Core Insights - AXIL Brands, Inc. reported solid financial results for fiscal year ended May 31, 2025, achieving a net income of $0.9 million and a 21% increase in Adjusted EBITDA year-over-year, despite global trade challenges [4][7] - The company is focusing on relocating a significant portion of its manufacturing to the United States to reduce tariff exposure and enhance operational stability [5] - A major wholesale partnership with a leading national retailer is expected to drive top-line growth starting in fiscal 2026, expanding brand visibility and market reach [6] Financial Highlights - Net sales for fiscal 2025 were $26.3 million, a decrease from $27.5 million in fiscal 2024 [7] - Gross profit margin was 71.0% in fiscal 2025, down from 73.4% in the prior year [7] - Operating expenses improved to 66.6% of net sales in fiscal 2025 from 67.9% in fiscal 2024 [7] - Adjusted EBITDA for fiscal 2025 was $2.4 million, reflecting a 21.3% increase from $2.0 million in fiscal 2024 [7][12] - Cash on hand increased to $4.8 million as of May 31, 2025, up from $3.3 million in the previous year [7] Operational Developments - The company appointed a veteran contractor to lead its hair and skin care division, aiming to accelerate brand growth [6] - AXIL launched Sharper Vision Marketing, a subsidiary to leverage internal digital marketing expertise and reduce customer acquisition costs [8] - The supply chain transition plan is on track, with advancements in domestic manufacturing to mitigate tariff pressures [8] Market Positioning - AXIL Brands is recognized in military publications, enhancing its reputation in the hearing protection market [7] - The company is positioned to scale its multi-channel distribution and product innovation to create long-term shareholder value [10]

[Company Overview & Fiscal Year 2025 Highlights](index=1&type=section&id=1.%20Company%20Overview%20%26%20Fiscal%20Year%202025%20Highlights) [Company Introduction](index=1&type=section&id=1.1.%20Company%20Introduction) AXIL Brands, Inc. is an emerging global consumer products company specializing in AXIL® hearing protection and enhancement products and Reviv3® haircare and skincare products, with its fiscal year financial and operational results for the period ended May 31, 2025, announced on August 21, 2025 - AXIL Brands, Inc. is a global consumer products company with two main brands: **AXIL®** (hearing protection and enhancement products) and **Reviv3®** (haircare and skincare products)[1](index=1&type=chunk)[21](index=21&type=chunk) - The company announced its fiscal year financial and operational results for the period ended May 31, 2025[1](index=1&type=chunk) [Fiscal Year 2025 Financial Highlights](index=1&type=section&id=1.2.%20Fiscal%20Year%202025%20Financial%20Highlights) AXIL Brands reported mixed FY2025 financial results, with net sales decreasing to $26.3 million, yet achieved its third consecutive year of profitability with $0.9 million net income and a 21.3% Adjusted EBITDA increase to $2.4 million, alongside improved operating efficiency and cash flow from operations FY2025 Financial Performance Highlights | Metric | FY2025 | FY2024 | Change (YoY) | | :-------------------------------- | :------------- | :------------- | :------------- | | Net sales | $26.3 million | $27.5 million | -4.4% | | Gross profit as % of sales | 71.0% | 73.4% | -2.4 pp | | Operating expenses as % of net sales | 66.6% | 67.9% | -1.3 pp | | Net income | $0.9 million | $2.0 million | -55.0% | | Adjusted EBITDA | $2.4 million | $2.0 million | +21.3% | | Net cash provided by operating activities | $1.9 million | $3 thousand | Substantial increase | | Cash on hand (as of May 31) | $4.8 million | $3.3 million | +45.5% | | Basic EPS | $0.13 | $0.57 | -77.19% | | Diluted EPS | $0.10 | $0.21 | -52.38% | [Recent Business Highlights](index=1&type=section&id=1.3.%20Recent%20Business%20Highlights) During FY2025, AXIL Brands secured a significant wholesale agreement with a leading national membership retailer, appointed new leadership for its haircare and skincare division, advanced its supply chain transition to domestic manufacturing, established Sharper Vision Marketing, and received media recognition for its hearing protection products - A significant wholesale agreement was signed with a leading national membership retailer, with initial purchase orders issued in **Q1 FY2026**, expanding retail reach and consumer access[4](index=4&type=chunk)[7](index=7&type=chunk) - An experienced contractor was appointed to lead the haircare and skincare division, aiming to accelerate brand growth[4](index=4&type=chunk)[9](index=9&type=chunk) - Supply chain transformation initiatives are on track, accelerating domestic manufacturing development and operational adjustments to mitigate tariff risks and build long-term resilience[4](index=4&type=chunk)[6](index=6&type=chunk)[8](index=8&type=chunk) - Sharper Vision Marketing, a wholly-owned subsidiary, was established to monetize internal digital marketing expertise as an external revenue stream while reducing internal customer acquisition costs[4](index=4&type=chunk)[8](index=8&type=chunk) - Featured in leading military publications like Military Times, highlighting brand innovation in hearing protection and solidifying its position among tactical and professional users[5](index=5&type=chunk) [Management Discussion and Outlook](index=2&type=section&id=2.%20Management%20Discussion%20and%20Outlook) [CEO's Review of FY2025 Performance](index=2&type=section&id=2.1.%20CEO's%20Review%20of%20FY2025%20Performance) CEO Jeff Toghraie highlighted FY2025 as a pivotal year for AXIL, achieving its third consecutive year of profitability with $0.9 million net income and a 21% Adjusted EBITDA increase despite global trade challenges, emphasizing disciplined growth, optimized expenses, a 71% gross margin, and significantly improved operating cash flow - FY2025 was a pivotal year for AXIL, achieving its **third consecutive year of profitability** with **$0.9 million net income**[5](index=5&type=chunk) - Adjusted EBITDA increased by **21% year-over-year**, reflecting the company's disciplined approach to growth and optimized marketing and operating expenses[5](index=5&type=chunk) - Core business remained resilient with a **71% gross margin** and significantly improved operating cash flow[5](index=5&type=chunk) [Strategic Initiatives and Future Outlook](index=2&type=section&id=2.2.%20Strategic%20Initiatives%20and%20Future%20Outlook) Management is accelerating the relocation of most manufacturing and operations to the US to mitigate tariff risks and enhance stability, anticipating significant long-term benefits, while a key wholesale partnership is expected to drive revenue growth and brand awareness from FY2026, and the new Sharper Vision Marketing subsidiary aims to generate external revenue and reduce internal customer acquisition costs, with the Reviv3® haircare and skincare division poised for increased growth under new leadership, entering FY2026 with strong momentum, a robust balance sheet, and investment flexibility without external capital reliance - Accelerating the relocation of most manufacturing and operations to the US to mitigate tariff risks and enhance stability, anticipating significant long-term benefits[6](index=6&type=chunk)[8](index=8&type=chunk) - A significant wholesale partnership was established with one of the nation's largest membership retailers, projected to drive substantial revenue growth and brand awareness starting in **FY2026**[7](index=7&type=chunk) - Sharper Vision Marketing, a wholly-owned subsidiary, was launched to convert internal digital marketing expertise into an external revenue stream while reducing internal customer acquisition costs[8](index=8&type=chunk) - The Reviv3® haircare and skincare division added experienced leadership, with the segment expected to become an increasingly important contributor to the company's growth story[9](index=9&type=chunk) - The company enters **FY2026** with strong momentum, a robust balance sheet, and flexibility to invest in growth without relying on external capital, focusing on expanding multi-channel distribution and product innovation to drive sustainable long-term shareholder value[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=3.%20Non-GAAP%20Financial%20Measures) [Explanation of Non-GAAP Measures](index=3&type=section&id=3.1.%20Explanation%20of%20Non-GAAP%20Measures) The company utilizes non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, to offer insights into financial trends and operational performance, with EBITDA calculated by adjusting GAAP net income for income taxes, interest, depreciation, and amortization, and Adjusted EBITDA further adjusting for stock-based compensation, which management considers important for business evaluation but cautions against using as a sole financial metric due to potential differences in calculation methods compared to other companies - EBITDA is calculated as GAAP net income plus provision (benefit) for income taxes, interest income or expense, and depreciation and amortization[11](index=11&type=chunk) - Adjusted EBITDA further adjusts EBITDA for stock-based compensation expenses[11](index=11&type=chunk) - The company believes these non-GAAP measures provide useful information regarding its financial condition and operating performance, and management considers them important metrics for evaluating the company's business[11](index=11&type=chunk) - Investors should not rely on any single financial measure to evaluate the company's business, as these non-GAAP measures exclude significant expenses and income required to be recorded under GAAP and may not be comparable for all purposes[11](index=11&type=chunk) [Consolidated EBITDA and Adjusted EBITDA Reconciliation](index=3&type=section&id=3.2.%20Consolidated%20EBITDA%20and%20Adjusted%20EBITDA%20Reconciliation) For FY2025, the company reported GAAP net income of $854,988 and total EBITDA of $1,321,399, with total Adjusted EBITDA increasing to $2,430,333 from $2,002,889 in FY2024 after adjusting for stock-based compensation, improving Adjusted EBITDA as a percentage of net sales from 7.3% in FY2024 to 9.3% Consolidated EBITDA and Adjusted EBITDA Reconciliation | Metric | FY2025 | FY2024 | | :------------------------------------- | :------------- | :------------- | | Net income (GAAP) | $854,988 | $2,003,134 | | Provision (benefit) for income taxes | $453,828 | $(220,205) | | Interest income, net | $(135,915) | $(177,833) | | Depreciation and amortization | $148,498 | $130,610 | | **Total EBITDA (Non-GAAP)** | **$1,321,399** | **$1,735,706** | | Stock-based compensation | $1,108,934 | $267,183 | | **Total Adjusted EBITDA (Non-GAAP)** | **$2,430,333** | **$2,002,889** | | Sales, net (GAAP) | $26,257,522 | $27,498,539 | | Adjusted EBITDA as a percentage of Sales, net | 9.3% | 7.3% | [Consolidated Financial Statements](index=4&type=section&id=4.%20Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=4&type=section&id=4.1.%20Consolidated%20Balance%20Sheets) As of May 31, 2025, total assets increased to $12.87 million from $10.97 million in FY2024, primarily driven by higher cash and accounts receivable, while total liabilities slightly decreased to $3.21 million, and total stockholders' equity significantly rose to $9.66 million due to increased retained earnings and additional paid-in capital Consolidated Balance Sheet Highlights (as of May 31) | Metric | 2025 | 2024 | Change | | :-------------------------- | :------------- | :------------- | :------------- | | Total Current Assets | $9,255,648 | $7,966,860 | +16.18% | | Cash | $4,769,854 | $3,253,876 | +46.6% | | Accounts receivable, net | $1,003,945 | $509,835 | +96.9% | | Inventory, net | $2,533,658 | $3,394,023 | -25.35% | | Total Assets | $12,869,795 | $10,974,361 | +17.27% | | Total Current Liabilities | $2,462,824 | $2,798,045 | -12.0% | | Total Liabilities | $3,210,087 | $3,278,575 | -2.09% | | Total Stockholders' Equity | $9,659,708 | $7,695,786 | +25.52% | | Retained Earnings (Accumulated deficit) | $720,718 | $(134,270) | Shift to positive | [Consolidated Statements of Operations](index=6&type=section&id=4.2.%20Consolidated%20Statements%20of%20Operations) For FY2025, net sales decreased to $26.26 million from $27.50 million in FY2024, with gross profit falling to $18.64 million and gross margin declining from 73.4% to 71.0%, while operating expenses decreased to $17.48 million, resulting in operating income dropping to $1.16 million, and net income significantly decreased to $0.85 million from $2.00 million in FY2024, primarily due to lower sales and increased income tax expense, with basic EPS falling to $0.13 and diluted EPS to $0.10 Consolidated Statements of Operations Highlights | Metric | FY2025 | FY2024 | Change (YoY) | | :-------------------------------- | :------------- | :------------- | :------------- | | Sales, net | $26,257,522 | $27,498,539 | -4.51% | | Cost of sales | $7,615,954 | $7,321,838 | +4.02% | | Gross profit | $18,641,568 | $20,176,701 | -7.51% | | Gross profit as % of sales | 71.0% | 73.4% | -2.4 pp | | Total Operating Expenses | $17,480,203 | $18,673,321 | -6.49% | | Income from operations | $1,161,365 | $1,503,380 | -22.75% | | Income before provision for income taxes | $1,308,816 | $1,782,929 | -26.6% | | Provision (benefit) for income taxes | $453,828 | $(220,205) | Significant increase in tax expense | | NET INCOME | $854,988 | $2,003,134 | -57.32% | | Basic EPS | $0.13 | $0.57 | -77.19% | | Diluted EPS | $0.10 | $0.21 | -52.38% | [Consolidated Statements of Cash Flows](index=7&type=section&id=4.3.%20Consolidated%20Statements%20of%20Cash%20Flows) In FY2025, cash flow from operating activities significantly increased to $1.93 million from $2,677 in FY2024, driven by higher net income, increased stock-based compensation, and positive changes in inventory, while cash used in investing activities rose to $394,298 due to increased purchases of intangible assets and property and equipment, and cash used in financing activities substantially decreased to $18,385, primarily due to the absence of preferred stock repurchases from the prior year, resulting in an overall cash increase of $1.52 million and an ending cash balance of $4.77 million Consolidated Statements of Cash Flows Highlights | Metric | FY2025 | FY2024 | Change (YoY) | | :------------------------------------- | :------------- | :------------- | :------------- | | Net cash provided by operating activities | $1,928,661 | $2,677 | Substantial increase | | Net cash used in investing activities | $(394,298) | $(160,525) | +145.63% (increased outflow) | | Net cash used in financing activities | $(18,385) | $(1,420,958) | -98.71% (reduced outflow) | | Net increase (decrease) in cash | $1,515,978 | $(1,578,806) | Shift from decrease to increase | | Cash - End of year | $4,769,854 | $3,253,876 | +46.6% | [Additional Information](index=8&type=section&id=5.%20Additional%20Information) [About AXIL Brands](index=8&type=section&id=5.1.