AIRWA INC. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Lazex Inc. (“Lazex”) was incorporated under the laws of the State of Nevada on July 12, 2015. On August 23, 2019, the majority owner of Lazex entered into a Stock Purchase Agreement with Slinger Bag Americas Inc., a Delaware corporation (“Slinger Bag Americas”), which was 100% owned by Slinger Bag Ltd. (“SBL”), an Israeli company. In connection with the Stock Purchase Agreement, Slinger Bag Americas acquired 2,000,000 shares of common stock of Lazex for $332,239. On September 16, 2019, SBL transferred its ownership of Slinger Bag Americas to Lazex in exchange for the 2,000,000 shares of Lazex acquired on August 23, 2019. As a result of these transactions, Lazex owned 100% of Slinger Bag Americas and the sole shareholder of SBL owned 2,000,000 shares of common stock (approximately 82%) of Lazex. Effective September 13, 2019, Lazex changed its name to Slinger Bag Inc. On October 31, 2019, Slinger Bag Americas acquired control of Slinger Bag Canada, Inc., (“Slinger Bag Canada”) a Canadian company incorporated on November 3, 2017. There were no assets, liabilities or historical operational activity of Slinger Bag Canada. On February 10, 2020, Slinger Bag Americas became the 100% owner of SBL, along with SBL’s wholly owned subsidiary Slinger Bag International (UK) Limited (“Slinger Bag UK”), which was formed on April 3, 2019. On February 10, 2021, Zehava Tepler, the owner of SBL, contributed Slinger Bag UK to Slinger Bag Americas for no consideration. Effective February 25, 2020, the Company increased the number of authorized shares of common stock from 75,000,000 to 300,000,000 via a four-to-one forward split of its outstanding shares of common stock. All share and per share information contained in this report have been retroactively adjusted to reflect the impact of the stock split. On June 21, 2021, Slinger Bag Americas entered into a membership interest purchase agreement with Charles Ruddy to acquire a 100% ownership stake in Foundation Sports Systems, LLC (“Foundation Sports”). On February 2, 2022, the Company entered into a share purchase agreement with Flixsense Pty, Ltd. (“Gameface”). As a result of the share purchase agreement, Gameface would become a wholly owned subsidiary of the Company. On February 22, 2022, the Company entered into a merger agreement with PlaySight Interactive Ltd. (“PlaySight”) and Rohit Krishnan (the “Shareholders’ Representative”). As a result of the merger agreement, PlaySight would become a wholly owned subsidiary of the Company. During April 2022, the Company determined that the technology utilized in the Foundation Sports acquired entity would take substantially more financial resources and more time to bring to market and achieve profitability than originally anticipated. As a result, the goodwill and intangible assets related to Foundation Sports were fully impaired as of April 30, 2022, resulting in an impairment loss of $3,486,599. In addition, during April 2022 the Company decided to sell a portion of Foundation Sports. The Company continued to classify Foundation Sports in continuing operations, until December 5, 2022 when they sold 75% of Foundation Sports back to the original owners at which time it deconsolidated this subsidiary and recorded a loss on the sale. The Company also determined to dispose of the PlaySight entity during the year ended April 30, 2023. The Company completed the sale in November 2022 and recorded a loss on the sale at that time. In April 2022, the Company changed its domicile from Nevada to Delaware. On April 7, 2022, the Company effected a name change to Connexa Sports Technologies Inc. We also changed our ticker symbol, “CNXA”. Connexa is now the holding company under which Slinger Bag, PlaySight, Gameface and Foundation Sports reside. The operations of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL, Foundation Sports, PlaySight and Gameface are collectively referred to as the “Company.” On June 14, 2022, the Company effected a 1-for-10 reverse stock split, where the Company’s common stock began to trade on a reverse split adjusted basis. No fractional shares were issued in connection with the reverse stock split and all such fractional interests were rounded up to the nearest whole number of shares of common stock. All references to the outstanding stock have been retrospectively adjusted to reflect this reverse split. The Company also consummated a public offering of shares of its common stock and the listing of its common stock on the Nasdaq Capital Market. The Company operates in the sports equipment and technology business. The Company is the owner of the Slinger Launcher, which is comprised of a portable tennis ball launcher, a portable padel tennis ball launcher and a portable pickleball launcher and Gameface AI, providing AI technology and performance analytics. 41 Critical Accounting Policies and Estimates Basis of Presentation The consolidated financial statements of the Company are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). As a result of the transactions described above, the accompanying consolidated financial statements include the combined results of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada, Slinger Bag UK, SBL, Foundation Sports, PlaySight, and Gameface for the years ended April 30, 2022 and 2021. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Accordingly, actual results could differ from those estimates. Valuation of Inventory Inventory is valued at the lower of the cost (determined principally on a first-in, first-out basis) or net realizable value. The Company’s valuation of inventory includes inventory reserves for inventory that will be sold below cost and the impact of inventory shrink. Inventory reserves are based on historical information and assumptions about future demand and inventory shrink trends. It is possible that changes to inventory reserve estimates could be required in future periods due to changes in market conditions. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. The Company recognizes revenue for its performance obligation associated with its contracts with customers at a point in time once products are shipped. Amounts collected from customers in advance of shipping products ordered are reflected as deferred revenue on the accompanying consolidated balance sheets. The Company’s standard terms are non-cancelable and do not provide for the right-of-return, other than for defective merchandise covered under the Company’s standard warranty. The Company has not historically experienced any significant returns or warranty issues. Business Combinations Upon acquisition of a company, we determine if the transaction is a business combination, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, the assets acquired, and liabilities assumed, are recorded at fair value. We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. One of the most significant estimates relates to the determination of the fair value of these assets and liabilities. The determination of the fair values is based on estimates and judgments made by management. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable. Measurement period adjustments are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired and liabilities assumed is received and is not to exceed one year from the acquisition date. We may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. We continue to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided we are within the measurement period. If outside of the measurement period, any subsequent adjustments are recorded to the consolidated statement of operations. 42 Fair Value of Financial Instruments Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities Level 3 — Unobservable pricing inputs in the market Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their categorization within the fair value hierarchy. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amount of these financial instruments approximates fair value due to their short-term maturity. The Company’s derivative liabilities were calculated using Level 2 assumptions. The Company’s contingent consideration in connection with the acquisition of Gameface and PlaySight were calculated using Level 3 inputs. The Company estimates the fair value of its intangible assets using Level 3 assumptions, primarily based on the income approach utilizing the discounted cash flow method. Income Taxes Income taxes are accounted for in accordance with the provisions of ASC 740, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts that are more likely than not to be realized. Long-Lived Assets In accordance with ASC 360-10, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. If those net undiscounted cash flows do not exceed the carrying amount, impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value or discounted expected cash flows of those assets and is recorded in the period in which the determination is made. Long-lived assets related to Foundation Sports in the amount of $1,056,599 were fully impaired as of April 30, 2022, resulting in an impairment loss. There was no impairment of long-lived assets identified during the year ended April 30, 2021. Goodwill The Company accounts for goodwill in accordance with ASC 350, Intangibles - Goodwill and Other (“ASC 350”). ASC 350 requires that goodwill not be amortized, but reviewed for impairment if impairment indicators arise and, at a minimum, annually. The Company records goodwill as the excess purchase price over assets acquired and includes any work force acquired as goodwill. Goodwill is evaluated for impairment on an annual basis. With the adoption of the ASU 2017-04, which eliminates the second step of the goodwill impairment test, the Company tests impairment of goodwill in one step. In this step, the Company compares the fair value of each reporting unit with goodwill to its carrying value. The Company determines the fair value of its reporting units with goodwill using a combination of a discounted cash flow and a market value approach. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, the Company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that reporting unit, goodwill is not impaired and the Company will not record an impairment charge. The Company determined in April 2022 that the fair value of the reporting unit was less than the carrying value of the net assets assigned to the reporting unit, and therefore goodwill was fully impaired for Foundation Sports at April 30, 2022, resulting in an impairment loss of $2,430,000. There was no impairment of goodwill as of April 30, 2021. 