Axil Brands Inc
For the period ended Aug 31, 2024. Filed Oct 10, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 31, 2024 · Filed Oct 10, 2024
AXIL$5.16-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-02-29; filed 2024-04-09.
0001520138-24-000162
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-08-31; filed 2024-10-10.
0001520138-24-000344
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 47 previous paragraphs and 36 current paragraphs.
18 unchanged; 16 reworded; 2 added; 10 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
For the three months ended August 31, 2024 no provision for income taxes was recorded since the Company incurred a net loss. For the three months ended August 31, 2023, provision for income tax expense was $65,989.
Current report
Net cash provided by operating activities for the three months ended August 31, 2023 was $397,172, attributable to a net income of $154,452, items of adjustments to depreciation and amortization, bad debts and stock-based compensation that totaled $132,210. There were favorable changes in accounts payable and accrued expenses of $168,399, contract and current liabilities of $476,200, and prepaid expense and other current assets of $315,751. The favorable changes were partially offset by a net decrease in operating assets and liabilities of $849,840 primarily due to increases in accounts receivable and inventory.
Removed paragraphs (10)
Previous report
As part of the Company’s ongoing rebranding efforts, the Company changed its name from Reviv3 Procare Company to AXIL Brands, Inc. effective February 14, 2024. On February 14, 2024, the Company successfully completed efforts to uplist (the “Uplist Transaction”) from the over-the-counter, or OTC, markets to the NYSE American exchange (“NYSE American”).
Previous report
On May 1, 2022, we entered into an Asset Purchase Agreement dated May 1, 2022 and amended on June 15, 2022 and September 8, 2022 with AXIL & Associated Brands, a leader in hearing protection and enhancement products, for the acquisition of both the hearing protection business of AXIL & Associated Brands consisting of ear plugs and ear muffs, and AXIL & Associated Brands’ ear bud business. These businesses constituted substantially all of the business operations of AXIL & Associated Brands. The acquisition was completed subsequently on June 16, 2022. On September 8, 2022, the Company and AXIL & Associated Brands entered into an amendment to the Asset Purchase Agreement which eliminated the provision in the Asset Purchase Agreement requiring the Company to effectuate a reverse stock split of our common stock and preferred stock pursuant to the Asset Purchase Agreement within a certain period of time.
Previous report
Effective as of January 16, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Articles of Incorporation with the Delaware Secretary of State to implement the reverse stock split of the Company’s issued shares of common stock at a ratio of 1-for-20 approved by the Board of Directors. The reverse stock split did not affect the total number of shares of common stock that the Company is authorized to issue and any fractional shares remaining after the Reverse Stock Split were rounded up to the nearest whole share. The accompanying financial statements and notes to the financial statements give retroactive effect to the Reverse Stock Split for all periods presented, unless otherwise specified.
Previous report
For the Nine Months Ended February 29, 2024 Compared to the Nine Months Ended February 28, 2023
Previous report
Net sales for the nine months ended February 29, 2024 and February 28, 2023 were $20,997,289 and $16,625,818, respectively. Net sales for the nine months ended February 29, 2024 increased by $4,371,471 or 26.3%, as compared to the nine months ended February 28, 2023. The increase was driven primarily by an increase in marketing campaign spend and strength in our sales channels for the Company’s products.
Previous report
Income from operations for the nine months ended February 29, 2024 and February 28, 2023 was $1,333,790 and $1,400,984, respectively. The decrease in income from operations for the nine months ended February 29, 2024, of $67,194 or 4.8% compared to the nine months ended February 28, 2023, was primarily driven by the increase in professional and compliance expenses due to the Uplist Transaction and an increase in sales of lower margin products.
Previous report
For the nine months ended February 29, 2024 the provision for income taxes amounted to a benefit of $397,054, that was related to the reversal of fiscal year ended May 31, 2023 income tax liability due to filing of the federal and state tax returns, as well as additional net operating losses which can offset current year income tax liability. In addition, there are remaining net operating losses that created a deferred tax asset which management believes are fully realizable. Provision for income tax expense was $395,344 for the nine months ended February 28, 2023.
