AIRWA INC. quarterly report, Q3 FY2023

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Business context and reporting period

This filing is Connexa Sports Technologies Inc.’s unaudited Form 10-Q for the quarter and nine months ended January 31, 2023 (fiscal Q3). The request metadata names AIRWA Inc., but the filing identifies Connexa Sports Technologies Inc. as the registrant. Connexa’s continuing business included Slinger tennis equipment and Gameface sports analytics. PlaySight and Foundation Sports were classified as discontinued operations following their disposals.

Financial performance and position

  • Revenue: Continuing-operations net sales were $1.61 million for the quarter, down 62% from $4.19 million; nine-month sales were $7.63 million, down 37% from $12.11 million.
  • Profit and margins: Quarterly gross profit was $1.07 million, a 66.6% gross margin, versus $0.95 million and 22.8% a year earlier. Nine-month gross profit was $2.38 million, a 31.2% margin, versus $3.81 million and 31.4%. Continuing-operations net loss was $6.83 million for the quarter and $18.29 million for nine months. Total net loss, including discontinued operations, was $48.88 million for the quarter and $64.17 million for nine months.
  • Unusual loss items: Nine-month discontinued-operations loss was $45.88 million, including a $41.41 million loss on disposal of PlaySight and Foundation Sports. Quarterly discontinued-operations loss was $42.05 million.
  • Cash flow: Nine-month net cash used in operating activities was $6.85 million; continuing operations used $13.46 million, partly offset by $6.62 million from discontinued operations. Financing provided $6.48 million. Cash and cash equivalents were $316,750 at January 31, 2023.
  • Liquidity and liabilities: Current assets were $5.94 million against current liabilities of $29.26 million, a working-capital deficit of approximately $23.32 million. Total liabilities were $31.21 million; derivative liabilities were $18.14 million. The balance sheet reported $347,535 of current notes payable and $1.95 million of related-party notes payable, plus $999,257 accrued related-party interest. The January 2023 loan had an initial $1.4 million advance; its additional $600,000 advance was made after quarter-end.
  • Equity and dilution: Stockholders’ deficit was $11.70 million. Common shares outstanding increased to 13.54 million from 4.19 million at April 30, 2022; the cover page reports 19.39 million shares outstanding as of July 24, 2023. Warrants and pre-funded warrants create additional potential dilution.

Changes versus the prior comparable period

  • Quarterly and nine-month sales declined, which management attributed mainly to reduced U.S. e-commerce demand and social-media advertising, alongside lower international distributor orders.
  • Operating expenses fell substantially year over year, including lower marketing, general and administrative, and research and development costs. Despite this, quarterly gross profit improved as cost of sales fell faster than revenue.
  • Quarterly results were burdened by derivative fair-value and issuance expenses. Nine-month total net loss rose from $44.63 million to $64.17 million, with the disposal loss a major contributor.
  • Assets fell from $74.86 million at April 30, 2022 to $19.51 million at January 31, 2023, principally reflecting the classification and disposal of the former subsidiaries.

Outlook, risks and notable developments

  • Going concern: Management and the filing state there is substantial doubt about the Company’s ability to continue as a going concern. Management expected to rely on existing cash, related-party loans, and additional debt or equity financing; there is no assurance financing will be available on acceptable terms.
  • Financing and default: The January 2023 loan was secured by a pledge of Company and subsidiary assets and guaranteed by subsidiaries; associated warrants were sized at 200% of the note face amount. The filing also states the Company failed to repay the note on July 6, 2023 and was in default, with the interest rate increased to 6.43%.
  • Listing and governance: Nasdaq had cited delinquent reports, bid-price deficiencies and board/committee composition deficiencies as potential delisting grounds. The filing describes a conditional continued-listing decision and deadlines, but gives no assurance the Company would regain compliance.
  • Controls: Management concluded internal control over financial reporting was ineffective at January 31, 2023, citing material weaknesses in segregation of duties, inventory accounting, accounting resources and timely reconciliations. Remediation was still in progress.
  • Strategy and guidance: Management described plans for a Slinger tennis AI consumer app later in 2023 and potential pickleball and padel offerings in early 2024. These are plans, not assured results; the filing provides no formal financial guidance.
  • Reporting context: The report was signed July 24, 2023, well after the period end; the filing also discloses prior reporting delinquencies. Management cites supply-chain, demand, financing, dilution and execution risks.

Important facts for investors to verify

  1. Confirm the issuer identity: this filing is for Connexa Sports Technologies Inc., not AIRWA Inc.
  2. Verify current cash, cash burn, working-capital needs, and the status and terms of the January 2023 loan default and collateral.
  3. Check subsequent Nasdaq listing status, compliance with filing and governance requirements, and any later delisting action.
  4. Review the terms, exercise status and potential dilution from pre-funded warrants, common warrants and other equity-linked financing.
  5. Assess the collectability and terms of the $2 million PlaySight note receivable and the accounting for discontinued operations and disposal losses.
  6. Track whether management remediated the reported control weaknesses and whether the planned apps and revenue initiatives were delivered.