Affiliate Marketing

SLINGER BAG INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes
included elsewhere in this report and our Annual Report on Form 10-K for the
year ended April 30, 2021. Certain statements in this discussion and elsewhere
in this report constitute forward-looking statements. See "Cautionary Statement
Regarding Forward Looking Information'' elsewhere in this report. Because this
discussion involves risks and uncertainties, our actual results may differ
materially from those anticipated in these forward-looking statements.



Overview and Description of Business

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 20,000,000 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 20,000,000 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 20,000,000 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 at that time.



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. The owner of SBL
contributed it to Slinger Bag Americas for no consideration.

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”).




The operations of Slinger Bag Inc., Slinger Bag Americas, Slinger Bag Canada,
Slinger Bag UK, SBL and Foundation Sports are collectively referred to as the
"Company" or "Slinger."



The Company operates in the sporting and athletic goods business. The Company is
the owner of the Slinger Launcher, a highly portable and affordable ball
launcher built into an easy to transport wheeled trolley bag. The Slinger
Launcher allows anyone to simply and easily control the speed, frequency and
elevation of balls that are launched for practice, training or fitness purposes.



The Company has initially focused all its energies on the tennis market
worldwide, but is in the early stages of developing ball launchers for other
ball sports.




For the regular tennis player, the Slinger Launcher is much more than a tennis
ball launcher. It also functions as a complete tennis bag with ample room for
racquets, shoes, towels, water bottles and other accessories and can charge
mobile phones and other devices.



Tennis ball machines have been around since the 1950's when they were introduced
by Renne Lacoste. Improvements to performance were made in the 1970's when
Prince started its tennis business on the back of its first product - Little
Prince - which was a vacuum operated ball machine. In the 1990's the first
battery operated machines came to the market and since that time very little, if
anything, has changed in the structure of ball machine products outside of added
computerization. Typically, the machines being marketed by traditional ball
machine brands are large, cumbersome and awkward to operate. They are also very
expensive - often well above U.S. $1,000. Up until today the vast majority of
all tennis ball machines have sold to tennis facilities, with only a few being
sold directly to tennis playing consumers.



According to the Tennis Industry Association (www.tia.org) the single largest
challenge facing tennis participation is the fact that 34% of lapsed players
cited a "lack of playing partner" as the reason for them stopping to play
tennis. The Slinger Launcher goes a long way to solving this issue.



The global tennis market is regarded by industry experts, governing
organizations, tennis brands and tennis-specific market research companies as
having 100 million active players globally, with as many consumers again being
avid fans of the sport. Of this 100 million tennis player market, 20 million
players are regarded as frequent or avid players - players who play regularly -
at least 1 time per month. These avid players drive the total tennis industry
and account for 80% of all tennis revenues worldwide.



1






It is this avid player market that the Company is focused on penetrating with
its Slinger Launcher and associated tennis accessories.

The Company intends to disrupt this traditional tennis market by creating a new
ball machine category - called Slinger Launcher - and marketing portable and
affordable Slinger Launchers directly to avid, regular tennis players.
Constructed within a wheeled trolley tennis bag, a Slinger Launcher weighs
around 15kgs / 34lbs when empty. If stored with 72 balls inside the weight
increases to 19kgs / 42lbs. It can easily be stored in a car trunk, wheeled to
the court and set up within minutes to use. The Slinger Launcher is powered by a
6.6Ah Lithium battery that can last up to 3.5 hours of play depending on the
settings being used and frequency of use. The Slinger Launcher's convenience as
a tennis bag combined with its ease of operation and overall performance as a
tennis ball launcher is the basis that the Company will target direct sales
to
these avid players.



While the initial brand focus is clearly on tennis, the Company is developing
similar launchers to address other forms of tennis around the globe that are
either rapidly gaining new participants or are already well-established sports
in their own right. These include, but are not limited to, Pickleball (U.S.),
Soft Tennis (Japan), and Paddle Tennis (International markets), all of which are
currently in either development or testing and are planned for introduction
in
calendar 2022.



On December 3, 2020, Slinger signed an exclusive agreement with Flixsense Pty
Limited d/b/a Gameface for the development of a tennis specific artificial
intelligence (AI) application. The Company intends to introduce a market
disrupting tennis app for players of all ages and abilities. This app will
provide a wide range of analytics and other services and include practice and
tennis fitness drills and activities, coaching tips and advice and a full suite
of AI analytics. The Company will offer some services free of charge and will
build a tiered subscription model for others. The app is expected to be ready to
launch to the market in calendar 2022.



