Connexa Sports Technologies Inc.(YYAI) - 2024 Q4 - Annual Report

Financial Performance and Losses - Connexa Sports Technologies Inc. reported an impairment loss of $3,486,599 related to Foundation Sports due to longer-than-expected time and resources needed to achieve profitability[15]. - The company recorded a loss on the sale of PlaySight in November 2022, following the decision to eliminate further financing for its operations[22]. - The Legacy Business had assets of approximately $5.1 million and liabilities of $12.0 million as of April 30, 2024[39]. - Financial statements are prepared on a going concern basis, with substantial doubt about the ability to continue without generating profitable operations or obtaining necessary financing[151][152]. - A decline in demand could force the company to liquidate extra inventory at lower margins or at a loss, adversely affecting financial performance[196]. Business Agreements and Acquisitions - The company entered into an exclusive distribution agreement for Padel Tennis with Desarrollo y Promocion de Padel S.L., projected to generate approximately $15 million in revenue by the end of 2028[24]. - Connexa entered into a merger agreement with PlaySight Interactive Ltd., which subsequently became a wholly owned subsidiary[14]. - The Company entered into agreements to acquire 70% of Yuanyu Enterprise Management Co., Limited for a total of $56 million, resulting in YYEM shareholders owning 82.4% of the Company's common stock[33]. - The Share Purchase Agreement involved purchasing 20% of YYEM for $16.5 million, which closed on March 20, 2024[34]. - The Share Exchange Agreement included purchasing 50% of YYEM for 8,127,572 newly issued shares of common stock[35]. Stock and Shareholder Matters - Connexa's name change from Slinger Bag Inc. to Connexa Sports Technologies Inc. was effective on April 7, 2022, along with a change in ticker symbol to "CNXA"[16]. - The company increased its authorized shares of common stock from 300 million to 1 billion as of June 27, 2024[12]. - A reverse stock split of 1-for-20 was approved and took effect on June 27, 2024[48]. - Following a 1-20 reverse stock split on June 27, 2024, the company's share price rose to $8.31, allowing it to regain compliance with the Minimum Bid Price Requirement[74]. - The company regained compliance with Nasdaq's minimum shareholder equity requirement after receiving an investment of $16.5 million on January 24, 2024[70]. Cash Flow and Financing - Connexa sold $693,500 in future receivables to Agile Capital Funding for $450,000 in cash, agreeing to pay back $28,895.83 weekly until the receivable amount is fully paid[25]. - The Company sold $1,460,000 in future receivables to Agile Capital Funding, LLC for $1,000,000 in cash, agreeing to weekly payments of $52,142.86 until the amount is paid in full[80]. - The Company sold $1,183,200 in future receivables to Cedar Advance LLC for $752,000 in cash, with weekly payments of $39,440 until the amount is settled[81]. - The Company entered into a second agreement with Cedar, selling $438,000 in future receivables for $285,000 in cash, with weekly payments of $14,600[84]. - The Company sold $481,800 in future receivables to Cedar in a third agreement for $310,200 in cash, agreeing to weekly payments of $18,530.77[84]. Product Development and Market Strategy - The Company operates in the sports equipment and technology sector, focusing on the Slinger Launcher products, which include portable launchers for tennis, padel, and pickleball[86]. - The Company estimates a manufacturing capacity of approximately 5,000 units monthly across its three Slinger Bag Launcher products[96]. - The pickleball product, introduced in March 2023, is selling at a rate of around 300 units per month[96]. - The Company plans to target the global tennis, padel tennis, and pickleball communities, with an estimated 80 million active participants in the tennis market[94]. - The Company is working on an upgraded Tennis Launcher and aims to finalize testing for a Baseball/Softball Launcher by the end of the year[94]. Marketing and Consumer Engagement - Approximately 70% of Slinger Bag Tennis Launcher revenues are generated through a direct-to-consumer strategy in North America[101]. - The United States market has 17.4 million tennis players and over 5 million pickleball players, making it a key market for growth[103]. - Slinger Bag has built a user base of approximately 100,000 users and has access to a database of over 500,000 avid tennis players through Foundation Sports[112]. - The Slinger App for tennis, launched in April 2024, offers both freemium and subscription options for users[104]. - The company is experiencing a consistent Return On Ad Spend (ROAS) of 10X+ from its digital advertising efforts[116]. Risks and Challenges - The company acknowledges risks related to brand strength and the need for continuous innovation to maintain market position and financial performance[158][160]. - Rising costs for raw materials, labor, and freight could significantly impact gross margins and profitability, with labor costs at independent manufacturers increasing and energy costs fluctuating dramatically[163]. - The company relies heavily on supply chain reliability, and disruptions from factors like the COVID-19 pandemic and geopolitical tensions could materially affect operations and profitability[178]. - International operations are subject to risks including foreign currency exchange rates, economic instability, and changes in trade laws, which could adversely impact results[180]. - Political, economic, and military conditions in Israel may adversely affect business operations, as key personnel and product development are based there[167]. Technology and Innovation - The company has applied for international design and utility patent protection for its main products, including the Slinger Launcher and Slinger Oscillator[126]. - Slinger Bag is engaged in ongoing efforts to register more trademarks across an expanding list of products and services[128]. - The company is collaborating with Stride Innovation and Chinese vendors to develop ball launchers for new market segments, with a development timeline of approximately 18 months[138]. - The Gameface team has completed initial work on the Slinger App for Tennis, which is now available on Apple and Google Play Stores, with full functionality expected by the end of 2024[140]. - Significant reliance on information technology systems means that any security breach or failure could damage the company's reputation and operations[201].