Connexa Sports Technologies Inc.(YYAI) - 2025 Q4 - Annual Report

PART I Business Connexa Sports Technologies, after divesting its legacy business, now focuses on licensing AI and metaverse matchmaking technology and developing a new social networking vertical - On March 18, 2024, the Company acquired 70% of Yuanyu Enterprise Management Co., Limited (YYEM) for $56 million, concurrently divesting its legacy "Slinger Bag" business for $1.00, making YYEM its sole operating subsidiary[16][17] - Primary revenue is derived from licensing six metaverse-related technologies and five AI matchmaking patents, designed to integrate with major AI models like Huawei Pangu and Baidu Wenxinyiyan[20][21] Fiscal Year 2025 Revenue | Metric | Value | | :--- | :--- | | Royalty Revenue | $12.8 million | - A new social networking vertical was established in February 2025 through an agreement with TikTok to produce content for the MENA region, creating an independent revenue stream[27] - The company has three main licensees for its technology, covering Japan/South Korea, UK/Europe, and Sub-Saharan Africa[35] Risk Factors The company faces significant operational, financial, and regulatory risks, including reliance on licensees, market competition, funding needs, and geopolitical exposure through its Hong Kong subsidiary - A substantial portion of revenue is dependent on intellectual property licensing agreements with third parties, and their failure to perform could significantly impact financial results[61][62] - The love and marriage market is highly competitive with low switching costs for consumers, and competition from large, established players like Facebook's dating feature poses a significant threat[68][70] - The company may require additional financing to fund its working capital needs and growth strategy, with no guarantee of availability on favorable terms[115][116] - Operating a subsidiary in Hong Kong exposes the company to risks from the Chinese government, which could exercise significant oversight and control, potentially impacting operations and stock value[142][148] - The company's former independent auditor, Olayinka Oyebola & Co. (OOC), faces SEC charges, which could impact the credibility of past financial statements for both Connexa and YYEM and potentially require restatements[125][127] - Following the acquisition of YYEM, the former YYEM shareholder owns approximately 55.8% of the company's common stock, enabling significant influence over corporate matters[161] Unresolved Staff Comments This item is not applicable to the company because it qualifies as a smaller reporting company - Not applicable to smaller reporting companies[178] Cybersecurity The company has established a comprehensive cybersecurity risk management framework, managed internally and overseen by the Board, with no material incidents reported for FY2025 - A cybersecurity risk management framework is in place, managed by internal IT staff with oversight from the Board of Directors[180][184] - No cybersecurity incidents occurred during the fiscal year ended April 30, 2025, that resulted in operational interruptions or material impact[183] Properties The company does not own any real estate, leasing its principal office in Hong Kong for HKD 42,000 monthly, with the lease expiring in August 2026 - The company leases its principal office in Hong Kong for HKD 42,000 per month, with the lease expiring in August 2026[186] Legal Proceedings As of the report date, the company was not involved in any pending or threatened legal proceedings expected to materially affect its operations - There are no pending or threatened legal proceedings that could materially affect the company[187] Mine Safety Disclosures This item is not applicable to the company - Not applicable[189] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "YYAI" with 509 holders of record as of August 7, 2025, and it has no plans to pay cash dividends, retaining earnings for operations and expansion - The company's common stock is listed on Nasdaq under the symbol "YYAI"[192] - As of August 7, 2025, there were 509 holders of record of the common stock[193] - The company has never declared or paid cash dividends and does not anticipate paying any in the near future[194] Selected Financial Data This item is not applicable to the company because it qualifies as a smaller reporting company - Not applicable to smaller reporting companies[200] Management's Discussion and Analysis of Financial Condition and Results of Operation For FY2025, revenue increased by 147% to $12.8 million due to new licensing agreements, driving a 145% increase in gross profit and a 71% increase in operating income, while working capital grew 93% despite a decrease in operating cash flow due to increased accounts receivable Results of Operations (FY 2025 vs. FY 2024) | Metric | FY 2025 ($M) | FY 2024 ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $12.8 | $5.2 | +147% | | Gross Profit | $9.8 | $4.0 | +145% | | Operating Income | $6.6 | $3.9 | +71% | Cash Flow Summary (FY 2025 vs. FY 2024) | Metric | FY 2025 ($M) | FY 2024 ($M) | | :--- | :--- | :--- | | Cash Flow from Operating Activities | ($0.38) | $2.49 | | Cash Flow from Financing Activities | $0.39 | ($2.45) | - Working capital increased by 93% to $16.0 million as of April 30, 2025, up from $8.2 million a year prior[216] - The decrease in operating cash flow was primarily driven by a $10.0 million increase in accounts receivable, as licensees have up to 90 days after year-end to pay[216][218] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company because it qualifies as a smaller reporting company - As a smaller reporting company, we are not required to provide this information[250] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2025 and FY2024, with an unqualified opinion from