In future years, the Company plans to enter new ball sport markets such as
baseball, softball, and cricket, which are currently planned for introduction in
calendar 2023.




The Company delivers Slinger Launchers directly from the final assembly facility
in Xiamen, China to customers either by direct shipment from the port in China,
or to third party logistics facilities in Columbia, SC (U.S.) to support our
U.S. business, Belleville, Ontario, Canada, Rotterdam, The Netherlands to
support smaller distributors in Canada, Europe, the Middle East, Africa, and
Israel.



Additionally, we ship full containers of our Slinger Triniti tennis balls from
Wilson (our supplier) in Thailand to the United States and Belgium for onward
distribution.



The Company has contracted with exclusive distributors globally. These include
Japan, UK, Ireland, Switzerland, Scandinavian markets (covering Denmark, Sweden,
Norway, Finland), Australia, New Zealand, Bulgaria, Czech Republic, Singapore,
Morocco, Slovenia, Slovkian Republic, Hungary, Croatia, Germany, Austria,
France, Italy, Spain, Portugal, Netherlands, Belgium and Luxembourg, Russia,
Middle East GCC markets, Egypt, Bangladesh, Pakistan, Malaysia, Greece, Panama,
South Africa, Hong Kong, Macau, China, Indonesia, Philippines, Ecuador and
Poland and we are in various stages of negotiation with other potential market
distribution companies across the globe.



Strategic Brand Partnerships




The Company is actively working on securing a number of highly visible
ground-breaking strategic partnerships across tennis. These partnerships will
both provide the Company with co-branded products to supplement the core product
offering and, at the same time, are expected to drive mutually beneficial
marketing campaigns aimed at reaching avid tennis players globally. Details of
such partners announced and active today include:



? Wilson Sporting Goods: North America: The Company has entered a strategic
partnership with the global leader in tennis, Wilson, for the supply of
co-branded Triniti tennis balls in the U.S. and Canada markets.

? Professional Tennis Registry (PTR): PTR is the world’s most prestigious
teaching pro organization with more than 40,000 members. The Company has
partnered with PTR for the supply of Slinger Launchers to their membership.

? Peter Burwash International (PBI): A high profile organization providing
coaching and tennis services to high level, high quality hotels, resorts and
tennis facilities across the globe. The Company is the official supplier of
Slinger Launchers to PBI, which will be used at each location and PBI will offer
an affiliate marketing program promoting sales to its list of global clients.



? DSV Logistics USA and OSL Logistics: DSV is one of the world's leading
suppliers of warehousing, freight forwarding and logistics. The Company will use
DSV warehousing services in the U.S. to optimize logistical activities. OSL are
currently providing all freight forwarding for the U.S. markets and Europe as
well as 3rd party warehousing logistics in Rotterdam for Europe.



2







Competition



There are currently no competitors with products that are similar to the Slinger
Launcher, based on its portability, affordability and tennis bag functionality.
There are, however, other companies that make tennis ball machines, including
the following:



  ? Spinshot
  ? Lobster Sports
  ? Spinfire Pro 2
  ? Match Mate Rookie
  ? Sports Tutor
  ? Silent Partner




Raw Materials


All materials used in the Slinger Launder are available off-the-shelf. The
trolley bag is manufactured with 600D Polyester and has the CA65 certification
for the U.S. market. The launcher housing, Oscillator and Telescopic Ball Tube
parts are produced using an injection mold using poly propylene mixed with 30%
glass fibers. The electronic motors, PCB boards and remote-control parts are all
standard off-the-shelf items.



Intellectual Property


As at the date hereof, the Company has applied for international design and
utility patent protection for its main 3 products: Slinger Launcher, Slinger
Oscillator and Slinger Telescopic Ball Tube. Patents have been applied for in
all key markets including the U.S., China, Taiwan, India, Israel and EU markets
and granted in China and Israel. Trademarks have been applied for in all major
markets around the globe. Trademark protection has been applied for and/or
received in the following countries:



  ? U.S.
  ? Chile
  ? Taiwan
  ? Mexico
  ? EU
  ? Russia
  ? Poland
  ? Czech Republic
  ? Australia
  ? New Zealand
  ? China
  ? South Korea




3







  ? Vietnam
  ? Singapore
  ? India
  ? Canada
  ? Argentina
  ? Brazil
  ? United Arab Emirates*
  ? South Africa*
  ? Columbia*
  ? Israel*
  ? Japan*
  ? Switzerland*
  ? Indonesia*
  ? Malaysia*
  ? Thailand*
  ? Turkey*




*Protection is pending.