%20About%20AXIL%20Brands) AXIL Brands is an emerging global consumer products company that manufactures and sells premium hearing enhancement and protection products under the AXIL® brand, along with premium haircare and skincare products under its Reviv3® brand, with products sold across the United States, Canada, the European Union, and Asia - AXIL Brands manufactures and sells premium hearing enhancement and protection products under the **AXIL®** brand, including earplugs, earmuffs, and earbuds[21](index=21&type=chunk) - The company also sells premium haircare and skincare products under its in-house **Reviv3®** brand[21](index=21&type=chunk) - Products are sold across the United States, Canada, the European Union, and Asia[21](index=21&type=chunk) [Forward-Looking Statements](index=8&type=section&id=5.2.%20Forward-Looking%20Statements) This section contains forward-looking statements, identified by words such as 'anticipate,' 'believe,' and 'expect,' based on currently available information and management's expectations, which are subject to significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including the company's ability to grow sales, obtain financing, implement cost savings, compete effectively, manage customer concentration, adapt to regulatory changes (taxes, tariffs), execute acquisitions, accelerate supply chain transformation, and navigate volatile market and economic conditions (inflation, recession, geopolitical events, supply chain disruptions), with no obligation to update these statements - Forward-looking statements are based on currently available information and management's beliefs, forecasts, and current expectations[22](index=22&type=chunk) - These statements are subject to numerous significant risks and uncertainties, many beyond management's control, which could cause the company's results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by these forward-looking statements[22](index=22&type=chunk) - Factors that could cause actual results to differ materially from forward-looking statements include the company's ability to grow net sales and operations, obtain financing, implement cost savings and efficiency measures, compete effectively, manage customer concentration, adapt to changes in laws and regulations (taxes, tariffs, trade policies, or product safety), undertake acquisitions, investments, collaborations, strategic alliances, or dispositions, successfully accelerate its supply chain transformation strategy and realize anticipated benefits, and the impact of volatile market and macroeconomic conditions (inflation, recession, geopolitical events, supply chain disruptions and restrictions, labor shortages)[22](index=22&type=chunk) - The company undertakes no obligation to update or revise these forward-looking statements, except as required by law[22](index=22&type=chunk) [Investor Relations](index=8&type=section&id=5.3.%20Investor%20Relations) Investor relations contact information is provided, including contact name Todd McKnight, phone number, and email address - Investor Relations contact: **Todd McKnight**, Phone: **+1 (917) 349-2175**, Email: **investors@goaxil.com**[23](index=23&type=chunk)

[Cautionary Note Regarding Forward-Looking Information](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Information) This section highlights that the Annual Report on Form 10-K contains **forward-looking statements** regarding future events, financial performance, liquidity, capital needs, and industry trends, which are subject to various **risks and uncertainties**[12](index=12&type=chunk) - Key factors that could cause actual results to differ from forward-looking statements include **unstable market conditions**, **economic downturns**, **geopolitical events**, **supply chain disruptions**, **regulatory changes**, **cybersecurity risks**, and the ability to obtain **additional capital**[13](index=13&type=chunk) [PART I](index=6&type=section&id=PART%20I) This part details the company's business operations, risk factors, legal proceedings, and other foundational information [ITEM 1. BUSINESS.](index=6&type=section&id=ITEM%201.%20BUSINESS.) AXIL Brands, Inc. is engaged in the manufacturing, marketing, sale, and distribution of hearing enhancement and protection products, and professional-grade hair and skin care products. The company operates primarily through two segments, with a recent focus on expanding market share, optimizing e-commerce, and developing new service-based revenue streams [General Overview & Corporate History](index=6&type=section&id=General%20Overview%20%26%20Corporate%20History) This section outlines the company's recent name change, asset acquisition, and the incorporation of a new marketing subsidiary - AXIL Brands, Inc. (formerly Reviv3 Procare Company) changed its name on **February 14, 2024**, to reflect its broader operations, following the acquisition of Axil & Associated Brands Corp. assets in **June 2022**[19](index=19&type=chunk) - The company incorporated a new wholly owned subsidiary, Sharper Vision Marketing Inc., on **May 5, 2025**, to offer marketing services and capitalize on internal marketing expertise[19](index=19&type=chunk) [Business Segments & Strategy](index=6&type=section&id=Business%20Segments%20%26%20Strategy) The company's strategy focuses on market share expansion, e-commerce optimization, and technological improvements across its primary business segments Revenue Contribution by Segment (FY2025) | Segment | Revenue Contribution | | :-------------------------------- | :------------------- | | Hearing Enhancement and Protection | 94% | | Hair and Skin Care | 6% | - The company's strategy focuses on driving growth by expanding market share in existing channels, developing new online and traditional platforms, optimizing e-commerce, building sales teams, and enhancing value through **strategic partnerships**[22](index=22&type=chunk) - AXIL prioritizes **technological improvements** in hearing enhancement and protection, evaluates expansion into adjacent verticals, and plans to internalize marketing functions to optimize efficiency and explore **third-party revenue opportunities**[23](index=23&type=chunk) [Hearing Enhancement and Protection Segment](index=6&type=section&id=Hearing%20Enhancement%20and%20Protection%20Segment) This segment designs, manufactures, and distributes advanced hearing products for diverse markets, leveraging patents and expanding global distribution - AXIL designs, manufactures, markets, and distributes advanced hearing enhancement and protection products, including earplugs, earmuffs, earbuds, and outdoor speakers with **Bluetooth and wireless audio technologies**[24](index=24&type=chunk) - Products serve sporting goods, tactical, industrial, recreational, military, law enforcement, and federal agencies, with sales primarily **direct-to-consumer** via its website and third-party e-commerce platforms, dealers, and national retail chains[24](index=24&type=chunk)[25](index=25&type=chunk) - The company holds **three active patents**, one patent pending, and **six registered trademarks** in this segment, and is expanding distribution and licensing agreements across various target markets globally[26](index=26&type=chunk) [Hair and Skin Care Segment](index=7&type=section&id=Hair%20and%20Skin%20Care%20Segment) This segment offers professional-grade hair and skin care products through multi-channel sales, targeting a growing global market - AXIL's hair and skin care segment offers **professional-grade products** under the Reviv3 Procare® brand, with outsourced manufacturing and a product line including shampoos, conditioners, scalp treatments, and skin health solutions[30](index=30&type=chunk)[31](index=31&type=chunk) - Sales are driven by a **multi-channel strategy** including direct-to-consumer, domestic and international distributors, and professional salon partnerships, with **12 exclusive distribution agreements** across the U.S., Canada, Europe, and Asia[32](index=32&type=chunk)[35](index=35&type=chunk) - The global hair care market is projected to grow from approximately **$113.9 billion in 2025** to **$213.5 billion by 2032**, driven by consumer interest in premium, clean, and specialized products[33](index=33&type=chunk) [Key Customers and Suppliers](index=8&type=section&id=Key%20Customers%20and%20Suppliers) The company's sales are primarily direct-to-consumer, with significant reliance on a limited number of vendors for both business segments - For the fiscal year ended May 31, 2025, no single customer accounted for more than **10% of net sales** in the hearing enhancement and protection segment (**94% of consolidated net sales**); approximately **80% of consolidated net sales** were direct-to-consumer via Shopify and Amazon[36](index=36&type=chunk) - The company relies on a **limited number of vendors**; in fiscal year 2025, **two vendors accounted for 90% of total purchases** in the hearing segment (**67% and 23% respectively**), and **two vendors accounted for 98%** in the hair and skin care segment (**79% and 19% respectively**)[38](index=38&type=chunk) [Customer Service and Support](index=8&type=section&id=Customer%20Service%20and%20Support) The company emphasizes responsive and empathetic customer service through an integrated support platform - The company's customer service approach emphasizes listening, empathy, timely responses, and follow-up, utilizing an **integrated platform** to track support tickets and conversations[39](index=39&type=chunk) [Governmental Regulation & Environmental Matters](index=8&type=section&id=Governmental%20Regulation%20%26%20Environmental%20Matters) AXIL operates under diverse and evolving regulations across multiple jurisdictions, maintaining compliance with environmental laws - AXIL is subject to diverse and evolving laws and regulations across multiple jurisdictions (U.S., Canada, Europe, Australia, New Zealand, Africa) covering **consumer health, safety, and environmental protection**[40](index=40&type=chunk) - The company believes it is in compliance with applicable environmental laws and regulations, and continued compliance is not expected to materially affect capital expenditures, earnings, or competitive position[41](index=41&type=chunk) [Intellectual Property](index=8&type=section&id=Intellectual%20Property) The company protects its technology and proprietary rights through active U.S. patents, pending applications, and federally registered trademarks - As of May 31, 2025, AXIL held **three active U.S. patents** (expiring 2035-2038) and one pending U.S. patent application, along with **seven federally registered trademarks**, to protect its technology and proprietary rights[46](index=46&type=chunk)[47](index=47&type=chunk) - The company also owns domain names reviveprocare.com and www.goaxil.com, acknowledging that domain name regulation is subject to change and could impact business[48](index=48&type=chunk) [Seasonality](index=9&type=section&id=Seasonality) The business experiences typical seasonal variations in consumer demand that do not materially impact overall operating results - The business experiences typical variations in consumer demand around certain holidays and promotional periods, consistent with industry norms, but these do not materially impact overall operating results[49](index=49&type=chunk) [Human Capital Management](index=9&type=section&id=Human%20Capital%20Management) The company focuses on recruiting, retaining, and integrating employees, prioritizing health and safety for its approximately ten full-time staff - As of May 31, 2025, the company had approximately **ten full-time employees**, all in the United States, none covered by collective bargaining agreements[50](index=50&type=chunk) - Human capital objectives include identifying, recruiting, retaining, incentivizing, and integrating employees, with a focus on health and safety through training, risk assessments, and compliance reviews[50](index=50&type=chunk)[51](index=51&type=chunk) [Available Information](index=9&type=section&id=Available%20Information) The company files various reports with the SEC, which are accessible on www.sec.gov and its investor websites - The company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other information with the SEC, available on **www.sec.gov** and in the Investors section of its websites (reviveprocare.com and www.goaxil.com)[54](index=54&type=chunk) [ITEM 1A. RISK FACTORS.](index=10&type=section&id=ITEM%201A.%20RISK%20FACTORS.) Investing in AXIL's securities involves a high degree of risk, including those related to the execution of strategic initiatives, market acceptance of products, inflationary pressures, supply chain disruptions, reliance on limited suppliers, complex and evolving regulations, changes in trade policies, maintaining effective internal controls, the need for additional capital, stock price volatility, IT system failures, cybersecurity breaches, economic downturns, and shifts in consumer behavior [Risks Related to Our Business and Operations](index=10&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Operations) Future growth depends on successful execution of strategic initiatives and market acceptance of products, both subject to significant management and capital commitments - Future growth depends on successful execution of **strategic initiatives**, including retail and international expansion, which require significant management and capital commitments[56](index=56&type=chunk) - Failure of existing or new products to achieve or maintain **market acceptance** could harm the business, results of operations, and financial condition[56](index=56&type=chunk) [Risks Related to Our Supply Chain and Cost Structure](index=10&type=section&id=Risks%20Related%20to%20Our%20Supply%20Chain%20and%20Cost%20Structure) The company faces inflationary pressures, supply chain disruptions, and inventory forecasting challenges, which could increase costs and impact sales - The company is subject to **inflationary pressures** and **supply chain risks**, including increased raw material costs, transportation delays, and disruptions in supplier relationships, which could increase expenses or limit product delivery[57](index=57&type=chunk) - Inaccurate inventory forecasting may lead to **excess inventory (write-downs)** or **stockouts (missed sales, lost revenues)**, impacting customer satisfaction and margins[58](index=58&type=chunk) - Reliance on a **limited number of third-party suppliers** for key components and raw materials poses risks of disruption, delays, capacity constraints, or financial deterioration, potentially leading to production delays and increased costs[59](index=59&type=chunk) [Risks Related to Legal and Regulatory Matters](index=10&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) The business is subject to complex and evolving regulations and trade policies, with non-compliance or changes potentially leading to significant costs and operational burdens - The business is subject to **complex and evolving local, regional, state, federal, and international regulations**, with changes potentially imposing significant compliance costs and operational burdens[60](index=60&type=chunk) - Changes in U.S. and international trade policies, including tariffs and import rules (e.g., all inbound shipments subject to tariffs from **August 29, 2025**), could increase costs, disrupt operations, and negatively impact margins[61](index=61&type=chunk) - Failure to maintain **effective internal control over financial reporting** could result in material misstatements, financial restatements, regulatory scrutiny, increased costs, and loss of investor confidence[62](index=62&type=chunk) [Risks Related to Our Capital and Securities](index=11&type=section&id=Risks%20Related%20to%20Our%20Capital%20and%20Securities) The company may require additional capital, which could dilute existing stockholders, and its common stock price may experience volatility - The company may need **additional capital** through equity or debt financings, which may not be available on attractive terms or at all, potentially delaying growth initiatives and diluting existing stockholders[63](index=63&type=chunk)[64](index=64&type=chunk) - The common stock price may be **volatile** due to factors such as financial performance, changes in product demand, execution of growth strategy, market speculation, trading liquidity, macroeconomic trends, and key personnel changes[65](index=65&type=chunk)[66](index=66&type=chunk) [Risks Related to Technology and Cybersecurity](index=12&type=section&id=Risks%20Related%20to%20Technology%20and%20Cybersecurity) IT system failures or cybersecurity breaches could disrupt operations, harm reputation, and lead to legal or regulatory liabilities - A failure of IT systems or a **cybersecurity breach** could disrupt business operations, harm reputation, and expose the company to legal or regulatory liabilities, despite implemented prevention and mitigation measures[67](index=67&type=chunk) [Risks Related to Macroeconomic and External Conditions](index=12&type=section&id=Risks%20Related%20to%20Macroeconomic%20and%20External%20Conditions) Economic downturns or shifts in consumer behavior, influenced by external factors, may reduce product demand and adversely impact profitability - **Economic downturns** or shifts in consumer behavior, influenced by factors like inflation, tariffs, supply chain disruptions, and geopolitical events, may reduce consumer demand for products, adversely impacting revenue and profitability[68](index=68&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS.](index=12&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS.) This item is not applicable to the company, indicating no unresolved comments from the SEC staff [ITEM 1C. CYBERSECURITY.](index=12&type=section&id=ITEM%201C.