Core Insights - AXIL Brands, Inc. has launched the GS Extreme 3.0, the most advanced tactical lanyard earbud product to date, featuring cutting-edge sound filter technology and enhanced battery life [1][2][5] Product Features - The GS Extreme 3.0 offers a battery life of 15 hours, which is double that of the previous generation (GS Extreme 2.0) [6] - It has an IP65 rating for water and sweat resistance and an IP64 rating for dust resistance [6] - The product incorporates advanced SonicShieldX™ technology for improved sound filtering and situational awareness [6][7] - It features a Lock-n-Loaded fit system for a secure and custom fit during activities [6] - The earbuds are available in black and a new desert tan color [6] Market Position - The GS Extreme product line is AXIL's best-selling line and the GS Extreme 3.0 is positioned as the most advanced offering in this category [2][5] - The list price for the GS Extreme 3.0 is set at $184.60, with pre-orders starting on November 1, 2025 [7]

Core Insights - AXIL Brands, Inc. has been upgraded to "Outperform" due to accelerating operating leverage, strong wholesale momentum, disciplined expense management, and improved profitability following entry into national retail chains like Costco [1][12] Financial Performance - In Q1 fiscal 2026, AXIL's net sales increased by 17.2% year over year to $6.9 million, driven by shipments to a national membership-based retailer [2] - Gross margin decreased to 67.6% from 71%, while operating expenses fell to 61.6% of sales from 73.4% in the prior year, resulting in operating income of $0.4 million (6% of revenues) compared to a loss of $0.1 million a year earlier [3] - Adjusted EBITDA surged by 291% to $0.7 million, indicating scalable profitability amid modest revenue growth [3] Channel Diversification - The shift towards offline retail is reshaping AXIL's revenue mix and profit profile, with management noting that retail distribution offers greater cost efficiency and better visibility into recurring demand [4] - The retail-driven mix has improved AXIL's ability to control fixed costs, with professional and consulting expenses down 16% year over year and general and administrative spending down nearly 11% [5] Inventory and Cash Flow - Inventory rose approximately 53% quarter over quarter to $3.9 million to support initial orders from a new retail customer, reflecting proactive positioning for sustained wholesale growth [6] - Accounts receivable increased by 177% quarter over quarter to $2.8 million, but AXIL's $4.1 million cash balance provides adequate liquidity for working capital needs [7] Product Innovation - The upcoming launch of the GS Extreme 3.0 aims to enhance ergonomics and performance in the hearing protection line, with multiple next-generation releases expected in the next two to three quarters [8] - The introduction of the Reviv3 hair and skincare line across Chatters, Canada's largest salon chain, adds growth potential, although near-term contributions are limited [9] Valuation and Outlook - AXIL Brands trades at a trailing EV/Sales multiple of 1.45X, significantly below the consumer staples industry average of 2.9X, with positive inflection in operating performance [11] - The company's execution on offline retail penetration, operational discipline, and upcoming product launches support an "Outperform" rating, indicating expected above-market returns over the next 6-12 months [12] Conclusion - AXIL's Q1 fiscal 2026 results validate its channel diversification strategy, with new retail partnerships driving growth and structural operating leverage [13] - Product innovation and retail sales are expected to sustain consumer demand and lower acquisition costs, positioning AXIL for continued profit expansion [13]

Shares of AXIL Brands, Inc. (AXIL) have gained 0.2% since reporting results for the first quarter of fiscal 2026 against the S&P 500 index’s 0.07% decline. However, over the past month, the stock has declined 19%, trailing the S&P 500’s 2.5% growth, reflecting investor caution despite the company’s improved quarterly results.AXIL Brands reported net sales of $6.9 million for the quarter ended Aug. 31, 2025, up 17.2% from $5.9 million in the prior-year period. Net income stood at $0.3 million, reversing a ne ...

LOS ANGELES, Oct. 07, 2025 (GLOBE NEWSWIRE) -- AXIL Brands, Inc. (“AXIL” or the “Company”) (NYSE American: AXIL), an emerging global consumer products company for AXIL® hearing protection and enhancement products and Reviv3® hair and skin care products, announces its financial results for the first quarter ended August 31, 2025 (“1Q26”). Financial Highlights for the Quarter Ended August 31, 2025 Net sales in 1Q26 were $6.9 million, as compared to $5.9 million in the prior year period, an increase of 17.2%Gr ...