The Company is engaged in ongoing efforts to register more trademarks across an
expanding list of products, services and applications, which are in various
stages of the registration process.

Slinger Bag Inc. owns the rights to its Slingerbag.com domain.



Strategy



The Company has an opportunity to disrupt the traditional tennis market
globally. The Company expects to drive 80% of its global revenues through its
direct-to-consumer go-to-market strategy, whether that be through its on-line
e-commerce platform at www.slingerbag.com or through associated e-commerce
platforms established and managed by its distribution network. The balance of
revenues will be driven through partnerships with leading wholesalers,
federations and teaching pro organizations and other transactions across various
markets. The Company will operate a third-party distributor structure in all
markets with the exception of the United States, the largest tennis market
globally, Canada and its founder's home market of Israel. Distributor partners
will have exclusive territories and will have a recognized background within the
tennis industry for their market as well as having the financial capacity and
service infrastructure to aggressively grow the Slinger brand. Uniquely in the
sports industry, all consumer orders received into Slingerbag.com from markets
outside the United States will be routed back to our local distribution partners
to fulfill and to service their local customers. All distributor partners will
purchase with advanced orders, either based on a vendor-direct FOB Asia direct
ship or through 1 of our 3 global 3rd party distribution facilities on a duty
paid basis and at premium cost price. Currently, the Company has signed a number
of exclusive distribution agreements in key markets and has on-going discussions
with other key potential distributor partners in other markets around the globe.



The United States market will remain a direct to consumer market for Slinger. As
the largest tennis market in the world with 17.4 million players of which 10.5
million are regular / avid players, the United States is a key market both to
establish the Slinger brand and to drive demonstrable growth. Recently the
industry reported a significant increase in U.S. tennis participation and
overall number of tennis play occasions, something that has been replicated in
other key tennis markets around the globe. Direct to consumer sales will be
supplemented by one or more leading tennis wholesalers who manage large
databases of coach, player, college, high school and club clients. This market
will be serviced out of a third-party logistics facility in West Columbia, SC
and operated by one of Slinger's preferred global logistics partners, DSV, one
of the world's leading suppliers of freight-forwarding, logistics and
warehousing.



Brand Marketing



As a direct-to-consumer e-commerce brand, all marketing activity and advertising
media will be centered around pushing consumers to www.slingerbag.com and
converting them to purchases. Slinger has engaged a number of leading agencies
to support its global marketing efforts:



Brand Nation is a world class influencer marketing agency based in London. Brand
Nation will lead all influencer programming globally. Slinger has seeded about
50% of its planned 1,000 global influencers to date. Influencers targeted are
wide ranging and include leading sports, tennis, film, TV, music and blogger
celebrities all known for the fact that they play tennis regularly and have a
fan base in excess of 10,000 followers. All influencer activity is rolled back
up to the Slinger social media platforms as a means of generating significant
brand awareness and product interest.



4







Ad Venture Media Group is a New York based leading PPC (pay-per-click) agency
whose work is grounded in sophisticated scientific analysis of consumer data and
consumer trends and they are recognized globally as leaders in paid search and
paid social media campaigns. Ad Venture Media will lead all Slinger PPC activity
on a performance-based fee structure and is briefed to drive consumer
engagement, through bespoke advertising campaigns that are aligned to our
product profitability objectives.



In the United States market, we have partnered with an organization called Team
HQS who will manage an affiliate marketing program across U.S. based teaching
professionals, players, juniors and events. These affiliates will be provided
with unique affiliate marketing codes to share with their social media followers
and other such communities that they are connected to and each will receive an
affiliate marketing fee based on revenues generated by consumers purchasing
Slinger products attributable to their unique code.



We continue to evaluate each support agency on a monthly basis and at the same
time are continually exploring new avenues to expand our reach to our core
customers.




Each of our distributor partners around the world are establishing their Slinger
distribution business as Slinger itself would do if it was establishing a
Slinger subsidiary in each market. As such, each distributor will also adopt all
forms of Slinger brand marketing programs as well as initiating new local
concepts of their own - all aimed at reaching the avid/regular tennis player
directly and ensuring that the Slinger brand message is consistent around the
globe. Slinger has agreed a local marketing budget structure with each
distributor as part of its distribution agreement. This marketing budget will be
primarily funded by the distributor partner with an additional contribution
coming from Slinger with the contribution being linked to the distributor's
purchase objectives. Each distributor will execute local grassroots programs
including demonstration days, local teaching pro partnerships, specialist tennis
network communications, seeding of Slinger product locally as necessary to local
key market tennis influencers to further increase the intensity of the
influencer effort. Marketing dollars will also be allocated to Google, Facebook,
YouTube and other social media advertising spend and, where appropriate,
approved and overseen by Ad Venture Media Group.