Previous report
As a result of the above, we reported a net income of $1,953,618 and $1,064,475, for the nine months ended February 29, 2024 and February 28, 2023, respectively, an increase of $889,143.
Previous report
For the three months ended February 29, 2024 provision for income taxes amounted to a benefit of $827,436 that was related to the reversal of fiscal year ended May 31, 2023 income tax liability due to filing of the federal and state tax returns, as well as additional net operating losses which can offset current year income tax liability. In addition, there are remaining net operating losses that created a deferred tax asset which management believes are fully realizable. For the three months ended February 28, 2023, provision for income tax expense was $59,547.
Previous report
Net cash flows provided by operating activities for the nine months ended February 28, 2023 was $2,319,976, attributable to net income of $1,064,475, depreciation and amortization of $66,944, provision for bad debts of $13,782, stock based compensation expense of $155,067, gain on settlement of debt of $50,500, and net change in operating assets and liabilities of $1,070,209 primarily due to an increase in accounts receivables, increase in prepaid expenses, increase in security deposit offset by a decrease of inventory, an increase in accounts payable, increase in other current liabilities and increase in contract liabilities.
Reworded paragraphs (16)
Previous wording
As a result of the acquisition of AXIL & Associated Brands’ assets, the Company has two reportable segments: hair care and skin care, and hearing enhancement and protection.
Current wording
The Company has two reportable segments: hair care and skin care, and hearing enhancement and protection.
Previous wording
The Company’s overall business strategy is to establish market awareness of our products through our direct-to-consumer campaigns. We believe the increase in awareness will allow the Company to increase distribution and gain customers through our distribution partners’ retail establishments, with the goal of helping us achieve growth in market share and diversify our sales channels.
Current wording
The Company’s overall business strategy is to establish market awareness of our products through our direct-to-consumer campaigns. The Company's strategy centers on driving growth by expanding market share within existing channels and developing new ones through both online and traditional platforms. The Company’s primary focus is optimizing its e-commerce strategies, building sales teams to meet the needs of distribution channels, and enhancing value through strategic partnerships. We believe the increase in awareness will allow the Company to increase distribution and gain customers through our distribution partners’ retail establishments, with the goal of helping us achieve growth in market share and diversify our sales channels.
Previous wording
Net sales for the three months ended February 29, 2024 and February 28, 2023 were $6,469,343 and $5,656,461, respectively. Net sales for the three months ended February 29, 2024 increased by $812,882 or 14.4%, as compared to the three months ended February 28, 2023, due to the increase in marketing campaign spend and strength in our sales channels for AXIL products.
Current wording
Net sales for the three months ended August 31, 2024 and 2023 were $5,851,272 and $6,106,269 respectively. Net sales for the three months ended August 31, 2024 decreased by $254,997 or 4%, as compared to the three months ended August 31, 2023, due to the decrease in marketing campaign spend and strength in our distribution channels for AXIL products.
Previous wording
For the three months ended February 29, 2024, the overall cost of sales increased by $407,041 or 28.3%, as compared to the three months ended February 28, 2023, which was also primarily due to the relative increase in sales of the Company’s products. Cost of sales as a percentage of net revenues for the three months ended February 29, 2024 was 28.5% as compared to 25.4% for the comparable period in 2023. The marginal increase in cost of sales, as a percentage of sales, was primarily attributable to an increase in transportation costs. The Company will continue to work to increase efficiencies in procurement and logistics.
Current wording
For the three months ended August 31, 2024, the overall cost of sales increased by $238,921 or 16%, as compared to the three months ended August 31, 2023, which was primarily due to the relative increase in sales of the Company’s hair and skin care products. Cost of sales as a percentage of net revenues for the three months ended August 31, 2024 was 29.0% as compared to 23.9% for the comparable period in 2023. The marginal increase in cost of sales, as a percentage of sales, was primarily attributable to an increase in transportation costs. The Company will continue to work to increase efficiencies in procurement and logistics.