[Company Overview & Q1 FY26 Highlights](index=1&type=section&id=Company%20Overview%20%26%20Q1%20FY26%20Highlights) AXIL Brands reported strong Q1 FY2026 results, with increased net sales, profitability, and strategic business growth [Introduction](index=1&type=section&id=Introduction) AXIL Brands announced Q1 FY2026 results, highlighting its AXIL hearing and Reviv3 beauty product lines - AXIL Brands, Inc. (AXIL) announced its first-quarter fiscal year 2026 financial results[1](index=1&type=chunk) - The company primarily offers AXIL hearing protection and enhancement products, alongside Reviv3 hair and skin care products[1](index=1&type=chunk) [Financial Highlights for the Quarter Ended August 31, 2025](index=1&type=section&id=Financial%20Highlights%20for%20the%20Quarter%20Ended%20August%2031%2C%202025) AXIL Brands achieved significant Q1 FY2026 financial improvements, with net sales up 17.2%, turning profitable, and strong net income and adjusted EBITDA Q1 FY2026 Key Financial Data | Metric | August 31, 2025 (1Q26) | Prior Year Period | Change | Change Rate | | :-------------------------------- | :-------------------- | :--------- | :----- | :------- | | Net Sales | $6.9 million | $5.9 million | +$1.0 million | +17.2% | | Gross Margin | 67.6% | 71.0% | -3.4% | - | | Operating Expenses as % of Net Sales | 61.6% | 73.4% | -11.8% | - | | Operating Income (Loss) | $0.4 million | $(0.1) million | +$0.5 million | Turnaround to Profit | | Net Income (Loss) | $0.3 million | $(0.1) million | +$0.4 million | Turnaround to Profit | | Adjusted EBITDA | $0.7 million | $0.2 million | +$0.5 million | +291.3% | | Cash Flow from Operating Activities | $(0.7) million (Used) | $0.9 million (Provided) | - | - | | Cash at Period End | $4.1 million | $4.8 million (May 31) | $(0.7) million | - | | Basic and Diluted EPS (Loss) | $0.05 / $0.04 | $(0.02) | +$0.07 / +$0.06 | Turnaround to Profit | [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) The company made business expansion progress, including AXIL hearing products entering Costco and the full launch of Reviv3 Procare at Chatters, Canada's largest salon retailer - AXIL hearing products, including XCOR SE earplugs (in-store and Costco.com) and X30i filter earplug bundles (Costco.com only), expanded into Costco channels[4](index=4&type=chunk) - The full line of Reviv3 Procare products launched at Chatters, Canada's largest salon retailer with over 115 salons[4](index=4&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management highlights Q1 FY2026's strong financial turnaround, strategic channel diversification, product innovation, and solid liquidity [CEO's Statement on Q1 Performance](index=2&type=section&id=CEO's%20Statement%20on%20Q1%20Performance) CEO Jeff Toghraie noted Q1 FY2026 revenue shifted towards retail, driven by initial shipments to a new national membership chain, boosting total revenue by 17% and achieving significant operating leverage through stringent expense management - The Q1 revenue mix shifted more towards retail channels, primarily driven by initial shipments of AXIL hearing products to a new national membership retail chain[5](index=5&type=chunk) - Despite a **$1.0 million increase in revenue** (17% total revenue growth, 25% for AXIL branded hearing products), operating expenses remained flat year-over-year, decreasing from 73% to **62% of sales** this quarter[6](index=6&type=chunk) - Net income increased from a **$0.1 million net loss** in Q1 FY2025 to a **$0.3 million net income** in Q1 FY2026, with EBITDA growing by **$0.6 million** and turning positive[6](index=6&type=chunk) [Strategic Focus and Channel Diversification](index=2&type=section&id=Strategic%20Focus%20and%20Channel%20Diversification) The company's 18-month strategic focus has been diversifying revenue channels to balance online, offline retail, and international distribution, with wholesale retail offering higher profitability and operating leverage despite slightly lower gross margins due to reduced sales and marketing costs - The strategic focus over the past 18 months has been diversifying revenue channels to establish a more stable and balanced mix of owned e-commerce, offline retail, and international distribution[7](index=7&type=chunk) - An increased wholesale retail revenue mix is expected to benefit the company by providing **higher profitability and operating leverage** compared to online e-commerce channels[7](index=7&type=chunk) - The company will continue seeking additional retail distribution channels to enhance customer awareness of AXIL hearing enhancement and protection products[8](index=8&type=chunk) [Product Innovation and Roadmap](index=2&type=section&id=Product%20Innovation%20and%20Roadmap) AXIL Brands will continue innovation, planning multiple new or next-generation product launches over the next two to three quarters, starting with the GS Extreme 3.0 for the holiday season - The product roadmap includes launching multiple new or next-generation products over the next two to three quarters[9](index=9&type=chunk) - The next-generation GS Extreme 3.0 product is planned for a holiday season launch[9](index=9&type=chunk) [Balance Sheet and Liquidity](index=2&type=section&id=Balance%20Sheet%20and%20Liquidity) Inventory increased as expected to meet wholesale and new customer orders, with normalization anticipated; cash balance was **$4.1 million** at Q1 FY2026 end, deemed sufficient for strategic and growth objectives - Inventory significantly