Distribution Agreements


Slinger Bag Americas has entered into exclusive distribution agreements for
Slinger's line of products, including, but not limited to, tennis ball launcher
devices, tennis ball launcher accessories, sports bags, tennis balls, tennis
court accessories and other tennis related products in the following markets and
with the following distributors:



                                                            Minimum Purchase
                                                         Requirement of Slinger
                                                                   Bag
Territory                   Distributor                   Tennis Ball Launchers
                                                        32,500 through the end of
Japan                       Globeride Inc.              January 2025
United Kingdom and          Framework Sports &          9,000 through the end of
Ireland                     Marketing Ltd               May 2025
                                                        3,000 through the end of
Switzerland                 Ace Distribution            May 2025
Denmark, Finland, Norway                                6,500 through the end of
and Sweden                  Frihavnskompagniet ApS      December 2025
                                                        1,000 through the end of
Morocco                     Planet Sport Sarl           December 2025
                            Sportsman Warehouse t/a     2,500 through the end of
Australia                   Tennis Only                 2025
                            Sporting Goods              100 through the end of
New Zealand                 Specialists                 2025
                                                        950 through the end of
Bulgaria                    Ark Dream EOOD              2025
                                                        165 through the end of
Chile                       Sporting Brands Ltda        2025
Croatia, Hungary and                                    380 through the end of
Slovenia                    Go 4 d.o.o.                 2025
Austria, Belgium, France,
Germany, Italy,
Luxembourg, Portugal,       Dunlop International        120,000 through the end
Spain and The Netherlands   Europe Ltd                  of 2025
                                                        950 through the end of
Singapore                   Tennis Bot Pte Ltd          2025
                                                        10,000 through the end of
India                       Racquets4U                  2025
                                                        2,050 through the end of
Israel                      Eran Shine                  2025
Bahrain, Bangladesh,
Egypt, Kuwait, Maldives,
Oman, Pakistan, Qatar,
Saudi Arabia, Sri Lanka,
Tunisia and United Arab                                 3,000 through the end of
Emirates                    Color Sports Inc            2025
                                                        380 through the end of
Greece                      Elsol                       2025
                                                        50 through the end of
Panama                      Orange Pro                  2021
                                                        1,900 through the end of
Russia                      Neva Sport                  2025
                                                        500 through the end of
Malaysia                    Tennis Bot                  2025
Czech and Slovak                                        3,000 through the end of
Republics                   RaketSport s.r.o            2025
                                                        5,000 through the end of
South Africa                Golf Racket Pty Ltd         2025
                                                        750 through the end of
Hong Kong and Macau         Tennis Bot                  2025
                                                        650 through the end of
Indonesia and Philippines   Tennis Bot                  2026
                            Xiamen Powerway Sports      17,500 through the end of
China                       Co. Ltd                     2026
                                                        1,850 through the end of
Poland                      Frameworks Sports Poland    2026
                            Brandsinc SA / Siati        240 through the end of
Ecuador                     Express                     2026
Total                                                   223,915




5







Brand Endorsements


We have reached agreements with several globally recognized tennis players and
coaches to become brand ambassadors.

Tommy Haas (former ATP #2 Player) has been appointed the Slinger Bag Chief
Ambassador. In this role Tommy will support Slinger in building out its global
ambassador team focused on identifying ambassadors in our key global business
markets of the U.S., Japan, Europe, Australia, China, Brazil and India. Tommy
will also be very active supporting and promoting Slinger across the globe with
personal appearances at Slinger events and via online training and drill videos.



Mike and Bob Bryan (aka the Bryan Brothers - the foremost doubles team in the
tennis world) have extended their ambassador agreements and will continue to
feature prominently in our marketing activities and messaging.



Additionally, we have brand endorsements with the following athletes and
coaches:



  ? Eugenie Bouchard
  ? Luke and Murphy Jensen (aka the Jensen Brothers)
  ? Darren Cahill
  ? Nick Bollettieri
  ? Patrick Mouratoglou
  ? Dustin Brown



Each of the foregoing athletes and coaches is or was either a world-ranked
singles or doubles tennis player or, in the case of Nick Bollettieri and Patrick
Mouratoglou, the coach of a number of world-ranked tennis players, has a large
following of fans and supporters and is active across many aspects of tennis
today.



