Connexa Sports Technologies, Inc., which owns the Slinger Bag brand and sports technology brands, reported revenue of $2.1 million for the fiscal third quarter ended January 31, compared to $1.6 million in the prior-year period, an increase of 29 percent, as the company said it caught up on unshipped orders reported at the end of the fiscal second quarter ended November 30, 2023.
The company said the increase was due to incremental sales driven by Slinger Bag Pickleball compared to the prior-year period, as Slinger Bag Pickleball had not been introduced to the market then.
Connexa said the increase in net sales came despite ongoing inventory shortage issues that resulted in significant delays in meeting consumer demand due to higher-than-planned sales orders. Had inventory levels been normal, the company estimated that sales would have been greater in the quarter.
Gross income increased 21 percent in the quarter to $1.3 million, compared to $1.1 million in the prior year period. This improvement in gross income was said to be driven by a combination of the higher levels of net sales and greater efficiencies realized in the company’s supply chain across both container rates and ocean freight.
Selling and marketing expenses increased 172 percent year-over-year to $735,575 in fiscal Q3, driven by increased social media advertising across tennis and pickleball and other investments in the public relations area.
The company also made marketing investments in the beta launch of the Slinger Bag App for tennis.
General and administrative expenses, which primarily consist of compensation, including share-based compensation, other employee-related costs, and legal and professional services fees, increased 50 percent year-over-year to $2.8 million in the fiscal third quarter. This increase was primarily driven by increased debt settlement and legal and other professional fees in the period.
Loss from operations increased 111 percent to $2.2 million in the quarter, compared to a loss of $1.0 million in the prior-year quarter. This increase in loss in operations was reportedly driven by a $1.4 million increase in total operating expenses recorded in the quarter, offset by an improvement in gross income of $222,889.
“Despite the ongoing challenges with inventory availability for both our tennis and pickleball launchers, the underlying Slinger Bag business remains resilient, with consistently high levels of consumer demand,” said Mike Ballardie, CEO of Connexa Sports Technologies. “Sales would have been up to 10 percent higher had inventory been available to meet the order demand on our books.
“The impact of our consistent improvements in gross margins, coupled with the reduction in operating expenses over the first nine months of the fiscal 2024, are clearly delivering strong improvements in both operating and net income results. Based on our current supply chain challenges, our revenue expectation for fiscal 2024 is revised to deliver annual growth of around 5 percent with ongoing improvements in margin and the operating expense base,” concluded Ballardie.
Total other expenses decreased $4.2 million, or 65 percent to negative $1.6 million in the fiscal third quarter.
“We recorded an improvement in both amortization of debt discounts of $217,775 and in fair value of derivatives of $5,070,525, the company wrote in their 10-Q. “Excluding these improvements, we recorded other expenses totaling $3,102,141 and $2,024,490 for the periods to January 31, 2024 and 2023 respectively, an increase of $1,077,651. The increases in other expenses for the three months ended January 31, 2024, as compared to January 31, 2023, included an increase in derivative and interest expenses offset by a reduction in interest to related parties.”
The net loss from continuing operations was $3.8 million for the third quarter, compared to the net loss from continuing operations of $6.8 million in the prior-year corresponding Q3 period.
“Slinger Bag continues to enjoy high levels of support by global tennis consumers and we are now experiencing strong demand for our pickleball launchers,” Ballardie continued. “Unfortunately consumer demand in the US continues to outstrip supply and we have found ourselves out of inventory for several periods during the last quarter. We continue to work with our Asian supply team to ramp up inventory for the balance of this fiscal year.”
As part of its Sport-as-a-Service vision, the company said it initiated beta testing of its Slinger App for tennis, bringing its patent-pending AI algorithms and analysis to over 1,500 tennis players globally. Available on IOS and Android, the App records practice sessions or matchplay videos, analyzes play, and provides actionable feedback on how the player can improve. Feedback from its beta testers over the past six weeks was positive and provided insight and feedback to its AI engineers as to what features and analyses are most valuable to them as players, offering direction on minor improvements and upgrades.
“We envision our AI platform as being at the heart of ‘powering’ the Connexa portfolio of brands across multiple sports verticals,” commented Ballardie. “It will deliver real-time data and analytics for players across all of our sport verticals. Of course, the Slinger App has been designed to be used both as a stand-alone app or in conjunction with a player using their Slinger Bag Launcher.”
He concluded, “This AI market provides an opportunity for future supplemental revenue growth based on monthly or yearly subscriptions in the range of $15 and $100, respectively, and we now expect to launch the freemium version in the next few weeks.”
Connexa said in its 10-Q filing with the SEC that the financial statements were prepared on a going concern basis, which assumes the company can realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.
The company has an accumulated deficit of $154.6 million as of January 31, 2024, and more losses are anticipated in the development of the business.
Accordingly, there is substantial doubt about the company’s ability to continue as a going concern. The financial statements in the filing do not include adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that could be necessary should the company be unable to continue as a going concern.
The ability to continue as a going concern is dependent upon the company generating profitable operations in the future and/or being able to obtain the necessary financing to meet its obligations and repay its liabilities from normal business operations when they become due. Management intends to finance operating costs over the next twelve months with cash on hand, loans from related parties and/or private placement of debt and/or common stock. If the company is unable to raise capital and/or generate revenues, it will likely reduce general and administrative expenses, and cease or delay its development plan until it can obtain sufficient financing. The company has begun reducing operating expenses and cash outflows by selling PlaySight, as well as selling 75 percent of Foundation Sports in November and December 2022, respectively to the former shareholders of those companies. There can be no assurance that additional funds will be available on terms acceptable to the company, or at all.
Connexa recorded a 25 percent investment in Foundation Sports at $0.
From February 1, 2024, through the date hereof, the company issued the following shares of common stock:
- 5,347,594 shares of common stock to Yonah Kalfa, the company’s chief innovation officer and director, for his contribution to the company, which represents all but $137,000 of his deferred base salary, through January 31, 2024. In exchange, Kalfa waived his right to receive all but $137,000 of his deferred base salary as defined and described in clause 2.1(a) of his service agreement with Slinger Bag Limited dated September 7, 2020.
Image courtesy Slinger Bag