Previous wording
Gross profit for the three months ended February 29, 2024 and 2023 was $4,624,326 and $4,218,485, respectively. Gross profit as a percentage of sales for the three months ended February 29, 2024, was 71.5% as compared to 74.6% for the comparable period in 2023. The decrease in the gross profit margin for the nine months ended February 29, 2024 was primarily attributable to an increase in sales of lower margin products in both our segments, partially offset by a decrease in discounts in our sales of AXIL products.
Current wording
Gross profit for the three months ended August 31, 2024 and 2023 was $4,153,648 and $4,647,566, respectively. Gross profit as a percentage of sales for the three months ended August 31, 2024, was 71% as compared to 76.1% for the comparable period in 2023. The decrease in the gross profit margin for the three months ended August 31, 2024 was primarily attributable to an increase in sales of lower margin products in our segments, partially offset by a decrease in discounts in our sales of AXIL products.
Previous wording
Operating expenses consisted of marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses increased by $726,308 or 18.1% from $4,001,897 in the three months ended February 28, 2023 to $4,728,205 in the three months ended February 29, 2024. Operating expenses as a percentage of net revenues for the three months ended February 29, 2024, were 73.1% compared to 70.7% for the three months ended February 29, 2024. The increase in operating expenses related primarily to a net increase in advertising and marketing expenses of $225,566 for expansion of current marketing campaigns and costs attributable to new product awareness, and a net increase of $336,235 for professional and consulting expenses and to enhance existing business processes. General and administrative costs increased by $296,440 primarily due to an increase in public related costs associated with our Uplist Transaction. This increase was partially offset by the optimization of our workforce resulting in an overall reduction of $131,933 for compensation and related taxes for the three months ended February 29, 2024 as compared to three months ended February 28, 2023.
Current wording
Operating expenses consisted of marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses decreased by $179,459 or 4% from $4,473,809 in the three months ended August 31, 2023 to $4,294,350 in the three months ended August 31, 2024. Operating expenses as a percentage of net revenues for the three months ended August 31, 2024, were 73.4% compared to 73.3% for the three months ended August 31, 2023. The decrease in operating expenses related primarily to a net decrease in advertising and marketing expenses of $537,370 relating to prior expansion of current marketing campaigns and costs attributable to new product awareness, and partially offset by a net increase of $521,074 for professional and consulting expenses which included costs to enhance existing business processes. General and administrative costs decreased by $73,822 primarily due to a decrease in costs associated with our listing on NYSE American in February 2024. This decrease was augmented by the optimization of our workforce resulting in an overall reduction of $89,341 for compensation and related taxes for the three months ended August 31, 2024 as compared to three months ended August 31, 2023.
Previous wording
Loss from operations for the three months ended February 29, 2024 was $103,879 compared to income of $216,588 for the three months ended February 28, 2023. The decrease in income from operations of $320,467 or (148.03%) was primarily related to the increase in operating costs related to our Uplist Transaction and expanded marketing campaign as well as the increased sales of lower margin products partially offset by a decrease in discounts.
Current wording
Loss from operations for the three months ended August 31, 2024 was $140,702 compared to income of $173,757 for the three months ended August 31, 2023. The decrease in income from operations of $314,459 or (181%) was primarily related to the increase in professional and consulting fee related to our non-cash stock based compensation and expanded marketing campaign as well as the decrease in sales.
Previous wording
As a result of the above, we reported a net income of $781,091 and $162,048 for the three months ended February 29, 2024 and three months ended February 28, 2023, respectively, an increase of $619,043 or 382.0%.
Current wording
As a result of the above, we reported a net loss of $109,805 and a net income of $154,452 for the three months ended August 31, 2024 and three months ended August 31, 2023, respectively.
Previous wording
We are currently engaged in product sales and development. Although we earned a net income in the nine months ended February 29, 2024, we have incurred operating losses in the past. We currently expect to earn net income during the current fiscal year ending May 31, 2024. We believe our current cash balances, coupled with anticipated cash flow from operating activities, will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. We intend to continue to control our cash expenses as a percentage of expected revenue on an annual basis and thus may use our cash balances in the short-term to invest in revenue growth. As a result of the acquisition of AXIL & Associated Brands’ assets, we have generated and expect we will continue to generate sufficient cash for our operational needs, including any required debt payments, for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. Management is focused on growing the Company’s existing product lines, introducing new products, as well as expanding its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands, including those resulting from the purchase of AXIL & Associated Brands’ assets in June 2022, may lead to cash utilization at levels greater than recently experienced. The Company cannot provide any assurance that it will be able to raise additional capital or obtain necessary financing on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements.
Current wording
We are currently engaged in product sales and development. Although we incurred a net loss in the three months ended August 31, 2024, we recognized operating income in the past fiscal year. We currently expect to earn net income during the current fiscal year ending May 31, 2025. We believe our current cash balances, coupled with anticipated cash flow from operating activities, will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. We intend to continue to control our cash expenses as a percentage of expected revenue on an annual basis and thus may use our cash balances in the short-term to invest in revenue growth. As a result of the acquisition of AXIL & Associated Brands’ assets in June 2022, we have generated and expect we will continue to generate sufficient cash for our operational needs, including any required debt payments, for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements. Management is focused on growing the Company’s existing product lines and introducing new products, as well as expanding its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. The Company cannot provide any assurance that it will be able to raise additional capital or obtain necessary financing on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying unaudited consolidated financial statements.
Previous wording
Net cash provided by operating activities for the nine months ended February 29, 2024 was $339,323, attributable to a net income of $1,953,618, items of adjustments to depreciation and amortization, bad debts, gain on settlement, benefit for deferred income taxes and stock based compensation that total $87,894. There were favorable changes in accounts payable and accrued expenses of $1,061,420 and prepaid expenses and other current assets of $145,032 offset primarily by an increase of inventory of $2,131,429.
Current wording
Net cash provided by operating activities for the three months ended August 31, 2024 was $897,318, attributable to a net loss of $109,805 offset by adjustments for depreciation and amortization, bad debts and stock-based compensation that totaled $329,544. There were favorable changes in accounts payable and accrued expenses of $405,511 and prepaid expenses and other current assets of $486,958 and a change in inventory of $120,603. The increase was partially offset by an increase in accounts receivables of $108,100 and a decrease in contract liabilities and other current liabilities of $227,393.
Previous wording
Net cash flows used in investing activities for the nine months ended February 29, 2024 was $80,192 due to the purchase of property and equipment for the Company’s business. For the nine months ended February 28, 2023, net cash flows provided were $1,000,764, attributable to the cash received from acquisition of the AXIL & Associated Brands business and partially offset by the purchase of property and equipment of $65,650 during the same period.
Current wording
Net cash flows used in investing activities for the three months ended August 31, 2024 was $41,840 due to the purchase of intangibles for the Company’s business. For the three months ended August 31, 2023, net cash flows used were $50,960, attributable to the cash used in the purchase of property and equipment.
Previous wording
Net cash flows used in financing activities for the nine months ended February 29, 2024 was $204,246, and were for repayment of equipment financing and note payable, and a prepayment made to a related party. Net cash flows provided by financing activities for the nine months ended February 28, 2023, amounted to $485,861, primarily resulting from the Company’s capital raise of $447,850 pursuant to a private placement of shares of common stock, including receipt of $63,008 in related party loans, and repayment of loans that totaled $24,997.
Current wording
Net cash flows provided by financing activities for the three months ended August 31, 2024 was $39,370, and were from advances made from a related party of $41,707 partially offset by a repayment of the note payable of $2,337. Net cash flows used in financing activities for the three months ended August 31, 2023 were $117,171, and were for repayment of equipment financing and note payable of $18,079, and a decrease in the amount due from a related party of $99,092.
Previous wording
During the nine months ended February 29, 2024, the Company has various financed items and has debt outstanding in order to run the Company’s business operations.
Current wording
During the three months ended August 31, 2024, the Company has various financed items and has debt outstanding in order to run the Company’s business operations.
Previous wording
As of February 29, 2024, we had a secured Economic Injury Disaster Loan outstanding, administered pursuant to the CARES Act in the principal amount of $147,150, with a maturity date of May 18, 2050. The Company continues to pay interest on the loan.
Current wording
As of August 31, 2024, we had a secured Economic Injury Disaster Loan outstanding, administered pursuant to the CARES Act in the principal amount of $144,257, with a maturity date of May 18, 2050. The Company continues to pay interest and principal on the loan.
Previous wording
We are dependent on our product sales to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock or of debt securities or entering into credit agreements or other borrowing arrangements with institutions or private individuals, to maintain operations, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. In addition, pursuant to a voting agreement, effective June 16, 2022, with AXIL & Associated Brands and Intrepid Global Advisors, Inc., we are subject to certain limitations on our ability to sell our capital stock until June 2024. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. We do not have any plans to seek additional financing at this time and anticipate that our existing cash equivalents and cash provided by operations will be sufficient to meet our working capital requirements. However, if the need arises for additional cash, there can be no assurance that we will be able to raise the capital we need for our operations on favorable terms, or at all. We may not be able to obtain additional capital or generate sufficient revenues to fund our operations. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
Current wording
We are dependent on our product sales to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock or of debt securities or entering into credit agreements or other borrowing arrangements with institutions or private individuals, to maintain operations, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. We do not have any plans to seek additional financing at this time and anticipate that our existing cash equivalents and cash provided by operations will be sufficient to meet our working capital requirements. However, if the need arises for additional cash, there can be no assurance that we will be able to raise the capital we need for our operations on favorable terms, or at all. We may not be able to obtain additional capital or generate sufficient revenues to fund our operations. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to cease operations. If we fail to raise funds, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.
Previous wording
See the footnotes to our unaudited consolidated financial statements for the three and nine months ended February 29, 2024, included with this Quarterly Report on Form 10-Q for additional discussion of our critical accounting policies and use of estimates.
Current wording
See the footnotes to our unaudited consolidated financial statements for the three months ended August 31, 2024, included with this Quarterly Report on Form 10-Q for additional discussion of our critical accounting policies and use of estimates.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Cost of sales primarily includes the cost of products and freight-in costs. For the nine months ended February 29, 2024, the overall cost of sales increased by $1,381,813 or 33.8%, as compared to the comparable period ended February 28, 2023, which was primarily due to the relative increase in sales of Company products. Cost of sales as a percentage of net revenues for the nine months ended February 29, 2024 was 26.0% as compared to 24.6% for the comparable period in 2023. The marginal increase in cost of sales, as a percentage of sales, was primarily attributable to higher transportation costs and lower margin product sales. The Company will continue to work to increase efficiencies in procurement and logistics, as well as focus on enhanced production capabilities.
Previous report — wording carried elsewhere
Gross profit for the nine months ended February 29, 2024 and February 28, 2023 was $15,529,831 and $12,540,173, respectively. Gross profit as a percentage of sales for the nine months ended February 29, 2024, was 74.0% as compared to 75.4% for the same comparable period in 2023. The decrease in the gross profit margin for the nine months ended February 29, 2024 was primarily attributable to an increase in sales of lower margin products in both our segments, partially offset by a decrease in discounts in our sales of AXIL products.
Previous report — wording carried elsewhere
Operating expenses consisted of marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses increased by $3,056,852 or 27.4% from $11,139,189 for the nine months ended February 28, 2023 to $14,196,041 for the nine months ended February 29, 2024. Operating expenses as a percentage of net sales for the nine months ended February 29, 2024 were 67.6% compared to 67.0% for the comparable period in 2023. Operating expenses increased primarily due to a net increase in advertising and marketing expenses by $2,028,313 for expansion of current marketing campaigns and costs attributable to new product awareness, and a net increase of $891,181 for business general and administrative costs. The increase in general and administrative costs was primarily attributed to the increase in public related costs associated with our Uplist Transaction. Additionally, there was an increase of $638,067 for professional and consulting expenses to enhance existing business processes. This increase was partially offset by the optimization of our workforce resulting in an overall reduction of $500,709 for compensation and related taxes for the nine months ended February 29, 2024 as compared to the comparable period in 2023.