increased due to additional product supply required for wholesale business and initial purchase orders from new customers[10](index=10&type=chunk) - Cash balance was **$4.1 million** at the end of Q1 FY2026, which the company believes is sufficient to internally fund its strategy and growth objectives[10](index=10&type=chunk) [Hair and Skin Care Segment Outlook](index=3&type=section&id=Hair%20and%20Skin%20Care%20Segment%20Outlook) The company believes the Reviv3 hair and skin care business can exceed its current state, with strategic leadership additions and a new partnership with Chatters in Canada poised to add value and create sustainable shareholder value, particularly in the professional beauty channel - The hair and skin care business (Reviv3 line) has the potential to become a significant asset for the company[11](index=11&type=chunk) - Strategic leadership additions have been made to this business unit, with plans for further team strengthening[11](index=11&type=chunk) - The new partnership with Chatters, a top salon chain in Canada, demonstrates the leadership's ability to generate meaningful impact[11](index=11&type=chunk) [Concluding Remarks](index=3&type=section&id=Concluding%20Remarks) Management remains focused on execution for long-term growth across both product segments and is encouraged by Q1 performance and FY2026 business trends to date - The company will continue to focus on execution to achieve meaningful long-term growth across both product segments[12](index=12&type=chunk) - The company has built a solid foundation to support sustainable growth and operational efficiency and is encouraged by Q1 performance and FY2026 business trends to date[12](index=12&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the company's use of non-GAAP financial metrics like EBITDA and Adjusted EBITDA to provide additional insights into financial performance and trends [Explanation of Non-GAAP Measures](index=3&type=section&id=Explanation%20of%20Non-GAAP%20Measures) The company uses non-GAAP financial measures like EBITDA and Adjusted EBITDA, adjusting GAAP net income for income taxes, interest, depreciation, amortization, and stock-based compensation, to provide useful insights into financial condition and operating performance trends, aiding management in period-over-period business assessment, though comparability with other companies may vary - EBITDA is calculated by adjusting GAAP net income for income taxes, interest income or expense, and depreciation and amortization[13](index=13&type=chunk) - Adjusted EBITDA further adjusts EBITDA for stock-based compensation expense[13](index=13&type=chunk) - The company believes these non-GAAP measures provide useful information regarding its financial condition and operating performance, and management considers them important indicators for assessing business trends[13](index=13&type=chunk) [Consolidated EBITDA and Adjusted EBITDA Reconciliation](index=4&type=section&id=Consolidated%20EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) In Q1 FY2026, both EBITDA and Adjusted EBITDA significantly improved, with Adjusted EBITDA growing **291.3%** year-over-year and increasing from **2.9% to 9.8% of net sales** Consolidated EBITDA and Adjusted EBITDA Reconciliation | Metric | August 31, 2025 | August 31, 2024 | | :----------------------------------- | :------------- | :------------- | | Net Income (Loss) (GAAP) | $334,294 | $(109,805) | | Provision for Income Taxes | $115,058 | - | | Net Interest Income | $(36,296) | $(28,631) | | Depreciation and Amortization | $62,087 | $12,895 | | **Total EBITDA (Non-GAAP)** | **$475,143** | **$(125,541)** | | Adjustments: | | | | Stock-based Compensation | $199,212 | $297,864 | | **Total Adjusted EBITDA (Non-GAAP)** | **$674,355** | **$172,323** | | Net Sales (GAAP) | $6,856,218 | $5,851,2

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) AXIL Brands, Inc. filed its Form 10-Q for Q1 FY2026, trading on NYSE American as a non-accelerated, smaller reporting company - AXIL Brands, Inc. filed its Quarterly Report on Form 10-Q for the period ended August 31, 2025, with its common stock traded on The NYSE American LLC under the symbol **AXIL**, classified as a **non-accelerated filer** and a **smaller reporting company**[2](index=2&type=chunk)[3](index=3&type=chunk)[4](index=4&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that forward-looking statements are subject to various risks and uncertainties that could materially alter actual results - The report contains forward-looking statements regarding future events and financial performance, which are subject to various risks and uncertainties that could cause actual results to differ materially[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with explanatory notes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets and liabilities increased, driven by accounts receivable, inventory, and accounts payable, alongside a rise in stockholders' equity | Metric | August 31, 2025 (Unaudited) | May 31, 2025 | | :-------------------------------- | :-------------------------- | :----------- | | **Total Assets** | **$15,355,888** | **$12,869,795** | | Cash | $4,086,624 | $4,769,854 | | Accounts receivable, net | $2,778,751 | $1,003,945 | | Inventory, net | $3,889,462 | $2,533,658 | | **Total Liabilities** | **$5,162,674** | **$3,210,087** | | Accounts payable | $2,391,752 | $866,573 | | Income tax liability | $501,370 | $310,369 | | **Total