43 Valuation of Warrants The Company grants warrants to key employees and executives as compensation on a discretionary basis. The Company also grants warrants in connection with certain note payable agreements and other key arrangements. The Company is required to estimate the fair value of share-based awards on the measurement date and recognize as expense that value of the portion of the award that is ultimately expected to vest over the requisite service period. Recent Accounting Pronouncements Recently Adopted In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under ASU 2017-04, goodwill impairment will be tested by comparing the fair value of a reporting unit with its carrying amount, and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2017-04 effective May 1, 2021. The adoption of the new standard did not have a material effect on the Company’s consolidated financial statements. Accounting Pronouncements Not Yet Adopted In December 2019, the FASB issued Accounting Standards Update (“ASU”), 2019-12, Simplifying the Accounting for Income Taxes , which amends ASC 740, Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company has not yet adopted this update and is currently evaluating the effect of this ASU on the Company’s financial statements and related disclosures. In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for public companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s consolidated financial statement presentation or disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). The guidance replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credits, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. ASC 326 requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses as well as the credit quality and underwriting standards of a company’s portfolio. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities the Company does not intend to sell or believes that it is more likely than not they will be required to sell. The ASU can be adopted no later than January 1, 2020 for SEC filers and January 1, 2023 for private companies and smaller reporting companies. The Company has not yet adopted this ASU as it qualifies as a smaller reporting company. The Company does not expect this ASU will have a material impact on its consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, “Business Combinations - Accounting for Contract Assets and Contract Liabilities (Topic 805)”. The amendments in this Update address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination. The amendments in this Update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company does not expect the adoption of this ASU to have a material impact on the Company’s financial statements. The FASB has issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 provides guidance that an entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument. The standard also provides guidance on how an entity should measure and recognize the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified. The amendments in this ASU are effective for the Company for fiscal years beginning after December 15, 2021. Early adoption is permitted for all entities, including adoption in an interim period. The Company is currently evaluating the impact that the adoption of ASU 2021-04 will have on the Company’s consolidated financial statement presentation or disclosures. 44 Results of Operations for the Years Ended April 30, 2022 and 2021 The following are the results of our operations for the year ended April 30, 2022 as compared to April 30, 2021: For the Years Ended April 30, 2022 2021 Change ($) Change (%) Net sales $ 16,831,477 $ 10,804,214 $ 6,027,263 55.79 % Cost of sales 12,346,712 7,680,290 4,666,422 60.74 6% Gross profit 4,484,765 3,123,924 1,360,841 43.56 % Operating expenses: Selling and marketing expenses 3,536,617 1,881,434 1,655,183 87.97 % General and administrative expenses 43,424,105 4,629,642 38,794,463 837.96 % Research and development costs 855,660 339,385 516,275 152.12 % Impairment loss 3,486,599 — 3,486,599 N/A Transaction costs 5,109,522 — 5,109,522 N/A Total operating expenses 56,412,503 6,850,461 49,562,042 723.48 % Loss from operations (51,927,738 ) (3,726,537 ) (48,201,201 ) 1293.46 % Other expenses (income): Amortization of debt discount 8,150,284 376,506 7,773,778 2064,72 % Loss on extinguishment of debt 7,096,730 3,030,495 4,066,235 134.18 % Loss on issuance of convertible notes 5,889,369 - 5,889,369 N/A Gain on change in fair value of derivatives (18,557,184 ) (1,939,639 ) (16,617,545 ) 856.73 % Gain on change in fair value of contingent consideration (4,847,000 ) — (4,847,000 ) N/A Interest expense - related party 165,558 608,668 (443,110 ) (72.80 )% Interest expense 1,948,157 12,792,193 (10,844,036 ) (84.77 )% Total other (income) expense (154,086 ) 14,868,223 (15,022,309 ) (101.04 )% Loss before income taxes (51,773,652 ) (18,594,760 ) (33,178,892 ) 178.43 % Provision for income taxes — — — N/A Net loss $ (51,773,652 ) $ (18,594,760 ) $ (33,178,892 ) 178.43 % Net sales Our net sales during the year ended April 30, 2022 were $16,831,477, which consisted partially of shipped orders related to new orders placed and fulfilled to consumers via our online marketplace and to our international distributors. Our net sales during the year ended April 30, 2021 were $10,804,214 which consisted partially of shipped orders related to our Kickstarter and Indiegogo