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The Pickleball Club

Developing dedicated indoor pickleball clubs
Real Estate Sports Wellness
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Pickleball Company Market The first two clubs Facilities Revenue model Operational excellence Vision and strategy Founders
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Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by SRQ Pickleball Partners LLC. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
The Pickleball Club Crowd SAFE The Pickleball Club Form C.pdf
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Highlights


  • Fastest-growing sport in the U.S. (4.2 mm + players, w/ 20% annual growth)
  • The Pickleball Club™ is developing the premier membership-based facilities
  • First two clubs under development in Sarasota, FL
  • Each club will include 34,000 sq ft, 12 indoor courts, pro shop, juice bar
  • ~600 people on membership wait list for Sarasota clubs.
  • 38% Target IRR- backed by real estate assets.

Pickleball


The sport of Pickleball is exploding in popularity. From its casual roots on Bainbridge Island near Seattle, where Joel Pritchard, Bill Bell, and Barney McCallum invented the game to entertain their bored kids during the summer of 1965, there are now nearly 21,000 pickleball courts throughout America and 85 new pickleball courts opening each week through early 2020. The spread of the sport is attributed to its popularity within community centers, PE classes, YMCA facilities and retirement communities. It attributes much of its popularity to America’s aging and retiring baby-boomer cohort, which needed an active competitive sport that had lower physical demands compared to tennis, squash and racquetball. 

Pickleball is played on a smaller version of a tennis court using a paddleball type racket and a plastic ball. The sport requires less running, overall strength, and less strain on aging joints. It is a game that requires skill over strength, but with enough physicality to make it exciting for players at all levels. Over 75% of the current players are baby-boomers and retirees; however, the sport is growing rapidly among younger segments of the population. The sport is most often played as doubles, with four players on the court at a time. The sport continues to grow worldwide as well with many new international clubs forming and national governing bodies now established in Canada and India.

Company


SRQ Pickleball Partners, LLC, (the “Company”) is developing The Pickleball Club™ to be the premier membership-based indoor pickleball facilities in the United States. The Company will begin in Sarasota, Florida, where the first two clubs are under development. The Company’s strategy is to take advantage of the significant unmet demand for a quality indoor sports experience dedicated to pickleball. Each of the Company’s clubs is designed to be approximately 34,000 sq ft with 12 indoor pickleball courts, a pro shop, coffee/juice bar, and locker room facilities. The coffee/bar will be supplemented by a series of rotating food trucks, to accommodate special events and major activities such as tournaments.

The Club’s positioning is a “Member Only” amenity-based destination. The Clubs will focus on the social aspect of the sport, as well as health & fitness and skill development. Over 10% of the facility footprint will be dedicated to communal social space with ample seating from which members can socialize, watch gameplay and consume food and beverages from the Coffee/Juice bar.

Market


SARASOTA

The Company’s first market is Sarasota, Florida. Management believes the local Sarasota market is ideal for indoor Pickleball facilities. As in all of Florida, rain, heat, wind and humidity frequently disrupt the opportunity to play outdoor sports. Sarasota receives 56 inches of rain a year (compared Dominic Catalano at the APP Masters Tournament in Punta Gorda, FL to U.S. national average of 38) with rain occurring during 106 days per year, nearly one out of every 3 days. For half of the year, high temperatures can affect the desirability and safety of outdoor play for at least part of the day. From April to October, the average high temperature exceeds 85 degrees, and from June to September, the high is 90 or above (83 days per year).

The Sarasota market has a large middle and upper-class retiree population. Sarasota County has a median household income of over $55,000. Thirty eight percent of the population is between 50 and 79 years old. In contrast, only 34% of the total US population is over 50 years old. Sarasota was ranked third most popular destination for retirees.

Pickleball is extremely popular in the Sarasota market. There are currently no indoor facilities dedicated to pickleball in greater Sarasota. Some facilities, such as community centers, have eliminated offering pickleball, as the overwhelming popularity was disruptive to their general mission.

Target Market

The Club’s target audience are those players who desire a higher level of amenity and superior playing conditions. Outdoor facilities will always be utilized by the most budget-conscious players seeking a game at the lowest possible cost. The low-budget segment of the market is willing to endure significant wait times (for a player’s turn due to insufficient supply of even outdoor courts) and weather-related interruptions and cancellations. Likewise, low budget players do turn to nondedicated indoor facilities to avoid weather related issues; however, these facilities significantly limit available court time, as Pickleball interferes with other higher priority uses. The typical gym floor found in these facilities, is not optimal for Pickleball, particularly for those playing competitively.

Management believes that the Company’s critical assumptions behind the overall business thesis and drivers of the financial forecasts are validated by third party market research. The Company engaged Kempton Research and Planning (http://kemptonresearch.com/) to conduct individual interviews and surveys. Kempton solicited survey participation from 4,000-5,000 pickleball players in the first market, Sarasota, which it believes will be representative of most of the Company’s initial markets in southern Florida. They received over 300 responses to a 32-question survey of which over 200 completed the survey in full. Key data are summarized as follows:

Validation

During the last several months, other indoor pickleball facilities have opened around the country, each

reporting strong customer metrics:

  • Pickle N Par opened in Melville, NY on September 30th. The facility has been averaging 92% court utilization and an average $371 revenue per court per day. By way of comparison, that unit economic metric is 12 times the first year forecast for the Club and 2.4 times the second-year forecast.
  • Flemington Pickleball Club opened in Flemington, NJ on October 1st. They signed 100 members during pre-opening and had 280 members in less than 30 days after opening.
  • Club Pickleball USA opened in Orem, Utah in January 2021 and reported over 400 membership sales within their first 21 days.
  • Pictona, an outdoor facility in Holly Hills, FL, has grown to over 600 members since opening in late July 2020.

Management feels all clubs’ performance, during the pandemic, are a strong validation of The Pickleball Club investment thesis.

The first two clubs


LAKEWOOD RANCH

The first Club will be located at 1251 Global Ct., Sarasota, FL. This is in the southern part of the Lakewood Ranch area of Sarasota. Lakewood Ranch is a suburban area of Sarasota consisting of 18,000 homes and nearly 43,000 residents— and growing rapidly. Lakewood Ranch was named the #1 Best-Selling Multi-Generational Community in the Nation. Virtually all of Sarasota is within a 20-30 minute drive of the Lakewood Ranch location. There are significant populations with prime Pickleball playing demographic cohorts in the close vicinity to the Club. The Club is just a 5-minute drive from I-75 allowing easy access for customers who live in communities to the north and south.

The Company has signed a purchase agreement to acquire a 2.43-acre parcel (105,850 sqft) plot for $820,000. The Company has paid a $25,000 deposit and has agreed to a $14,500 fee to extend the closing date. The closing is planned for first quarter 2021.

The company has received zoning confirmation from Sarasota County and has filed the site development plan with the county. It is in the process of responding to initial comments, none of which are seen as material.

The Company further expects to file for the building permit by in the coming weeks and expects approval within 60 days. There are no variances required for either the site plan or the building permit, accordingly, Management believes that there is no material risk from a permitting perspective that could prevent development of this location.

SARASOTA

The second Club will be located at 2170 Robinhood Street adjacent to Trader Joes on the east side of South Tamiami Trail.

The property is planned for 207 luxury condominium units, a fitness center, outdoor tennis courts, an indoor Pickleball facility, swimming pool retail shops and public green space with walking trails. The project is expected to be completed in the fall of 2022 or early 2023.

In December, 2020, the Company signed a lease with the owners of the Bath & Racquet Club of Sarasota, Inc., (BRC). The lease requires BRC to construct the facility to the Company’s specifications. The initial lease term is 15 years with three five-year options to extend in favor of the Company. The annual rent is calculated as 6.9% of the development cost, plus an allocated cost of land of $950,000.

The rent increases by 2% after each five-year period. The forecasted development cost is $5.035 million, resulting in a total cost basis of approximately $6 million, for which annual rent would be $414,000, paid in $34,500 monthly installments. Rent begins 90 days following delivery of the facility.

All condo owners will receive one membership in the Sarasota Club. The membership fees will be included in the homeowners’ common charges, in essence making each owner a guaranteed member of the club.