%20CYBERSECURITY.) Cybersecurity is an integral part of the company's Enterprise Risk Management (ERM) program, with continuous analysis and updates to policies, standards, and processes. The company employs controls like firewalls, anti-malware, and access controls, conducts third-party testing, and provides employee training. Executive management and the Board oversee cybersecurity risks, with regular reports to the Audit Committee and full Board - Cybersecurity is integrated into the company's **ERM program**, with established controls, an Incident Response Plan, and continuous updates to policies and practices[70](index=70&type=chunk) - The company utilizes **firewalls, anti-malware, intrusion prevention/detection systems, and access controls**, and engages third parties for periodic assessments and testing[70](index=70&type=chunk) - Executive management is responsible for assessing and managing cybersecurity risks, with the Board and Audit Committee providing oversight and receiving regular **quarterly reports** on risks and significant incidents[71](index=71&type=chunk) [ITEM 2. PROPERTIES.](index=13&type=section&id=ITEM%202.%20PROPERTIES.) The company leases two primary facilities: a 2,793 square foot office space in Beverly Hills, California, under a lease commencing November 1, 2024, and expiring January 31, 2029; and a 6,050 square foot office and warehouse space in American Fork, Utah, under a sublease from October 1, 2024, through September 30, 2027. Both facilities are considered adequately maintained and suitable for current business needs - The principal executive office is a **2,793 sq ft leased space** in Beverly Hills, California, with a lease term from **November 1, 2024, to January 31, 2029**, and a monthly base rent of **$11,168** for the first 12 months[73](index=73&type=chunk) - The company also leases a **6,050 sq ft office and warehouse space** in American Fork, Utah, under a sublease from **October 1, 2024, to September 30, 2027**, with a base rent of **$7,684 per month** for the first 12 months[74](index=74&type=chunk) [ITEM 3. LEGAL PROCEEDINGS.](index=13&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS.) The company is periodically involved in various lawsuits and legal proceedings arising in the ordinary course of business. Management accrues liabilities for probable and estimable losses, reevaluating them quarterly. While outcomes are uncertain, management believes ultimate liability will not materially adversely affect results of operations, financial position, or cash flows - The company is involved in various lawsuits and legal proceedings in the **ordinary course of business**[76](index=76&type=chunk) - Liabilities are recorded when a loss is **probable and estimable**, with reevaluation as matters progress[76](index=76&type=chunk) - Management believes ultimate liability from these matters is not expected to have a **material adverse effect** on financial results, though legal proceedings are inherently uncertain[76](index=76&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=13&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) This item is not applicable to the company [PART II](index=14&type=section&id=PART%20II) This part provides information on the company's common equity market, financial condition, results of operations, and market risk disclosures [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.](index=14&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) The company's common stock trades on the NYSE American under the symbol 'AXIL'. As of August 18, 2025, there were 6,657,717 common shares outstanding held by 167 stockholders of record. The company has never paid cash dividends and does not expect to in the foreseeable future, with any future decisions at the Board's discretion. No unregistered securities were issued during the fourth quarter of fiscal year 2025 - Common stock trades on the **NYSE American** under the symbol '**AXIL**'[80](index=80&type=chunk) Common Stock Outstanding (August 18, 2025) | Title of Class | Shares Outstanding | | :------------- | :----------------- | | Common Stock | 6,657,717 | - The company has never paid cash dividends on its common stock and does not expect to in the foreseeable future[81](index=81&type=chunk) - No unregistered securities were issued during the **fourth quarter of 2025**[82](index=82&type=chunk) [ITEM 6. [RESERVED]](index=14&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=14&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) This section provides management's perspective on the company's financial condition and results of operations for the fiscal years ended May 31, 2025, and 2024. It covers an overview of the business, recent updates, detailed financial performance, liquidity and capital resources, off-balance sheet arrangements, and critical accounting policies and estimates [Overview & Business Update](index=14&type=section&id=Overview%20%26%20Business%20Update) The company operates in two segments, with strategic initiatives for growth, addressing temporary tariff disruptions, and building supply chain resilience - The company operates in two reportable segments: hair and skin care, and hearing enhancement and protection, with a new subsidiary for marketing services[85](index=85&type=chunk) - A **strategic supply arrangement** with a national membership-based retail chain is expected to drive revenue growth and enhance brand visibility in **fiscal 2026**[88](index=88&type=chunk) - The company experienced a **temporary disruption in Q4 FY2025** due to newly imposed international tariffs, leading to increased cost of goods sold and softer sales, but management implemented operational efficiencies to mitigate the impact[91](index=91&type=chunk) - Progress is being made on a **supply chain transition strategy** to build resilience against elevated U.S. tariffs and geopolitical risks, including relocating manufacturing leadership to the U.S. and developing domestic production capabilities[92](index=92&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) This section details the company's consolidated financial performance, including net sales, cost of sales, gross profit, operating expenses, and net income for fiscal years 2025 and 2024 Consolidated Results of Operations (Fiscal Years Ended May 31) | Metric | 2025 ($) | 2024 ($) | | :-------------------------------- | :----------- | :----------- | | Sales, net | 26,257,522 | 27,498,539 | | Cost of sales | 7,615,954 | 7,321,838 | | Gross profit | 18,641,568 | 20,176,701 | | Total operating expenses | 17,480,203 | 18,673,321 | | Income from operations | 1,161,365 | 1,503,380 | | Net income after tax | 854,988 | 2,003,134 | | Total EBITDA (Non-GAAP) | 1,321,399 | 1,735,706 | | Total Adjusted EBITDA (Non-GAAP) | 2,430,333 | 2,002,889 | | Adjusted EBITDA as % of Sales | 9.3% | 7.3% | - Net sales decreased by **$1,241,017 (4.5%) in FY2025**, primarily due to reduced advertising expenditure affecting direct-to-consumer sales and temporary disruption from international tariff changes[98](index=98&type=chunk) - Cost of sales increased by **$294,116 (4.0%) in FY2025**, and as a percentage of net revenues, increased from **26.6% to 29.0%**, mainly due to lower-margin distributor sales and elevated input/logistics costs from tariffs[99](index=99&type=chunk) - Gross profit decreased by **$1,535,133 (7.6%) in FY2025**, with gross profit margin declining from **73.4% to 71.0%** due to increased cost of sales as a percentage of revenue and higher discounts[100](index=100&type=chunk) - Operating expenses decreased by **$1,193,118 (6.4%) in FY2025**, primarily from a net decrease in advertising expenses and a **$220,000 forgiveness of accounts payable**, partially offset by an **$841,751 increase in non-cash stock-based compensation**[101](index=101&type=chunk) Net Income Per Common Share (Fiscal Years Ended May 31) | Metric | 2025 ($) | 2024 ($) | | :----- | :------- | :------- | | Basic | 0.13 | 0.57 | | Diluted| 0.10 | 0.21 | [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) The company assesses its ability to meet working capital needs, detailing cash flow activities and outstanding loan obligations - The company believes it has **sufficient liquidity** to meet working capital needs for at least one year from the issuance date of the financial statements, based on current cash balances and anticipated operating cash flows[106](index=106&type=chunk)[107](index=107&type=chunk) Cash Flows (Fiscal Years Ended May 31) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :-------------------------------- | :---------- | :----------- | | Net cash provided by operating activities | 1,928,661 | 2,677 | | Net cash used in investing activities | (394,298) | (160,525) | | Net cash used in financing activities | (18,385) | (1,420,958) | | Net increase (decrease) in cash and cash equivalents | 1,515,978 | (1,578,806) | - Net cash provided by operating activities significantly improved to **$1,928,661 in FY2025** from **$2,677 in FY2024**, driven by increased inventory levels, substantial decrease in advertising expense, and a **$220,000 forgiveness of accounts payable**[110](index=110&type=chunk) - Net cash used in financing activities decreased substantially in FY2025 to **$18,385** from **$1,420,958 in FY2024**, primarily due to the absence of preferred stock repurchases that occurred in the prior year[112](index=112&type=chunk) - The company has a secured Economic Injury Disaster Loan (EIDL) outstanding of **$140,229** as of May 31, 2025, with a maturity date of **May 18, 2050**[113](index=113&type=chunk) [Off-Balance Sheet Arrangements](index=19&type=section&id=Off-Balance%20Sheet%20Arrangements) As of May 31, 2025, the company did not have any material off-balance sheet arrangements - As of May 31, 2025, the company did not have any **off-balance sheet arrangements** that are material to investors[115](index=115&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies and estimates include allowance for doubtful accounts, revenue recognition, and goodwill impairment testing, requiring significant management judgment - Critical accounting policies and estimates include the **allowance for doubtful accounts**, **revenue recognition (ASC 606)**, and **goodwill impairment testing**[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Revenue recognition involves a **five-step process**, with transaction price considering discounts, promotional incentives, and expected returns, requiring judgment based on historical experience and market conditions[118](index=118&type=chunk)[221](index=221&type=chunk)[226](index=226&type=chunk) - Goodwill is tested for impairment at least annually, or more frequently if indicators suggest potential impairment, using **qualitative and quantitative assessments** (discounted cash flow method)[119](index=119&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=21&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) As a smaller reporting company, AXIL Brands, Inc. is not required to provide the information typically required by this item regarding quantitative and qualitative disclosures about market risk [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.](index=34&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA.) This section presents the audited consolidated financial statements of AXIL Brands, Inc. and its subsidiaries for the fiscal years ended May 31, 2025, and 2024, along with the report of the independent registered public accounting firm and detailed notes to the financial statements [Report of Independent Registered Public Accounting Firm](index=35&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Salberg & Company, P.A. issued an unqualified opinion on the consolidated financial statements for fiscal years 2025 and 2024, with no critical audit matters identified - Salberg & Company, P.A. issued an **unqualified opinion** on the consolidated financial statements of AXIL Brands, Inc. for the fiscal years ended May 31, 2025, and 2024[192](index=192&type=chunk) - The audit determined that there were **no critical audit matters**[196](index=196&type=chunk) [Consolidated Balance Sheets](index=36&type=section&id=Consolidated%20Balance%20Sheets) This table presents the company's financial position, including assets, liabilities, and stockholders' equity, as of May 31, 2025, and 2024 Consolidated Balance Sheet Highlights (May 31) | Metric | 2025 ($) | 2024 ($) | | :------------------------- | :----------- | :----------- | | Cash | 4,769,854 | 3,253,876 | | Total Current Assets | 9,255,648 | 7,966,860 | | Total Assets | 12,869,795 | 10,974,361 | | Total Current Liabilities | 2,462,824 | 2,798,045 | | Total Liabilities | 3,210,087 | 3,278,575 | | Total Stockholders' Equity | 9,659,708 | 7,695,786 | [Consolidated Statements of Operations](index=38&type=section&id=Consolidated%20Statements%20of%20Operations) This table summarizes the company's revenues, expenses, and net income for the fiscal years ended May 31, 2025, and 2024 Consolidated Statements of Operations Highlights (Fiscal Years Ended