The Professional Tennis Registry (PTR) - a United States-based teaching teacher
association with approximately 40,000 members will become a non-exclusive
strategic partner for Slinger with all their members able to access an affiliate
member part of our website.



Peter Burwash International (PBI) - a United States-based, highly respected,
global tennis services company set up by Peter Burwash some 35 years ago. PBI
provides tennis programs and other tennis services to as many as 56 of the
globes leading hotels and resorts. Slinger Launchers will be available to use at
each resort and the PBI team will be actively promoting Slinger as part of
our
affiliate marketing activity.


PTCA Central Europe – a European coach organization of leading touring pro
coaches and they, like others, will undertake an affiliate marketing approach.




Tie Break 10s - a global organization that owns and operates Tie Break 10 events
both independently and in partnership with major global tour events, e.g.,
Indian Wells. These events involve top players playing 'tie-break' matches with
the event fully completed in one evening and with a significant cash prize for
the winner. Slinger will be promoted at each of these events and will be
available for fans to test out as well as the Slinger brand name being
prominently used on Tie Break 10s social media.



Tennis One App - a United States-based company that has developed and
successfully marketed an all-inclusive tennis app for players across the globe.
Slinger has engaged with Tennis One to support its coaches corner segment - a
weekly podcast series and in doing so benefits from the brand exposure available
through the reach of the consumers using the app on a regular basis.



Functional Tennis – an Ireland based social media tennis blog site with an
excess of 250,000 followers. Slinger is engaged with Functional Tennis in a
variety of ways and is the presenting sponsor of its weekly Tennis Podcast.

We are currently in discussions with other organizations, events, prominent
coaches and players and have to date seeded Slinger products to 12 of the Top 20
ATP male players, 5 of the top 20 WTA women players, plus numerous other
top-class touring and teaching professionals.

Throughout 2020 we sponsored several prominent tennis events, e.g., Battle of
the Brits, Tie Break 10s (all shown live across the globe).



Research and Development



The Company is involved in additional research and development of transportable,
affordable and player-enhancing ball launching machines and associated game
improvement products for all ball sports. Following a successful launch of its
tennis ball launcher, Slinger is currently field testing its new pickleball,
paddle and soft tennis launchers, which are expected to be introduced to the
market in calendar 2022. Slinger plans to introduce similar transportable,
versatile and affordable ball launchers for baseball, softball, cricket,
badminton and other high participation ball sports over the course of the next 3
years. In this connection, on September 10, 2020, Slinger entered into an
agreement with Igloo Design, which is the same company that designed the Slinger
Launcher for tennis, for a Slinger ball launcher for baseball and softball. This
development commenced in the second half of 2020 and initial design ideas and
further direction have been provided.



We retain outside consultants to provide research and product design services
and each consultant has a specific expertise (e.g., molding technology,
electronics, product design, bag design, as examples). We also are working with
a select group of highly qualified and resourceful third-party suppliers in
Asia. We are continually striving to identify product enhancements, new concepts
and improvement to the production process on an on-going daily basis. In respect
of any new project, management provides detailed briefs, market data, product
cost targets, competitive analysis, timelines and project cost goals to either
the product consultants or vendors and manages them to agreed upon key
performance indicators ("KPIs"). These KPI's include, but are not limited to:
(i) manufacturing to target costs; (ii) agreed development timelines; (iii)
established quality criteria; and (iv) defined performance criteria.



We also retain specialist trademark and patent attorneys and work with these
attorneys on the projects, as needed.



Government Regulation


Both Slinger Launcher and Slinger Oscillator meet all the U.S. government
requirements for electrical, radio wave and battery standards as well as having
all necessary and required certification to facilitate global marketing and
sales of these products.



