Connexa Sports Technologies Inc

Previous wording

On March 18, 2024, the Company entered into a share purchase agreement (the “Purchase Agreement”) and a share exchange agreement (the “Exchange Agreement”) to acquire 70% of Yuanyu Enterprise Management Co., Limited (“YYEM”) from Mr. Hongyu Zhou, the sole shareholder of YYEM (“YYEM Seller”) for a combined $56 million (the “Acquisition”). $16.5 million of this amount was paid in cash pursuant to the Purchase Agreement, and the balance will be paid in shares pursuant to the Exchange Agreement. As of September 9, 2024, the Acquisition has not been completed. Such closing will result in a change of control of the Company, as the shareholders of YYEM will become the owners of approximately 75.3% of the issued and outstanding shares of Common Stock and the board of directors of Connexa (the “Board of Directors” or the “Board”) will comprise individuals designated by the YYEM Seller. As part of this transaction, the Company agreed to sell its wholly owned subsidiary, Slinger Bag Americas Inc., to a newly established Florida limited liability company called J&M Sports LLC (“J&M”). J&M is owned by Yonah Kalfa and Mike Ballardie.

Current wording

On March 18, 2024, the Company entered into a share purchase agreement (the “Purchase Agreement”) and a share exchange agreement (the “Exchange Agreement”) to acquire 70% of Yuanyu Enterprise Management Co., Limited (“YYEM”) from Mr. Hongyu Zhou, the sole shareholder of YYEM (“YYEM Seller”) for a combined $56 million (the “Acquisition”). $16.5 million of this amount was paid in cash on March 20, 2024 pursuant to the Purchase Agreement to acquire 20% of YYEM.

Previous wording

The Company expects the Acquisition to close following receipt of Nasdaq’s approval of YYEM’s new listing application. The Acquisition will be completed via the purchase of 5,000 ordinary shares of YYEM, representing 50% of the issued and outstanding ordinary shares of YYEM, in exchange for 8,127,572 newly issued shares of Common Stock to the sole shareholder of YYEM, Mr. Hongyu Zhou representing 75.3% of the issued and outstanding shares of Common Stock as of the date of the closing. In this connection, the Company’s directors and officers intend to resign from their positions promptly following Nasdaq approval and to be replaced with the following individuals:

Current wording

On November 21, 2024, following Nasdaq approval of the new listing application submitted to it in connection with the Acquisition, the Company completed the purchase of 5,000 ordinary shares of YYEM, representing 50% of the issued and outstanding ordinary shares of Yuanyu Enterprise Management Co., Limited (“YYEM”), for 8,127,572 newly issued shares of Common Stock to the sole shareholder of YYEM, Mr. Hongyu Zhou, representing 55.8% of the issued and outstanding shares of Common Stock as of the date of the closing (the “Share Exchange Transaction”). As part of this transaction, the Company agreed to sell its wholly owned subsidiary, Slinger Bag Americas Inc., to a newly established Florida limited liability company called J&M Sports LLC (“J&M”). J&M is owned by Yonah Kalfa, former Chief Innovation Officer and director of the Company, Mike Ballardie, former President, Chief Executive Officer, Treasurer and director of the Company, Juda Honickman, former Chief Marketing Officer of the Company, and Mark Radom, former general counsel and Secretary of the Company. On November 21, 2024, the Company entered into a separation and assignment agreement (the “Separation Agreement”) with J$M, to sell, transfer and assign all or substantially all of its legacy business, assets and liabilities related to or necessary for the operations of its “Slinger Bag” business or products (the “Legacy Business”) to J$M, in consideration for $1.00. Following the Separation Agreement, J$M has obtained the sole right to and assumed all the obligations of the Legacy Business and is liable to the Company for any losses arising from third-party claims against the Company that arise from liabilities related to the Legacy Business (the “Separation”). As a result of the completion of the Acquisition, on November 21, 2024, the Company’s directors and officers resigned from their positions on November 21, 2024. On November 19, 2024, prior to the resignation of all of the directors of the Company, the Board of Directors appointed the five (5) directors named below, with such appointment taking effect on November 21, 2024 upon the closing of the Transaction.

