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ACQUISITIONS AND BUSINESS COMBINATIONS
 12 Months Ended
Apr. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
ACQUISITIONS AND BUSINESS COMBINATIONS

Note 5: ACQUISITIONS AND BUSINESS COMBINATIONS

 

Foundation Sports Systems, LLC

 

On June 21, 2021, the Company entered into a membership interest purchase agreement (“MIPA”) with Charles Ruddy (the “Seller”) to acquire a 100% ownership stake in Foundation Sports Systems, LLC (“Foundation Sports”) in exchange for 100,000 shares of common stock of the Company to be issued to the Seller and two other Foundation Sports employees in three tranches (the “Purchase Price”): (i) 60,000 shares of common stock on the closing date, (ii) 20,000 shares of common stock on the first anniversary of the closing date and (iii) 20,000 shares of common stock on the second anniversary of the closing date (collectively, the “Shares”), provided that 10% of the Shares of each tranche will be held back by the Company and not delivered to the recipients for a period of 12 months from the date of their issuance. The Shares are subject to a 12-month lock-up from their date of delivery during which time they may not be offered or sold by the Seller or any other recipient thereof without the express written consent of the Company. On June 23, 2021, the Company issued 54,000 shares of its common stock to the receipts under the MIPA, which consisted of 60,000 shares less a hold-back of 10% (i.e., 6,000 shares).

 

 

CONNEXA SPORTS TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company accounted for the transaction as a business combination and elected to apply pushdown accounting to the entity. The Company allocated the aggregate purchase price for the acquisition based upon the tangible and intangible assets acquired, as the Company did not acquire any liabilities in this acquisition. The allocation of the purchase price is detailed below:

 

Consideration transferred:    
Equity consideration  $3,550,000 
Total Purchase Price  $3,550,000 

 

Description  Fair Value 
Assets acquired:     
Trade name  $70,000 
Internally developed software   100,000 
Customer relationships   950,000 
Total assets acquired   1,120,000 
Fair value of net assets acquired  $1,120,000 
      
Goodwill  $2,430,000 

 

The amounts allocated for internally developed software, customer relationships, and the goodwill were updated since the Company’s third quarter filing upon further review of the fair value of the intangible assets. The fair value of internally developed software and customer relationships decreased by $140,000 and $1,050,000, respectively, resulting in an increase of $1,190,000 in the fair value of goodwill. There was no change in the total purchase price.

 

As a result of the change in fair value of the intangible assets, the amortization expense of the intangible assets acquired from Foundation Sports decreased by $154,999. (Refer to Note 18 related to the disposition of 75% of this business in December 2022). The Company impaired all of the remaining intangible assets and goodwill on April 30, 2022 as market conditions changed from June 2021 through April 30, 2022 and the Company determined that there was no fair value associated with these assets that should be recognized as of April 30, 2022.

 

Gameface Ltd.

 

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 became a wholly owned subsidiary of the Company in exchange for 590,327 shares of common stock of the Company, 100,000 earn out shares of common stock of the Company, 66,667 shares of common stock of the Company that will not be issued until the end of the retention period, 478,225 warrants of the Company, and $500,000 in cash in lieu of 14,259 shares of common stock of the Company. Additionally, the Company recorded contingent consideration with a fair value of $1,334,000 related to the earn out shares of common stock. Financial results of Gameface are allocated to the Company’s technology segment.

