Connexa Sports Technologies (YYAI) Risk Analysis

If we develop our own offerings for end users, we will likely accept payment from our users primarily through credit card transactions and certain online payment service providers. When we or a third party experiences a data security breach involving credit card information, affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party's customer base and the greater the number of credit card accounts impacted, the more likely it is that our users would be impacted by the breach. To the extent our users are affected by such a breach experienced by us or a third party, we would need to contact such users to obtain new credit card information and process any pending transactions. It is likely that we would not be able to reach all affected users, and even if we could, some users' new credit card information may not be obtained and some pending transactions may not be processed, which could adversely affect our business, financial condition, and results of operations. Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online or choose alternative payment methods that are less convenient or more costly for us or otherwise restrict our ability to process payments without significant effort on the part of the user or us, or both. Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card-related and remediation costs, or refusal by credit card processors to continue to process payments on our behalf, any of which could adversely affect our business, financial condition, and results of operations.

If we develop our own offerings for end users, we will receive, process, store, and transmit a significant amount of personal user and other confidential or sensitive information, including, without limitation, credit card information and user-to-user communications. We would also likely enable our users to share their personal information with each other. In some cases, we might engage third-party service providers to store or process this information. We will work to protect the security, integrity, and confidentiality of this information, but we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur in the future or that third parties will not gain unauthorized access to, or will not use for unauthorized purposes, this information despite our efforts. When such events occur, we may not be able to remedy them, and we may be required by an increasing number of laws to notify regulators and individuals whose personal information was processed, used, or disclosed without authorization. We may also be subject to claims against us, including government enforcement actions, fines, and litigation, and have to expend significant capital and other resources to mitigate the impact of such events, including by developing and implementing protections to prevent future events of this nature from occurring. When breaches of security (or the security of our service providers) occur, the perception of the effectiveness of our security measures, the security measures of our service providers, and our reputation may be harmed, we may lose current and potential users, and our reputation and competitive position may be tarnished, any or all of which might adversely affect our business, financial condition, and results of operations.

If we develop our own offerings for end users, we may rely on third parties in connection with the provision of our services generally, as well as to facilitate and process certain transactions with our users. These third parties would likely include data centers and cloud-based, hosted web service providers, as well as third-party computer systems, service providers, and broadband and other communications systems. We will have no control over any of these third parties or their operations, and such third-party systems are increasingly complex. Any changes in service levels at our data centers or hosted web service providers or any interruptions, outages, or delays in our systems or those of our third-party providers, deterioration in the performance of these systems, or cyber or similar attacks on these systems could impair our ability to provide our services or process transactions with our users, which would adversely impact our business, financial condition, and results of operations.

We and our licensees may rely extensively on the Apple App Store and Google Play Store, as well as other technology platforms, to distribute and monetize our mobile applications. Users and subscribers will pay through these platforms, which will prevent us or our licensees from accessing key user data that we or they would otherwise receive if the transaction were with the users and subscribers directly. This could negatively impact customer relationship management efforts, the ability to reach new segments of our respective user and subscriber bases and the population generally, the efficiency of paid marketing efforts, the rates we or our licensees are able to charge advertisers seeking to reach users and subscribers of our respective services, our ability to comply with applicable law, and our ability, and our licensees' ability, to identify and exclude users and subscribers whose access would violate applicable terms and conditions, including underage individuals and bad actors, all of which could cause our business, financial condition, and results of operations to be adversely affected.