Previous wording

The following table lists the names, ages and positions of the individuals who are expected to serve as executive officers and directors of the Company upon completion of the Acquisition:

Current wording

The following table lists the names, ages and positions of the individuals who now serve as executive officers and directors of the Company upon completion of the Acquisition:

Previous wording

Kong (“Luke”) Liu is an entrepreneur with experience in both traditional industries and the technology and Web3 areas. (He is not related to Chenlong Liu.) Mr. Liu has experience in management and strategy roles in companies ranging from startups to multinationals, and he has founded several companies over the years. Mr. Liu has has a particular focus on digital strategies at both traditional retailers and technology companies, as well as in the recruitment field. He serves as the CEO of World@Meta, a Singapore-based technology company developing mobile apps and games, where maximizing user engagement is a primary objective. He also serves as a managing director of MS Consultancy Pte Ltd, a business consultancy that he founded in November 2020. In such environments, Mr. Liu has been responsible for establishing the vision of the enterprise and working across teams to make that vision a reality.

Current wording

Kong (“Luke”) Liu is an entrepreneur with experience in both traditional industries and the technology and Web3 areas. (He is not related to Chenlong Liu.) Mr. Liu has experience in management and strategy roles in companies ranging from startups to multinationals, and he has founded several companies over the years. Mr. Liu has a particular focus on digital strategies at both traditional retailers and technology companies, as well as in the recruitment field. He serves as the CEO of World@Meta, a Singapore-based technology company developing mobile apps and games, where maximizing user engagement is a primary objective. He also serves as a managing director of MS Consultancy Pte Ltd, a business consultancy that he founded in November 2020. In such environments, Mr. Liu has been responsible for establishing the vision of the enterprise and working across teams to make that vision a reality.

Previous wording

As an inducement to the Company to complete the Acquisition, YYEM has agreed to make an aggregate payment to the Company of $4.5 million in cash of which $2 million has been transferred to the Company to-date and of which $556,629 has been transferred to the parties that arranged the Acquisition prior to the date hereof.

Current wording

As an inducement to the Company to complete the Acquisition, YYEM has agreed to make an aggregate payment to the Company of $5,000,000 million in cash of which $3,244,960 million has been transferred to the Company to-date. Since the Acquisition has now been consummated, the remaining $1,755,040 million in cash will be transferred to the order of J&M (defined below) instead of the Company.

Previous wording

Following the closing of the Acquisition, the Company will sell, transfer and assign all of its legacy business, assets and liabilities related to or necessary for the operations of its “Slinger Bag” business or products (the “Legacy Business”) to a newly established Florida limited liability company called J&M Sports LLC (“J&M”) and will agree that J&M will have the sole right to and obligations of the Legacy Business and will be liable to the Company for any losses arising from third-party claims against the Company arising from liabilities related to the Legacy Business.

Current wording

Following the closing of the Acquisition, the Company sold, transferred and assigned all of its legacy business, assets and liabilities related to or necessary for the operations of its “Slinger Bag” business or products (the “Legacy Business”) to a newly established Florida limited liability company called J&M Sports LLC (“J&M”) and agreed that J&M has the sole right to and obligations of the Legacy Business and will be liable to the Company for any losses arising from third-party claims against the Company arising from liabilities related to the Legacy Business.

Previous wording

The operations of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL and Gameface are collectively referred to as the “Company.” Following the closing of the Acquisition and the separation of the Legacy Business, the Company’s historic operations will no longer be part of the Company’s operations and YYEM will be the Company’s operating subsidiary. The results of the Company’s operations for the three months ended July 31, 2024 reflect the Legacy Business operations and are not necessarily representative of what the results of operations of the Company (based on YYEM’s results of operations) will be following the closing of the Acquisition.

Current wording

For the quarter ended on October 31, 2024, the operations of Connexa Sports Technology Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, Slinger Bag Limited and Gameface are collectively referred to as the “Company.” Following the closing of the Acquisition and the separation of the Legacy Business, the Company’s historic operations are no longer be part of the Company’s operations and YYEM will be the Company’s operating subsidiary. The results of the Company’s operations for the six months ended October 31, 2024 reflect the Legacy Business operations and are not necessarily representative of what the results of operations of the Company (based on YYEM’s results of operations) will be following the closing of the Acquisition.

Previous wording

Net sales decreased $2.42 million, or -77%, during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. The decrease was as a direct result of on-going inventory availability issues stemming back to the start of calendar 2024. The company had limited Tennis Launcher inventory (its primary revenue driver) available for sale through our e-commerce platform in North America nor to any of our international distributor-managed markets throughout the quarter ended July 31, 2024. The majority of revenues generated within the quarter came from our D2C Pickleball Launcher sales within North America.

Current wording

Net sales decreased $1.93 million, or -84%, during the three months ended October 31, 2024 as compared to the three months ended October 31, 2023. The decrease was as a direct result of on-going inventory availability issues stemming back to the start of calendar 2024. The company had zero Tennis Launcher inventory (its primary revenue driver) available for sale through our e-commerce platform in North America nor to any of our international distributor-managed markets throughout the Quarter ended October 31, 2024. The majority of revenues generated within the quarter came from our limited D2C Pickleball Launcher inventory within North America.