May 31) | Metric | 2025 ($) | 2024 ($) | | :------------------------------ | :----------- | :----------- | | Sales, net | 26,257,522 | 27,498,539 | | Cost of sales | 7,615,954 | 7,321,838 | | Gross profit | 18,641,568 | 20,176,701 | | Total Operating Expenses | 17,480,203 | 18,673,321 | | INCOME FROM OPERATIONS | 1,161,365 | 1,503,380 | | INCOME BEFORE PROVISION FOR INCOME TAXES | 1,308,816 | 1,782,929 | | Provision (benefit) for income taxes | 453,828 | (220,205) | | NET INCOME | 854,988 | 2,003,134 | | Basic EPS | 0.13 | 0.57 | | Diluted EPS | 0.10 | 0.21 | [Consolidated Statements of Changes in Stockholders' Equity](index=39&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section details changes in the company's equity accounts, including preferred stock, common stock, additional paid-in capital, and retained earnings for fiscal years 2025 and 2024 Changes in Stockholders' Equity (Fiscal Years Ended May 31) | Metric | May 31, 2025 ($) | May 31, 2024 ($) | | :------------------------- | :--------------- | :--------------- | | Preferred Stock Amount | 2,777 | 4,225 | | Common Stock Amount | 666 | 591 | | Additional Paid-in Capital | 8,935,547 | 7,825,240 | | Retained Earnings (Accumulated Deficit) | 720,718 | (134,270) | | Total Stockholders' Equity | 9,659,708 | 7,695,786 | - In FY2025, stock options expense was **$624,559** and stock-based compensation was **$484,375**; net income for the year was **$854,988**[203](index=203&type=chunk) - In FY2024, preferred stock buyback resulted in a **$1,246,490 reduction** in total stockholders' equity, and net income was **$2,003,134**[204](index=204&type=chunk) [Consolidated Statements of Cash Flows](index=40&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This table presents the company's cash inflows and outflows from operating, investing, and financing activities for the fiscal years ended May 31, 2025, and 2024 Consolidated Statements of Cash Flows Highlights (Fiscal Years Ended May 31) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :-------------------------------- | :---------- | :----------- | | Net cash provided by operating activities | 1,928,661 | 2,677 | | Net cash used in investing activities | (394,298) | (160,525) | | Net cash used in financing activities | (18,385) | (1,420,958) | | Net increase (decrease) in cash | 1,515,978 | (1,578,806) | | Cash - End of year | 4,769,854 | 3,253,876 | - Operating activities provided significantly more cash in **2025 ($1,928,661)** compared to **2024 ($2,677)**, largely due to inventory management, reduced advertising, and accounts payable forgiveness[110](index=110&type=chunk)[207](index=207&type=chunk) - Cash used in investing activities increased in 2025 to **$394,298**, primarily for intangibles (product testing) and property/equipment[111](index=111&type=chunk)[207](index=207&type=chunk) - Cash used in financing activities decreased substantially in 2025 to **$18,385**, mainly because there were no preferred stock repurchases, unlike the **$1,246,490 in 2024**[112](index=112&type=chunk)[207](index=207&type=chunk) [Notes to Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, balances, and transactions [Note 1 – Organization](index=41&type=section&id=Note%201%20%E2%80%93%20Organization) This note describes the company's corporate history, including its name change, stock exchange uplisting, asset acquisition, and new subsidiary formation - AXIL Brands, Inc. (formerly Reviv3 Procare Company) changed its name on **February 14, 2024**, and uplisted to the **NYSE American stock exchange**[209](index=209&type=chunk)[210](index=210&type=chunk) - The company acquired assets of Axil & Associated Brands Corp. in **June 2022** and incorporated Sharper Vision Marketing Inc. on **May 5, 2025**[209](index=209&type=chunk) [Note 2 – Basis of Presentation and Summary of Significant Accounting Policies](index=41&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the financial statement preparation basis, consolidation principles, reverse stock split impact, and key accounting policies for revenue, goodwill, and leases - Financial statements are prepared in accordance with **U.S. GAAP** and include consolidated subsidiaries, with all significant intercompany accounts and transactions eliminated[211](index=211&type=chunk) - The company effected a **1-for-20 reverse stock split** on **January 16, 2024**, with retroactive effect on all periods presented[212](index=212&type=chunk) - Revenue is recognized in accordance with **ASC 606**, typically upon shipment, considering discounts, promotional incentives, and expected returns[221](index=221&type=chunk)[222](index=222&type=chunk) - Goodwill is tested for impairment annually on **May 31st**, or more frequently if indicators dictate, using qualitative and quantitative assessments (discounted cash flow method)[240](index=240&type=chunk)[241](index=241&type=chunk) - The company adopted **ASC Topic 842, Leases**, on **June 1, 2019**, recognizing right-of-use (ROU) assets and lease liabilities for leases over 12 months[254](index=254&type=chunk) [Note 3 – Accounts Receivable, net](index=48&type=section&id=Note%203%20%E2%80%93%20Accounts%20Receivable%2C%20net) This note details the composition of accounts receivable, including customer and merchant processor balances, and the allowance for credit losses Accounts Receivable, net (May 31) | Metric | 2025 ($) | 2024 ($) | | :------------------------- | :---------- | :--------- | | Customers receivable | 922,616 | 524,730 | | Merchant processor receivable | 185,719 | 78,417 | | Less: Allowance for credit losses | (104,390) | (93,312) | | Accounts receivables, net | 1,003,945 | 509,835 | - The company recognized a **net recovery from credit losses of $4,519 in FY2025**, compared to a provision of **$25,471 in FY2024**[267](index=267&type=chunk) [Note 4 – Inventory, net](index=48&type=section&id=Note%204%20%E2%80%93%20Inventory%2C%20net) This note provides a breakdown of inventory, including finished goods and raw materials, and details changes in inventory held at third-party locations and obsolescence reserves Inventory, net (May 31) | Metric | 2025 ($) | 2024 ($) | | :------------ | :---------- | :--------- | | Finished Goods| 2,509,840 | 3,190,344 | | Raw Materials | 23,818 | 203,679 | | Inventory, net| 2,533,658 | 3,394,023 | - Inventory held at third-party locations increased from **$58,242 in 2024** to **$109,706 in 2025**, and inventory in-transit increased from **$15,738 to $174,564**[268](index=268&type=chunk) - The company provided **$0 as obsolescence reserve** on slow-moving inventory in FY2025, compared to **$46,895 in FY2024**[268](index=268&type=chunk) [Note 5 – Property and Equipment](index=49&type=section&id=Note%205%20%E2%80%93%20Property%20and%20Equipment) This note details the company's property and equipment, including various asset categories, estimated useful lives, and accumulated depreciation Property and Equipment, net (May 31) | Category | Estimated Life | 2025 ($) | 2024 ($) | | :----------------------- | :------------- | :---------- | :--------- | | Promotional display racks | 2 years | 62,944 | 30,709 | | Furniture and fixtures | 5 years | 57,137 | 5,759 | | Computer equipment | 3 years | 18,558 | 22,130 | | Plant equipment | 5-10 years | 390,028 | 264,168 | | Office equipment | 5-10 years | 8,838 | 8,838 | | Automobile | 5 years | 24,347 | 24,347 | | Less: Accumulated depreciation | | (149,591) | (95,003) | | Total Property, plant and equipment, net | | 412,261 | 260,948 | - Depreciation expense totaled **$62,171 in FY2025**, with **$31,431** classified within cost of sales and the remainder in general and administrative expenses[269](index=269&type=chunk) [Note 6 – Intangible Assets](index=49&type=section&id=Note%206%20%E2%80%93%20Intangible%20Assets) This note outlines the company's intangible assets, including licensing rights, customer relationships, trade names, and product certification testing, along with goodwill and intellectual property details Intangible Assets, net (May 31) | Category | Estimated Life | 2025 ($) | 2024 ($) | | :----------------------- | :------------- | :---------- | :--------- | | Licensing rights | 3 years | 22,080 | 34,024 | | Customer relationships | 3 years | 70,000 | 70,000 | | Trade names | 10 years | 275,000 | 275,000 | | Website | 5 years | 100,000 | 100,000 | | Product certification testing | 3 years | 180,815 | - | | Less: Accumulated amortization | | (244,304) | (169,920) | | Intangible assets, net | | 403,591 | 309,104 | - Amortization expense amounted to **$86,327 in FY2025** and **$95,649 in FY2024**[270](index=270&type=chunk) - Goodwill remained constant at **$2,152,215** as of May 31, 2025, and 2024[271](index=271&type=chunk) - The company holds **three active U.S. patents** (expiring 2035-2038) and **seven federally registered trademarks**, but has not capitalized costs associated with internally developed intellectual property[272](index=272&type=chunk)[273](index=273&type=chunk) [Note 7 – Other Current Liabilities](index=50&type=section&id=Note%207%20%E2%80%93%20Other%20Current%20Liabilities) This note provides a breakdown of other current liabilities, including credit cards, sales tax payable, and accrued expenses Other Current Liabilities (May 31) | Metric | 2025 ($) | 2024 ($) | | :-------------------- | :------- | :------- | | Credit Cards | 1,863 | 5,734 | | Sales Tax Payable | 218,828 | 231,283 | | Royalty Payment Accrual | - | 3,376 | | Accrued expenses | 24,307 | 92,543 | | Total other current liabilities | 244,998 | 322,936 | [Note 8 – Notes Payable](index=50&type=section&id=Note%208%20%E2%80%93%20Notes%20Payable) This note details the company's secured Economic Injury Disaster Loan (EIDL), including its outstanding balance, interest rate, maturity date, and payment schedule - As of May 31, 2025, the company had a secured Economic Injury Disaster Loan (EIDL) outstanding of **$140,229**, with a **3.75% annual interest rate** and maturity on **May 18, 2050**[275](index=275&type=chunk)[276](index=276&type=chunk) EIDL Loan Payments Due (Fiscal Year Ended May 31) | Fiscal Year | Total ($) | | :---------- | :-------- | | 2026 | 3,574 | | 2027 | 3,712 | | 2028 | 3,852 | | 2029 | 3,999 | | 2030 | 4,152 | | Thereafter | 120,940 | | Total | 140,229 | [Note 9 – Stockholders' Equity](index=51&type=section&id=Note%209%20%E2%80%93%20Stockholders%27%20Equity) This note details changes in authorized shares, preferred stock conversions, and stock option and restricted stock award activity for fiscal years 2025 and 2024 - On **May 19, 2025**, the authorized shares of common stock were reduced from **450,000,000 to 15,000,000**, and preferred stock from **300,000,000 to 28,000,000**[278](index=278&type=chunk) - In FY2025, **14,478,250 preferred shares were converted into 723,913 common shares**; as of May 31, 2025, **27,773,500 Series A Preferred Stock shares** were outstanding[285](index=285&type=chunk) - The company granted **634,000 stock options in FY2025** to officers and an employee, with exercise prices ranging from **$4.00 to $4.01 per share**, vesting over **48 months or one year**[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk)[302](index=302&type=chunk) Stock Option Activity (Fiscal Years Ended May 31) | Metric | Number of Options (2025) | Weighted Average Exercise Price (2025) ($) | Number of Options (2024) | Weighted Average Exercise Price (2024) ($) | | :------------------------- | :----------------------- | :----------------------------------------- | :----------------------- | :----------------------------------------- | | Outstanding as of June 1 | 268,750 | 1.83 | 268,750 | 1.83 | | Granted | 634,000 | 4.17 | - | - | | Outstanding as of May 31 | 902,750 | 3.48 | 268,750 | 1.83 | | Less: Unvested at May 31 | (511,500) | 4.03 | - | - | | Vested at May 31 | 391,250 | 2.74 | 268,750 | 1.83 | - The company expensed **$624,559 for stock options** and **$484,375 for restricted stock awards in FY2025**[302](index=302&type=chunk)[309](index=309&type=chunk) [Note 10 – Commitments and Contingencies](index=56&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's operating lease agreements for office and warehouse spaces, including maturity schedules, and details royalty forgiveness - The company entered into new operating lease agreements for a corporate office in Beverly Hills (**Nov 2024-Jan 2029**) and a warehouse in American Fork, Utah (**Oct 2024-Sep 2027**)[311](index=311&type=chunk)[312](index=312&type=chunk) Operating Lease Liabilities Maturities (May 31, 2025) | Fiscal Year | Total ($) | | :---------- | :-------- | | 2026 | 246,575 | | 2027 | 257,647 | | 2028 | 206,270 | | 2029 | 119,790 | | Total | 830,282 | | Less: Imputed interest | (213,070) | | Present value of lease liabilities | 617,212 | - During FY2025, **$218,699 previously due in royalties was forgiven** and included in Sales and marketing expenses[316](index=316&type=chunk) [Note 11 – Related Party Transactions](index=57&type=section&id=Note%2011%20%E2%80%93%20Related%20Party%20Transactions) This note details transactions with related parties, including consulting fees and working capital advances involving the CEO and CFO - Jeff Toghraie, CEO and Chairman, is the managing director of Intrepid Global Advisors, which received **$227,100 in consulting fees in FY2025**[318](index=318&type=chunk) - Intrepid provided **$6,950,210 in advances** and received **$6,962,230 in repayments in FY2025**; these advances are short-term and non-interest bearing[318](index=318&type=chunk) - Jeff Brown, CFO, COO, and Board member, has a controlling interest in BZ Capital Strategies, which was paid **$120,000 in consulting fees in FY2025**[319](index=319&type=chunk) [Note 12 – Concentrations](index=58&type=section&id=Note%2012%20%E2%80%93%20Concentrations) This note identifies concentrations of risk related to cash balances, customer sales, and reliance on a limited number of vendors across both business segments - The company held approximately **$4,019,854 in cash** in excess of federally insured limits at May 31, 2025[321](index=321&type=chunk) - For hearing enhancement and protection, no single customer accounted for **>10% of sales in FY2025**; international sales were **~5% of segment net sales**[322](index=322&type=chunk)[323](index=323&type=chunk) - **Two vendors accounted for 90% of hearing segment purchases** in FY2025 (**67% and 23% respectively**)[325](index=325&type=chunk) - For hair and skin care, one customer accounted for **36% of segment net sales (2.1% consolidated) in FY2025**; international sales were **~31% of segment net sales**[326](index=326&type=chunk)[327](index=327&type=chunk) - **Two vendors represented ~98% of hair and skin care segment purchases** in FY2025 (**79% and 19% respectively**)[330](index=330&type=chunk) [Note 13 – Business Segment and Geographic Area Information](index=60&type=section&id=Note%2013%20%E2%80%93%20Business%20Segment%20and%20Geographic%20Area%20Information) This note provides financial performance data by reportable segment (Hearing Enhancement and Protection, Hair and Skin Care) and geographic area - The company operates in **two reportable segments**: Hearing Enhancement and Protection and Hair and Skin Care, with the CEO as the Chief Operating Decision Maker (CODM)[332](index=332&type=chunk)[333](index=333&type=chunk) Segment Performance (Fiscal Years Ended May 31) | Metric (2025) | Hearing Enhancement and Protection ($) | Hair and Skin Care ($) | Consolidated ($) | | :------------------------------------- | :------------------------------------- | :--------------------- | :--------------- | | Sales, net | 24,735,101 | 1,522,421 | 26,257,522 | | Gross profit | 17,806,856 | 834,712 | 18,641,568 | | Segment non-cash operating income | 3,511,895 | 157,060 | 3,668,955 | | Total Assets | 8,109,272 | 4,760,523 | 12,869,795 | | Payments for property and equipment and intangible assets | 392,428 | 1,870 | 394,298 | | Depreciation and amortization | 144,955 | 3,543 | 148,498 | - Approximately **93% of consolidated net sales in FY2025** were to customers located in the U.S., with all company assets also located in the U.S.