 

 

CONNEXA SPORTS TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company accounted for the transaction as a business combination and elected to apply pushdown accounting to the entity. The Company allocated the aggregate purchase price for the acquisition based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the purchase price is detailed below:

 

Consideration transferred:    
Contingent consideration  $1,334,000 
Seller note payable   500,000 
Seller’s liability assumed   9,700,000 
Total Purchase Price  $11,534,000 

 

Description  Fair Value 
Assets acquired:     
Cash and cash equivalents  $125,659 
Prepaid expenses and other receivables   38,972 
Property, plant and equipment   39,888 
Other non-current assets   81,921 
Intangible asset - Tradename   270,000 
Intangible asset - Internally developed software   580,000 
Intangible asset - Customer relationships   3,930,000 
Total assets acquired  $5,066,440 
      
Liabilities assumed:     
Accounts payable  $88,712 
Contract liabilities   50,728 
Provisions   90,388 
Other liabilities   83,805 
Total liabilities assumed   313,633 
Fair value of net assets acquired  $4,752,807 
      
Goodwill  $6,781,193 

 

PlaySight Interactive Ltd.

 

On February 21, 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 became a wholly owned subsidiary of the Company in exchange for 2,537,969 shares of common stock of the Company, and issued to PlaySight employees options to purchase up to 142,858 shares of Company common stock, and used a cash sum equal to 152,490 shares of the Company’s common stock ($2,200,000) to cover certain expenses. The PlaySight employee options vest at issuance, have an exercise price of $0.01 per share, and expire 10 years from issuance. The Company also agreed to earn-out consideration of up to 514,286 shares of common stock of the Company. Additionally, the Company recorded contingent consideration with a fair value of $4,847,000 related to the earn out shares of common stock.

 

 

CONNEXA SPORTS TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

The Company accounted for the transaction as a business combination and elected to apply pushdown accounting to the entity. The Company allocated the aggregate purchase price for the acquisition based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the purchase price is detailed below:

 

Consideration transferred:    
Contingent consideration  $4,847,000 
Seller’s note   2,200,000 
Equity consideration   37,750,000 
Total  $44,797,000 

 

Description  Fair Value 
Assets acquired:     
Cash and cash equivalents  $351,000 
Restricted cash   155,000 
Accounts receivable, net   347,000 
Prepaid expenses and other current assets   294,000 
Inventories, net   521,000 
Contract assets   277,000 
Fixed assets, net   129,000 
Operating lease right-of-use asset   262,000 
Contract assets, net of current portion   219,000 
Finished products used in operations, net   4,749,000 
Intangible asset - Tradename   1,700,000 
Intangible asset - Internally developed software   2,430,000 
Intangible asset - Customer relationships   15,590,000 
Total assets acquired  $27,024,000 
      
Liabilities assumed:     
Accounts payable  $1,126,000 
Accrued expenses   1,800,000 
Contract liabilities   2,534,000 
Operating lease liability, current portion   257,000 
Contract liabilities, net of current portion   1,311,000 
Notes payable, net   1,061,000 
Total liabilities assumed   8,089,000 
Fair value of net assets acquired  $18,935,000 
      
Goodwill  $25,862,000 

 

Goodwill balances comprise of synergies recognized from combining operations and brand recognition. Total transaction costs for the three acquisitions were $5,109,522 and are included in the Transaction costs line of the consolidated statements of comprehensive loss.

 

During November 2022, the Company made the decision to dispose of these operations. See Note 18 related to the disposition of this business in November 2022.

 

 

CONNEXA SPORTS TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Pro Forma Results

 

The following pro forma financial information presents the results of operations of the Company as of the year ended April 30, 2022 and 2021, as if the acquisitions of PlaySight and Gameface had occurred as of the beginning of the first period presented instead of February 2022. The pro forma financial information (in thousands) of the Company as of the years ended April 30, 2022 and 2021 is as follows:

 

   Reported   Proforma   Reported   Proforma 
   For the For the Years Ended April 30, 
   2022   2021 
   Reported   Proforma   Reported   Proforma 
Revenues  $16,831   $21,236   $10,804   $16,424 
Loss from operations   (51,928)   (57,372)   (3,933)   (11,350)
Net loss  $(51,774)  $(48,011)  $(18,595)  $(31,333)
                     
Basic and diluted earnings (loss) per share  $(13.44)  $(12.46)  $(6.96)  $(11.73)