Previous wording

Cost of sales decreased $$1.79 million or -81% during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023, which is directly as a result of the decrease in net sales. Gross income decreased $0.62 million, or -70%, during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. This reduction in gross income is driven primarily as a result of the net sales reduction. Gross Margin on the actual sales made remained positive at 41%.

Current wording

Cost of sales decreased $1.21 million or -74% during the three months ended October 31, 2024 as compared to the three months ended October 31, 2023, which is directly as a result of the decrease in net sales. Gross income decreased $0.72 million, or -111%, during the three months ended October 31, 2024 as compared to the three months ended October 31, 2023. This reduction in gross income is driven primarily as a result of the net sales reduction.

Previous wording

Selling and marketing expenses decreased $0.96 million, or -40%, during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. This decrease is a direct result of the reduction in net sales and the associated ceasing of all Tennis product related marketing activities.

Current wording

Selling and marketing expenses decreased $0.71 million, or -56%, during the three months ended October 31, 2024 as compared to the three months ended October 31, 2023. This decrease is a direct result of the reduction in net sales and the associated ceasing of all Tennis and Pickleball product related marketing activities.

Previous wording

General and administrative expenses, which primarily consist of compensation (including share-based compensation) and other employee-related costs, as well as legal fees and fees for professional services, increased $0.88 million or 35% during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. This increase is primarily driven by an increase in debt settlement, issuance of share-based compensation to several employees and board directors and on-going legal and other professional fees related to the acquisition of YYEM and management of the company’s Nasdaq compliance within the period.

Current wording

General and administrative expenses, which primarily consist of compensation) and other employee-related costs, as well as legal fees and fees for professional services, increased $0.42 million or 10% during the six months ended October 31, 2024 as compared to the six months ended October 31, 2023. This increase was primarily driven by an increase in debt settlement, the annual company insurance policies becoming due for renewal and the on-going legal and other professional fees related to the acquisition of YYEM and management of the company’s Nasdaq compliance within the period.

Previous wording

Loss from operations increased by $1.4 million or 76% in the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. This increase in loss in operations was driven by a combination of an $0.78 million increase in total operating expenses recorded in the quarter, coupled with a reduced in gross profit of $0.62 million.

Current wording

Loss from operations increased by $1.45 million or 48% in the six months ended October 31, 2024 as compared to the six months ended October 31, 2023. This increase in loss in operations was driven by a combination of an $1.50 million increase in total operating expenses recorded in the quarter, coupled with a reduced in gross profit of $1.34 million.

Previous wording

Total other expense decreased $2.00 million or 196% during the three months ended July 31, 2024 as compared to the three months ended July 31, 2023. We recorded an improvement in both amortization of debt discounts of $0.78 million; in loss on conversion of accounts payable to common stock of $0.29 million; in fair value of derivatives of $2.15 million. Excluding these improvements, we recorded an increasein interest payments of $0.90 million for the periods to July 31, 2024 and 2023 respectively, an increase of 1290%.

Current wording

Total other expense increased $5.01 million or 124% during the six months ended October 31, 2024 as compared to the six months ended October 31, 2023. We recorded an improvement in both amortization of debt discounts of $0.79 million; in loss on conversion of accounts payable to common stock of $0.29 million; in fair value of derivatives of $16.94 million. Excluding these improvements, we recorded an increase in interest expense of $0.55 million for the periods to October 31, 2024 and 2023 respectively, an increase of 130%.

Previous wording

Our financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We had an accumulated deficit of $171,607,773 as of July 31, 2024, and more losses are anticipated in the development of the business. Accordingly, there is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Current wording

Our financial statements have been prepared on a going concern basis, which assumes we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We had an accumulated deficit of $(172,973,917) as of October 31, 2024.

Previous wording

The following is a summary of our cash flows from operating, investing and financing activities for the three months ended July 31, 2024 and 2023:

Current wording

The following is a summary of our cash flows from operating, investing and financing activities for the six months ended October 31, 2024 and 2023:

Previous wording

We had cash and cash equivalents of $1,711,283 as of July 31, 2024, as compared to $229,705 as of April 30, 2024.

Current wording

We had cash and cash equivalents of $1,642,969 as of October 31, 2024, as compared to $229,705 as of April 30, 2024.