6






Results of Operations for the Three Months Ended October 31, 2021 and 2020

The following are the results of our operations for the three months ended
October 31, 2021 as compared to 2020:



                                          For the Three Months Ended
                                        October 31,        October 31,
                                            2021              2020             Change
                                        (Unaudited)        (Unaudited)

Net sales                              $    5,400,542     $   2,620,068     $   2,780,474
Cost of sales                               3,315,605         1,579,750         1,735,855
Gross income                                2,084,937         1,040,318         1,044,619

Operating expenses:
Selling and marketing expenses                887,809           397,922    

489,887

General and administrative expenses        36,197,888           829,510    

35,368,378

Research and development costs                103,318            15,439    
       87,879
Total operating expenses                   37,189,015         1,242,871        35,946,144
Loss from operations                      (35,104,078 )        (202,553 )     (34,901,525 )

Other expense (income):
Amortization of debt discounts              2,629,069            52,543    

2,576,526

Loss on extinguishment of debt              1,978,295         1,999,487           (21,192 )
Induced conversion loss                             -            51,412           (51,412 )
Gain on change in fair value of
derivatives                                (4,803,569 )               -        (4,803,569 )
Loss on issuance of convertible
notes                                       3,689,369                 -    

3,689,369

Interest expense - related party               22,495           144,085    
     (121,590 )
Interest expense, net                         205,620            74,046           131,574
Total other expense                         3,721,279         2,321,573         1,399,706
Loss before income taxes                  (38,825,357 )      (2,524,126 )     (36,301,231 )
Provision for income taxes                          -                 -                 -
Net loss                               $  (38,825,357 )   $  (2,524,126 )   $ (36,301,231 )




Net sales



Net sales increased $2,780,474, or 106%, during the three months ended October
31, 2021 as compared to the three months ended October 31, 2020. The increase is
due to an increase in the number of new orders placed on the Company's website
and from its international distributors and fulfilled during the three months
ended October 31, 2021 as compared to the three months ended October 31, 2020
when the product was still relatively new to the market. As of October 31, 2021,
we had deferred revenue of $71,242 representing amounts received for units that
have not been shipped to customers. We expect these orders to be fulfilled and
the sales to be recognized in the Company's next fiscal quarter.



Cost of sales and Gross income

Cost of sales increased $1,735,855, or 110%, during the three months ended
October 31, 2021 as compared to the three months ended October 31, 2020, which
was primarily due to the increase in net sales. Gross income increased
$1,044,619, or 100%, during the three months ended October 31, 2021 as compared
to the three months ended October 31, 2020. The slight decrease in gross margin
as compared to prior year is primarily due to increased freight and duty costs
in the current year as compared to prior year.



7






Selling and marketing expenses




Selling and marketing expenses increased $489,887, or 123%, during the three
months ended October 31, 2021 as compared to the three months ended October 31,
2020. This increase is largely driven by an increase in social media
advertising, sponsorships, and other investments in our public relations
presence in the current year in order to drive sales and build brand awareness.



General and administrative expenses




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 $35,368,378 during
the three months ended October 31, 2021 as compared to the three months ended
October 31, 2020. This increase is primarily driven by an increase of
$32,381,309 of share-based compensation related to warrants granted to
employees, a $681,155 increase in expense related to shares and warrants issued
in connection with services the majority of which relate to the warrants issued
to the lead placement agent as part of the issuance of the Convertible Notes,
and a $1,000,000 increase in legal fees related to closing costs incurred as
part of the acquisitions of PlaySight Interactive Ltd. and Flixsense Pty Ltd.
d/b/a Gameface during the three months ended October 31, 2021. The remainder of
the increase is largely due to an increase in compensation expense due to
increased headcount to support the continued growth of the business as well as
the acquisition of Foundation Sports in 2021.



Research and development costs




Research and development costs increased $87,879 during the three months ended
October 31, 2021 as compared to the three months ended October 31, 2020. This
increase is primarily driven by our investment in a new platform and app that
will integrate artificial intelligence (AI) technology to offer more value to
our customers, which we began developing in December 2020, as well as the
continued development and testing of launchers for new ball sports that are
expected to be brought to market in the future.



8







Other expense



Total other expense increased $1,399,706 during the three months ended October
31, 2021 as compared to the three months ended October 31, 2020. The increase
was primarily due to the loss on the issuance of the Convertible Notes as well
as an increase in amortization of debt discounts and interest expense, net due
to the issuance of the Convertible Notes during the three months ended October
31, 2021. These increases were partially offset by the increased gain on the
change in fair value of derivatives as well as a decrease in the loss on
extinguishment of debt, induced conversion loss, and related party interest
expense as a result of lower related party debt balances year over year.