[337](index=337&type=chunk) [Note 14 – Income Taxes](index=62&type=section&id=Note%2014%20%E2%80%93%20Income%20Taxes) This note details the company's income tax expense, deferred tax assets, and net operating loss (NOL) carryforwards for federal and state jurisdictions Income Tax Expense (Benefit) (Fiscal Years Ended May 31) | Category | 2025 ($) | 2024 ($) | | :------- | :------- | :--------- | | Current | | | | Federal | 206,950 | 92,406 | | State | 61,530 | 81,870 | | Deferred | | | | Federal | 268,985 | (394,481) | | State | (83,637) | - | | Total | 453,828 | (220,205) | Deferred Tax Assets (May 31) | Category | 2025 ($) | 2024 ($) | | :------------------------ | :---------- | :--------- | | Property, Plant and Equipment | (101,415) | - | | Intangibles | (59,238) | - | | Net operating loss | 90,060 | 231,587 | | Stock-based compensation | 163,018 | - | | Others | (46,186) | - | | Total net deferred tax assets | 46,239 | 231,587 | - As of May 31, 2025, the company had California net operating loss (NOL) carryforwards of **$1,289,587**, with no federal or Utah NOL carryforwards[341](index=341&type=chunk) - In FY2025, the company utilized approximately **$465,613 of federal NOLs** and **$123,216 of California NOLs**, and management believes remaining NOLs will be fully realized[342](index=342&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.](index=21&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE.) There have been no changes in or disagreements with the company's accountants on accounting and financial disclosure matters [ITEM 9A. CONTROLS AND PROCEDURES.](index=21&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES.) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of May 31, 2025, concluding they were effective. They also assessed the effectiveness of internal control over financial reporting based on COSO criteria, concluding it was effective. The annual report does not include an attestation report from the registered public accounting firm - The CEO and CFO concluded that **disclosure controls and procedures were effective** as of May 31, 2025[124](index=124&type=chunk) - Management assessed and concluded that **internal control over financial reporting was effective** as of May 31, 2025, based on COSO criteria[126](index=126&type=chunk) - The annual report does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting[127](index=127&type=chunk) [ITEM 9B. OTHER INFORMATION.](index=22&type=section&id=ITEM%209B.%20OTHER%20INFORMATION.) This section provides updates on Rule 10b5-1 trading plans, the upcoming 2025 Annual Meeting of Stockholders, and new employment agreements for the Chief Executive Officer and Chief Financial Officer - No **Rule 10b5-1 trading plans** were adopted, modified, or terminated by directors or executive officers during the quarter ended May 31, 2025[129](index=129&type=chunk) - The **2025 Annual Meeting of Stockholders** is scheduled for **December 17, 2025**, with stockholders of record as of **October 22, 2025**, entitled to vote[130](index=130&type=chunk) - On **August 18, 2025**, the company entered into new employment agreements with CEO Jeff Toghraie and CFO Jeff Brown, formalizing their terms of employment, including base salaries (**$275,000 and $225,000 respectively**) and annual bonus opportunities (not less than **40% of base salary**)[131](index=131&type=chunk)[132](index=132&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.](index=22&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS.) This item is not applicable to the company [PART III](index=23&type=section&id=PART%20III) This part covers information on directors, executive officers, corporate governance, executive compensation, and security ownership [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.](index=23&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE.) This section provides information on the company's directors and executive officers, including their ages, positions, and biographies. It also details the composition and independence of the Board's standing committees (Audit, Compensation, and Nominating and Corporate Governance), and outlines the company's Code of Business Conduct and Ethics, Section 16(a) reporting compliance, and Insider Trading Policy [Information about Directors and Executive Officers](index=23&type=section&id=Information%20about%20Directors%20and%20Executive%20Officers) This section lists the company's directors and executive officers, their ages, positions, and provides brief biographies highlighting their experience Directors and Executive Officers (as of August 18, 2025) | Name | Age | Director Class | Position | | :----------- | :-- | :------------- | :------------------------------------- | | Jeff Toghraie| 58 | Class III | Chief Executive Officer and Chairman | | Jeff Brown | 43 | Class III | Chief Financial Officer, COO, Director | | Manu Ohri | 69 | Class II | Director | | Peter Dunne | 84 | Class II | Director | | Nancy Hundt | 57 | Class I | Director | - Jeff Toghraie has served as CEO and Chairman since **June 2015**, bringing over **20 years of industry experience** and expertise in implementing complex strategies[137](index=137&type=chunk)[138](index=138&type=chunk) - Jeff Brown has served as CFO since **May 2024** and COO since **March 2017**, bringing over **15 years of operational experience** and deep industry knowledge[139](index=139&type=chunk)[140](index=140&type=chunk) [Board Committees](index=25&type=section&id=Board%20Committees) The Board has three standing committees (Audit, Compensation, and Nominating and Corporate Governance), with all members qualifying as independent directors - The Board consists of five directors and has **three standing committees**: Audit, Compensation, and Nominating and Corporate Governance[149](index=149&type=chunk) - Each member of the standing committees qualifies as an **independent director** under SEC and NYSE American rules, and the Board is comprised of a majority of independent directors[149](index=149&type=chunk)[178](index=178&type=chunk) Board Committee Membership (as of August 18, 2025) | Name | Audit | Compensation | Nominating and Corporate Governance | | :---------- | :---- | :----------- | :---------------------------------- | | Jeff Toghraie | | | | | Jeff Brown | | | | | Peter Dunne | X | X | X* | | Nancy Hundt | X | X* | X | | Manu Ohri+ | X* | X | X | * Committee chairperson. + Audit committee financial expert. [Code of Business Conduct and Ethics](index=26&type=section&id=Code%20of%20Business%20Conduct%20and%20Ethics) The Board adopted a Code of Business Conduct and Ethics applicable to all directors, employees, and officers, available on the company's website - The Board adopted a **Code of Business Conduct and Ethics** applicable to all directors, employees, and officers, with the full text available on the Investors section of the company's website[152](index=152&type=chunk) [Delinquent Section 16(a) Reports](index=26&type=section&id=Delinquent%20Section%2016(a)%20Reports) All Section 16 filing requirements for executive officers, directors, and major stockholders were complied with during fiscal year 2025 - To the best of the company's knowledge, all **Section 16 filing requirements** applicable to executive officers, directors, and greater than 10% stockholders were complied with during the fiscal year ended May 31, 2025[153](index=153&type=chunk) [Insider Trading Policy](index=26&type=section&id=Insider%20Trading%20Policy) The company's Insider Trading Policy prohibits certain transactions like short sales, derivatives, hedging, or pledging company securities without approval - The company's **Insider Trading Policy** prohibits officers, directors, employees, and agents from engaging in short sales, investing in company-based derivative securities, hedging, or pledging company securities in margin accounts without prior approval[154](index=154&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION.](index=27&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION.) This section details the compensation for the company's named executive officers (NEOs), Jeff Toghraie (CEO) and Jeff Brown (CFO/COO), for fiscal years 2025 and 2024, including salaries, option awards, and other compensation. It also outlines the terms of their new employment agreements, outstanding equity awards, and compensation for non-employee directors [Summary Compensation Table](index=27&type=section&id=Summary%20Compensation%20Table) This table summarizes the compensation for named executive officers, including salaries, option awards, and other compensation for fiscal years 2025 and 2024 Summary Compensation for Named Executive Officers (Fiscal Years Ended May 31) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :--------------- | :---------------- | :----------------------------------------- | :-------------------------------------------- | :------------------------- | :---------- | | Jeff Toghraie | 2025 | — | — | — | 1,403,500 | — | — | 227,100 | 1,630,600 | | Chief Executive Officer and Chairman | 2024 | — | — | — | — | — | — | — | — | | Jeff Brown | 2025 | 144,000 | — | — | 1,002,500 | — | — | 120,000 | 1,266,500 | | Chief Operating Officer, Chief Financial Officer, and Director | 2024 | 144,000 | 67,000 | — | — | — | — | — | 211,000 | - The value of option awards represents the **fair value computed in accordance with FASB ASC Topic 718**[161](index=161&type=chunk) - All Other Compensation for Mr. Toghraie and Mr. Brown consists of consulting fees paid to firms where they are managing director or co-owner/Chairman/CFO, respectively[161](index=161&type=chunk) [Executive Employment Agreements](index=27&type=section&id=Executive%20Employment%20Agreements) New employment agreements for the CEO and CFO formalize their base salaries, annual bonus opportunities, and provisions for change of control or termination - On **August 18, 2025**, new employment agreements were entered into with CEO Jeff Toghraie and CFO Jeff Brown, formalizing their continued employment[160](index=160&type=chunk) - Mr. Toghraie's annual base salary is **$275,000**, and Mr. Brown's is **$225,000**, with both eligible for an annual bonus target of not less than **40% of their base salary**[132](index=132&type=chunk)[162](index=162&type=chunk) - Agreements include provisions for fully vested common stock shares (**500,000 for Mr. Toghraie, 175,000 for Mr. Brown**) upon a Change of Control, and severance payments upon termination without Cause or resignation for Good Reason[132](index=132&type=chunk)[162](index=162&type=chunk) [Outstanding Equity Awards at Fiscal Year-End](index=29&type=section&id=Outstanding%20Equity%20Awards%20at%20Fiscal%20Year-End) This table details the outstanding equity awards for named executive officers, including exercisable and unexercisable options, exercise prices, and expiration dates Outstanding Equity Awards for NEOs (as of May 31, 2025) | Name | Grant Date | Number of securities underlying unexercised options () exercisable | Number of securities underlying unexercised options () unexercisable | Option exercise price ($) | Option expiration date | | :---------- | :--------- | :---------------------------------------------------------------- | :-------------------------------------------------------------------- | :------------------------ | :--------------------- | | Jeff Toghraie | 5/10/2022 | 155,000 | — | 1.80 | 4/20/2032 | | | 10/14/2024 | 58,333 | 291,667 | 4.01 | 10/31/2034 | | Jeff Brown | 5/10/2022 | 110,000 | — | 1.80 | 4/20/2032 | | | 10/14/2024 | 41,667 | 208,333 | 4.01 | 10/31/2034 | - Options granted on **October 14, 2024**, vest and become exercisable in **48 equal monthly installments** beginning on **October 31, 2024**[167](index=167&type=chunk) [Director Compensation](index=29&type=section&id=Director%20Compensation) This table outlines the compensation for non-employee directors, primarily consisting of restricted stock awards, for the fiscal year ended May 31, 2025 Non-Employee Director Compensation (Fiscal Year Ended May 31, 2025) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | All Other Compensation ($) | Total ($) | | :---------- | :------------------------------ | :--------------- | :------------------------- | :-------- | | Peter Dunne | — | 20,750 | — | 20,750 | | Nancy Hundt | — | 20,750 | — | 20,750 | | Manu Ohri | — | 20,750 | — | 20,750 | - Compensation for non-employee directors consisted of **5,000 restricted stock awards each**, granted on **January 13, 2025**, with a grant date fair value of **$20,750 per director**, vesting on **January 13, 2026**[170](index=170&type=chunk)[171](index=171&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.](index=30&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS.) This section provides details on the beneficial ownership of the company's common stock by principal stockholders (owning more than 5%), directors, and executive officers as of August 18, 2025. It also includes information on the company's equity compensation plans, outlining the number of securities to be issued and remaining available for future issuance [Beneficial Ownership](index=30&type=section&id=Beneficial%20Ownership) This table details the beneficial ownership of common stock by principal stockholders, directors, and executive officers, including their respective percentages Beneficial Ownership of Common Stock (as of August 18, 2025) | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent | | :----------------------- | :---------------------------------- | :------ | | Jeff Toghraie | 3,537,038 | 46.1% | | Don Frank Nathaniel Vasquez | 1,276,251 | 19.2% | | Shircoo, Inc. | 534,510 | 8.0% | | Jeff Brown | 287,643 | 4.2% | | Peter Dunne | 31,250 | * | | Nancy Hundt | 12,273 | * | | Manu Ohri | 20,001 | * | | All Current Executive Officers and Directors as a Group (5 persons) | 3,888,205 | 49.6% | * Represents beneficial ownership of less than 1% of the outstanding common stock. - Jeff Toghraie's beneficial ownership includes shares held directly by Intrepid Global Advisors, shares with shared voting power with Don Frank Nathaniel Vasquez, exercisable options, and shares convertible from Series A Preferred Stock[175](index=175&type=chunk) - The calculation of percentage ownership is based on **6,657,717 shares of common stock outstanding** on **August 18, 2025**[174](index=174&type=chunk) [Equity Compensation Plan Information](index=31&type=section&id=Equity%20Compensation%20Plan%20Information) This table provides information on