crowdfunding campaigns initiated in fiscal year 2019, as well as new orders placed and fulfilled to consumers via our online marketplace and to our international distributors. The increases to our online marketplace in Slinger Bag contributed to the increase in sales along with increases related to the purchase of PlaySight in February 2022. As of April 30, 2022 and 2021, we had contract liabilities of $2,656,706 and $99,531, respectively, representing units that have not been shipped at year end. Cost of sales Our cost of sales during the year ended April 30, 2022 were $12,346,712, which represents the costs of units shipped during the period, and resulted in a gross profit of $4,484,765, or 26.65%. Our cost of sales during the year ended April 30, 2021 were $7,680,290, which represents the costs of units shipped during the period, and resulted in a gross profit of $3,123,924, or 28.91%. During the first quarter of the current year, we experienced a gross loss as the bulk of our sales in that period related to the shipment of initial crowdfunding orders. The loss on these shipments was due to (1) discounted pricing on the initial crowdfunding orders, (2) as fulfillment was later than initially scheduled we fulfilled orders with the “deluxe” version of launcher (including all features), as well as tennis balls, both of which increased costs, and (3) due to sanctions by the U.S. against Chinese sourced products, the import duty was raised on all launchers brought into the U.S. increasing our cost of sales. As a result, our cost of sales exceeded initial sales values raised in our crowdfunding campaigns. As of the beginning of the third quarter of the previous year, substantially all of the initial crowdfunding orders had been fulfilled. Sales generated during the last two fiscal quarters represented new orders placed and fulfilled during the current year by consumers and distributors, which resulted in a positive gross profit. Currently, our cost of sales is being negatively impacted by the large increase in container costs out of Asia. In addition, we had increases in 2022 cost of sales related to the purchase of PlaySight in February 2022. Our gross margins slightly increased in 2022 versus 2021 related to the above items. 45 Selling and marketing expenses During the year ended April 30, 2022, we incurred selling and marketing expenses of $3,536,617 compared with $1,881,434 during the year ended April 30, 2021. This increase is largely driven by an increase in social media advertising, sponsorships, and other investments in our public relations presence in order to drive sales and build brand awareness. General and administrative expenses General and administrative expenses consist primarily of compensation, including share-based compensation, and other employee-related costs, as well as legal fees and fees for professional services. During the year ended April 30, 2022, we incurred general and administrative expenses of $43,424,105 compared with $4,629,642 during the year ended April 30, 2021. The increase in general and administrative expenses is largely due to our share based compensation that resulted in an expense of $32,176,087. Research and development costs During the year ended April 30, 2022, we incurred research and development costs of $855,660 compared with $339,385 during the year ended April 30, 2021. This increase is mainly driven by our investment in new slinger bag launcher products for Pickleball and Padel as well as costs relating to the development of a consumer app that will integrate artificial intelligence (AI) technology that is targeted to provide performance and training insights to provide more value to our customers. Impairment loss During the year ended April 30, 2022, we incurred an impairment loss of $3,486,599 due to the full impairment of goodwill and intangible assets for Foundation Sports. Transaction costs During the year ended April 30, 2022, we incurred transaction costs of $5,109,522 associated with completing the acquisitions of Gameface, PlaySight and Foundation Sports. Other expenses During the year ended April 30, 2022, we recorded a gain on change in fair value of derivatives of $18,557,184, compared to $1,939,639 during the year ended April 30, 2021. A gain on change in fair value of contingent consideration of $4,847,000 and $0 was recorded during the years ended April 30, 2022 and 2021, respectively, relating to the acquisition of PlaySight. Excluding the gains, during the years ended April 30, 2022 and 2021, we had other expenses totaling $23,250,098 and $16,807,862, respectively. The increase in other expenses for the year ended April 30, 2022 as compared to April 30, 2021 was primarily due amortization of discounts and losses incurred on extinguishment of our convertible notes totaling net of decreases in interest expense from 2021 to 2022 due to changes in our long-term debt. Liquidity and Capital Resources 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 $80,596,925 as of April 30, 2022, 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. The ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or being able to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from related parties, and/or private placement of debt and/or common stock. 