Enrome LLP, reflecting the reverse acquisition accounting of YYEM and detailing key financial figures and accounting policies - The financial statements were audited by Enrome LLP, which issued an unqualified opinion[256] - The acquisition of YYEM was accounted for as a "reverse acquisition," with YYEM being the accounting acquirer and Connexa (the legal acquirer) being the accounting acquiree[281][282] Consolidated Balance Sheet Highlights (as of April 30) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Total Assets | 32,905,794 | 23,164,682 | | Total Liabilities | 6,487,171 | 1,442,006 | | Total Shareholders' Equity | 26,418,623 | 21,722,676 | Consolidated Statement of Operations Highlights (for the year ended April 30) | Metric | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Revenue | 12,818,182 | 5,195,804 | | Net Income | 4,633,447 | 2,625,554 | | Net Income Attributable to Controlling Interest | 3,491,287 | 2,625,554 | - The company's three largest customers accounted for 100% of total accounts receivable and revenues for the year ended April 30, 2025[353] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On March 24, 2025, the company dismissed Bush & Associates CPA and engaged Enrome LLP as its new independent registered public accounting firm to improve communication efficiency, with no disagreements on accounting principles or disclosures - The company changed its independent auditor from Bush & Associates CPA to Enrome LLP on March 24, 2025[383] - The reason for the change was to address communication challenges due to the geographic locations of the auditor and management[384] - There were no disagreements with the former auditor on any matter of accounting principles or practices[385] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of April 30, 2025, with no material changes to internal control over financial reporting during the fiscal year - Management concluded that disclosure controls and procedures were effective as of the end of the fiscal year, April 30, 2025[387] - No material changes to internal control over financial reporting occurred during the year ended April 30, 2025[388] Other Information This item is not applicable - Not applicable[392] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - Not applicable[393] PART III Directors, Executive Officers and Corporate Governance This section provides biographical details for the company's executive officers, Thomas Tarala (CEO) and Guibao Ji (CFO), and its five-member Board of Directors, which includes three independent directors and an Audit Committee Financial Expert - The company's executive officers are Thomas Tarala (CEO) and Guibao Ji (CFO)[396] - The Board of Directors is composed of five members, three of whom are independent[407][408] - Chenlong Liu is qualified as the Audit Committee Financial Expert[410] Executive Compensation Executive compensation for FY2025 and FY2024 is detailed, including CEO Thomas Tarala's $720,000 base salary, $300,000 stock signing bonus, and $1,000,000 merger success fee, and CFO Guibao Ji's $250,000 annual salary, with director compensation now a $15,000 quarterly cash payment Executive Compensation (FY 2025) | Name and Principal Position | Salary ($) | Share Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Thomas Tarala (CEO) | 320,000 | 1,300,000 | 1,620,000 | | Guibao Ji (CFO) | 111,111 | - | 111,111 | - CEO Thomas Tarala's employment agreement includes a base salary of $720,000, a $300,000 signing bonus in common stock, and a $1,000,000 success fee related to the YYEM merger[429] - CFO Guibao Ji's employment agreement provides for an annual salary of $250,000 and a discretionary bonus[436] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of August 7, 2025, director Hongyu Zhou was the largest beneficial owner, holding 55.81% of the company's common stock, representing the entire ownership of all current officers and directors as a group, with 1,500,000 shares available for future issuance under the 2020 Global Share Incentive Plan Security Ownership of Major Shareholders and Management | Name | of Shares | % of Class | | :--- | :--- | :--- | | Hongyu Zhou (Director) | 8,127,572 | 55.81% | | All current officers and directors as a group (5 persons) | 8,127,572 | 55.81% | - The 2020 Global Share Incentive Plan has 1,500,000 shares of common stock available for issuance[449] Certain Relationships and Related Transactions and Director Independence The company has significant related-party transactions with director Hongyu Zhou, including a $2,827,528 contingent receivable from his guarantee on an investment and a $775,406 payable to him for covered expenses - Director Hongyu Zhou has provided a guarantee on the value of the company's investment in Brightstar Technology Group, creating a contingent receivable of $2,827,528 as of April 30, 2025[450] - As of April 30, 2025, the company had a payable of $775,406 to Mr. Zhou for expenses he covered on behalf of the company[451] Principal Accountant Fees and Services The company incurred $200,000 in audit fees for fiscal year 2025 and $120,000 for fiscal year 2024 from its principal independent accountants, with no other fees paid for tax or other services in either year Accountant Fees | Fee Type | Fiscal 2025 ($) | Fiscal 2024 ($) | | :--- | :--- | :--- | | Audit Fees | 200,000 | 120,000 | | Tax Fees | 0 | 0 | | All Other Fees | 0 | 0 | | Total | 200,000 | 120,000 | PART IV Exhibits, Financial Statement Schedules This section incorporates the company's financial statements by reference and provides a comprehensive list of all exhibits filed as part of the Annual Report on Form 10-K, including key corporate documents and material agreements - This section lists all exhibits filed with the Form 10-K, including key corporate documents and material contracts[456]