Stockholders' Equity** | **$10,193,214** | **$9,659,708** | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) The company achieved net income in Q1 2025, a turnaround from a prior-year net loss, driven by increased sales and operating efficiency | Metric | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Sales, net | $6,856,218 | $5,851,272 | | Cost of sales | $2,221,284 | $1,697,624 | | Gross profit | $4,634,934 | $4,153,648 | | Total Operating Expenses | $4,223,196 | $4,294,350 | | Income (Loss) from Operations | $411,738 | $(140,702) | | Provision for income taxes | $115,058 | $- | | NET INCOME (LOSS) | $334,294 | $(109,805) | | Basic EPS | $0.05 | $(0.02) | | Diluted EPS | $0.04 | $(0.02) | [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased due to net income and stock-based compensation, with prior-year preferred stock conversions also impacting capital | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Total Stockholders' Equity | $10,193,214 | $9,659,708 | | Net income for the period | $334,294 | N/A | | Stock options expense | $176,488 | N/A | | Stock-based compensation | $22,724 | N/A | - For the three months ended August 31, 2024, preferred stock conversions resulted in **555,913 shares of common stock**[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased due to operating activities, driven by increased accounts receivable and inventory, partially offset by financing activities | Cash Flow Activity | Three months ended August 31, 2025 | Three months ended August 31, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | | Net cash (used in)/provided by operating activities | $(739,194) | $897,318 | | Net cash used in investing activities | $(94,497) | $(41,840) | | Net cash provided by financing activities | $150,461 | $39,370 | | Net (decrease)/increase in cash | $(683,230) | $894,848 | | Cash - End of period | $4,086,624 | $4,148,724 | [Condensed Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=Condensed%20Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of accounting policies, financial statement line items, and other relevant disclosures [Note 1 – Organization](index=11&type=section&id=Note%201%20%E2%80%93%20Organization) AXIL Brands, Inc. manufactures and distributes high-tech hearing and audio protection, and hair/skin care products globally - AXIL Brands, Inc. (formerly Reviv3 Procare Company) is headquartered in Beverly Hills, California, operating through subsidiaries like AXIL Distribution Company and Sharper Vision Marketing Inc[24](index=24&type=chunk)[25](index=25&type=chunk) - The company's product lines include high-tech hearing and audio enhancement/protection and professional quality hair and skin care products, sold globally[24](index=24&type=chunk) [Note 2 – Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation, key accounting policies, and recent accounting pronouncements, covering revenue recognition, inventory, goodwill, stock-based compensation, and leases - The unaudited consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, with all significant intercompany balances and transactions eliminated[26](index=26&type=chunk) - Revenue is recognized when performance obligations are satisfied, generally upon product shipment, with variable consideration for returns estimated based on historical data[37](index=37&type=chunk)[41](index=41&type=chunk)[43](index=43&type=chunk) - The company adopted ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective June 1, 2025, which will expand annual income tax disclosures[78](index=78&type=chunk)[79](index=79&type=chunk) [Note 3 – Accounts Receivable, net](index=20&type=section&id=Note%203%20%E2%80%93%20Accounts%20Receivable,%20net) Accounts receivable, net, significantly increased due to a rise in customer receivables, with the company recognizing a net recovery from credit losses | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Customers receivable | $2,540,473 | $922,616 | | Merchant processor receivable | $345,543 | $185,719 | | Less: Allowance for credit losses | $(107,265) | $(104,390) | | Total Accounts receivables, net | $2,778,751 | $1,003,945 | - The company recognized a net recovery from credit losses of **$158** for the three months ended August 31, 2025, compared to a provision of $18,785 in the prior year[80](index=80&type=chunk) [Note 4 – Inventory, net](index=20&type=section&id=Note%204%20%E2%80%93%20Inventory,%20net) Inventory, net, increased substantially due to a significant rise in finished goods and inventory in-transit | Metric | August 31, 2025 | May 31, 2025 | | :---------------- | :-------------- | :----------- | | Finished Goods | $3,874,121 | $2,509,840 | | Raw Materials | $15,341 | $23,818 | | Total Inventory | $3,889,462 | $2,533,658 | - Inventory in-transit increased from **$174,564** as of May 31, 2025, to **$747,536** as of August 31, 2025[81](index=81&type=chunk) [Note 5 – Property and Equipment](index=20&type=section&id=Note%205%20%E2%80%93%20Property%20and%20Equipment) Net property and equipment decreased slightly, while depreciation expense increased significantly year-over-year | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Total Property, plant and equipment, net | $395,857 | $412,261 | | Accumulated depreciation | $(174,363) | $(149,591) | | Depreciation expense (3 months ended Aug 31) | $24,771 (2025) | $9,893 (2024) | [Note 6 – Intangible Assets](index=21&type=section&id=Note%206%20%E2%80%93%20Intangible%20Assets) Net intangible