start off with something here, a great deal of progress on your part here. First of all, you’ve got $600,000 worth of backorders on your products compared with none last year. Obviously you’re going in the correct direction. Would you like to comment on this backorder?
Bruce Caldwell: Yeah, I really think that product acceptance has been really good. We do have a situation in the industry where the national high school federation and the NCAA has mandated a larger and safer landing system for the high schools and the colleges and fortunately we were already producing that product, so it’s put us in a lead position to provide a product to them that meets those specs. You know, sometimes you have to be careful of what you wish for, but we’re ready to tackle this with more shifts and more employees and we’re pleased to have more product demand at a time when profit margins are at their best due to product enhancements in our design.
Tom: All right. In your executive summary it is stated that you’re concentrating on track and field and soccer; can you give us some details regarding the products that you’ve developed?
Bruce Caldwell: Well, half of the directors and employees who are involved in track and field have an expertise there, and the other half is soccer, and then some various other sports. But right now the focus is on track and field because there is a need and a demand in this area for, as I said, these new landing systems for the high schools. There are 8,000 high schools across the nation that need a new system or an upgrade, so with the invent of our new pyramid deceleration system that we use in our foam products for safety, we’ve had a big call for this because our product doesn’t bounce the athlete up in the air like the former designs that are on the market. In fact, we’ve even had some stunt men from the television industry ask for this product because the athlete doesn’t spring back up into the picture whenever they’re doing a stunt. This system uses forced deflection. It automates the amount of deceleration of a falling object and it’s all based on height and volume and weight of the athlete. It’s a very unique item to the industry and it’s opening more doors for us in other product revenues.
Tom: Okay. How about specific training products?
Bruce Caldwell: We’re working on some training items because we are looking to broaden our product line. We do have a few things that we’re working on but nothing that you would consider to be for the TV consumer, you know, someone to use at home, because our targets are schools, colleges and institutions.
Tom: Now, I want to go into the nuts and bolts as far as your business goes, your strategy and what have you. Specifically, what are your target markets?
Bruce Caldwell: With the target markets being the schools, colleges and private institutions, we use kind of a reverse-type marketing strategy that enables us to create the product demand to the schools and colleges and the individual users. They in turn place their orders with distributors and dealers across the nation. Now we do sell some direct where we don’t have distributors and dealers, but we’re adding new dealers and distributors every day. We do some private-label products for our competitors to lengthen our selling system. But that’s basically our target markets.
Tom: Okay. Now, as far as your marketing strategy, could you elaborate on that a bit? I mean, how will you go about getting your products out there and so forth the way that people will be able to see them, purchase them and what not?
Bruce Caldwell: We’ve done very little advertising; it’s been word of mouth and people talk about the product, creating a demand. But most generally, we’ve been using the Internet to promote and provide products on our e-commerce site, which is www.eonlinesports.com and our objective, again, is to bring the needs to the consumer to kind of want the product and create a need and we’re not afraid to introduce anything new. As former athletes we know what the needs are in the industry and we’re developing newer products all the time. We sell products for several sports but right now, again, the demand is for the landing systems across the nation in this high school event.
Tom: Okay. You intend to sponsor special sport events watched on major sport TV stations such as ESPN where world-class athletes could be seen using EssxSport high-quality products, where do you stand with respect to this? I mean, where are you at as far as actually doing the sponsorship and seeing the products out there in the major media?
Bruce Caldwell: We have been the supplier to two of the Jay Leno Tonight Shows for our pole vault and high-jump equipment. We’ve been used in several commercials, especially during Olympic years – people buy our products to use in Olympic commercials. We’ve just been selected as the official supplier to the L.A. Indoor Championships for the fifth time in a row, which will be held on the 16th of February. We expect and do have several world-class athletes using our products that will show some great performances this coming year on our product and we expect these products will do well on TV and many other sporting events that will be televised. The key factor is more and more world-class athletes are starting to ask for our product and they have done real well on them. Most recently, a young lady got the gold medal in the world masters game. She got the bronze medal in the world championships on our product, so as we grow into this and more athletes find and realize that these are high-performance products, we expect to get some exposure.
Tom: Now, it’s also mentioned in your executive summary that your intent is to build shareholder value. Specifically what are your plans with respect to building shareholder value?
Bruce Caldwell: I was once told to build shareholder value you just have to run the company properly and all the rest falls in place. Well, when sales are up, margins are up and the expenses are held low, you can build something everyone can be proud of, especially to the shareholders, and that’s exactly what we’ve put in place right now. We’ve structured ourselves in our new infrastructure to bring us to a point where we are having a greater profit margin, increasing sales by demand, and we are holding very tight on our expenses, and we believe that’s how you can build shareholder value.
Tom: Okay, now this may be a very broad question, but how about competition in your line of business?