Results of Operations for the Six Months Ended October 31, 2021 and 2020

The following are the results of our operations for the six months ended October
31, 2021 as compared to 2020:



                                          For the Six Months Ended
                                        October 31,       October 31,
                                           2021              2020             Change
                                        (Unaudited)       (Unaudited)

Net sales                              $   7,938,115     $   3,185,053     $   4,753,062
Cost of sales                              5,067,956         2,516,650         2,551,306
Gross income                               2,870,159           668,403         2,201,756

Operating expenses:
Selling and marketing expenses             1,594,906           699,940     

894,966

General and administrative expenses 38,592,687 1,588,778

37,003,909

Research and development costs               277,366            43,549     
     233,817
Total operating expenses                  40,464,959         2,332,267        38,132,692
Loss from operations                     (37,594,800 )      (1,663,864 )     (35,930,936 )

Other expense (income):
Amortization of debt discounts             2,650,285           286,251     

2,364,034

Loss on extinguishment of debt             7,096,730         1,432,820     

5,663,910

Induced conversion loss                            -            51,412           (51,412 )
Gain on change in fair value of
derivatives                               (9,130,913 )               -        (9,130,913 )
Loss on issuance of convertible
notes                                      3,689,369                 -     

3,689,369

Interest expense - related party              78,728           316,549     
    (237,821 )
Interest expense, net                        281,670           147,256           134,414
Total other expense                        4,665,869         2,234,288         2,431,581
Loss before income taxes                 (42,260,669 )      (3,898,152 )     (38,362,517 )
Provision for income taxes                         -                 -                 -
Net loss                               $ (42,260,669 )   $  (3,898,152 )   $ (38,362,517 )




Net sales



Net sales increased $4,753,062, or 149%, during the six months ended October 31,
2021 as compared to the six months ended October 31, 2020. The increase is due
to an increase in the number of new orders placed on the Company's website and
from its international distributors and fulfilled during the six months ended
October 31, 2021 as compared to the six months ended October 31, 2020 when a
large portion of the orders during the first three months of the year were
related to the Kickstarter and Indiegogo crowdfunding campaigns initiated in
fiscal year 2019.


Cost of sales and Gross income




Cost of sales increased $2,551,306, or 101%, during the six months ended October
31, 2021 as compared to the six months ended October 31, 2020, which was
primarily due to the increase in net sales. Gross income increased $2,201,756,
or 329%, during the six months ended October 31, 2021 as compared to the six
months ended October 31, 2020.



9







The increase in gross margin is largely due to the first quarter of the prior
year resulting in a gross loss on net sales 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 cost of sales,
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
in the prior year, substantially all of the initial crowdfunding orders had
been
fulfilled.


Selling and marketing expenses

Selling and marketing expenses increased $894,966, or 128%, during the six
months ended October 31, 2021 as compared to the six months ended October 31,
2020. This increase is largely driven by an increase in social media
advertising, sponsorships, and other investments in our public relations
presence in the current year in order to drive sales and build brand awareness.

General and administrative expenses




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 $37,003,909 during
the six months ended October 31, 2021 as compared to the six months ended
October 31, 2020. This increase is primarily driven by an increase of
$32,381,309 of share-based compensation related to warrants granted to
employees, a $1,233,883 increase in expense related to shares and warrants
issued in connection with services the majority of which relate to the warrants
issued to the lead placement agent as part of the issuance of the Convertible
Notes and shares and warrants issued to brand ambassadors, and a $1,000,000
increase in legal fees related to closing costs incurred as part of the
acquisitions of PlaySight Interactive Ltd. and Flixsense Pty Ltd. d/b/a Gameface
during the six months ended October 31, 2021. The remainder of the increase is
largely due to an increase in compensation expense due to increased headcount to
support the continued growth of the business as well as the acquisition of
Foundation Sports in 2021.



Research and development costs




Research and development costs increased $233,817 during the six months ended
October 31, 2021 as compared to the six months ended October 31, 2020. This
increase is primarily driven by our investment in a new platform and app that
will integrate artificial intelligence (AI) technology to offer more value to
our customers, which we began developing in December 2020, as well as the
continued development and testing of launchers for new ball sports that are
expected to be brought to market in the future.



Other expense



Total other expense increased $2,431,581 during the six months ended October 31,
2021 as compared to the six months ended October 31, 2020. The increase was
primarily due to the loss on the issuance of the Convertible Notes, an increase
in loss on extinguishment of debt as a result of the conversion of the notes
payable - related party, and increases in amortization of debt discounts and
interest expense, net due to the issuance of the Convertible Notes during the
six months ended October 31, 2021. These increases were partially offset by an
increased gain on the change in fair value of derivatives as well as a decrease
in induced conversion loss and related party interest expense as a result of
lower related party debt balances year over year.