assets increased due to higher product certification testing costs, with goodwill remaining constant and amortization expense rising substantially | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Total Intangible assets, net | $452,405 | $403,591 | | Product certification testing | $255,905 | $180,815 | | Accumulated amortization | $(281,620) | $(244,304) | | Goodwill | $2,152,215 | $2,152,215 | | Amortization expense (3 months ended Aug 31) | $37,316 (2025) | $3,002 (2024) | - The company holds three active U.S. patents and seven federally registered trademarks, considered material to its business[85](index=85&type=chunk) [Note 7 – Other Current Liabilities](index=21&type=section&id=Note%207%20%E2%80%93%20Other%20Current%20Liabilities) Other current liabilities increased, mainly due to a rise in accrued expenses and the introduction of accrued interest | Metric | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Sales tax payable | $207,511 | $218,828 | | Accrued expenses | $86,734 | $24,307 | | Accrued interest | $149 | $- | | Total other current liabilities | $294,394 | $244,998 | [Note 8 – Notes Payable](index=21&type=section&id=Note%208%20%E2%80%93%20Notes%20Payable) The company has an outstanding Economic Injury Disaster Loan (EIDL) with a principal balance of $139,199, bearing 3.75% annual interest and payable until May 2050 | Metric | August 31, 2025 | May 31, 2025 | | :----------------------------------- | :-------------- | :----------- | | Economic Injury Disaster Loan Program (EIDL) | $139,199 | $140,229 | | Less: Current portion | $(3,459) | $(3,574) | | Non-current portion | $135,740 | $136,655 | - Interest expense related to the EIDL was **$1,312** for the three months ended August 31, 2025, compared to $1,495 in the prior year[88](index=88&type=chunk) [Note 9 – Stockholders' Equity](index=23&type=section&id=Note%209%20%E2%80%93%20Stockholders'%20Equity) This note details the company's capital structure, including authorized shares, preferred and common stock, stock options, and restricted stock awards, highlighting changes and compensation expenses - Authorized common stock was reduced from **450,000,000 to 15,000,000 shares**, and preferred stock from **300,000,000 to 28,000,000 shares**, effective May 19, 2025[91](index=91&type=chunk) - As of August 31, 2025, **27,773,500 shares of Series A Preferred Stock** were outstanding, convertible into common stock at a twenty-to-one ratio, subject to a 5% beneficial ownership limit[95](index=95&type=chunk)[96](index=96&type=chunk) - Stock options expense for the three months ended August 31, 2025, was **$176,488**, and restricted stock awards expense was **$22,724**[112](index=112&type=chunk)[114](index=114&type=chunk) [Note 10 – Commitments and Contingencies](index=28&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) The company entered new operating lease agreements for facilities in Beverly Hills and American Fork, with terms extending to 2029, and expects no material adverse effect from legal contingencies - New operating leases commenced in November 2024 (Beverly Hills) and October 2024 (American Fork), with a weighted average remaining term of **3.1 years** and a discount rate of **13.1%** as of August 31, 2025[116](index=116&type=chunk)[117](index=117&type=chunk)[120](index=120&type=chunk) | Lease Liability Maturity (Fiscal Year-End) | Amount | | :--------------------------------------- | :------- | | 2026 (nine months remaining) | $183,736 | | 2027 | $257,647 | | 2028 | $206,270 | | 2029 | $119,790 | | Total | $767,443 | | Less: Imputed interest | $(207,039) | | Present value of lease liabilities | $560,404 | - Operating lease costs for the three months ended August 31, 2025, were **$63,161**, up from $18,659 in the prior year[119](index=119&type=chunk) [Note 11 – Related Party Transactions](index=30&type=section&id=Note%2011%20%E2%80%93%20Related%20Party%20Transactions) The company engages in transactions with related parties, including consulting fees paid to entities managed by its Chairman/CEO and CFO/COO, and short-term advances from the CEO's entity - Intrepid Global Advisors, managed by the CEO, provided **$1,207,693** in advances and received **$1,056,202** in repayments during the three months ended August 31, 2025, with consulting fees paid to Intrepid totaling **$66,100**[124](index=124&type=chunk) - BZ Capital Strategies, co-owned by the CFO/COO, received **$40,000** in consulting fees for the three months ended August 31, 2025[125](index=125&type=chunk) [Note 12 – Concentrations](index=30&type=section&id=Note%2012%20%E2%80%93%20Concentrations) The company faces concentrations of credit risk in cash deposits, and significant customer and supplier concentrations, with one customer accounting for 28% of net sales and 66% of gross accounts receivable - Cash held in excess of federally insured limits was **$3,586,624** as of August 31, 2025[126](index=126&type=chunk) - One customer represented **28% of consolidated net sales** and **66% of gross accounts receivable** for the three months ended August 31, 2025[127](index=127&type=chunk)[129](index=129&type=chunk) - The two largest manufacturing vendors accounted for **91% of all purchases** for the three months ended August 31, 2025[130](index=130&type=chunk) [Note 13 – Business Segment and Geographic Area Information](index=31&type=section&id=Note%2013%20%E2%80%93%20Business%20Segment%20and%20Geographic%20Area%20Information) The company operates in two