Facilities


The Company has invested a significant amount of time and capital in designing the template for the Clubs. The Club’s plan calls for a 26’ high single-story building containing approximately 34,000 sqft, which will accommodate 12 indoor pickleball courts, a 544 SF pro shop, coffee/juice bar, storage, a 4,000 sqft mezzanine level, 2,000 sqft of communal space for members, locker rooms, storage and administrative space.

The cost for developing each facility is expected to be approximately $5.1 million. The full development budget is detailed below. For full financial forecasts see Appendix A. Please note, final plans for each location is expected to cause changes to the budget; however, the management believes that any differences will not have a material impact on the final budget.

Realty expense is forecasted to be $750,000 to $1.25 million per location. To accommodate the Club footprint and typical parking requirements, each plot is expected to be at least 2.15 acres. Additional land will enable clubs to accommodate a small number of outdoor covered courts.

The fixture and equipment budget for each club (not included in either the realty development budget or expensed as start-up costs) is $239,500.

Revenue model


Each Club’s revenue is forecast to be derived from:

1. Member Initiation Fees

Membership will require a one-time initiation fee that is forecasted to be $150. Additional members from the same immediate family may be added to the membership at a 30% discount. The forecast assumes that 20% of memberships will be family-based.

2. Membership Fees

Membership is expected to be offered at $780/annum, payable in advance, or $65/month. Management may adjust pricing levels as needed. Membership will allow members to use the facility and participate in designated “Open Play” sessions with no additional charge. Open play time will be restricted to non-premium hours and reduced to accommodate the needs of members paying for reserved time and for instructional activities. From an asset utilization perspective, open play allows the Club to offer the members value at virtually no marginal cost, as the open play court time will essentially be surplus court inventory.

3. Court Reservation Fees

Members who wish to access court time either during non-open play hours or who wish a dedicated court during open-play can pay for court time at the rate of $25 per hour. For a typical doubles match, the reservation fee is a very affordable $6.25 per hour per player. Management may employ a dynamic pricing model, based on intra-day demand for court time, to price court time at a premium or discount to the standard rate. The financial forecasts only assume approximately two hours of reserved court time per member each month. Even with such a small amount of court time being on a (paid) reservation basis, the Company forecasts that it will generate approximately one third of revenue from court reservation fees.

4. Instructional Fees (Lessons, Clinics and Academies)

The Company is already receiving strong interest from top teaching professionals, who put a premium on working in a comfortable, climate-controlled environment that allows them to have uninterrupted court access, irrespective of the weather, which can cost professionals a third of their income from cancelled instruction. Management forecasts instructional program fees will account for 20% to 25% of revenue.

5. Leagues & Tournaments

Leagues: The Company will organize leagues based on skill level in which players will either join their own teams or will be placed on a team. Leagues are highly popular in adult sports and in particular among the Company’s prime age cohorts. Leagues are a great benefit in helping maintain higher asset utilization levels at strong margins. Leagues are initially forecast to have only 20 participants, each of whom will pay a $75 fee to participate. Leagues typically generate approximately 80% gross margins. While leagues and tournaments are only expected to account for 5% of total revenue, they are important in creating a strong social fabric among members and generating excitement and publicity.

Tournaments: Management believes the facility has the potential to draw major tournaments. Typical tournaments suffer from one of two significant problems. They are either  held indoors in gyms or multisport facilities that do not have the correct type of flooring surface for higher level competitive play; or, they are held outdoors, which exposes the event to weather related interruptions and cancellations. The Club facility would solve both of these problems. Club events would be indoors and also played on a competition-level outdoor flooring surface. Even many outdoor venues do not invest in competitive level flooring materials. Management believes that it can position the facility to be a premier host for “level” competitive events, many of which are televised and attract sponsors.

Management is forecasting one tournament every three to four months, with an average of 250 participants per event. Entry fees are forecast to be $50 per participant, generating over $12,000 in revenue per event. Typical gross margins are approximately 70%, not including any sponsorship revenue.

6. Pro Shop & Café Rental Income

Management plans to have both a Pro Shop and a Juice/Coffee Bar. The Pro Shop is expected to be approximately 600 square feet of retail space. The retail operation will be run by Joe Capuano, who operates Sarasota Pickleball. Joe is one of the preeminent retailers of Pickleball equipment in the entire Southeast, if not the nation.

Operational excellence


The Pickleball Club organization espouses The 12 pillars of Operational Excellence as our core organizational philosophy. This is where problem-solving, teamwork, and leadership results in the continuous improvement within an organization. The Pickleball Club organization focuses on members’ needs, keeping the employees positive and empowered, engagement with the communities in which we operate and continually improving the current activities in our clubs:

1. Respect for Every Individual 

2. Lead with Humility 

3. Seeking Perfection 

4. Embrace Scientific Thinking 

5. Focus on Process 

6. Assure Quality at the Source 

7. Flow & Pull Value 

8. Think Systemically 

9. Creating Consistency of Purpose 

10. Create Value for our Members 

11. Systems can create value

12. Facility Templates reduce costs and improves operational efficiency 

Vision and strategy


The Pickleball Club™ organization has the potential to support extraordinary growth. The sport of Pickleball has created unmet demand for indoor facilities. Tennis is a good proxy to indicate the growth potential for Pickleball. There are currently about 17.8 million tennis players in the US and who play on a total of 250,000 courts of which hundreds if not thousands are located in indoor court facilities. This is in contrast to 3.4 million Pickleball players who play primarily on 18,000 outdoor courts with less than fifteen dedicated indoor facilities (of four or more courts).

Based on these ratios, there should be nearly 30,000 more Pickleball courts in the US and one to two hundred indoor facilities.

Our bilateral growth strategy is to; (i) develop our own realty, in which we own the land and improvements and (ii) where we lease the facilities, built to our specifications, from a third party. Our first two locations in Sarasota are an example of each. 

Planned Growth - Our Expansion Vision 

Our growth strategy will allow us to establish a strong competitive footprint in Western Florida, from Tampa to Naples, as our primary area of geographic focus, after which we will continue our expansion throughout Florida. Our expectation is that several competitors will seek to replicate our strategy of servicing the demand for indoor Pickleball facilities. Additional competition will be good for the market and help drive user adoption of the sport. Our plan is to create a strong footprint in each locality where we choose to operate, dissuading others from building competing facilities in that locality.

The pace of our growth will be a function of capital availability. In 2021, our focus will be completing and opening our Lakewood Ranch Club. If sufficient capital is available, our plan is to locate up to two additional sites in Venice, Bonita Springs, Naples or St. Petersburg and commence development during 2021 - to open in early 2022, staggering each timeline by approximately 90-120 days.

During 2021, we will augment the corporate development team so that we have the ability to initiate an additional seven locations during 2022. This includes our second location in Sarasota (under contract with Bath & Racket Club of Sarasota, Inc.) These locations would start coming on-line during late 2022 and into 2023. This will give us a total of ten locations.

We believe most of our focus will be in Florida, in filling our footprint from Tampa to Naples. Other potential near-term markets include Jacksonville, Orlando, Miami, Fort Lauderdale, Boca Raton and Palm Beach. We will also consider going outside of Florida opportunistically during this time.

During 2022, we will continue to grow the development team so that by 2023 we have the ability to add 30 - 40 locations into the development cycle. Further developing the available Florida markets listed above will be the priority. We will also target growth in other strong Pickleball markets including Dallas-Ft Worth, New Jersey, Scottsdale, AZ, and certain areas of Northern and Southern of California. Our goal is to have these locations operational by the 2025 season.

Exit/Liquidity

Each Club is expected to support at least 1,500 members, which translates into forecasted  annual operating profits of $1.5 million. At the scale of 40 locations, the total operating profit of $68 million is expected to support an enterprise valuation of the company of between $680 million and $1 billion. This is 10 to 15 times operating profit, which values each location at $15 to $22.5 million.

For clubs in which the Company is the realty developer and owner, we are forecasting a 6.5% compound return on the realty value over a five-year period. The strategy would be to engage in a sale-leaseback transaction with a REIT or other institutional real estate investor. The assumed exit value of the realty would be $8 million per location. Assuming half the locations were company owned and developed, this would imply an addition $400 million in enterprise value of which $100 million would be capital appreciation above development costs.

The valuation of the company would benefit from the additional lines of business we are able to create, including the tournaments and media properties.