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 $71,083,942 as of October 31, 2021, 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.



10






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.

The following is a summary of our cash flows from operating, investing and
financing activities for the six months ended October 31, 2021 and 2020:



                                              For the Six Months Ended
                                            October 31,      October 31,
                                                2021             2020

Net cash used in operating activities $ (5,999,433 ) $ (1,544,039 )
Net cash used in investing activities (1,400,000 )

              -

Net cash provided by financing activities 8,209,420 2,120,000

We had cash and cash equivalents of $1,747,661 as of October 31, 2021, as
compared to $928,796 as of April 30, 2021.

Net cash used in operating activities was $5,999,433 during the six months ended
October 31, 2021, as compared to $1,544,039 during the same period in 2020. Our
net cash used in operating activities during the six months ended October 31,
2021 was primarily the result of our net loss of $42,260,669 for the period as
well as increases in inventory, prepaid expenses and other current assets, and
accounts receivable as well as decreases in accrued payroll and bonuses and
deferred revenue during the period, which was partially offset by net non-cash
expenses of $38,424,269 and increases in accounts payable and accrued expenses
and accrued interest - related party during the period. Our net cash used in
operating activities during the six months ended October 31, 2020 was primarily
the result of our net loss of $3,898,152 for the period as well as increases in
inventory and accounts receivable during the period, which was partially offset
by net non-cash expenses of $1,954,328, increases in accounts payable and
accrued expenses, accrued payroll and bonuses, deferred revenue and accrued
interest - related party as well as a decrease in prepaid expenses and other
current assets during the period.



Net cash used in investing activities was $1,400,000 and $0 for the six months
ended October 31, 2021 and 2020. Our net cash used in investing activities
during the six months ended October 31, 2021 consisted of $1,400,000 in
issuances related to a note receivable.

Net cash provided by financing activities was $8,209,420 for the six months
ended October 31, 2021, as compared to $2,120,000 for the same period in 2020.
Cash provided by financing activities for the six months ended October 31, 2021
primarily consisted of proceeds of $11,000,000 from convertible notes payable
and proceeds of $1,000,000 from notes payable with a related party, which was
partially offset by a $2,000,000 repayment of a note payable, a $1,000,000
repayment of related party notes payable and $800,251 in debt issuance costs
related to the convertible notes payable. Cash provided by financing activities
for the six months ended October 31, 2021 consisted of proceeds of $2,000,000
from notes payable with a related party and proceeds of $120,000 from a note
payable.



11







Description of Indebtedness



Notes Payable - Related Party



There were no outstanding borrowings from the Company's related party lender as
of October 31, 2021. Accrued interest due to this related party as of October
31, 2021 amounted to $821,925.



See Note 5 to the condensed consolidated financial statements for additional
information.




Convertible Notes Payable



On August 6, 2021, the Company consummated the closing (the "Closing") of a
private placement offering (the "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 (the
"Purchasers"). At the Closing, the Company sold to the Purchasers (i) 8% Senior
Convertible Notes (the "Convertible Notes") in an aggregate principal amount of
$11,000,000 and (ii) warrants to purchase up to 7,333,334 shares of common stock
of the Company (the "Warrants" and together with the Convertible Notes, the
"Securities"). The Company received an aggregate of $11,000,000 in gross
proceeds from the Offering, before deducting offering expenses and commissions.



Total outstanding borrowings related to the Convertible Notes as of October 31,
2021 were $11,000,000. The outstanding amount is net of total discounts of
$8,372,222 for a net book value of $2,627,778 as of October 31, 2021.

See Note 6 to the condensed consolidated financial statements for additional
information.




Note Payable



On April 15, 2021, the Company entered into a $2,000,000 note payable (the
“Note”). The Note matures April 14, 2023 and bears interest at fifteen percent
(15%) per year. The Company pays interest at maturity, at which time all
principal and unpaid interest is due.




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 the Note.


See Note 7 to the condensed consolidated financial statements for additional
information.

Future amounts due as of October 31, 2021 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 $ 11,000,000 $ 11,000,000 $

   -     $          -     $                 -
Total                       $ 11,000,000     $       11,000,000     $          -     $          -     $                 -



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 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 the (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.



Going Concern



Our independent registered public accounting firm auditors' report accompanying
our April 30, 2021 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.



12

© Edgar Online, source Glimpses

Related Articles

Leave a Reply

Back to top button
%d bloggers like this: