AXIL Brands(AXIL) - 2024 Q3 - Quarterly Report

Financial Performance - Net sales for the three months ended February 29, 2024, were $6.47 million, a 14.4% increase from $5.66 million in the same period last year[18]. - Net income for the nine months ended February 29, 2024, was $1.95 million, a significant increase from $1.06 million for the same period in 2023, reflecting an 83.3% growth[18]. - Net income for the three months ended February 29, 2024, was $781,091, compared to $162,048 for the same period in 2023, representing a year-over-year increase of approximately 382%[73]. - For the nine months ended February 29, 2024, net sales increased by $4,371,471 or 26.3% to $20,997,289 compared to $16,625,818 for the same period in 2023, driven by increased marketing spend and stronger sales channels[162]. - Gross profit for the nine months ended February 29, 2024 was $15,529,831, up from $12,540,173 in the prior year, reflecting a significant increase in sales[161]. Assets and Liabilities - Total assets increased to $12.71 million as of February 29, 2024, up from $10.17 million on May 31, 2023, representing a growth of 25.1%[15]. - Total stockholders' equity rose to $8.79 million as of February 29, 2024, compared to $6.67 million on May 31, 2023, marking a 31.7% increase[16]. - Total liabilities increased to $3.93 million as of February 29, 2024, from $3.50 million on May 31, 2023, an increase of 12.4%[16]. - As of February 29, 2024, the company reported an accumulated deficit of $1,513,374, highlighting ongoing financial challenges despite recent profitability[31]. Cash Flow and Operating Activities - Cash provided by operating activities decreased significantly to $339,323 from $2,319,976 year-over-year, indicating a decline of about 85.3%[25]. - Cash and cash equivalents at the end of the period increased to $4,887,567 from $4,180,332, reflecting a net increase of $54,885[25]. - The company expects to generate sufficient cash flow from operations to meet its working capital requirements for at least one year from the date of the financial statements[31]. Expenses - Operating expenses for the three months ended February 29, 2024, were $4.73 million, up from $4.00 million in the same period last year, indicating an 18.2% increase[18]. - Operating expenses increased by $3,056,852 or 27.4%, totaling $14,196,041 for the nine months ended February 29, 2024, with operating expenses as a percentage of net sales at 67.6% compared to 67.0% in the prior year[165]. - Depreciation and amortization expenses increased to $83,634 from $66,944, reflecting a rise of approximately 25%[25]. Inventory and Receivables - Accounts receivable increased to $719,504 as of February 29, 2024, from $417,016 on May 31, 2023, representing a 72.5% rise[15]. - Inventory levels rose to $3.44 million as of February 29, 2024, compared to $1.31 million on May 31, 2023, reflecting a 162.5% increase[15]. - Inventory net as of February 29, 2024, was $3,443,293, representing a significant increase of 162.3% from $1,311,864 on May 31, 2023[80]. Stock and Equity - The company completed a reverse stock split at a ratio of 1-for-20 effective January 16, 2024, aimed at improving its stock price and market perception[29]. - The Company issued 250,000,000 shares of non-voting Series A Preferred Stock valued at $3,100,000 during the fiscal year ended May 31, 2023[91]. - As of February 29, 2024, 5,878,939 shares of common stock were issued and outstanding[95]. Legal and Compliance - The company settled a legal dispute with Jacksonfill, LLC for $125,000, resulting in a gain on settlement of $79,182 recorded in fiscal year 2024 other income[120]. - The company does not expect ongoing legal proceedings to have a material adverse effect on its financial condition or cash flows[194]. - The internal control over financial reporting was also assessed as ineffective as of February 29, 2024, based on established criteria[190]. Business Operations and Strategy - The acquisition of Axil & Associated Brands in June 2022 is anticipated to continue generating cash for operational needs, including debt payments[32]. - The company is utilizing Axil & Associated Brands' assets to expand into the hearing enhancement business through a newly incorporated subsidiary[128]. - Direct-to-consumer sales accounted for 88.4% of AXIL's sales during the three months ended February 29, 2024[137].