Bruce Caldwell: Yes, we have some competition in the sporting goods industry, it’s a very large industry, it’s an $80 billion industry. You have the specialty manufacturers who are doing $6-$8 million in revenues each year. You have the multi-sports catalog houses that are doing $30-$50 million each year. To compete, you have to introduce products that they do now have, and market share comes to you with product demand. We believe in not reinventing the wheel but to provide a needed product that works and increases performances for athletes’ abilities, and then the sales come to you because of that product need.
Tom: All right. Now your company is already producing revenues, in other words it’s not just a start-up company, you’re already in business. Can you give us some idea of your current revenues and what you expect for the year 2003?
Bruce Caldwell: We are a small-cap company growing. Just in this one avenue of track and field we did about $700,000 last year. But we are growing and we are at our early stages, so we can progress with relationships with customers as we find more niche products to introduce to the mix. Kind of building a one-stop shopping is our goal of specialty products. We expect the current backlog that we are getting out the door now to reach over $1 million in sales revenues this year, and I think we can grow from there as we introduce more product needs and more product lines. The potential right now is to try to get our financial support up so that we can handle a $10-$20 million business. To do this we’ve got to broaden our sports products and offer more in the other sports fields – soccer, volleyball, baseball, etc.
Tom: All right. Now you had a small loss in 2001; where do you stand as far as profitability? It seems like that can’t be very far off at this point.
Bruce Caldwell: Yeah, those losses were there to build the business and the actual infrastructure. We basically went from a company that had someone private label for them to a position where we acquired the ability to make the product ourselves. Our target is being more in control of our own manufacturing and that has paid off. This new infrastructure that we’ve put together in the last couple of years, which has cost us and shown a loss, is now starting to pay off because with this new infrastructure of manufacturing in our facility in California, we can generate more profit margins in the next quarters. Profit is only there if you hold tight on the expenses and the consolidation of our Texas operations into our California leased 8,000 square-foot building has been a logistics struggle but is yielding low expenses each quarter. They’re getting lower each quarter. Our prime products right now related to the track and field industry are profitable and products should bring us a nice position in the next quarter.
Tom: All right. Are you planning to announce any new acquisitions of business or products or are you just going to go with what you’re producing right now?
Bruce Caldwell: We’re going to go with what we’re producing right now; however, there are some acquisition candidates we’re looking at. We believe that once we build the value of the stocks and the value to the shareholders, we can possibly go out and acquire some of these candidates. Some of them are in the sports field, some are not, and also it will enable us to introduce new products into our works.
Tom: Okay. How about financing? Where do you stand with respect to having the cash to continue to execute your business plan?
Bruce Caldwell: You know, money is tight right now, but we believe that the company’s growth will occur more rapidly with more funds available for inventory and working capital. We have some ideas we’re working on and we do plan a private placement very soon, once we’re able to build stock value.
Tom: All right. How about getting the company listed on the OTCBB or some other senior exchange? What are you working on as far as that’s concerned?
Bruce Caldwell: Yes we are a pink sheet company and we are trading. We have submitted to be approved for trading on the OTCBB and we look forward to completing our next amendment this week to finalize with the possibility of no comments. The rules set by the SEC are fair, but tough, and completing all the forms and keeping up with the new ones has been very tough for us. We feel we are very close to being approved but need about 30 to 45 days to move to that position. That’s just about what it takes the SEC to look at our next amendment we’re going to file within the next week.
Tom: All right. Now what about your management team? It’s obvious that you’ve got a lot of experience there.
Bruce Caldwell: All the people on our staff are athletes, former athletes or have been involved in the sporting goods industry for quite some time. I used to work for GYN, which used to be on the NYSE and I was with them for seven years and helped build a track and field line to over $5 million in revenues, along with assisting them with the 1996 Olympic games and to supply the Olympic games with 15 sports of equipment. I left there in 1998 and I was offered a position with ESXS to be President and put together a business plan. We have Mr. Alberto CaberLotto, former President of Lotto on the board, who brings over 30 years of shoe industry experience to the company. We have Mr. Dato’Sri Ram of Malaysia who has been responsible for hosting the Malaysian games the last couple of years and the most recent iron man competitions in Asia. We also have Earl Bell, one of the best coaches in the sport, and former world-record holder and Olympian in the pole vault event. We also have Dwight Stones on the board as an expert in media and high jump events, so we have a very strong management team that knows what is needed for the athletes and can build a product that we believe will be very accepted and be a product demand.
Tom: All right. Company goals; where do you expect to see EssxSport go over the next couple of years?
Bruce Caldwell: We’re looking hard at capturing other markets and raising the capital and increase shareholder value to acquire more businesses and other avenues to grow the company. We intend to increase sales and revenues and capture more market share.
Tom: All right. Finally, what makes the company a good investment?
Bruce Caldwell: I think the sports companies are a good diversifier for portfolios as they are businesses that support the school system, and schools are pretty solid right now. I think that also a sports company offers a more stable position than tech stocks at this point in time.
Tom: All right, Bruce. I want to thank you very much for taking the time on the interview this afternoon. We certainly do appreciate it.
Bruce Caldwell: Well thank you very much for giving me a call.
End
Transcript produced by Sound Virtual Solutions
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