46 The following is a summary of our cash flows from operating, investing and financing activities for the years ended April 30, 2022 and 2021: For the Years Ended April 30, 2022 2021 Cash flows used in operating activities $ (11,463,464 ) $ (4,517,457 ) Cash flows used in investing activities $ (1,618,341 ) $ (30,000 ) Cash flows provided by financing activities $ 13,734,286 $ 5,420,000 We had cash and cash equivalents of $1,424,360 as of April 30, 2022, as compared to $928,796 as of April 30, 2021. Net cash used in operating activities was $11,463,464 during the year ended April 30, 2022, compared with $4,517,457 during the year ended April 30, 2021. Our cash used in operating activities during the year ended April 30, 2022 was primarily the result of our net loss of $51,773,652 for the year as well as increases in inventory, prepaid inventory, accounts receivable, and prepaid expenses, which was partially offset by non-cash expenses of $38,363,555, and increases in accounts payable, accrued expenses, accrued interest, and a decrease in contract liabilities. Our net cash used in operating activities during the year ended April 30, 2021 was primarily the result of our net loss of $18,594,760 during the year as well as increases in inventory and accounts receivable, which was partially offset by non-cash expenses of $14,892,030 and increases in accounts payable and accrued expenses, as well as a decrease in prepaid expenses and other current assets. Net cash used in investing activities was $1,618,341 for the year ended April, 30 2022, compared with net cash used in investing activities of $30,000 for the for year ended April 30, 2021. Investing activities for the year ended April, 30 2022 related to cash acquired from Gameface and PlaySight acquisitions, and a note receivable issuance, while investing activities for the year ended April 30, 2021 were related to the purchase of the Slinger trademark. Net cash provided by financing activities was $13,734,286 for the year ended April, 30 2022, compared with $5,420,000 for the year ended April 30, 2021. Cash provided by financing activities for the year ended April, 30 2022 consisted of proceeds of $7,500,000 from notes payable and related party notes payable, $11,000,000 proceeds from convertible notes, offset by $3,965,463 in repayments of notes payable and debt $800,251 of issuance costs on convertible notes. Cash provided by financing activities for the year ended April 30, 2021, consisted of proceeds of $3,300,000, from notes payable with a related party, proceeds of $3,120,000 from notes payable, and a repayment of notes payable with a related party of $1,000,000. Description of Indebtedness Notes Payable - Related Party On January 14, 2022, the Company entered into two loan agreements with Yonah Kalfa and Naftali Kalfa, each for $1,000,000, pursuant to which we received a total amount of $2,000,000. The loans bear interest at a rate of 8% per annum, and we have agreed to repay the loans in full by July 3, 2022, or such other date as may be accepted by the lenders. We are not permitted to make any distribution or pay any dividends unless or until the loans are repaid in full. On June 28, 2022, the Company entered into amendments for the two related party loan agreements with the lenders in which the repayment date was extended to July 31, 2024. There were $2,000,000 and $6,220,000 in outstanding borrowings from the Company’s related parties for the years ended April 30, 2022 and 2021, respectively. Accrued interest due to related parties as of April 30, 2022 and 2021 amounted to $908,756 and $747,636, respectively. Securities Purchase Agreement and Convertible Notes On August 6, 2021, the Company consummated the closing of a private placement offering pursuant to the terms and conditions of that certain Securities Purchase Agreement, dated as of August 6, 2021 (the “Purchase Agreement”), between the Company and certain accredited investors. At closing, the Company sold (i) 8% Senior Convertible Notes in an aggregate principal amount of $11,000,000 and (ii) warrants to purchase up to 7,333,334 shares of our common stock (the “Noteholder Warrants”). The Company received an aggregate of $11,000,000 in gross proceeds from this private placement, before deducting offering expenses and commissions. The 8% Senior Convertible Notes are convertible into shares of common stock at any time following the date of issuance and prior to mandatory conversion (as defined in the Notes) at the conversion price equal to the lesser of: (i) $30.00, subject to adjustment set forth in the 8% Senior Convertible Notes and (ii) in the case of an uplist to the Nasdaq, the uplist conversion price (as defined in the 8% Senior Convertible Notes) of our common stock. 