Founders


The Company is led by Rear Admiral Brian McCarthy USN(Ret) who is a Sarasota resident with a long and distinguished career. Admiral McCarthy served in the United States Navy Reserve for three decades and became one of the military’s most accomplished logistics officers. In his civilian life, Admiral McCarthy developed over $500 million of commercial real estate and operated a variety of businesses, including numerous retail operations. Admiral McCarthy earned a BS in Engineering Science from Oakland University and an MBA from the Harvard Business School. He is very involved in our community as a past Governor of the Bird Key Yacht Club, First Vice President of the Pops Orchestra, Past President & Executive Director of the Military Officers Association & Foundation in Sarasota and recent Chairman of United Way’s Mission United initiative serving 88,000 Veterans in Sarasota and Manatee counties.

Matt Gordon supports Admiral McCarthy and the Company as the Chief Financial Officer and General Counsel. Mr. Gordon is an attorney and investment banker with over 20 years of experience. He is a noted policy expert on visa-based foreign investment in the United States and has testified in front of the United States House of Representatives as a policy expert. He is an avid lecturer and writer and serves as the Editor of The EB-5 Book, the leading treatise on the US EB-5 Program. Mr. Gordon is a licensed attorney in New York, having practiced mergers and acquisitions law at Fried Frank and Sullivan & Cromwell. Following his legal career, Mr. Gordon ran the US division of a Swiss multi-national corporation, after which he became an investment banking and finance professional. Mr. Gordon received his B.S. in Policy Analysis from Cornell University and his J.D., cum laude, from the University of Pennsylvania School of Law.

Valarie McCarthy is the Company’s Director of Operations. Mrs. McCarthy has over 20 years’ experience in the fitness industry, including as the executive director for the Palo Alto YMCA Association in California consisting of three facilities totaling an excess of 55,000. Mrs. McCarthy also founded and operated a successful fitness facility in Sausalito, California for nearly a decade. Mrs. McCarthy holds a BS and MS in Exercise Physiology from Kent State University. Dominic Catalano is the Company’s Director of Tournaments and Instruction Programs. Mr. Catalano is an active tournament-level and teaching Pickleball Pro. He is a seven-time US Open medalist and won gold medals at the 2019 Gamm Sundial Grand Slam and the 2018 Delray Beach Classic. Prior to becoming a Pickleball professional, Mr. Catalano was a public and private school physical education teacher. Mr. Catalano received two BA degrees from Bellarmine University where he was a second baseman on the collegiate baseball team. He later coached baseball there for three seasons.

Nova Grande is the Company’s Director of Marketing. Nova has worked in the health & wellness industry for the last 20 years. During this time Nova has worked with both professional and amateur athletes, including such as CrossFit athletes, weightlifters, professional football and her favorite crowd - The Atlanta Roller Derby! Over the past 4 years she’s been working most specifically with pickleball athletes. Ms. Grande also helps run 3D Pickleball with Dominic Catalano bringing top level pickleball tournaments to the Southwest Florida area, including Moneyball Pickleball. Ms. Grand owns The HIVE Media Lab which coordinates social media, branding and design. The HIVE is responsible not only for the marketing of The Pickleball Club, but also for The APP Tour, the First International Pickleball Tour. 


Deal terms


Valuation cap

$17,000,000

The maximum valuation at which your investment converts into equity shares or cash.
Learn more

Discount

0%

If a trigger event for The Pickleball Club occurs, the discount provision gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.

Minimum investment

$150

The smallest investment amount that The Pickleball Club is accepting.
Learn more

Funding goal

$5M

The Pickleball Club must achieve its minimum goal of $50K before the deadline. The maximum amount the offering can raise is $5M.
Learn more

Deadline
The Pickleball Club needs to reach their minimum funding goal before the deadline ( ). If they don’t, all investments will be refunded.
Learn more
Type of security

Crowd SAFE

A SAFE allows an investor to make a cash investment in a company, with rights to receive certain company stock at a later date, in connection with a specific event. · Learn more

How it works

Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by SRQ Pickleball Partners LLC. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
The Pickleball Club Crowd SAFE The Pickleball Club Form C.pdf

Bonus perks

In addition to your Crowd SAFE, you'll receive perks for investing in The Pickleball Club.
Invest
$150
Receive
  • All investors deserve RECOGNITION. Everyone will get a major shout out and thank you in Pickletalk, our monthly newsletter.
  • In addition, both on our website and in the Clubs, we will have our digital Wall of Heroes that will list everyone who chose to join The Pickleball Club family as an investor
Invest
$5,000
Receive
  • The Pickleball Club Hat. For five grand, you should get a hat!
Invest
$10,000
Receive
  • The Pickleball Club in a Bag. You get a logo bag with a whole bunch of really cool TPC branded items.
Invest
$100,000
Receive
  • Free membership to any of our clubs! Plus, you get the Club in a Bag too!

About The Pickleball Club

Legal Name
SRQ Pickleball Partners LLC
Founded
Nov 2019
Form
Florida LLC
Employees
0
Website
thepickleballclub.us
Social Media
Headquarters
Google Map location of of The Pickleball Club
8499 S Tamiami Trail 256 , Sarasota, FL
Headquarters
8499 S Tamiami Trail , 256, Sarasota, FL, United States 34238

The Pickleball Club Team
Everyone helping build The Pickleball Club, not limited to employees

Profile picture of Matt Gordon
Matt Gordon
Co-Founder - CFO
Profile picture of Brian McCarthy
Brian McCarthy
Co-Founder CEO
Profile picture of Valerie McCarthy
Valerie McCarthy
Director of Operations
Profile picture of Dominic  Catalano
Dominic Catalano
Director of Pickleball
Profile picture of Nova  Grande
Nova Grande
Director of Marketing
2 more team members
Matt Gordon
Co-Founder - CFO
Brian McCarthy
Co-Founder CEO
Valerie McCarthy
Director of Operations
Dominic Catalano
Director of Pickleball
Nova Grande
Director of Marketing

FAQ

How do I earn a return?

How do I earn a return?

We are using Republic's Crowd SAFE security. Learn how this translates into a return on investment here.

Is my investment in one club or in all the clubs?

Is my investment in one club or in all the clubs?

Your investment, when converted, from the SAFE will be in Class C membership interests of our parent  company, SRQ Pickleball Partners, LLC.  That means your investment will have financial exposure to all the clubs we ever develop. 

What must I do to receive my equity or cash in the event of the conversion of my Crowd SAFE?

What must I do to receive my equity or cash in the event of the conversion of my Crowd SAFE?

Suppose the Company converts the Crowd SAFE as a result of an equity financing. In that case, you must open a custodial account with the custodian and sign subscription documentation to receive the equity securities. The Company will notify you of the conversion trigger, and you must complete necessary documentation within 30 days of such notice. If you do not complete the required documentation with that time frame, you will only be able to receive an amount of cash equal to (or less in some circumstances) your investment amount. Unclaimed cash will be subject to relevant escheatment laws. For more information, see the Crowd SAFE for this offering.

If the conversion of the Crowd SAFE is triggered as a result of a Liquidity Event (e.g. M&A or an IPO), then you will be required to select between receiving a cash payment (equal to your investment amount or a lesser amount) or equity.  You are required to make your selection (and complete any relevant documentation) within 30 days of such receiving notice from the Company of the conversion trigger, otherwise you will receive the cash payment option, which will be subject to relevant escheatment laws. The equity consideration varies depending on whether the Liquidity Event occurs before or after an equity financing. For more information, see the Crowd SAFE for this offering.

What does a 36% targeted IRR mean?

What does a 36% targeted IRR mean?

Based on our forecasted exit/liquidity event calculations, it's the amount we project you would receive if you got an equal annual payment every year.  For example, if you invested $1,000,  it would be like getting $360 every year and then $1,000 back at the end.  In all likelihood, what we hope will happen is that after the first couple of years, the Company will generate enough free cash flow to start making investor distributions (those are dividends for LLC owners), then when we sell the company (or do an IPO), the investors will get a big payback.  If we made no distributions along the way, to achieve the 36% IRR, we would need to return nearly ten times your investment back to you and that is exactly what we hope wil, and will work hard to make, happen.

Why is Pickleball becoming so popular?

Why is Pickleball becoming so popular?