segments: Hearing Enhancement and Protection (primary revenue driver) and Hair and Skin Care (operating loss), with most sales to U.S. customers | Segment | Sales, net (3 months ended Aug 31, 2025) | Sales, net (3 months ended Aug 31, 2024) | Segment non-cash operating income (loss) (3 months ended Aug 31, 2025) | Segment non-cash operating income (loss) (3 months ended Aug 31, 2024) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------------------------------------- | :--------------------------------------------------------------------- | | Hearing enhancement and protection | $6,579,666 | $5,299,763 | $1,026,295 | $394,217 | | Hair and skin care | $276,552 | $551,509 | $(36,074) | $105,413 | | Consolidated | $6,856,218 | $5,851,272 | $990,221 | $499,630 | - Approximately **95% of consolidated net sales** for the three months ended August 31, 2025, were to customers located in the U.S., consistent with 92% in the prior year[135](index=135&type=chunk) [Note 14 – Income Taxes](index=33&type=section&id=Note%2014%20%E2%80%93%20Income%20Taxes) The company recorded an income tax expense of $115,058 for the three months ended August 31, 2025, and expects its tax positions to be upheld - Income tax expense for the three months ended August 31, 2025, was **$115,058**[138](index=138&type=chunk) - The company's 2022, 2023, and 2024 Corporate Income Tax Returns are subject to IRS examination[138](index=138&type=chunk) [Note 15 – Subsequent Events](index=33&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Events) Subsequent to the reporting period, two preferred stock holders converted 2,000,000 shares of preferred stock into 100,000 shares of common stock - On September 2 and September 15, 2025, **2,000,000 shares of preferred stock** were converted into **100,000 shares of common stock**[139](index=139&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, results of operations, and cash flows, covering business strategy, recent developments, and critical accounting policies [Overview](index=34&type=section&id=Overview) AXIL Brands, Inc. focuses on high-tech hearing/audio enhancement and protection products, and professional hair/skin care, emphasizing direct-to-consumer campaigns, e-commerce, and strategic partnerships - The company operates in two reportable segments: hearing enhancement and protection, and hair and skin care, with a new subsidiary planned for marketing services[143](index=143&type=chunk)[144](index=144&type=chunk) - Key strategic initiatives include expanding market share through online and traditional platforms, optimizing e-commerce, building sales teams, and seeking strategic partnerships[145](index=145&type=chunk) - Recent developments include a material order from a national membership-based retail chain, a partnership with a major Canadian salon chain, and media recognition in military publications[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) The company achieved a net income of $334,294, a significant improvement from a prior-year net loss, driven by a 17.2% increase in net sales and a 1.7% decrease in operating expenses | Metric | Three months ended August 31, 2025 | Three months ended August 31, 2024 | Change (%) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :--------- | | Sales, net | $6,856,218 | $5,851,272 | +17.2% | | Gross profit | $4,634,934 | $4,153,648 | +11.6% | | Gross profit as % of sales | 67.6% | 71.0% | -3.4 pp | | Total operating expenses | $4,223,196 | $4,294,350 | -1.7% | | Income (loss) from operations | $411,738 | $(140,702) | +392.6% | | Net income (loss) after tax | $334,294 | $(109,805) | N/A | | Adjusted EBITDA (Non-GAAP) | $674,355 | $172,323 | +291.3% | | Adjusted EBITDA as % of Sales, net | 9.8% | 2.9% | +6.9 pp | - The increase in net sales was primarily due to a **material order from a leading national membership-based retail chain**[155](index=155&type=chunk) - Cost of sales as a percentage of net revenues increased to **32.4%** (from 29.0%) due to tighter margins on the material wholesale order[156](index=156&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company expects sufficient liquidity for at least one year, planning to manage expenses and potentially seek additional capital for growth - The company anticipates sufficient liquidity for at least one year based on current cash balances and expected operating cash flows[163](index=163&type=chunk)[164](index=164&type=chunk) - Future cash demands may exceed historical levels, and additional capital may be sought, though there's no assurance of availability on favorable terms[164](index=164&type=chunk) [Cash Flows for the three months ended August 31, 2025 and 2024](index=38&type=section&id=Cash%20Flows%20for%20the%20three%20months%20ended%20August%2031,%202025%20and%202024) Net cash used in operating activities increased significantly due to inventory and accounts receivable, while investing activities increased cash used, and financing activities provided cash from related party advances - Net cash used in operating activities was **$(739,194)** for the three months ended August 31, 2025, a decrease from $897,318 provided in the prior year, mainly due to increased inventory and accounts receivable from a large wholesale order[165](index=165&type=chunk) - Net cash used in investing activities increased to **$(94,497)** in 2025, from $(41,840) in 2024, due to purchases of intangibles and property/equipment[166](index=166&type=chunk) - Net cash provided by