47 The Company used the net proceeds from this transaction for working capital purposes and to pay the outstanding principal amount and accrued interest through August 6, 2021 of the $2,000,000 secured term promissory note dated April 15, 2021 that bore interest at the rate of 15% per annum to SB Invesco LLC, a Wyoming limited liability company. Spartan Capital Securities, LLC served as placement agent for the private placement. The convertible notes mature on August 6, 2022, and bear interest at 8% per annum payable on each conversion date (as to that principal amount then being converted), on each redemption date as well as mandatory redemption date (as to that principal amount then being redeemed) and on the maturity date, in cash. The notes are convertible into shares of the Company’s common stock at any time following the date of issuance and prior to Mandatory Conversion (as defined in the convertible notes) at the conversion price equal to the lesser of: (i) $30.00, subject to adjustment and (ii) in the case of an up-list to the Nasdaq, the up-list Conversion Price (as defined in the convertible notes) of the Company’s common stock during the two trading day period after each conversion date; provided , however , that at any time from and after December 31, 2021 or upon an Event of Default (as defined in the convertible notes), the holder had the right, by delivery of written notice to the Company, elect to cause all, or any part, of the notes to be converted, at any time thereafter, all, or any part of, the then outstanding aggregate principal amount of the convertible notes into shares of common stock at the alternate conversion price. The convertible notes rank pari passu with all other notes now or thereafter issued under the terms set forth in the convertible notes. The convertible notes contain certain price protection provisions providing for adjustment of the number of shares of common stock issuable upon conversion in case of certain future dilutive events or stock-splits and dividends, including the reverse stock split we contemplating effectuation prior to or upon the effectiveness of the registration statement of which this prospectus forms a part. The notes issued in the August 6, 2021 private placement will automatically convert into shares of common stock at a 20% discount to the public offering price upon the closing of the offering. The warrants are exercisable for five years from August 6, 2021, at an exercise price equal to the lesser of $30.00 or a 20% discount to the public offering price that a share of the Company’s common stock or unit (if units are offered) is offered to the public resulting in the commencement of trading of the Company’s common stock on the Nasdaq, New York Stock Exchange or NYSE American. Accordingly, upon completion of this offering the exercise price of the warrants issued in the August 6, 2021 private placement will be reset to a 20% discount to the public offering price in accordance with the terms of the warrants. The warrants contain certain price protection provisions providing for adjustment of the amount of securities issuable upon exercise of the warrants in case of certain future dilutive events or stock-splits and dividends, including the reverse stock split we contemplating effectuation prior to or upon the effectiveness of the registration statement of which this prospectus forms a part. The Company’s obligations in this transaction are guaranteed by the Company’s subsidiaries. The Company’s obligations under the convertible notes are jointly and severally, unconditionally and irrevocably guaranteed by its subsidiaries. In connection with this transaction, the Company agreed to register the shares of common stock issuable pursuant to the terms of the convertible notes and the warrants for resale under the Securities Act. The Company filed registration statement with the SEC on September 8, 2021 and that registration statement was declared effective on January 27, 2022. However, additional sales of our common shares in the public market after the date hereof could occur as convertible notes and warrants for resale were not fully registered by the resale registration statement that we filed on September 8, 2021. If the public offering price of our common stock in this offering causes the conversion price to be below approximately $15.00 per share at the time of the closing of this offering, additional conversion shares need to be registered. The new registration statement will cover both the shares originally registered for resale and the new conversion shares. On February 15, 2022, the Company entered into a consignment transaction with consideration of $4,000,000 in exchange for all of the Company’s right, title, and interest in and to 13,000 units of certain surplus inventory, including all components, parts, additions, and accessions thereto (collectively, the “Consigned Goods”). The Company also agreed to purchase the Consigned Goods from the consignor and make certain payments to the consignor. As of April 30, 2022, the Company had repaid $965,463 resulting in a net balance of the convertible note payable of $3,034,537. Accrued interest on the consignment note was $1,104,839 for the year ended April 30, 2022. Omnibus Amendment to Purchase Agreement On December 31, 2021, the Company entered into an Omnibus Amendment Agreement with certain convertible note holders who collectively held 67% or more of the convertible notes and warrants outstanding on August 6, 2021, amending the original purchase agreement and the Company’s registration obligations. Simultaneously with the execution of the Omnibus Amendment Agreement, the Company issued to each convertible noteholder a replacement note in replacement of the convertible note held prior to December 31, 2021 by such noteholder. 