Firstly, it's a lot of fun to play.  Yes, the name is wacky, and it can look a little odd, but when you get out there it has just the right mix of speed, skill and strength to make it really enjoyable.  Most people who start truly get addicted.   The second reason is the ease of learning to play.  Unlike tennis, which can take dozens if not hundreds of hours of training before someone can have a good time, most people can actually play (and have fun) in their very first outing.  Lastly, it's a lot easier on the body.  Tennis, the sport from which most pickleballers are coming, is rough on knees, arms, and the back.  There is a lot less stress on the body with Pickleball. 

Are you worried that Pickleball is a fad?

Are you worried that Pickleball is a fad?

We don't think it is, because of the ease of learning and how much fun people have playing with it (see 'why is pickleball becoming so popular', but even if it is, Pickleball is just starting.  The largest group of players are baby-boomers.  Pickleball is enjoyable even into most people's 80's.  So if it is a fad, we'll have a good 15+ year run, which is a lot of time to deliver on our business plan.  

What is your break-even membership number?

What is your break-even membership number?

The breakeven membership level is between 525 and 565 members.  The reason for the range is due to the cost of debt financing.  The more expensive the debt, the more members it takes to break even.  Our financial forecasts assume (a very expensive) 12% interest expense for our construction loans.  Over time we hope to do better and we would refinance any construction loans as soon as we were able to reduce this cost. 

What is the biggest risk to the business?

What is the biggest risk to the business?

This is a matter of perception, but management believes is if a new covid mutation makes it impossible to operate an indoor sports facility.  In that case we have a backup plan.  Our buildings are essentially big empty rectangles.  If we could not operate as a sports facility, and it was going to last for a long time, we could rather easily convert to a warehouse.  In Lakewood Ranch, our land is already zoned for that use.  We have investigated operating as a warehouse and according to our commercial realtors, there is a shortage of warehouses in Florida, so a new, airconditioned facility would be in high demand.  In particular, if people could not go shopping, eCommerce demand for warehouses would increase. 

When will the first club open?

When will the first club open?

Our Lakewood Ranch location is scheduled to open in late 2021.  For this to happen, we will need to receive our building permits, which the county has indicated will take 30-60 days to issue.  It will also be dependent on our construction loan coming through.  Finally, it will require our general contractor to construct the building, which they have said they can do in less than six months.  So if all of that happens, which we are working hard every day to make happen, then we'll open in 2021.  

