Financial Performance - Net sales for the three months ended July 31, 2024, decreased by $2.42 million, or 77%, compared to the same period in 2023, primarily due to inventory availability issues[142]. - Gross profit for the same period decreased by $620,628, or 70%, with a gross margin of 41% on actual sales made[144]. - The Company incurred a net loss from continuing operations of $4.22 million for the three months ended July 31, 2024, compared to a loss of $846,765 in the same period in 2023[141]. - Loss from operations increased by $1.4 million or 76% for the three months ended July 31, 2024, compared to the same period in 2023, driven by a $0.78 million increase in total operating expenses and a $0.62 million reduction in gross profit[148]. - Total other expense decreased by $2.00 million or 196% during the three months ended July 31, 2024, with improvements in amortization of debt discounts and loss on conversion of accounts payable to common stock[149]. Cash Flow and Financing - Net cash used in operating activities was $(72,646) for the three months ended July 31, 2024, a significant improvement from $(803,363) in the same period in 2023[153]. - Cash and cash equivalents increased to $1,711,283 as of July 31, 2024, compared to $229,705 as of April 30, 2024[152]. - Net cash used in financing activities was $1,614,958 for the three months ended July 31, 2024, compared to net cash provided of $601,002 in the same period in 2023[154]. - The company has outstanding borrowings of $1,169,291 from related parties as of July 31, 2024, with accrued interest of $917,957[156]. Impairments and Losses - The Company recorded an impairment loss of $11,421,817 related to Gameface as of April 30, 2023, due to higher than anticipated financial resources and time required to achieve profitability[118]. - The Company fully impaired all goodwill as of April 30, 2024[118]. - The Company recorded a loss on the sale of Foundation Sports, which was deconsolidated on December 5, 2022[113]. - The total loss on disposal of Foundation Sports and PlaySight amounted to $0 for the year ended April 30, 2024[117]. Acquisitions and Corporate Actions - The Company agreed to acquire 70% of Yuanyu Enterprise Management Co., Limited for a total of $56 million, with $16.5 million paid in cash[125]. - The Company expects to complete the Acquisition of YYEM by purchasing 5,000 ordinary shares, representing 50% of YYEM, for 8,127,572 newly issued shares of Common Stock[126]. - The Company completed a reverse stock split of 1-for-40 on September 25, 2023, following shareholder approval[122]. - The Company entered into a securities purchase agreement in January 2024, raising approximately $16.5 million through the issuance of common stock and pre-funded warrants[121]. - The Company will transfer all legacy business assets related to the "Slinger Bag" business to a newly established entity, J&M Sports LLC, following the Acquisition[136]. Expenses and Operational Changes - General and administrative expenses increased by $876,119, or 35%, during the three months ended July 31, 2024, driven by debt settlement and legal fees related to the YYEM acquisition[146]. - Selling and marketing expenses decreased by $96,216, or 40%, during the three months ended July 31, 2024, due to reduced net sales and cessation of marketing activities for Tennis products[145]. - Research and development costs remained at $0 during the three months ended July 31, 2024, reflecting limited cash flow available for investment[147]. Management and Governance - The new executive team post-Acquisition will include Thomas Tarala as CEO and Guibao Ji as CFO, among others[126]. - There were no changes in the company's control over financial reporting since April 30, 2024, but material weaknesses were identified[163]. Going Concern - The company had an accumulated deficit of $171,607,773 as of July 31, 2024, raising substantial doubt about its ability to continue as a going concern[150]. - The independent auditors expressed substantial doubt about the company's ability to continue as a going concern in their report accompanying the financial statements[160].
Connexa(CNXA) - 2025 Q1 - Quarterly Report