the company's equity compensation plans, including outstanding options, weighted-average exercise price, and securities available for future issuance Equity Compensation Plan Information (as of May 31, 2025) | Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--------------------------------------------- | :------------------------------------------------------------------------------------------ | :---------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 902,750 | 3.48 | 1,122,385 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 902,750 | 3.48 | 1,122,385 | - The Plan provides for an annual increase in authorized shares, subject to Board approval, equal to the lesser of **4% of outstanding common stock** or a smaller number determined by the administrator[176](index=176&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.](index=32&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE.) This section outlines the Board's determination of director independence, identifying Peter Dunne, Nancy Hundt, and Manu Ohri as independent directors. It also details related party transactions, including consulting fees and working capital advances with Intrepid Global Advisors (associated with the CEO) and consulting fees with BZ Capital Strategies (associated with the CFO) [Director Independence](index=32&type=section&id=Director%20Independence) The Board determined that a majority of its directors, including all committee members, qualify as independent under NYSE American and SEC rules - The Board determined that **Peter Dunne, Nancy Hundt, and Manu Ohri** qualify as **independent directors** under NYSE American listing standards and SEC rules[178](index=178&type=chunk) - The Board is comprised of a **majority of independent directors**, and all Board committee members are independent[178](index=178&type=chunk) [Related Party Transactions](index=32&type=section&id=Related%20Party%20Transactions) This section details consulting fees and working capital advances with entities associated with the CEO and CFO - Intrepid Global Advisors, where CEO Jeff Toghraie is managing director, received approximately **$227,100 in consulting fees in FY2025** and provided **$6,950,210 in working capital advances**, with **$6,962,230 in repayments**[180](index=180&type=chunk) - BZ Capital Strategies, where CFO Jeff Brown has a controlling interest, was paid **$120,000 in consulting fees for FY2025**[181](index=181&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.](index=33&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES.) This section details the fees paid to Salberg & Company, P.A., the independent registered public accounting firm, for audit and audit-related services for the fiscal years ended May 31, 2025, and 2024. All services performed were pre-approved by the Audit Committee Principal Accountant Fees (Fiscal Years Ended May 31) | Fee Category | 2025 ($) | 2024 ($) | | :------------------ | :------- | :------- | | Audit fees | 132,800 | 126,000

Core Insights - AXIL Brands, Inc. has announced a significant new wholesale partnership with a prominent U.S. membership-based retail chain, marking a major milestone in its strategic expansion [1][2] - The partnership will make AXIL® hearing protection products available in approximately 300 retail locations nationwide starting in fiscal 2026, expected to drive revenue growth and increase brand visibility [2][3] Company Overview - AXIL Brands is an emerging global consumer products company that manufactures and markets premium hearing enhancement and protection products, including earplugs, earmuffs, and earbuds under the AXIL® brand, as well as hair and skincare products under the Reviv3® brand [5] Strategic Expansion - The partnership is seen as a transformative opportunity for AXIL, providing a platform to reach a broader audience and significantly enhance brand awareness [3] - The company has received an initial purchase order, with shipments expected in the first and early second quarters of fiscal 2026, reflecting its success in executing a multi-channel distribution strategy [3][4]

Core Insights - AXIL Brands, Inc. has announced a strategic partnership with JuiceCo Pro Agency to enhance the global distribution and visibility of its Reviv3 hair and skin care products [1][4] - The partnership aims to leverage JuiceCo's expertise in brand development and market penetration to secure key distribution partnerships and elevate Reviv3's profile among beauty professionals and consumers [2][3] Company Overview - AXIL Brands, Inc. is an emerging global consumer products company that manufactures and markets premium hearing enhancement and protection products under the AXIL brand, as well as hair and skincare products under the Reviv3 Procare brand [6] - Reviv3 Procare specializes in hair and skin care products that focus on clean ingredients and professional-grade performance, trusted by salons and consumers worldwide [7] Leadership and Expertise - Jack Ingraham, founder of JuiceCo Pro Agency, brings over 25 years of experience in brand development and product marketing, having previously served as Chief Commercial Officer for SalonCentric Canada and General Manager for Redken Canada [3][4] - The Board of Directors of Reviv3 Procare expressed confidence in Ingraham's strategic insight and commitment to excellence, viewing his leadership as a key asset for the company's global growth [4][5] Market Strategy - The partnership is expected to strengthen Reviv3 Procare's professional partnerships and expand its global footprint, contributing to a more meaningful financial impact from this segment under Ingraham's leadership [5] - The company aims to continue focusing on its AXIL branded hearing protection products while also enhancing the growth of the Reviv3 Procare segment [5]

Core Viewpoint - AXIL Brands, Inc. has received significant recognition for its innovative hearing protection and enhancement solutions, particularly from military and technology media outlets, highlighting its commitment to advanced technology and performance in high-intensity environments [1][2][3]. Group 1: Product Features and Innovation - AXIL's hearing protection and enhancement solutions are designed to meet the specific needs of military personnel, outdoor enthusiasts, and professionals in demanding environments, emphasizing superior comfort and performance [2]. - The products utilize advanced digital sound processing to provide exceptional hearing protection while amplifying critical sounds, ensuring users maintain situational awareness during high-intensity activities [3]. Group 2: Company Background and Market Presence - AXIL Brands is a global consumer products company that manufactures and markets premium hearing enhancement and protection products, including ear plugs, earmuffs, and earbuds, under the AXIL brand, as well as hair and skincare products under the Reviv3 brand [4]. - The company operates in multiple regions, including the United States, Canada, the European Union, and Asia, indicating a broad market presence [4]. Group 3: Media Recognition - AXIL's products have been featured in prominent military and technology publications such as Military Times, Marine Corps Times, Air Force Times, Navy Times, and Yahoo Tech, showcasing the brand's credibility and appeal within the military and tech communities [1][7].

Core View - AXIL Brands, Inc. has experienced a significant decline in stock performance, with a 2.2% drop since the third quarter results, contrasting with a 7.8% increase in the S&P 500 index during the same period [1] Financial Performance - In Q3 of fiscal 2025, AXIL reported revenues of $6.92 million, a 7% increase from $6.47 million in the same quarter last year [2] - Net income decreased by 26.1% to $0.6 million from $0.8 million a year earlier, with diluted EPS at 7 cents, down from 4 cents [2] - Adjusted EBITDA improved to $0.9 million, a significant turnaround from a negative $11,052 in the prior year, indicating enhanced operational efficiency [2] Operating Metrics & Business Segments - The hearing enhancement and protection segment was the primary revenue driver, contributing $6.45 million, or approximately 93% of total revenues, up from $5.99 million last year [3] - The hair and skin care segment reported flat revenues of $0.5 million, with a gross profit of $0.3 million [3] - Total assets increased to $12.95 million from $10.97 million as of May 31, 2024 [3] Profitability and Costs - Gross profit rose to $4.97 million from $4.62 million, with a margin expansion to 71.7% from 71.5% [4] - Operating expenses decreased by 7.3% to $4.38 million, attributed to lower advertising costs and a shift to targeted marketing [5] - Stock-based compensation increased significantly to $0.3 million from $59,099 a year earlier [5] Cash Flow and Financial Position - Cash position improved to $4.74 million from $3.25 million at the end of the previous fiscal year [6] - Operating cash flow for the nine months ended February 28, 2025, rose sharply to $1.73 million from $339,323 in the prior-year period [6] Management Insights - Management noted that reduced advertising spending in earlier quarters impacted direct-to-consumer sales but highlighted stronger performance in Q3 due to post-Thanksgiving sales and expanded distribution [7] - CEO Jeff Toghraie expressed confidence in navigating market challenges and emphasized initiatives for geographic expansion and cost efficiency [7] Strategic Developments - AXIL Brands incurred approximately $195,000 in consulting fees related to geographic expansion and new product lines [8] - The company completed a reverse stock split at a ratio of 1-for-20 and converted 3.36 million shares of Series A Preferred Stock into 168,000 shares of common stock, streamlining its capital structure [13] Supply Chain Strategy - AXIL accelerated its supply-chain transition strategy in response to elevated tariffs and geopolitical risks, relocating manufacturing leadership to the U.S. and establishing domestic facilities [14]

[Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward%20Looking%20Statements) This section outlines that the report contains forward-looking statements subject to various risks and uncertainties, advising careful evaluation - This report contains forward-looking statements regarding future events, financial performance, liquidity, capital needs, operational plans, and industry outlook, which are subject to various risks and uncertainties[9](index=9&type=chunk) - Actual results may differ due to factors such as unstable market conditions, economic downturns, geopolitical events, financial performance, capital access, international market risks, regulatory changes, and competition[10](index=10&type=chunk) - The company does not assume an obligation to update forward-looking statements, except as required by law, and advises careful evaluation of described factors[12](index=12&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 for AXIL Brands, Inc. and its subsidiary, covering the balance sheets, statements of operations, changes in stockholders' equity, and cash flows for the periods ended February 28, 2025, and February 29, 2024, along with accompanying condensed notes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated balance sheets, detailing assets, liabilities, and equity for the specified periods | Metric | Feb 28, 2025 (Unaudited) | May 31, 2024 | | :-------------------------------- | :----------------------- | :----------- | | **ASSETS** | | | | Total Current Assets | $9,251,172 | $7,966,860 | | Total Other Assets | $3,699,775 | $3,007,501 | | **TOTAL ASSETS** | **$12,950,947** | **$10,974,361** | | **LIABILITIES & EQUITY** | | | | Total Current Liabilities | $2,449,751 | $2,798,045 | | Total Long Term Liabilities | $844,330 | $480,530 | | **Total Liabilities** | **$3,294,081** | **$3,278,575** | | Total Stockholders' Equity | $9,656,866 | $7,695,786 | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$12,950,947** | **$10,974,361** | - **Total assets increased by $1,976,586 (18.0%)** from May 31, 2024, to February 28, 2025, driven by increases in cash, accounts receivable, property and equipment, intangible assets, and right-of-use assets[16](index=16&type=chunk) - **Total current liabilities decreased by $348,294 (12.4%)** primarily due to decreases in customer deposits, contract liabilities, income tax liability, and other current liabilities, partially offset by an increase in lease liability[16](index=16&type=chunk) - **Total stockholders' equity increased by $1,961,080 (25.5%)** mainly due to net income, stock options expense, stock-based compensation, and preferred shares converted to common stock, leading to a positive retained earnings balance[16](index=16&type=chunk)[17](index=17&type=chunk) [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's consolidated statements of operations, detailing revenues, expenses, and net income for the specified periods | Metric | 3 Months Ended Feb 28, 2025 | 3 Months Ended Feb 29, 2024 | 9 Months Ended Feb 28, 2025 | 9 Months Ended Feb 29, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Sales, net | $6,922,367 | $6,469,343 | $20,506,213 | $20,997,289 | | Cost of sales | $1,955,939 | $1,845,017 | $5,888,090 | $5,467,458 | | Gross profit | $4,966,428 | $4,624,326 | $14,618,123 | $15,529,831 | | Total Operating Expenses | $4,383,319 | $4,728,205 | $13,502,845 | $14,196,041 | | Income (Loss) From Operations | $583,109 | $(103,879) | $1,115,278 | $1,333,790 | | Net Income | $576,662 | $781,091 | $1,100,563 | $1,953,618 | | Basic EPS | $0.09 | $0.13 | $0.17 | $0.33 | | Diluted EPS | $0.07 | $0.04 | $0.13 | $0.11 | - For the three months ended February 28, 2025, **net sales increased by 7.0%** YoY, **gross profit increased by 7.4%** YoY, and the company reported **income from operations of $583,109** compared to a loss of **$(103,879)** in the prior year[18](index=18&type=chunk) - For the nine months ended February 28, 2025, **net sales decreased by 2.3%** YoY, **gross profit decreased by 5.9%** YoY, and **income from operations decreased by 16.4%** YoY[18](index=18&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details changes in the company's stockholders' equity, including net income, stock-based compensation, and share conversions | Metric | Feb 28, 2025 (9 Months) | Feb 29, 2024 (9 Months) | | :-------------------------------- | :---------------------- | :---------------------- | | Balance, May 31 | $7,695,786 | $6,671,959 | | Stock options expense | $416,935 | $153,320 | | Stock based compensation / Restricted stock awards | $443,582 | $7,994 | | Preferred shares converted to common | $0 | $0 | | Net income | $1,100,563 | $1,953,618 | | Balance, End of Period | $9,656,866 | $8,786,891 | - **Total stockholders' equity increased from $7,695,786** as of May 31, 2024, to **$9,656,866** as of February 28, 2025, primarily driven by net income and significant stock-based compensation expenses[21](index=21&type=chunk)[22](index=22&type=chunk) - **During the nine months ended February 28, 2025, 14,478,250 preferred shares were converted into 723,913 common shares**[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's consolidated cash flow statements, categorizing cash movements from operating, investing, and financing activities | Cash Flow Activity | 9 Months Ended Feb 28, 2025 | 9 Months Ended Feb 29, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $1,734,230 | $339,323 | | Net Cash Used in Investing Activities | $(255,778) | $(80,192) | | Net Cash Provided by (Used in) Financing Activities | $11,142 | $(204,246) | | Net Increase in Cash | $1,489,594 | $54,885 | | Cash - End of period | $4,743,470 | $4,887,567 | - **Net cash provided by operating activities significantly increased to $1,734,230** for the nine months ended February 28, 2025, from **$339,323** in the prior year, primarily due to inventory management and accounts payable forgiveness[25](index=25&type=chunk)[170](index=170&type=chunk) - **Net cash used in investing activities increased to $255,778** (from **$80,192** in prior year) due to purchases of intangibles and property and equipment[25](index=25&type=chunk)[171](index=171&type=chunk) - **Net cash provided by financing activities was $11,142** (compared to **$204,246** used in prior year), primarily from related party advances partially offset by note payable repayments[25](index=25&type=chunk)[172](index=172&type=chunk) [Condensed Notes to Unaudited Consolidated Financial Statements](index=13&type=section&id=Condensed%20Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies and specific financial items [Note 1 – Organization](index=13&type=section&id=Note%201%20%E2%80%93%20Organization) This note describes AXIL Brands, Inc.'s rebranding, NYSE American uplisting, and its business segments in hearing protection and hair/skin care - The Company changed its name from Reviv3 Procare Company to AXIL Brands, Inc. effective **February 14, 2024**[26](index=26&type=chunk) - **AXIL Brands, Inc. is engaged in the manufacturing, marketing, sale, and distribution of high-tech hearing and audio enhancement/protection products and professional quality hair and skin care products**[26](index=26&type=chunk) - The Company successfully uplisted from the over-the-counter (OTC) markets to the NYSE American stock exchange on **February 14, 2024**[26](index=26&type=chunk) [Note 2 – Basis of Presentation and Summary of Significant Accounting Policies](index=13&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note details the basis of preparing financial statements, including a reverse stock split, revenue recognition, and other key accounting policies - A **1-for-20 reverse stock split** was effected on **January 16, 2024**, with retroactive effect on all periods presented in the financial statements[28](index=28&type=chunk) - Revenue recognition follows **ASC 606**, a five-step process, with revenue for products recognized upon shipment and for services (extended warranty) recognized ratably over the warranty period[38](index=38&type=chunk)[45](index=45&type=chunk) - Contract liabilities, primarily for unfulfilled warranty services and customer right of return, amounted to **$1,148,322** as of **February 28, 2025**, with expected recognition over one to three years[46](index=46&type=chunk) - Stock-based compensation is accounted for under **ASC 718**, with fair value estimated using the Black-Scholes model and recognized on a straight-line basis over the vesting period[67](index=67&type=chunk)[106](index=106&type=chunk) - The company adopted **ASC 842 (Leases)** effective **June 1, 2019**, recognizing right-of-use assets and lease liabilities for operating leases with terms greater than **12 months**[72](index=72&type=chunk) [Note 3 – Accounts Receivable, net](index=22&type=section&id=Note%203%20%E2%80%93%20Accounts%20Receivable,%20net) This note details the composition of net accounts receivable, including customer and merchant processor receivables and the allowance for credit losses | Component | Feb 28, 2025 | May 31, 2024 | | :-------------------------- | :----------- | :----------- | | Customers receivable | $776,313 | $524,730 | | Merchant processor receivable | $117,156 | $78,417 | | Less: Allowance for credit losses | $(92,079) | $(93,312) | | **Accounts receivables, net** | **$801,390** | **$509,835** | - **The provision for credit losses decreased significantly for both the three-month period ($3,880 vs. $79,068 YoY)** and the nine-month period (**$31,834 vs. $143,395 YoY**) ended February 28, 2025[79](index=79&type=chunk) [Note 4 – Inventory, net](index=22&type=section&id=Note%204%20%E2%80%93%20Inventory,%20net) This note details the composition of net inventory, including finished goods, raw materials, and the obsolescence reserve | Component | Feb 28, 2025 | May 31, 2024 | | :---------------- | :----------- | :----------- | | Finished Goods | $2,728,309 | $3,190,344 | | Raw Materials | $16,127 | $203,679 | | **Inventory** | **$2,744,436** | **$3,394,023** | | Inventory at third party locations | $322,012 | $58,242 | | Inventory in-transit | $127,750 | $15,738 | | Obsolescence reserve | $23,448 | $46,895 | - **The obsolescence reserve on slow-moving inventory decreased from $46,895 to $23,448**[80](index=80&type=chunk) [Note 5 – Property and Equipment](index=22&type=section&id=Note%205%20%E2%80%93%20Property%20and%20Equipment) This note details the company's property and equipment, including additions, categories, and accumulated depreciation | Category | Feb 28, 2025 | May 31, 2024 | | :-------------------------- | :----------- | :----------- | | Promotional display racks | $39,565 | $30,709 | | Furniture and Fixtures | $67,653 | $5,759 | | Computer Equipment | $18,558 | $22,130 | | Plant Equipment | $351,078 | $264,168 | | Office equipment | $8,838 | $8,838 | | Automobile | $24,347 | $24,347 | | Less: Accumulated Depreciation | $(135,004) | $(95,003) | | **Total Property, plant and equipment, net** | **$375,035** | **$260,948** | - **Depreciation expense for the three months ended February 28, 2025, was $18,703**, up from **$8,237** in the prior year. For the nine months, it was **$40,001**, up from **$25,508**[81](index=81&type=chunk) [Note 6 – Intangible Assets](index=23&type=section&id=Note%206%20%E2%80%93%20Intangible%20Assets) This note details the company's intangible assets, including licensing rights, customer relationships, trade names, and goodwill | Category | Feb 28, 2025 | May 31, 2024 | | :-------------------------- | :----------- | :----------- | | Licensing Rights | $22,080 | $34,024 | | Customer Relationships | $70,000 | $70,000 | | Trade Names | $275,000 | $275,000 | | Website | $100,000 | $100,000 | | Product Certification Testing | $101,690 | $- | | Less: Accumulated Amortization | $(210,977) | $(169,920) | | **Intangible assets, net** | **$357,793** | **$309,104** | | Goodwill | $2,152,215 | $2,152,215 | - **Amortization expense for the three months ended February 28, 2025, was $26,963**, up from **$19,375** in the prior year. For the nine months, it was **$53,000**, down from **$58,126**[83](index=83&type=chunk) [Note 7 – Other Current Liabilities](index=23&type=section&id=Note%207%20%E2%80%93%20Other%20Current%20Liabilities) This note details the composition of other current liabilities, including sales tax payable and accrued expenses | Component | Feb 28, 2025 | May 31, 2024 | | :-------------------- | :----------- | :----------- | | Credit Cards | $245 | $5,734 | | Royalty Payment Accrual | $- | $3,376 | | Sales Tax Payable | $197,536 | $231,283 | | Accrued expenses | $12,898 | $92,543 | | **Total other current liabilities** | **$210,679** | **$332,936** | [Note 8 – Notes Payable](index=23&type=section&id=Note%208%20%E2%80%93%20Notes%20Payable) This note details the company's outstanding notes payable, specifically the EIDL loan, its balance, interest rate, and repayment terms - **Outstanding balance of the EIDL loan was $140,958** as of **February 28, 2025**, down from **$146,594** as of May 31, 2024[86](index=86&type=chunk) - **Interest expense for the three months ended February 28, 2025, was $1,271**, and for the nine months, it was **$2,567**[85](index=85&type=chunk) [Note 9 – Stockholders' Equity](index=24&type=section&id=Note%209%20%E2%80%93%20Stockholders'%20Equity) This note details the company's authorized capital, preferred and common stock, and equity incentive plan, including stock option grants and restricted awards - **Authorized capital consists of 450,000,000 common shares and 300,000,000 preferred shares**, both with **$0.0001** par value[88](index=88&type=chunk) - **During the nine months ended February 28, 2025, 14,478,250 preferred shares were converted into 723,913 common shares**. As of **February 28, 2025, 27,773,500 Series A Preferred Stock shares were outstanding**[95](index=95&type=chunk) - **The 2022 Equity Incentive Plan was amended to increase authorized shares for issuance to 2,050,000**. **Stock options granted during the nine months ended February 28, 2025, totaled 634,000 shares**, **with a weighted average exercise price of $4.17**[100](index=100&type=chunk)[101](index=101&type=chunk)[113](index=113&type=chunk) - **Stock options expense for the nine months ended February 28, 2025, was $416,935**. **Restricted stock awards and expense totaled $443,582** for the same period, including grants to non-employee directors and a former officer/consultant[113](index=113&type=chunk)[118](index=118&type=chunk) [Note 10 – Commitments and Contingencies](index=30&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the company's lease commitments, operating lease costs, and management's assessment of legal contingencies - The company entered into two new lease agreements during the nine months ended February 28, 2025, for a warehouse and new corporate headquarters, with expiration dates in **September 2027** and **January 2029**[73](index=73&type=chunk)[123](index=123&type=chunk) | Lease Metric | Feb 28, 2025 | May 31, 2024 | | :-------------------------- | :----------- | :----------- | | Operating lease assets, net | $672,221 | $36,752 | | Total lease liability, net | $710,260 | $36,752 | | Current portion | $(227,418) | $(36,752) | | Non-current portion | $482,842 | $- | - **Operating lease costs for the three months ended February 28, 2025, were $66,108** (up from **$18,659** YoY), and for the nine months, they were **$133,847** (up from **$55,976** YoY)[124](index=124&type=chunk) - **During the nine months ended February 28, 2025, $218,699 previously due in relation to royalties was forgiven** and included in Sales and marketing expenses[127](index=127&type=chunk) - Management believes that the ultimate liability from legal proceedings is not expected to have a material adverse effect on results of operations, financial position, or cash flows[128](index=128&type=chunk) [Note 11 – Related Party Transactions](index=32&type=section&id=Note%2011%20%E2%80%93%20Related%20Party%20Transactions) This note details transactions with related parties, including consulting fees and advances involving entities associated with the CEO and CFO - **Intrepid Global Advisors (managed by the CEO) was paid approximately $178,000** in consulting fees for the nine months ended February 28, 2025[129](index=129&type=chunk) - **Amounts payable to Intrepid were $28,576** as of **February 28, 2025**, compared to **$11,798** as of May 31, 2024[129](index=129&type=chunk) - **BZ Capital Strategies (controlled by the CFO/COO) was paid $100,000** in consulting fees for the nine months ended February 28, 2025[129](index=129&type=chunk) [Note 12 – Concentrations](index=32&type=section&id=Note%2012%20%E2%80%93%20Concentrations) This note addresses concentrations of credit risk, revenue, geographic sales, accounts receivable, and key suppliers - **The company held approximately $3,993,470** in cash in excess of federally insured limits (**$250,000**) as of **February 28, 2025**[130](index=130&type=chunk) - **No single customer accounted for greater than 10%** of consolidated net sales for the three and nine months ended February 28, 2025[131](index=131&type=chunk) - **Approximately 92.8%** of consolidated net sales for the three months ended February 28, 2025, and **91.1%** for the nine months, were to U.S. customers[132](index=132&type=chunk)[133](index=133&type=chunk) - As of **February 28, 2025, two customers accounted for 38.9%** of accounts receivable[134](index=134&type=chunk) - **The two largest manufacturing vendors accounted for 68.3% and 26.2%** of all purchases for the three months ended February 28, 2025, and **65.1% and 26.5%** for the nine months[135](index=135&type=chunk) [Note 13 – Business Segment and Geographic Area Information](index=33&type=section&id=Note%2013%20%E2%80%93%20Business%20Segment%20and%20Geographic%20Area%20Information) This note provides financial information by business segment (hair/skin care, hearing protection) and geographic area, detailing sales and gross profit | Segment | 3 Months Ended Feb 28, 2025 | 3 Months Ended Feb 29, 2024 | 9 Months Ended Feb 28, 2025 | 9 Months Ended Feb 29, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Sales, net** | | | | | | Hair care and skin care | $472,302 | $476,864 | $1,308,356 | $1,022,458 | | Hearing enhancement and protection | $6,450,065 | $5,992,479 | $19,197,857 | $19,974,831 | | **Total net sales** | **$6,922,367** | **$6,469,343** | **$20,506,213** | **$20,997,289** | | **Segment gross profit** | | | | | | Hair care and skin care | $255,968 | $247,859 | $685,964 | $641,966 | | Hearing enhancement and protection | $4,710,460 | $4,376,467 | $13,932,159 | $14,887,865 | | **Total segment gross profit** | **$4,966,428** | **$4,624,326** | **$14,618,123** | **15,529,831** | | **Consolidated total assets** | **$12,950,947** | **$12,713,718** | **$12,950,947** | **$12,713,718** | - **The hearing enhancement and protection segment's sales increased by 7.6%** for the three months ended February 28, 2025, but decreased by **3.9%** for the nine months compared to the prior year[137](index=137&type=chunk) - **The hair care and skin care segment's sales slightly decreased by 1.0%** for the three months but increased by **28.0%** for the nine months ended February 28, 2025[137](index=137&type=chunk) [Note 14 – Income Taxes](index=34&type=section&id=Note%2014%20%E2%80%93%20Income%20Taxes) This note details the company's income tax expense or benefit and its exposure to IRS examination for prior tax returns | Period | Income Tax Expense (Benefit) | | :-------------------------- | :-------------------------- | | 3 Months Ended Feb 28, 2025 | $53,085 | | 3 Months Ended Feb 29, 2024 | $(827,436) | | 9 Months Ended Feb 28, 2025 | $120,335 | | 9 Months Ended Feb 29, 2024 | $(397,054) | - **The company has no uncertain tax positions** and its corporate income tax returns for **2021, 2022, 2023, and 2024** are subject to IRS examination[141](index=141&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's Discussion and Analysis provides an overview of AXIL Brands, Inc.'s business, strategic initiatives, and a detailed analysis of its financial performance for the three and nine months ended February 28, 2025. It covers net sales, gross profit, operating expenses, net income, and non-GAAP measures like EBITDA and Adjusted EBITDA, along with discussions on liquidity, cash flows, and critical accounting policies [Overview](index=35&type=section&id=Overview) This section provides an overview of AXIL Brands, Inc.'s business, strategic initiatives, and potential divestiture of its hair and skin care segment - **AXIL Brands, Inc. operates in