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Risks

Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people.
The Company is dependent on certain key personnel in order to conduct its operations and execute its business plan, however, the Company has not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if any of these personnel die or become disabled, the Company will not receive any compensation to assist with such person’s absence. The loss of such person could negatively affect the Company and its operations. We have no way to guarantee key personnel will stay with the Company, as many states do not enforce non-competition agreements, and therefore acquiring key man insurance will not ameliorate all of the risk of relying on key personnel.
We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
The Company is still in an early phase and is just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of its success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by companies in their early stages of development. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
The amount of capital the Company is attempting to raise in this Offering may not be enough to sustain the Company’s current business plan.
In order to achieve the Company’s near and long-term goals, the Company may need to procure funds in addition to the amount raised in the Offering. There is no guarantee the Company will be able to raise such funds on acceptable terms or at all. If we are not able to raise sufficient capital in the future, we may not be able to execute our business plan, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause a Purchaser to lose all or a portion of his or her investment.
We rely on other companies to provide components and services for our products.
We depend on suppliers and subcontractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers may be adversely affected if suppliers or subcontractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide components which meet required specifications and perform to our and our customers’ expectations. Our suppliers may unable to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or two subcontractors or suppliers for a particular component. Our products may utilize custom components available from only one source. Continued availability of those components at acceptable prices, or at all, may be affected for any number of reasons, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet our requirements. The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to us adversely affecting our business and results of operations.
We rely on various intellectual property rights, including licenses in order to operate our business.
The Company relies on certain intellectual property rights to operate its business. The Company’s intellectual property rights may not be sufficiently broad or otherwise may not provide us a significant competitive advantage. In addition, the steps that we have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, could adversely impact our competitive position and results of operations. We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights. As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management’s attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
The Company is not subject to Sarbanes-Oxley regulations and may lack the financial controls and procedures of public companies.
The Company may not have the internal control infrastructure that would meet the standards of a public company, including the requirements of the Sarbanes Oxley Act of 2002. As a privately-held (non-public) Company, the Company is currently not subject to the Sarbanes Oxley Act of 2002, and it's financial and disclosure controls and procedures reflect its status as a development stage, non-public company. There can be no guarantee that there are no significant deficiencies or material weaknesses in the quality of the Company's financial and disclosure controls and procedures. If it were necessary to implement such financial and disclosure controls and procedures, the cost to the Company of such compliance could be substantial and could have a material adverse effect on the Company's results of operations.
Our business could be negatively impacted by cyber security threats, attacks and other disruptions.
Like others in our industry, we continue to face advanced and persistent attacks on our information infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations. These attacks may include sophisticated malware (viruses, worms, and other malicious software programs) and phishing emails that attack our products or otherwise exploit any security vulnerabilities. These intrusions sometimes may be zero-day malware that are difficult to identify because they are not included in the signature set of commercially available antivirus scanning programs. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of our customers or other third-parties, create system disruptions, or cause shutdowns. Additionally, sophisticated software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of the information infrastructure. A disruption, infiltration or failure of our information infrastructure systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security, loss of critical data and performance delays, which in turn could adversely affect our business.
Changes in government regulation could adversely impact our business.
The Company is subject to legislation and regulation at the federal and local levels and, in some instances, at the state level. [The FCC and/or Congress may attempt to change the classification of or change the way that our online content platforms are regulated and/or change the framework under which Internet service providers are provided Safe Harbor for claims of copyright infringement, introduce changes to how digital advertising is regulated and consumer information is handled, changing rights and obligations of our competitors.] We expect that court actions and regulatory proceedings will continue to refine our rights and obligations under applicable federal, state and local laws, which cannot be predicted. Modifications to existing requirements or imposition of new requirements or limitations could have an adverse impact on our business.
We may implement new lines of business or offer new products and services within existing lines of business.
As an early-stage company, we may implement new lines of business at any time. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.
Purchasers will be unable to declare the Security in "default" and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any "default" provisions upon which the Purchasers will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Purchasers have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may the Purchasers demand payment and even then, such payments will be limited to the amount of cash available to the Company.
Security breaches of confidential customer information, in connection with our electronic processing of credit and debit card transactions, or confidential employee information may adversely affect our business.
Our business requires the collection, transmission and retention of large volumes of customer and employee data, including credit and debit card numbers and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that customer and employee data is critical to us. The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings.
The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.
You should not rely on the fact that our Form C is accessible through the U.S. Securities and Exchange Commission’s EDGAR filing system as an approval, endorsement or guarantee of compliance as it related to this Offering.
Neither the Offering nor the Securities have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
The securities being offered have not been registered under the Securities Act of 1933 (the "Securities Act"), in reliance, among other exemptions, on the exemptive provisions of article 4(2) of the Securities Act and Regulation D under the Securities Act. Similar reliance has been placed on apparently available exemptions from securities registration or qualification requirements under applicable state securities laws. No assurance can be given that any offering currently qualifies or will continue to qualify under one or more of such exemptive provisions due to, among other things, the adequacy of disclosure and the manner of distribution, the existence of similar offerings in the past or in the future, or a change of any securities law or regulation that has retroactive effect. If, and to the extent that, claims or suits for rescission are brought and successfully concluded for failure to register any offering or other offerings or for acts or omissions constituting offenses under the Securities Act, the Securities Exchange Act of 1934, or applicable state securities laws, the Company could be materially adversely affected, jeopardizing the Company's ability to operate successfully. Furthermore, the human and capital resources of the Company could be adversely affected by the need to defend actions under these laws, even if the Company is ultimately successful in its defense. Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
The Company's management may have broad discretion in how the Company uses the net proceeds of an offering.
Unless the Company has agreed to a specific use of the proceeds from an offering, the Company's management will have considerable discretion over the use of proceeds from their offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The Company has the right to limit individual Purchasers commitment amount based on the Company’s determination of a Purchaser’s sophistication.
The Company may prevent Purchasers from committing more than a certain amount to this Offering based on the Company’s belief of the Purchaser’s sophistication and ability to assume the risk of the investment. This means that your desired investment amount may be limited or lowered based solely on the Company’s determination and not in line with relevant investment limits set forth by the Regulation Crowdfunding rules. This also means that other Purchasers may receive larger allocations of the Offering based solely on the Company’s determination.
The Company’s operations and growth strategy place significant demands on management.
The Company’s ability to compete effectively depends upon its ability to hire, train, and assimilate additional management and other employees, and its ability to expand, improve and effectively utilize its operating, management, marketing and financial systems to accommodate its expanded operations. Any failure by the Company’s management to effectively anticipate, implement and manage the changes required to sustain the Company’s growth may have a material adverse effect on the Company’s business, financial condition and operating results.
Regulatory changes in the terms of credit and debit card usage, including any existing or future regulatory requirements, could have an adverse effect on our business.
Our business is expected to rely heavily on the use of credit and debit cards in sales transactions. Regulatory changes to existing rules or future regulatory requirements affecting the use of credit and debit cards or the fees charged could impact the consumer and financial institutions that provide card services. This may lead to an adverse impact on our business if the regulatory changes result in unfavorable terms to either the consumer or the banking institutions.
The Company has the right to extend the Offering deadline. The Company has the right to end the Offering early.
The Company may extend the Offering deadline beyond what is currently stated herein. This means that your investment may continue to be held in escrow while the Company attempts to raise the Minimum Amount even after the Offering deadline stated herein is reached. While you have the right to cancel your investment in the event the Company extends the Offering, if you choose to reconfirm your investment, your investment will not be accruing interest during this time and will simply be held until such time as the new Offering deadline is reached without the Company receiving the Minimum Amount, at which time it will be returned to you without interest or deduction, or the Company receives the Minimum Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after release of such funds to the Company, the Securities will be issued and distributed to you. The Company may also end the Offering early; if the Offering reaches its target Offering amount after 21-calendary days but before the deadline, the Company can end the Offering with 5 business day’s notice. This means your failure to participate in the Offering in a timely manner, may prevent you from being able to participate – it also means the Company may limit the amount of capital it can raise during the Offering by ending it early.
The units of SAFE will not be freely tradable until one year from the initial purchase date. Although the units of SAFE may be tradable under federal securities law, state securities regulations may apply, and each Purchaser should consult with his or her attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the units of SAFE. Because the units of SAFE have not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction, the units of SAFE have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be affected. Limitations on the transfer of the units of SAFE may also adversely affect the price that you might be able to obtain for the units of SAFE in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.
Purchasers will not become equity holders until the Company decides to convert the Securities into CF Shadow Securities or until there is a change of control or sale of substantially all of the Company’s assets.
Purchasers will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time and depending on when and how the Securities are converted, the Purchasers may never become equity holders of the Company. Purchasers will not become equity holders of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities into CF Shadow Series Securities. The Company is under no obligation to convert the Securities into CF Shadow Securities (the type of equity Securities Purchasers are entitled to receive upon such conversion). In certain instances, such as a sale of the Company or substantially all of its assets, an IPO or a dissolution or bankruptcy, the Purchasers may only have a right to receive cash, to the extent available, rather than equity in the Company.