48 The original purchase agreement was amended to, among other things, (i) delete Exhibit A and replace it in its entirety with a replacement 8% Senior Convertible Note, (ii) add a new definition of “Inventory Financing”, (iii) amend Section 4.18 to add at the end of Section 4.18 before the final period “, it being agreed that the provisions of this Section 4.18 shall not apply to the Qualified Subsequent Financing expected to occur after the date hereof”, (iv) delete Section 4.20 and replace it in its entirety with substantially the same text, including the following after the period, replacing the period with a semicolon: “; provided that the provisions of this Section 4.20 shall not apply to (i) in respect of any Holder to the extent that such Holder is an investor or a purchaser of the securities offered pursuant such Subsequent Financing, and (ii) with respect to an Inventory Financing.”, and (v) add a new section as follows: “4.21. Most-Favored Nation. So long as any of the Notes are outstanding, upon any issuance by the Company or any of its subsidiaries of any new security, with any term that a majority of the holders of the outstanding Principal Amount of Notes, reasonably believe is more favorable to the holder of such security or with a term in favor of the holder of such security that a majority of the holders of the outstanding Principal Amount of Notes reasonably believe was not similarly provided to the Purchasers in the Notes, the Warrant, or under this Agreement, then (i) the Company shall notify each Note holder of such additional or more favorable term within one (1) business day of the issuance or amendment (as applicable) of the respective security, and (ii) such term, at the option of a majority of the holders of the outstanding Principal Amount of Notes, shall become a part of the Transaction Documents (regardless of whether the Company complied with the notification provision of this Section). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, and original issue discounts. If a majority of the holders of the outstanding Principal Amount of Notes elects to have the term become a part of the Transaction Documents, then the Company shall immediately deliver acknowledgment of such adjustment to the Note holder (the “Acknowledgment”) within one (1) business day of Company’s receipt of request from Investor (the “Adjustment Deadline”), provided that Company’s failure to timely provide the Acknowledgement shall not affect the automatic amendments contemplated hereby.” As consideration for entering into the Omnibus Amendment Agreement, the outstanding principal balance of each convertible note holder was increased by twenty percent (20%) and such increased principal balance is reflected on the replacement note issued to each convertible noteholder. After giving effect to this increase in principal amount, total outstanding borrowings related to the convertible notes as of April 30, 2022 was $13,200,000, excluding any interest due on the convertible notes at such time. The outstanding amount is net of discounts of $2,872,222 for a net book value of $10,327,778 as of April 30, 2022. Note Payable On April 15, 2021, the Company entered into a $2,000,000 note payable. On August 6, 2021, the Company used the net proceeds from the issuance of the convertible notes to pay 100% of the outstanding principal and accrued interest of this note. On April 15, 2021, the Company and its subsidiaries, Slinger Bag Americas Inc., (“SBA”), Slinger Bag Canada, Inc., (“SBC”), Slinger Bag International (UK) Limited (“SB UK”), and Slinger Bag Ltd., (“SBL” and, together with the Company, SBA, SBC, SB UK, SBL the “Borrower”) issued a $2,000,000 secured term promissory note that bears interest at the rate of 15% per annum (the “Note”) to SB Invesco LLC, a Wyoming limited liability company (the “Lender”). In connection with the Note, the Borrower and Lender entered into the following agreements: (i) business loan and security agreement (“BLSA”); (ii) intellectual property security agreement (“IPSA”); (iii) stock pledge agreement (“SPA”); (iv) intercreditor agreement (“ICA”); (v) warrant purchase agreement (“WPA”); and (vi) 2,200,000 warrants to the Lender and Chessler Holdings, LLC to purchase shares of common stock of SBI (“Warrants”) and, collectively, the “Loan Agreements”). On April 1, 2022, we entered into a loan agreement with Midcity Capital Ltd. pursuant to which we received $500,000. The loan bears interest at a rate of 8% per annum and is required to be repaid in full by July 1, 2022 or such other date as may be accepted by the lender. The accrued interest associated with this note payable was $3,178 as of April 30, 2022. We are not permitted to make any distribution or pay any dividends unless or until this loan is repaid in full. The Company used a portion of the net proceeds of the offering to repay this loan. See “Use of Proceeds.” Future amounts due as of April 30, 2022 are summarized as follows: Payments due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years Convertible notes payable $ 10,327,778 $ 10,327,778 $ — $ — $ — Notes payable 3,534,537 3,534,537 — — — Notes payable - related party 2,000,000 — 2,000,000 — — Total $ 15,862,315 $ 13,862,315 $ 2,000,000 $ — $ — 49 BLSA Pursuant to the BLSA, the Borrower granted to the Lender, as collateral security for the payment and performance of all of the obligations and liabilities of any member of and all of the Borrower in favor of the Lender (the “Obligations”), due or to become due, existing or hereafter incurred, contracted or acquired, a first priority continuing security interest in all