financing activities was **$150,461** in 2025, up from $39,370 in 2024, primarily from net advances from a related party[167](index=167&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) As of August 31, 2025, the company reported no material off-balance sheet arrangements that would significantly affect its financial condition or results of operations - The company did not have any material off-balance sheet arrangements as of August 31, 2025[170](index=170&type=chunk) [Significant Accounting Policies and Estimates](index=38&type=section&id=Significant%20Accounting%20Policies%20and%20Estimates) This section reiterates the company's significant accounting policies and estimates, focusing on areas requiring management's judgment, such as accounts receivable, revenue recognition, and goodwill impairment - Key accounting policies and estimates include the allowance for credit losses, revenue recognition (transfer of control upon shipment, considering discounts and returns), and annual goodwill impairment testing[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, AXIL Brands, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is exempt from providing market risk disclosures as a **smaller reporting company**[176](index=176&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures were effective as of August 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were deemed **effective** as of August 31, 2025, following an evaluation by the CEO and CFO[177](index=177&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended August 31, 2025[178](index=178&type=chunk) [PART II - OTHER INFORMATION](index=41&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=41&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various lawsuits and legal proceedings, but management believes the ultimate liability is not expected to have a material adverse effect on its financial position or results of operations - The company records liabilities for probable and estimable losses from legal proceedings, reevaluating accruals as matters progress[182](index=182&type=chunk) - Management does not expect the ultimate liability from current legal matters to have a **material adverse effect** on the company's financial results[182](index=182&type=chunk) [ITEM 1A. RISK FACTORS](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended May 31, 2025 - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended May 31, 2025[183](index=183&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the second quarter of fiscal year 2026, 2,000,000 shares of Series A Preferred Stock were converted into 100,000 shares of common stock, exempt from registration under Section 4(a)(2) of the Securities Act - **2,000,000 shares of Series A Preferred Stock** were converted into **100,000 shares of common stock** in Q2 FY2026[184](index=184&type=chunk) - The issuance was exempt from registration under **Section 4(a)(2) of the Securities Act**[184](index=184&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=41&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[185](index=185&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=41&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Mine Safety Disclosures are not applicable to AXIL Brands, Inc[186](index=186&type=chunk) [ITEM 5. OTHER INFORMATION](index=41&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended August 31, 2025 - No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter[187](index=187&type=chunk) [ITEM 6. EXHIBITS](index=42&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed as part of the Form 10-Q, including amendments to the Certificate of Incorporation, Bylaws, employment agreements, and certifications - Exhibits include various amendments to the Certificate of Incorporation and Bylaws, employment agreements for Jeff Toghraie and Jeff Brown, and Sarbanes-Oxley Act certifications[188](index=188&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) - The report was signed on **October 7, 2025**, by **Jeff Toghraie**, Chief Executive Officer and Chairman of the Board of Directors, and **Jeff Brown**, Chief Financial Officer, Chief Operating Officer, and Director[191](index=191&type=chunk)[193](index=193&type=chunk)

Core Insights - AXIL Brands, Inc. has launched its X30i filtered earplugs in a two-pack bundle available on Costco.com, expanding its product offerings on the Costco platform [1][2] - The X30i earplugs feature advanced technology to protect against continuous and impulse noise, making them suitable for various high-noise environments [3] Product Details - The X30i earplugs come in two colors: black and desert tan, and are designed for extreme noise environments such as concerts, air travel, and construction [2][3] - The earplugs provide up to 25dB SNR of noise reduction while allowing users to maintain situational awareness through a toggle switch to switch between modes [3] Company Overview - AXIL Brands is a global consumer products company specializing in hearing protection and enhancement products under the AXIL® brand, as well as hair and skincare products under the Reviv3® brand [5] - The company markets its products in the United States, Canada, the European Union, and Asia, indicating a broad international presence [5]