YYEM is incorporated and registered under the laws of Hong Kong. YYEM does not have, nor does it intend to have, any subsidiary, VIE structure or direct operations in mainland China. All of YYEM's revenue and profit is currently generated by operations in Hong Kong. The Basic Law of the Hong Kong Special Administrative Region (the "Basic Law") provides that PRC laws and regulations shall not be applied in Hong Kong except for those listed in Annex III of the Basic Law, which is confined to laws relating to national defense, foreign affairs, and other matters that are not within the scope of autonomy. YYEM therefore is not directly subject to PRC laws and regulations regarding the general conduct of its business or regarding overseas listings. Nevertheless, with its headquarters and substantial operations in Hong Kong, YYEM faces risks and uncertainties associated with the complex and evolving PRC laws and regulations, including whether and how PRC government statements and regulatory developments, such as those relating to corporate structure, overseas listings, data- and cybersecurity, and anti-monopoly concerns, would be applicable to Hong Kong companies such as YYEM, and whether and when the Chinese government might exercise significant oversight over the conduct of business in Hong Kong. If YYEM were to become subject to PRC laws and regulations, it could incur material costs to ensure compliance, and it might be subject to fines, no longer be permitted to conduct offerings to foreign investors, or no longer be permitted to continue business operations as presently conducted. The uncertainties regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene in or influence YYEM's operations, could result in a material change in its operations and the value of the securities we are registering, including the possibility that the value of such securities could become worthless. In recent years, the PRC government initiated, with little advance notice, a series of regulatory actions and statements to regulate certain types of business operations in mainland China, including cracking down on illegal activities in the securities market, enhancing supervision over mainland China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. For example, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to crack down on illegal activities in the securities market, requiring various governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over mainland China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. The CAC also promulgated the various data security-related measures described above under "Greater oversight by the Cyberspace Administration of China over data security, particularly for companies seeking to list on a foreign exchange, could adversely impact our business and our offering." As explained above, we believe the Company and its subsidiaries are not directly subject to the regulations and rules issued by CAC and other governmental agencies. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Enterprises (the "New Overseas Listing Rules") with five interpretive guidelines, which took effect on March 31, 2023. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under certain circumstances. The new rules provide that the determination as to whether a Chinese domestic company is indirectly offering and listing securities on an overseas market shall be made on a substance-over-form basis, and if the issuer meets the following conditions, the offering and listing will be deemed an indirect overseas offering and listing by a Chinese domestic company: (i) the revenue, profit, total assets or net assets of the Chinese domestic entity constitutes more than 50% of such item in the issuer's audited consolidated financial statements for the most recent fiscal year; or (ii) the senior managers in charge of business operations and management of the issuer are mostly Chinese citizens or with a regular domicile in China, the main locations of its business operations are in China, or its main business activities are conducted in China. YYEM is headquartered in Hong Kong, and at least 50% of its executive officers and directors are based in Hong Kong and are not Chinese citizens. Furthermore, all of its assets are located in Hong Kong and all of its revenue and profit is generated from operations in Hong Kong. We therefore believe that YYEM is not subject to the New Overseas Listing Rules. On February 24, 2023, the CSRC, the Ministry of Finance, the National Administration of State Secrets Protection, and the National Archives Administration released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Companies (the "Confidentiality and Archives Administration Provisions"), which took effect on March 31, 2023. PRC domestic enterprises seeking to offer securities and list in overseas markets, either directly or indirectly, are required to establish and improve their confidentiality systems and archives work and to complete various approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies, or other entities and individuals. As of the date of this prospectus, these new laws and guidelines have not impacted YYEM's ability to conduct its business. YYEM is headquartered in Hong Kong and does not have a VIE structure. YYEM is not a cyberspace operator with personal information of more than 1 million users or activities that affect or may affect the national security of China, and it does not possess documents and materials likely to affect the national security or public interest of China. However, any change in foreign investment regulations or other policies in China, or related enforcement actions by the PRC government, could result in a material change in YYEM's operations and the value of our Common Stock and could significantly limit or completely hinder our ability to offer our Common Stock to investors or cause the value of our Common Stock to significantly decline or be worthless.

Our former independent auditor, OOC, has been charged by the SEC in connection with allegedly aiding and abetting violations of the antifraud provisions of the federal securities laws. The SEC also charged OOC's principal, Olayinka Oyebola, with allegedly aiding and abetting his client's violation of lying to auditors. The SEC complaint seeks civil penalties as well as permanent injunctive relief, including an order permanently barring Olayinka Oyebola and OOC from acting as auditors or accountants for U.S. public companies or otherwise providing substantial assistance in the preparation of financial statements filed with the SEC. This action could affect the credibility of the financial statements audited by OOC. If their audit work is found to be deficient, our financial reporting could be questioned, leading to potential restatements, delays in regulatory filings, or reputational harm. If OOC is barred from acting as auditors or accountants for U.S. public companies, we will be unable to include the financial statements reviewed by OOC in any filing made after that date, and our financial statements will need to be reaudited. Any of these outcomes could have a material adverse effect on our business, financial condition, and stock price, which could contribute to the loss of all or part of your investment. On October 30, 2024, the Board of Directors and the audit committee approved the engagement of B&A as the Company's independent registered public accounting firm for the fiscal year ended April 30, 2025, effective immediately, and dismissed OOC as the Company's independent registered public accounting firm.