of the assets and personal property of the Borrower and its business (the “Collateral”). Such security interest is a first priority security interest in the Collateral. Upon the occurrence of an Event of Default (as defined in the BLSA), the Lender may (i) at any time thereafter, in its discretion transfer any securities or other property constituting Collateral into its own name or that of its nominee and receive the income thereon and hold the same as security for all Obligations or apply it on any or all amounts due on the Obligations in such order as Lender may elect in its sole discretion, (ii) enter the Borrower’s premises and take control of its business and (iii) require each Borrower to establish, at Borrower’s expense, a lock box account with such bank acceptable to Lender, into which Borrower shall promptly deposit and direct their account debtors to directly remit all payments on receivables and which such payments or deposits shall be the property solely of the Lender. IPSA To secure the prompt payment to the Lender of the Obligations of the Borrower, the Borrower pledged and granted to the Lender a continuing security interest in and lien upon all of Borrower’s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “ IP Collateral ”): a. trademarks and trademark licenses to which the Borrower is a party; b. patents and patent licenses to which Borrower is a party; c. copyrights and copyright licenses to which Borrower is a party; d. intellectual property not covered by the foregoing; e. rights to sue third parties for past, present or future infringement, dilution, misappropriation, or other violation of rights in any intellectual property, including injury to the goodwill associated with any trademark, and all causes of action for the same; and f. All proceeds of all or any of the foregoing, tort claims and all claims and other rights to payment including (i) insurance claims against third parties for loss of, damage to, or destruction of, the foregoing IP Collateral and (ii) payments due or to become due under copyright licenses, patent licenses or trademark licenses and proceeds payable under, or unearned premiums with respect to, policies of insurance in whatever form regarding the foregoing Collateral. SPA Pursuant to the SPA, SBI pledged, assigned and granted to the Lender and created a continuing first priority lien and security interest in favor of the Lender in and to all of its right, title, and interest in and to the following, property (collectively, the “Security Collateral”) to secure the due and prompt payment and performance of the Borrower’s Obligations: (a) 100% of the shares in each of its subsidiaries SBA, SBC, SB UK and SBL; and (b) all proceeds and products of the foregoing, all books and records relating to the foregoing, all supporting obligations related thereto, and all accessions to, substitutions, and replacements for, and profits and products of, each of the foregoing, and any and all proceeds of any insurance, indemnity, warranty, or guaranty payable to the Borrower from time to time with respect to any of the foregoing. The Borrower also agreed, from time to time, as may be required by the Lender with respect to all Security Collateral, to take all actions as may be requested by the Lender to perfect the security interest of the Lender in the Security Collateral and so that control of such Security Collateral is obtained and at all times held by the Lender. The Borrower further authorized the Lender at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Security Collateral, without the signature of the Borrower where permitted by law. 50 ICA Under the ICA, until the obligations, liabilities and indebtedness of every nature of the Borrower from time to time owed to the Lender under the Loan Agreements (the “First Lien Obligations”) have been paid in full, any other creditor’s security interest in and lien on the Collateral to secure the payment and performance of their obligations were subordinated to the Lender’s security interests in and liens on the Collateral to secure the First Lien Obligations, regardless of the order or time of attachment, or the order, time, or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a lien. WPA Pursuant to the WPA, SBI issued and sold to the Lender 2,000,000 warrants to purchase common stock of SBI and to Chessler Holdings, LLC 200,000 warrants to purchase common stock of SBI (together, the “Warrants”). Warrants Each Warrant permits its holder to purchase shares of SBI’s common stock at an exercise price of $0.025 per share, subject to the option to cashless exercise such warrants. Each warrant has other customary terms found in like instruments, including, but not limited to, events of default. We expect that working capital requirements will continue to be funded through a combination of our existing funds, cash flows from operations and further issuances of debt and/or securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to (i) acquisition of inventory; (ii) developmental expenses associated with a start-up business; and (iii) marketing expenses. We intend to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Effect of Inflation and Changes in Prices We do not believe that inflation and changes in prices will have a material effect on our operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information.