Core Insights - AXIL Brands, Inc. is launching its full Reviv3 Procare® product line in Chatters, Canada's largest professional haircare retailer, which has over 115 salons across seven provinces [1][2][3] - The partnership with Chatters is aimed at expanding AXIL's beauty division presence in North America and enhancing professional distribution channels for Reviv3 products [2][4] Company Overview - AXIL Brands, Inc. is an emerging global consumer products company that offers premium hearing enhancement and protection products under the AXIL® brand and hair and skin care solutions under the Reviv3 Procare® brand [4] - The company focuses on innovation, quality, and sustainability, delivering clinically tested, plant-based products to consumers in the United States, Canada, the European Union, and Asia [4] Partnership Details - The rollout of Reviv3 Procare® products in Chatters salons will begin in October 2025, with the full product line expected to be available by year-end [2] - The phased launch will include in-salon promotions and stylist training to highlight Reviv3's unique formulations, aiming to drive brand visibility and customer engagement [2]

Core Insights - AXIL Brands has launched the XCOR SE™ hearing protection and enhancement earbuds in over 300 Costco stores nationwide, significantly expanding its market presence and accessibility for consumers [1][3] - The XCOR SE™ features advanced technology with a 26 SNR (Signal-to-Noise Ratio) and up to 4x hearing enhancement, making it suitable for various loud environments [2][3] - The partnership with Costco reflects AXIL's commitment to innovation and operational excellence, aiming to meet the rising demand for premium hearing solutions [3] Product Details - The XCOR SE™ earbuds are equipped with Bluetooth 5.2 connectivity and are designed to be water- and sweat-resistant, catering to users in diverse settings such as gyms, shooting ranges, and concerts [2] - The product is positioned as a premium offering in the hearing protection market, building on the success of previous XCOR models and collaborations with industry leaders [3] Company Overview - AXIL Brands is an emerging global consumer products company, specializing in premium hearing enhancement and protection products, as well as hair and skincare products [5] - The company operates in multiple regions, including the United States, Canada, the European Union, and Asia, indicating a broad market reach [5]

Core Viewpoint - AXIL Brands, Inc. experienced a decline in revenue and net income for fiscal 2025, but management highlighted improvements in cash flow and strategic initiatives aimed at long-term growth [12]. Financial Performance - AXIL reported net sales of $26.3 million for fiscal 2025, down 4.5% from $27.5 million a year earlier [1] - Net income decreased significantly to $0.9 million in fiscal 2024 from $2 million a year earlier, resulting in basic earnings per share (EPS) of 13 cents compared to 57 cents in the previous year [2] - Adjusted EBITDA rose 21.3% to $2.4 million, representing 9.3% of sales versus 7.3% a year earlier [2] - Operating cash flow improved markedly, generating $1.9 million versus only $3 thousand in fiscal 2024 [2] Key Business Metrics - Cash on hand rose to $4.8 million at the end of May 2025 from $3.3 million in the prior year [3] - Inventory declined to $2.5 million from $3.4 million, reflecting improved working capital management [3] - Accounts receivable nearly doubled to just more than $1 million, indicating stronger sales momentum or extended collection cycles [3] Operating Efficiency - Operating expenses represented 66.6% of sales in fiscal 2025, improving from 67.9% a year earlier [4] - Reduced sales and marketing expenses fell to $11.7 million from $13.4 million, contributing to efficiency gains [4] - Higher professional and consulting costs rose to $3.3 million from $2.7 million, partially offsetting the efficiency improvements [4] Management Insights - CEO Jeff Toghraie described fiscal 2025 as "a pivotal year" for AXIL, marking its third consecutive year of profitability despite global trade challenges [5] - Management emphasized the robust gross margin of 71% and significant improvements in operating cash flow as evidence of financial discipline [6] - The company is reshaping its supply chain by relocating manufacturing to the U.S. to mitigate tariff exposure [6] Factors Influencing Results - Revenue decline was partly due to global trade challenges, including tariffs and supply-chain disruptions [7] - Improved cost structure with lower marketing outlays and tighter expense controls helped sustain profitability [7] - The decision to advance U.S.-based manufacturing played a role in offsetting tariff-related cost pressures [7] Brand Diversification - AXIL continued to diversify its brand portfolio, with early momentum in its Reviv3 hair and skin care division supported by new leadership hires [8] Future Guidance - For fiscal 2026, management projected strong momentum driven by a major wholesale agreement with a large membership-based retailer, expected to enhance revenues and brand visibility [9] - This partnership is anticipated to expand AXIL's national reach and support long-term growth [9] Strategic Developments - AXIL launched Sharper Vision Marketing, a subsidiary aimed at monetizing internal digital marketing expertise and reducing customer acquisition costs [11] - The company advanced its operational realignment efforts, emphasizing the transition of its supply chain to the U.S. [11] - A key leadership appointment was made to bolster the Reviv3 segment, signaling intent to accelerate growth in the hair and skin care market [11]