Purchasers will not have voting rights, even upon conversion of the Securities into CF Shadow Securities; upon the conversion of the Crowd SAFE to CF Shadow Securities (which cannot be guaranteed), holders of Shadow Securities will be required to enter into a proxy with the intermediary to ensure any statutory voting rights are voted in tandem with the majority holders of whichever series of securities the Shadow Securities follow.
Purchasers will not have the right to vote upon matters of the Company even if and when their Securities are converted into CF Shadow Securities (which the occurrence of cannot be guaranteed). Upon such conversion, CF Shadow Securities will have no voting rights and even in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to enter into a proxy agreement with the Intermediary ensuring they will vote with the majority of the security holders in the new round of equity financing upon which the Securities were converted. For example, if the Securities are converted upon a round offering Series B Preferred Shares, the Series B-CF Shadow Security holders will be required to enter into a proxy that allows the Intermediary to vote the same way as a majority of the Series B Preferred Shareholders vote. Thus, Purchasers will never be able to freely vote upon any manager or other matters of the Company.
Purchasers will not be entitled to any inspection or information rights other than those required by Regulation CF.
Purchasers will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by Regulation CF. Other security holders of the Company may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information – there are numerous methods by which the Company can terminate annual report obligations, resulting in no information rights, contractual, statutory or otherwise, owed to Purchasers. This lack of information could put Purchasers at a disadvantage in general and with respect to other security holders.
The Company may never elect to convert the Securities or undergo a liquidity event.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions. In addition to the risks listed above, businesses are often subject to risks not foreseen or fully appreciated by the management. It is not possible to foresee all risks that may affect us. Moreover, the Company cannot predict whether the Company will successfully effectuate the Company’s current business plan. Each prospective Purchaser is encouraged to carefully analyze the risks and merits of an investment in the Securities and should take into consideration when making such analysis, among other, the Risk Factors discussed above.
Equity securities acquired upon conversion of SAFE securities may be significantly diluted as a consequence of subsequent financings.
Company equity securities will be subject to dilution. Company intends to issue additional equity to employees and third-party financing sources in amounts that are uncertain at this time, and as a consequence holders of equity securities resulting from SAFE conversion will be subject to dilution in an unpredictable amount. Such dilution may reduce the purchaser’s control and economic interests in the Company. The amount of additional financing needed by Company will depend upon several contingencies not foreseen at the time of this offering. Each such round of financing (whether from the Company or other investors) is typically intended to provide the Company with enough capital to reach the next major corporate milestone. If the funds are not sufficient, Company may have to raise additional capital at a price unfavorable to the existing investors, including the purchaser. The availability of capital is at least partially a function of capital market conditions that are beyond the control of the Company. There can be no assurance that the Company will be able to predict accurately the future capital requirements necessary for success or that additional funds will be available from any source. Failure to obtain such financing on favorable terms could dilute or otherwise severely impair the value of the purchaser’s Company securities.
Equity securities issued upon conversion of company SAFE securities may be substantially different from other equity securities offered or issued at the time of conversion.
Company may issue to converting SAFE holders equity securities that are materially distinct from equity securities it will issue to new purchasers of equity securities. This paragraph does not purport to be a complete summary of all such distinctions. Equity securities issued to SAFE purchasers upon their conversion of Company SAFE securities will be distinct from the equity securities issued to new purchasers in at least the following respects - to the extent such equity securities bear any liquidation preferences, dividend rights, or anti-dilution protections, any equity securities issued at the Conversion Price (as provided in the SAFE Agreements) shall bear such preferences, rights, and protections only in proportion to the Conversion Price and not in proportion to the price per share paid by new investors in the equity securities. Company may not provide converting SAFE purchasers the same rights, preferences, protections, and other benefits or privileges provided to other purchasers of Company equity securities.
There is no present market for the Securities and we have arbitrarily set the price.
The offering price was not established in a competitive market. We have arbitrarily set the price of the Securities with reference to the general status of the securities market and other relevant factors. The Offering price for the Securities should not be considered an indication of the actual value of the Securities and is not based on our net worth or prior earnings. We cannot assure you that the Securities could be resold by you at the Offering price or at any other price.
In a dissolution or bankruptcy of the Company, Purchasers will not be treated as priority debt holders and therefore are unlikely to recover any assets in the event of a bankruptcy or dissolution event.
In a dissolution or bankruptcy of the Company, Purchasers of Securities which have not been converted will be entitled to distributions as described in the Crowd SAFE. This means that such Purchasers will be at the lowest level of priority and will only receive distributions once all creditors as well as holders of more senior securities, including any preferred stock holders, have been paid in full. If the Securities have been converted into CF Shadow Share Securities or SAFE Preferred Securities, the Purchasers will have the same rights and preferences (other than the ability to vote) as the holders of the Securities issued in the equity financing upon which the Securities were converted. Neither holders of Crowd SAFE nor holders of CF Shadow Share Securities nor SAFE Preferred Securities can be guaranteed a return in the event of a dissolution event or bankruptcy.
While the Crowd SAFE provides for mechanisms whereby a Crowd SAFE holder would be entitled to a return of their purchase amount, if the Company does not have sufficient cash on hand, this obligation may not be fulfilled.
In certain events provided in the Crowd SAFE, holders of the Crowd SAFE may be entitled to a return of their principal amount. Despite the contractual provisions in the Crowd SAFE, this right cannot be guaranteed if the Company does not have sufficient liquid assets on hand. Therefore potential purchasers should not assume that they are guaranteed a return of their investment amount.
The Company has the right to conduct multiple closings during the Offering
If the Company meets certain terms and conditions an intermediate close of the Offering can occur, which will allow the Company to draw down on half of the proceeds of the Offering committed and captured during the relevant period. The Company may choose to continue the Offering thereafter. Investors should be mindful that this means they can make multiple investment commitments in the Offering, which may be subject to different cancellation rights. For example, if an intermediate close occurs and later a material change occurs as the Offering continues, Investors previously closed upon will not have the right to re-confirm their investment as it will be deemed completed.
We may be unable to attract and retain members, which could have a negative effect on our business.
The performance of our clubs is highly dependent on our ability to attract and retain members, and we may not be successful in these efforts. In addition, we experience attrition and must continually engage existing members and attract new members in order to maintain our membership levels and ancillary sales. There are numerous factors that could in the future lead to a decline in membership levels or that could prevent us from increasing our membership, including a decline in our ability to deliver quality service at a competitive cost, the presence of direct and indirect competition in the areas in which the clubs are located, the public’s interest in pickleball and general economic conditions. In order to increase membership levels, we may from time to time offer lower membership rates and initiation fees. Any decrease in our average membership rates or reductions in initiation fees may adversely impact our results of operations. Negative economic conditions, including increased unemployment levels and decreased consumer confidence, have in the past contributed to and in the future could lead to significant pressures and declines in economic growth, including reduced consumer spending. In a depressed economic and consumer environment, consumers and businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for our services and products and such decline in demand may continue as the economy continues to struggle and disposable income declines. Other factors that could influence demand include increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. A resurgence in the pandemic and or the perception that indoor sports are unsafe can also have a negative impact on our ability to secure and retain members.
The level of competition in the fitness club industry could negatively impact our revenue growth and profitability.
Our industry is highly competitive and continues to become more competitive. In the market in which we operate, we compete with indoor and outdoor Pickleball facilities, fitness clubs, and recreational facilities established by local governments, hospitals and businesses for their employees, amenity and condominium clubs, the YMCA and similar organizations. We also compete with other entertainment and retail businesses for the discretionary income in our target demographics. We might not be able to compete effectively in the future. Competitors include companies that are larger and have greater resources than us and also may enter our market to our detriment. These competitive conditions may limit our ability to increase dues without a material loss in membership, attract new members and attract and retain qualified personnel. Additionally, consolidation in the fitness club industry could result in increased competition among participants, particularly large multi-facility operators that are able to compete for attractive acquisition candidates or newly constructed club locations, thereby increasing costs associated with expansion through both acquisitions and lease negotiation and real estate availability for newly constructed club locations.
Pickleball’s popularity may not last.
Pickleball has only recently become a popular sport in our market. If interest in the sport declines, and we are not able to utilize our facility for an alternative use such as volleyball, then we would expect financial difficulties.
Any condition that causes people to refrain, or prevents people, from visiting our clubs, such as severe weather, outbreaks of pandemic or contagious diseases, or threats of terrorist attacks may adversely affect our business, operating results and financial condition.
Our business and operations could be materially and adversely affected by severe weather or outbreaks of pandemic or contagious diseases, threats of terrorist attacks or other conditions that cause people to refrain, or prevent people, from visiting our clubs. Our business could be severely impacted by a widespread regional, national or global health epidemic. A widespread health epidemic or perception of a health epidemic (such as COVID-19), whether or not traced to our club, may cause members to avoid public gathering places or otherwise change their behaviors and impact our ability to staff our clubs. Outbreaks of disease, such as influenza, could reduce traffic in our club. Further a terrorist attack either locally or anywhere in the nation has the potential to reduce customer visits. Any of these events would negatively impact our business. In addition, any negative publicity relating to these and other health-related matters may affect members’ perceptions of our clubs, reduce member visits to our clubs and negatively impact demand for our offerings.
Our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could adversely affect our revenues and gross profit.
Equipment and certain products and services used in our clubs, including our exercise equipment and point-of-sale software and hardware, are sourced from third-party suppliers. Although we believe that adequate substitutes are currently available, we depend on these third-party suppliers to operate our business efficiently and consistently meet our business requirements. The ability of these third-party suppliers to successfully provide reliable and high-quality services is subject to technical and operational uncertainties that are beyond our control, including, for our overseas suppliers, vessel availability and port delays or congestion. Any disruption to our suppliers’ operations could impact our supply chain and our ability to service our existing stores and open new stores on time or at all and thereby generate revenue. If we lose such suppliers or our suppliers encounter financial hardships unrelated to the demand for our equipment or other products or services, we may not be able to identify or enter into agreements with alternative suppliers on a timely basis on acceptable terms, if at all. Transitioning to new suppliers would be time consuming and expensive and may result in interruptions in our operations. If we should encounter delays or difficulties in securing the quantity of equipment we require to open new and refurbish existing stores, our suppliers encounter difficulties meeting our demands for products or services, our websites experience delays or become impaired due to errors in the third-party technology or there is a deficiency, lack or poor quality of products or services provided, our ability to serve our members and grow our brand would be interrupted. If any of these events occur, it could have a material adverse effect on our business and operating results.
Our trademarks and trade names may be infringed, misappropriated or challenged by others.
We believe our brand names and related intellectual property are important to our business. We may seek to protect our trademarks, trade names and other intellectual property by exercising our rights under applicable trademark and copyright laws. If we were to fail to successfully protect our intellectual property rights for any reason, it could have an adverse effect on our business, results of operations and financial condition. Any damage to our reputation could cause membership levels to decline and make it more difficult to attract new members.
Use of social media may adversely impact our reputation or subject us to fines or other penalties.
There has been a substantial increase in the use of social media platforms, including blogs, social media websites and other forms of internet-based communication, which allow individuals' access to a broad audience of consumers and other interested persons. Negative commentary about us may be posted on social media platforms or similar devices at any time and may harm our reputation or business. Consumers value readily available information about health clubs and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction. In addition, social media platforms provide users with access to such a broad audience that collective action against our stores, such as boycotts, can be more easily organized. If such actions were organized, we could suffer reputational damage as well as physical damage to our stores. We also use social medial platforms as marketing tools. For example, we may maintain Facebook, Instagram and Twitter accounts. As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.
Disruptions and failures involving our information systems could cause customer dissatisfaction and adversely affect our billing and other administrative functions.
The continuing and uninterrupted performance of our information systems is critical to our success. We intend to use a fully-integrated information system to process new memberships, bill members, check-in members and track and analyze sales and membership statistics, the frequency and timing of utilization, among other things. Any failure of our current system could also cause us to lose members and adversely affect our business and results of operations. Our members may become dissatisfied by any systems disruption or failure that interrupts our ability to provide our services to them. Disruptions or failures that affect our billing and other administrative functions could have an adverse effect on our operating results. Fire, floods, earthquakes, power loss, telecommunications failures, break-ins, acts of terrorism and similar events could damage our systems. In addition, computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our sites. Any system disruption or failure, security breach or other damage that interrupts or delays our operations could cause us to lose members, damage our reputation, and adversely affect our business and results of operations.
Our Facilities
We intend to purchase land and develop our facilities and finance a material portion of the purchase and development cost with debt. We also will seek arrangements with developers to purchase and develop the facilities based on our specifications and then lease it to us. In either case, the lease or debt service payments are expected to be substantial. If we are not able to generate sufficient cash flow from operations and we are not able to make our payments, our landlord or lender may reclaim the premise. In this event, we may lose the of investments made in the location facilities. Currently, we have two facilities under development. The first is in Lakewood Ranch, Florida. The land was acquired on or about March 17, 2021. We have also entered into a lease with Bath and Racquet Club - Sarasota, Inc. (“BRC”) pursuant to which BRC will develop our facility. The lease requires that we jointly agree to the overall plans and budget for the facility. If we are unable to reach such an agreement, either party may terminate the lease. In addition, BRC requires certain approvals from Sarasota, which if they are unable to obtain, entitle them to terminate the lease. If BRC sells the project or decides not to pursue the project with an indoor pickleball facility as part of it, then they would be entitled to terminate the lease. If any of these events were to transpire, then our forecasts would be materially affected if we were not able to secure a new location on similar terms.
We are a start-up company with no operating history.
The Company has no operating results to date. The start up of a new company entails numerous risks not present in existing companies, any of which could have a detrimental effect on the results of operations and/or the value of our equity. The risks include: difficulties in assimilating operations and services; our ability to expand operations to support our needed revenue growth; our ability to finance our operations and capital expenditure needs; our ability to enter into contracts with customers and suppliers. Moreover, as with any start-up and many mature companies, the actual results are often materially different than what is forecast by management.
The price of the SAFE Securities and the conversion price into membership interests as part of this offering is arbitrary and may vary.
The Company has not conducted a valuation study or utilized any other metrics or parameters in setting the offering price of SAFE Securities sold as part of this offering. In addition, the Company may offer different prices to different investors based on a variety of factors including but not limited to the size of the investment and the potential for strategic collaboration.
Use of investment proceeds is not contingent on a minimum total amount of funds raised.
We estimate that the Company’s business plans require approximately six to seven million in capital (equity and debt) to finance development and fund initial working capital requirements of our first location in Sarasota. The total amount of capital for the first three locations is estimated to be approximately $17.7 million. The Company plans on executing on its business plans as soon as funds are available. If less than this amount is raised, or if more than this amount is required (even if this amount is raised), then the Company may be unable to commence operations. If either of these situations were to occur any amounts spent on the Company’s plan will be lost. If the Company raises at least sufficient capital to acquire the land of the first location, Management intends to do so and thereafter continue its efforts to raise the remainder of the needed development capital. Additional locations will require additional capital, which the Company may raise directly, or may raise through the project related subsidiary. Our ability to raise needed capital will have a material effect on our financial performance. The Company has executed a preliminary agreement CMN Funding to arrange for loans that should enable the Company to construct the Lakewood Ranch location. The loans for each location would be approximately $7.5 million of which $5.9 million is expected to be allocated to the development (including the first year’s interest of $900,000). $1.1 million would be required to be invested in an investment trading platform. The after-tax profits from the trading activities would be required to pay down principal of the loan. CMN and the Company have preliminarily agreed that the investment trading platform will be Gachi Partners 1, LP, which is a hedge fund managed by William Ryu. Mr. Ryu is a former employee of Mr. Gordon, who currently serves as part-time outside general counsel to the investment trading platform.
We are subject to a number of risks related to ACH, credit card and debit card payments we accept.
We intend to accept payments through automated clearing house (“ACH”), credit card and debit card transactions. For ACH, credit card and debit card payments, we pay interchange and other fees, which may increase over time. An increase in those fees would require us to either increase the prices we charge for our memberships, which could cause us to lose members or suffer an increase in our operating expenses, either of which could harm our operating results. If we or any of our processing vendors have problems with our billing software, or the billing software malfunctions, it could have an adverse effect on our member satisfaction and could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our members’ credit cards, debit cards or bank accounts on a timely basis or at all, we could lose membership revenue, which would harm our operating results. If we fail to adequately control fraudulent ACH, credit card and debit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher ACH, credit card and debit card related costs, each of which could adversely affect our business, financial condition and results of operations. The termination of our ability to process payments through ACH transactions or on any major credit or debit card would significantly impair our ability to operate our business.
Affiliate Transactions
The Company has and intends to engage with its Class A Members (or their affiliates) on a commercial basis, which may constitute a conflict of interests. In each case, the Company was or will be represented in negotiating the terms of the commercial arrangement by the Class A member who has no economic interest in the transaction. In such cases, the non-interested Class A Member (or both members if there is no unaffiliated member) must make the determination that the transaction will be in the best interests of the Company and that the commercial terms were on as good or better terms that are obtainable from unaffiliated sources; however, there are no guarantees that the resulting transaction will be on as good or better terms that could have been obtained from unaffiliated sources. In April 2020, the Company loaned $8,500 to Brian McCarthy. The loan remains outstanding. The Company entered into an agreement with Starboard Tact, LLC, which is owned by Brian McCarthy, to lead the realty development efforts on behalf of the Company. Starboard Tact is paid 7% of the amount of the development costs with a $10,000 per month minimum. The Company has also engaged with Matthew Gordon to provide legal services and other services at the flat rate of $5,000 per month. Following full capitalization, Mr. Gordon and Mr. McCarthy are expected to become employees of the Company whose salaries are forecast to be $300,000 respective. Prior, Mr. Gordon’s compensation is expected to increase to $20,000 per month. The Company has borrowed $700,000 from Mr. Gordon to finance the purchase of the property in Sarasota for its Lakewood Ranch club. The terms of the loan were superior to any of the multiple offers the Company received from unaffiliated sources. The fees and costs associated with the loan are approximately $45,000. The interest rate is 9%. The loan term is three years. The company is purchasing the property through its wholly owned subsidiary, TPC Sarasota, LLC (“TPCLR”). This entity is granting Mr. Gordon a first priority mortgage on the property. The Company is also guaranteeing the loan and pledging all membership interests in TPCLR as additional security for the loan. Mr. Gordon has agreed to share the first priority lien with any lender providing the development capital for the property. As part of the Company’s contemplated financing arrangement with CMN Funding (to secure a construction loan for the development of the Lakewood Ranch club), approximately $1.1 million of the $7.5 million loan is required to be invested in an investment firm. CMN and the Company have agreed to invest such funds with Gachi Partners 1, LP, (the “Fund”) a hedge fund run by Mr. William Ryu. Mr. Ryu was a former employee of Mr. Gordon and Mr. Gordon serves as part-time general counsel of Gachi for which he receives his normal hourly attorney rate. Mr. Ryu and Mr. Gordon have discussed making Mr. Gordon an equity owner in Gachi Management, LLC, the general partner of the Fund. If Mr. Gordon becomes an equity owner, he will have a direct financial benefit from the Company’s investment in the Fund. The contemplated investment in the Fund is based on economic terms that are superior to the Fund’s standard offer to investors and would be superior to any other investors in the Fund to date.
Regulation
The state of Florida regulates ‘health studios’, which require the posting of bonds (in some cases) and certain consumer protections as they related to offering membership contracts. The regulations are contained in Title XXXIII, Chapter 501 of the Florida statutes. Based on the definitions and our analysis of the statutory language, we do not believe that our business is subject to these regulations. Further Section 501.013 specifically excludes tennis and racquetball facilities. In the event that our conclusion is incorrect, we may be subject to penalties and other regulatory action, which may be material. Such action may affect our membership programs and result in the Company incurring significant additional expenses.
Zoning and Permits
Management spends considerable time and resources to help ensure that all locations are compliant with zoning and use requirements; however, until final plans are submitted there can be no guarantee that the needed permits and certificates of occupancy will be issued. If the Company is unable to obtain such permits and certificates, it may materially delay or prevent a location from opening and cause the Company to lose time and capital.
Development Risks
The Company is also subject to the risk that its key vendors and service providers fail to meet deadlines in the development process. These parties include our general contractor, subcontractors, the building materials fabricator (including the building itself) and other related parties.
Security and privacy breaches may expose us to liability and cause us to lose customers.
Federal and state law requires us to safeguard our customers’ financial information, including credit card information. Although we intend to establish security procedures and protocol, including credit card industry compliance procedures, to protect against identity theft and the theft of our customers’ financial information, our security and testing measures may not prevent security breaches and breaches of our customers’ privacy may occur, which could harm our business. For example, we believe that a significant number of our users provide us with credit card, banking and other confidential information and will authorize us to bill their credit card accounts directly for our products and services. Typically, we will rely on encryption and authentication technology licensed from third parties to enhance transmission security of confidential information. Techniques used to obtain unauthorized access or to sabotage systems change frequently and are constantly evolving. These techniques and other advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology used by us or one of our vendors to protect customer data. We may be unable to anticipate these techniques or to implement adequate preventive or reactive measures. Several recent, highly publicized data security breaches at other companies have heightened consumer awareness of this issue. Further, a significant number of states require the customers be notified if a security breach results in the disclosure of their personal financial account or other information. Additional states and governmental entities are considering such “notice” laws. In addition, other public disclosure laws may require that material security breaches be reported. Any compromise of our security or that of our third-party vendors or noncompliance with privacy or other laws or requirements could harm our reputation, cause our members to lose confidence in us, or harm our financial condition and, therefore, our business. In addition, a party who is able to circumvent our security measures or exploit inadequacies in our security measures or that of our third-party vendors, could, among other effects, misappropriate proprietary information, cause interruptions in our operations or expose members to computer viruses or other disruptions. We may be required to make significant expenditures to protect against security breaches or to remedy problems caused by any breaches. Actual or perceived vulnerabilities may lead to claims against us. To the extent the measures taken by us or our third-party vendors prove to be insufficient or inadequate, we may become subject to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.
Changes in legislation or requirements related to electronic fund transfer, or our failure to comply with existing or future regulations, may adversely impact our business.
We intent to accept payments for our memberships through EFT from members’ bank accounts and, therefore, we are subject to federal, state and provincial legislation and certification requirements governing EFT, including the Electronic Funds Transfer Act.
Company decisions require the approval of both of our Managers.
Each of Brian McCarthy and Matthew Gordon (through their wholly owned limited liability companies) are Class A members and managers of the Company. The Company operating agreement requires both of their consent for all material decisions. The Company operating agreement prescribes a dispute resolution procedure, which if ultimately requires one manager to purchase the membership interests of the other. In the event of a deadlock, the Company would have delays in taking actions, which may materially harm the Company.
The Company may incur casualty losses that are not covered by insurance.
The Company expects to obtain insurance coverage of the type and in the amount customarily obtained by owners of properties and businesses similar to the Company’s business, including comprehensive casualty insurance, liability and fire and extended coverage; however, such insurance coverages may be provided by blanket policies of insurance obtained by the Company with overall amounts, limits and deductibles as provided in such blanket policies. There are certain types of losses, however, generally of a catastrophic nature, resulting from, for example, earthquakes, floods, hurricanes, pollution, pandemics, environmental matters or terrorist acts, that may be uninsurable or that may not be economically insurable. If the Company experiences a catastrophic loss, it could disrupt seriously the Company’s operations, delay revenue and result in large expenses to the Company. Management has inquired about the ability to obtain business interruption insurance in the event that there is a resurgence of the current pandemic that causes our facilities to either close or significantly reduce operations. Insurers are generally unwilling to provide such coverage. If these events happen, the Company may have difficulty meeting lease and or debt service payments. Management will attempt to negotiate delays in payment obligations as part of lease and loan arrangement but is uncertain if we will be able to do so.
We could be subject to claims related to health or safety risks at our clubs.
Use of our facility poses some potential health or safety risks to members or guests through physical exertion and use of our services and facilities. Claims might be asserted against us for injury suffered by, or death of members or guests while exercising at a club. We might not be able to successfully defend such claims. As a result, we might not be able to maintain our general liability insurance on acceptable terms in the future or maintain a level of insurance that would provide adequate coverage against potential claims.
Delayed Schedule K-1’s.
The Company may not be able to provide final Schedule K-1s to Members for any given fiscal year until after April 15 of the following year. The Managers will endeavor to provide Members with final Schedule K-1s or with estimates of the taxable income or loss allocated to their investment in the Company on or before such date, but final Schedule K-1s may not be available until the Company has received tax–reporting information from its investment necessary to prepare final Schedule K-1’s. Members may be required to obtain extensions of the filing dates for their federal, state, and local income tax returns. Each prospective investor should consult with its own advisor as to the advisability and tax consequences of an investment in the Company.
The Company may be subject to increased labor and benefits costs.
In the U.S., the Company is subject to United States federal and state laws governing such matters as minimum wages, working conditions and overtime. As federal and state minimum wage rates increase, the Company may need to increase not only the wages of our minimum wage employees, but also the wages paid to employees at wage rates that are above minimum wage. Labor shortages, increased employee turnover and health care mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our results of operations may be adversely impacted. Additionally, competition and labor shortages in various markets could result in higher required wage rates.
We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
The Company is still in an early phase and we are just beginning to implement our business plan. There can be no assurance that we will ever operate profitably. The likelihood of our success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by early-stage companies. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
We may face potential difficulties in obtaining capital.
We may have difficulty raising needed capital in the future as a result of, among other factors, our lack of revenues from sales, as well as the inherent business risks associated with our Company and present and future market conditions. Our business currently does not generate any sales and future sources of revenue may not be sufficient to meet our future capital requirements. We will require additional funds to execute our business strategy and conduct our operations. If adequate funds are unavailable, we may be required to delay, reduce the scope of or eliminate one or more of our club locations, scale back club design, services offerings or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
The Company’s success depends on the experience and skill its executive officers and key employees.
In particular, we are dependent on our co-founders, Brian McCarthy and Matthew Gordon. Each are currently providing services through their wholly-owned consulting companies. We plan to enter into employment agreements with them as more fully described herein, however there can be no assurance that we will do so or that they will continue to be employed by the Company for a particular period of time. The loss of their services, or the services of executive officers or key employees could harm the Company’s business, financial condition, cash flow and results of operations.
The use of individually identifiable data by our business, our business associates and third parties is regulated at the state, federal and international levels.
The regulation of individual data is changing rapidly, and in unpredictable ways. A change in regulation could adversely affect our business, including causing our business model to no longer be viable. Costs associated with information security – such as investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud – could cause our business and results of operations to suffer materially. Additionally, the success of our online operations depends upon the secure transmission of confidential information over public networks, including the use of cashless payments. The intentional or negligent actions of employees, business associates or third parties may undermine our security measures. As a result, unauthorized parties may obtain access to our data systems and misappropriate confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography or other developments will prevent the compromise of our customer transaction processing capabilities and personal data. If any such compromise of our security or the security of information residing with our business associates or third parties were to occur, it could have a material adverse effect on our reputation, operating results and financial condition. Any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.
We operate in a regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
We are also subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and retail financing, debt collection, consumer protection, environmental, health and safety, creditor, wage-hour, anti-discrimination, whistleblower and other employment practices laws and regulations and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.
State and federal securities laws are complex, and the Company could potentially be found to have not complied with all relevant state and federal securities law in prior offerings of securities.
The Company has conducted previous offerings of securities and may not have complied with all relevant state and federal securities laws. If a court or regulatory body with the required jurisdiction ever concluded that the Company may have violated state or federal securities laws, any such violation could result in the Company being required to offer rescission rights to investors in such offering. If such investors exercised their rescission rights, the Company would have to pay to such investors an amount of funds equal to the purchase price paid by such investors plus interest from the date of any such purchase. No assurances can be given the Company will, if it is required to offer such investors a rescission right, have sufficient funds to pay the prior investors the amounts required or that proceeds from this Offering would not be used to pay such amounts. In addition, if the Company violated federal or state securities laws in connection with a prior offering and/or sale of its securities, federal or state regulators could bring an enforcement, regulatory and/or other legal action against the Company which, among other things, could result in the Company having to pay substantial fines and be prohibited from selling securities in the future.
The Investor must indemnify the Company, and its officers, managers, employees and agents under certain circumstances.
The Investor shall indemnify, defend and hold harmless the Company, and its officers, managers, employees and agents (each, a "Company Indemnified Person"), from and against any and all actions, suits, costs, expenses, losses, damages, claims and liabilities (including the reasonable compensation, expenses and disbursements of the Company’s agents, counsel, accountants and experts, including reasonable legal fees and expenses in connection with the enforcement of their indemnification rights hereunder) of any kind and nature whatsoever incurred by it in connection with the sale of the Securities or conversion into CF Shadow Series membership interests, including the costs and expenses of defending itself against any loss, damage, claim action, suit, or liability incurred by it in connection with the exercise or performance of any of its powers or duties under the Crowd SAFE or the Company operating agreement (after conversion), any breach of any representation, warranty, covenant or agreement of the Investor contained in the Crowd SAFE or in any other document provided by the Investor to the Company and any action for securities law violations instituted by the Investor that is resolved by judgment or otherwise against the Investor, but excluding any cost, expense, loss, damage, claim or liability (i) incurred by the Company through the Company’s willful misconduct, bad faith or gross negligence (except for errors in judgment).
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