two reportable segments**: high-tech hearing and audio enhancement/protection products and professional quality hair and skin care products[145](index=145&type=chunk)[146](index=146&type=chunk) - **The company's strategy focuses on expanding market share** through direct-to-consumer campaigns, optimizing e-commerce, building sales teams for distribution channels, strategic partnerships, and expanding offline retail presence and international markets[147](index=147&type=chunk) - **The company is exploring options for its hair care and skin care business**, including a potential divestiture, though there is no assurance of timely completion or benefits[148](index=148&type=chunk) [Business Update](index=35&type=section&id=Business%20Update) This section details AXIL's supply chain transition strategy, including domestic manufacturing and mitigation of tariff-related cost increases - In response to U.S. trade policy changes and tariffs, **AXIL has accelerated its supply chain transition strategy**, including relocating senior manufacturing leadership to the United States and establishing domestic manufacturing capabilities[149](index=149&type=chunk)[150](index=150&type=chunk) - **The company anticipates some near-term product cost increases due to tariffs** but expects to mitigate this through current inventory levels, supply chain optimization, pricing strategies, and sourcing adjustments, aiming for enhanced resilience and competitiveness long-term[151](index=151&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including net sales, gross profit, operating expenses, and net income for the specified periods [Three Months Ended February 28, 2025 Compared to February 29, 2024](index=37&type=section&id=For%20the%20Three%20Months%20Ended%20February%2028,%202025%20Compared%20to%20the%20Three%20Months%20Ended%20February%2029,%202024) For the three months ended February 28, 2025, net sales increased by 7.0% to $6.92 million, driven by direct-to-consumer sales and strengthened distribution channels. Gross profit rose by 7.4% to $4.97 million, with a stable gross margin of 71.7%. Operating expenses decreased by 7.3% due to lower advertising costs, leading to an income from operations of $0.58 million, a significant improvement from a loss in the prior year. Adjusted EBITDA increased substantially to $0.89 million | Metric | 3 Months Ended Feb 28, 2025 | 3 Months Ended Feb 29, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net sales | $6,922,367 | $6,469,343 | $453,024 | 7.0% | | Gross profit | $4,966,428 | $4,624,326 | $342,102 | 7.4% | | Gross profit as % of sales | 71.7% | 71.5% | 0.2% | - | | Total operating expenses | $4,383,319 | $4,728,205 | $(344,886) | (7.3%) | | Income (loss) from operations | $583,109 | $(103,879) | $686,988 | - | | Net income | $576,662 | $781,091 | $(204,429) | (26.2%) | | Adjusted EBITDA (Non-GAAP) | $890,546 | $(11,052) | $901,598 | - | | Adjusted EBITDA as % of Sales | 12.9% | (0.2%) | 13.1% | - | - The increase in sales was primarily due to a shift of post-Thanksgiving holidays into the third quarter of fiscal year **2025**, strengthened distribution channels for AXIL products, and increased distributor sales of hair and skin care products[155](index=155&type=chunk) - Operating expenses decreased due to lower advertising costs, reflecting a more targeted and efficient advertising approach, despite incurring approximately **$195,000** in consulting fees for new geographic market expansion (including **$116,000** in stock-based compensation)[158](index=158&type=chunk) [Nine Months Ended February 28, 2025 Compared to February 29, 2024](index=37&type=section&id=For%20the%20Nine%20Months%20Ended%20February%2028,%202025%20Compared%20to%20the%20Nine%20Months%20Ended%20February%2029,%202024) For the nine months ended February 28, 2025, net sales decreased by 2.3% to $20.51 million, mainly due to reduced advertising in earlier quarters. Gross profit declined by 5.9% to $14.62 million, with gross margin decreasing to 71.3% due to higher cost of sales from increased distributor sales. Operating expenses decreased by 4.9%, but income from operations decreased by 16.4% due to higher non-cash stock-based compensation. Adjusted EBITDA, however, increased by 23.8% to $2.08 million, benefiting from strong Q3 performance, accounts payable forgiveness, and reduced advertising | Metric | 9 Months Ended Feb 28, 2025 | 9 Months Ended Feb 29, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net sales | $20,506,213 | $20,997,289 | $(491,076) | (2.3%) | | Gross profit | $14,618,123 | $15,529,831 | $(911,708) | (5.9%) | | Gross profit as % of sales | 71.3% | 74.0% | (2.7%) | - | | Total operating expenses | $13,502,845 | $14,196,041 | $(693,196) | (4.9%) | | Income from operations | $1,115,278 | $1,333,790 | $(218,512) | (16.4%) | | Net income | $1,100,563 | $1,953,618 | $(853,055) | (43.7%) | | Adjusted EBITDA (Non-GAAP) | $2,076,821 | $1,677,058 | $399,763 | 23.8% | | Adjusted EBITDA as % of Sales | 10.1% | 8.0% | 2.1% | - | - **The decrease in net sales was primarily due to reduced advertising expenditure** affecting direct-to-consumer sales in the first and second quarters, partially offset by strong third-quarter performance[162](index=162&type=chunk) - Gross profit margin decreased due to an increase in cost of sales as a percentage of revenue, attributable to increased sales to distributors in both segments, which bear lower margins[163](index=163&type=chunk)[164](index=164&type=chunk) - Operating expenses decreased due to a net decrease in advertising expenses and a **$220,000** forgiveness of accounts payable, partially offset by a **$699,203** increase in stock-based compensation and higher professional and consulting fees[165](index=165&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its financial obligations, its capital needs, and strategies for revenue growth - **The company expects current cash balances and anticipated cash flow from operating activities to be sufficient** to meet working capital requirements for at least one year from the issuance date of the financial statements[169](index=169&type=chunk) - **Management is focused on growing existing product lines**, introducing new products, and expanding the customer base to increase revenues[169](index=169&type=chunk) - **The company may require additional capital in the future** through equity or debt financing, which may not be available on favorable terms, and failure to secure such financing could materially affect growth strategy and financial performance[174](index=174&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities, highlighting significant changes and drivers - **Net cash provided by operating activities significantly improved to $1,734,230** for the nine months ended February 28, 2025, from **$339,323** in the prior year, driven by inventory management and accounts payable forgiveness[170](index=170&type=chunk) - **Net cash used in investing activities increased to $255,778** (from **$80,192** in prior year) due to purchases of intangibles and property and equipment[171](index=171&type=chunk) - **Net cash provided by financing activities was $11,142** (compared to **$204,246** used in prior year), primarily from related party advances partially offset by note payable repayments[172](index=172&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms that the company did not have any material off-balance sheet arrangements as of February 28, 2025 - **As of February 28, 2025, the company did not have any material off-balance sheet arrangements**[175](index=175&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) This section outlines the company's critical accounting policies, emphasizing the use of significant estimates and assumptions in financial reporting - **Critical accounting policies involve significant estimates and assumptions**, including revenue recognition, impairment of intangible and long-lived assets, inventory valuation, stock compensation, and evaluation of contingencies[177](index=177&type=chunk) - **Actual results could materially differ from these estimates** if future events or circumstances lead to unanticipated consequences[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, AXIL Brands, Inc. is exempt from providing specific quantitative and qualitative disclosures about market risk - **The company is not required to provide quantitative and qualitative disclosures about market risk** as it qualifies as a smaller reporting company[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that its disclosure controls and procedures were effective as of February 28, 2025. There have been no material changes in internal control over financial reporting during the fiscal quarter - **The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of February 28, 2025**[180](index=180&type=chunk) - **No changes in internal control over financial reporting occurred during the fiscal quarter ended February 28, 2025**, that have materially affected or are reasonably likely to materially affect internal control over financial reporting[181](index=181&type=chunk) [PART II - OTHER INFORMATION](index=42&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits and legal proceedings in the ordinary course of business. While the outcome cannot be predicted with certainty, management believes the ultimate liability will not have a material adverse effect on its financial condition or results of operations - **The company is involved in various lawsuits and legal proceedings that arise in the ordinary course of business**[184](index=184&type=chunk) - **Management records a liability when a loss is probable and estimable**, and believes that the ultimate liability from these matters is not expected to have a material adverse effect on the company's results of operations, financial position, or cash flows[185](index=185&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, AXIL Brands, Inc. is not required to provide specific risk factor disclosures - **The company is not required to provide risk factor information** as it qualifies as a smaller reporting company[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the conversion of Series A Preferred Stock into common stock, exempt from registration under Section 4(a)(2) of the Securities Act - **During the third quarter of fiscal year 2025, 3,360,000 shares of Series A Preferred Stock were converted into 168,000 shares of common stock**[187](index=187&type=chunk) - **The issuance of these securities was deemed exempt from registration pursuant to Section 4(a)(2) of the Securities Act**[187](index=187&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - **There were no defaults upon senior securities during the reporting period**[188](index=188&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - **Mine Safety Disclosures are not applicable to the company**[189](index=189&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) During the quarter ended February 28, 2025, no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - **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 February 28, 2025**[190](index=190&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate organizational documents, the Amended and Restated 2022 Equity Incentive Plan, various certifications (CEO, CFO), and XBRL financial statements - **Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Amended and Restated 2022 Equity Incentive Plan, Form of Restricted Stock Award Agreement, CEO and CFO certifications (Sarbanes-Oxley Act), and iXBRL formatted financial statements**[191](index=191&type=chunk) [Signatures](index=44&type=section&id=Signatures) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report's accuracy - **The report is duly signed on April 8, 2025**, by **Jeff Toghraie, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)**, and **Jeff Brown, Chief Financial Officer, Chief Operating Officer and Director (Principal Financial Officer and Principal Accounting Officer)**[194](index=194&type=chunk)[196](index=196&type=chunk)

Core Insights - AXIL Brands, Inc. reported strong financial and operational results for the third quarter ended February 28, 2025, highlighting a successful execution of its multi-channel growth strategy [3][4] - The company achieved a positive Adjusted EBITDA of $0.9 million, a significant improvement from a loss in the prior-year period, indicating a meaningful inflection point in operational performance [4][6] - AXIL is proactively addressing risks associated with evolving U.S. trade policy by accelerating its supply chain transition strategy and enhancing domestic manufacturing capabilities [4] Financial Performance - Revenue for 3Q25 was $6.9 million, compared to $6.5 million in the prior year period, reflecting a year-over-year increase [6] - Gross profit margin improved slightly to 71.7% in 3Q25 from 71.5% in the prior year period [6] - Operating expenses as a percentage of sales decreased significantly to 63.3% in 3Q25 from 73.1% in the prior year period [6] - Net income for 3Q25 was $0.6 million, down from $0.8 million in the prior year period [6] - Adjusted EBITDA for 3Q25 was $0.9 million, compared to an Adjusted EBITDA loss of $11 thousand in the prior year period [6][8] Cash Flow and Balance Sheet - Net cash provided by operating activities for the nine months ended February 28, 2025, was $1.7 million, up from $0.3 million for the same period in the prior year [6][12] - Cash as of February 28, 2025, was $4.7 million, an increase from $3.3 million as of May 31, 2024 [6][9] - Total assets increased to $12.95 million as of February 28, 2025, compared to $10.97 million as of May 31, 2024 [9][10] Operational Strategy - The company is focusing on expanding into new geographic markets and deepening retail distribution to drive growth [3][4] - AXIL is taking decisive actions to enhance long-term resilience and control over its cost structure in response to new tariffs [4]

Core Insights - AXIL Brands, Inc. is focusing on expanding its offline retail presence and entering international markets as part of an 18-month marketing initiative [1][2] - The company aims to raise awareness about hearing loss, which affects over 1.5 billion people globally, while promoting its innovative hearing solutions [2] - By the end of 2026, AXIL targets a balanced revenue mix of 30% from retail, 30% from online sales, and 30% from international markets [2] Group 1 - AXIL is recognized for pioneering the in-ear hearing protection category and is leveraging its industry leadership to reach new customers worldwide [1][3] - The company is expanding partnerships with major retailers and distributors in the U.S. to enhance its offline presence [3] - AXIL has secured strategic distribution agreements in major hubs across the European Union and is negotiating in Asia-Pacific markets [3] Group 2 - The initiatives aim to make AXIL's products accessible to a broader audience, addressing both recreational and occupational hearing protection needs [3] - The company is exploring options for its legacy hair care and skin care subsidiary to maintain focus on its core business while maximizing shareholder value [4] - AXIL Brands manufactures and markets premium hearing enhancement and protection products, including ear plugs, earmuffs, and earbuds, under the AXIL brand [5]