Previous wording

Net cash used in operating activities was $(72,646) during the three months ended July 31, 2024, as compared to net cash used in operating activities of $803,363 during the same period in 2023. Our net cash used in operating activities during the three months ended July 31, 2024 was primarily the result of our net income of $(4,220,745) for the period, and our net non-cash expenses of $(965,550), incorporating the change in fair value of derivative liability, reductions in shares and warrants issued for services, share-based compensation, amortization of debt discounts, interest and interest due to related parties, settlement expense, loss on depreciation, amortization and impairment expenses, as well as changes in our current assets and liabilities related to our operations. The most notable changes occurred in our inventory and prepaid inventory which decreased in the three month periods, together with significant decreases in accounts payable, accrued expenses, derivative liabilities, contingent consideration and an increases in accounts receivable, accrued interest, current portion of notes payable, net of discount related and other current liabilities.

Current wording

Net cash used in operating activities was $2,726 during the six months ended October 31, 2024, as compared to net cash used in operating activities of $(648,056) during the same period in 2023. Our net cash used in operating activities during the six months ended October 31, 2024 was primarily the result of our net loss of $(5,586,889) for the period, and our net non-cash expenses of $2,496,748, incorporating the change in fair value of derivative liability, increases in shares and warrants issued for services, share-based compensation, amortization of debt discounts, interest and interest due to related parties, settlement expense, loss on depreciation, amortization and impairment expenses, as well as changes in our current assets and liabilities related to our operations. The most notable changes occurred in our decreased levels of inventory for the six month periods, together with decreases in accounts payable, derivative liabilities, contingent consideration, amortization, fair value changes in our derivative liability, amortization of debt discounts, settlement expense and loss on settlement of accounts payable. These were offset with increases in accounts receivable, accrued interest, prepaid inventory, accrued expenses - both across accounts payable and payroll costs.

Previous wording

We incurred $0 and no investing activities in either of the three-month periods ended July 31, 2024 and 2023.

Current wording

We incurred no investing activities in either of the six-month periods ended October 31, 2024 and 2023.

Previous wording

Net cash used in financing activities was $1,614,958 for the three months ended July 31, 2024, as compared to net cash provided by financing activities of $601,002 for the same period in 2023. The changes is financing activities for the three months ended July 31, 2024 primarily consisted of proceeds of $1,618,176 resulting from the exercise of warrants, $(3,218) from proceeds of notes payable, offset by $0 in payments of notes payable to related parties and $0 in payments of notes payable. Changes in financing activities for the three months ended July 31, 2023 consisted of 0$(298,834) in payments of notes to related parties and $(302,168) in payment of notes payable.

Current wording

Net cash used in financing activities was $1,546,328 for the six months ended October 31, 2024, as compared to net cash provided by financing activities of $654,479 for the same period in 2023. The changes in financing activities for the six months ended October 31, 2024 primarily consisted of proceeds of $1,618,996 resulting from the exercise of warrants, and $72,668 in payments of notes payable. Changes in financing activities for the six months ended October 31, 2023 consisted of $1,276,000 in proceeds from notes payable, offset by payments of $556,025 in related party notes payable and $65.496 in notes payable.

Previous wording

There were $1,169,291 and $1,169,291 in outstanding borrowings from the Company’s related parties for the period ended July 31, 2024 and April 30, 2024, respectively. Accrued interest due to related parties as of July 31, 2024 and April 30, 2024 amounted to $917,957 and $917,957, respectively.

Current wording

There were $1,169,291 and $1,169,291 in outstanding borrowings under these loan agreements from the Company’s related parties for the period ended October 31, 2024 and April 30, 2024, respectively. Accrued interest due to related parties as of October 31, 2024 and April 30, 2024 amounted to $917,957 and $917,957, respectively.

Previous wording

On January 6, 2023, we sold certain of our inventory including all components, parts, additions and accessions thereto to Yonah Kalfa and Naftali Kalfa who immediately consigned it back to us in exchange for a payment of $103 per ball launcher we sell until we have paid them an aggregate total of $2,092,700, which represents payment in full of the principal amounts of the Loan Agreements (as defined below) and certain other expenses they incurred in connection with the Company.

Current wording

On January 6, 2023, we sold certain of our inventory including all components, parts, additions and accessions thereto to Yonah Kalfa and Naftali Kalfa who immediately consigned it back to us in exchange for a payment of $103 per ball launcher we sell until we have paid them an aggregate total of $2,092,700, which represents payment in full of the principal amounts of the related-party loan agreements and certain other expenses they incurred in connection with the Company.

Previous wording

Our independent registered public accounting firm auditors’ report accompanying our April 30, 2024 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.

Current wording

Our former independent registered public accounting firm auditors’ report accompanying our April 30, 2024 financial statements contained an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.