Axil Brands, Inc.

Note 1 –Organization

AXIL Brands, Inc. (together with its subsidiaries, the “Company,” “we,” “us” or “our”) is a Delaware corporation headquartered at 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212. The Company is engaged in the manufacturing, marketing, sale and distribution of high-tech hearing and audio enhancement and protection products, professional quality hair and skin care products, and the delivery of marketing services. These offerings are sold or provided throughout the United States, Canada, Europe and Asia.

The Company changed its name from Reviv3 Procare Company to AXIL Brands, Inc. effective February 14, 2024 and concurrently uplisted to the NYSE American stock exchange. The Company operates through its subsidiaries, including AXIL Distribution Company (formerly Reviv3 Acquisition Corporation) and Sharper Vision Marketing Inc., which was incorporated on May 5, 2025.

In February 2026, the Company formed Reviv3 ProCare Company, a wholly owned Delaware subsidiary, to support the potential separation and strategic development of its Reviv3 hair and skin care business. As of February 28, 2026 no assets or operations have been transferred to the subsidiary.

Note 2 –Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of February 28, 2026 and February 28, 2025, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2025, filed on August 21, 2025. The results of operations for the three and nine months ended February 28, 2026, are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2026. The unaudited consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

Use of estimates

The preparation of the unaudited consolidated financial statements in conformity with accounting principles generally accepted (“GAAP”) in the United States (“U.S.”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Estimates made by management include, but are not limited to, the allowance for credit losses, inventory valuations and classifications, the useful life of property and equipment, the valuation of deferred tax assets, the value of stock-based compensation, contract liability, allowance on sales returns, valuation of lease liabilities and related right of use assets and the fair value of non-cash common stock issuances.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on previously reported consolidated assets, stockholder’s equity, net income or net cash flows.

The Company made the following reclassifications:

Cash and cash equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation. (See Note 12 - Concentrations).

Accounts receivable and allowance for credit losses

Accounts receivables are comprised of receivables from customers and receivables from merchant processors. The Company has a policy of providing an allowance for credit losses based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to provision for credit losses and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist primarily of cash prepayments to vendors for inventory, operational and corporate expenditure, and prepayments for trade shows and marketing events which will be utilized within a year, and prepayments on credit cards and other current assets relating to the right to recover assets (for the cost of goods sold) associated with the right of returns for products sold. Prepayments to vendors for inventory were $539,797 and $643,131 as of February 28, 2026 and May 31, 2025, respectively.

Inventory

The Company values inventory, consisting of finished goods and raw materials, at the lower of cost and net realizable value. Cost is determined using an average cost method. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its net realizable value. The Company evaluates its current level of inventory considering historical sales and other factors and based on this evaluation, classifies inventory markdowns in the statement of operations as a component of cost of goods sold. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. The Company continuously evaluates the levels of inventory held and any inventory held above the expected level of sales in the next twelve months is classified as non-current inventory.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed, and any resulting gains or losses are included in the statement of operations.

Product warranty

The Company provides a standard limited warranty, on its hearing enhancement and hearing protection products. This warranty is considered an assurance-type warranty and is not accounted for as a separate performance obligation. The Company records the costs of repairs and replacements related to these warranties as incurred within cost of sales. Based on historical experience, warranty claims have not been material, and accordingly, no warranty liability has been recorded as of February 28, 2026 and May 31, 2025.

The Company also offers a two-year or three-year limited warranty on its hearing enhancement and hearing protection products, which are sold separately. These extended warranties are considered distinct performance obligations, and the associated revenue is deferred and recognized on a straight-line basis over the warranty period.

Revenue recognition

The Company follows Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.” This revenue recognition standard has a five-step process: a) Determine whether a contract exists; b) Identify the performance obligations; c) Determine the transaction price; d) Allocate the transaction price; and e) Recognize revenue when (or as) performance obligations are satisfied.

The Company generates revenue from the sale of electronic hearing and enhancement products, hair and skin care products, marketing services, and extended warranties. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring goods or services to customers. Product revenue is recognized at a point in time when a purchase order is received from the customer and subsequently the product is shipped to the customer, which satisfies the performance obligation. Revenue from marketing services and extended warranties is recognized over time as the related services are performed. Consideration paid to customers to promote and sell the Company’s products is recorded as a reduction of revenue.

The five steps for revenue recognition are as follows:

*Identify the contract with a customer.*The Company generally considers completion of a sales order (which requires customer acceptance of the Company’s click-through terms and conditions for website sales and authorization of payment through credit card or another form of payment for sales made over the phone) or purchase orders from non-consumer customers as a customer contract provided that collection is considered probable. For payments that are not made upfront by credit card, the Company assesses customer creditworthiness based on credit checks, payment history, and/or other circumstances. For payments involving third party financier payors, the Company validates customer eligibility and reimbursement amounts prior to shipping the product.

Identify the performance obligations in the contract. Performance obligations include the delivery of products, delivery of marketing services and, when purchased separately, extended warranty services. Marketing services represent distinct services that are satisfied over time. Extended warranties are distinct performance obligations. Standard product warranties are assurance-type warranties and are not separate performance obligations.

The Company does not assess promised goods or services as separate performance obligations if they are immaterial in the context of the contract.

Determine the transaction price and allocation to performance obligations. The transaction price in the Company’s customer contracts consists of both fixed and variable consideration. Fixed consideration includes amounts contractually billed to customers. Variable consideration primarily relates to estimated product returns, as customers are generally provided with rights of return of up to 30 days for the hearing protection and enhancement segment and up to 60 days for the hair and skin care segment.

The Company estimates variable consideration using historical return rates, current economic trends, and changes in customer demand, and includes such amounts in the transaction price only to the extent that it is probable that a significant reversal of revenue will not occur. Estimated returns are recorded as a reduction to revenue, with a corresponding refund liability included in other current liabilities on the consolidated balance sheets.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on relative standalone selling prices.

Recognize revenue when or as the Company satisfies a performance obligation. Revenue for products is recognized at a point in time, which is generally upon shipment. Revenue from extended warranties is recognized on a straight-line basis over the warranty period. Revenue from marketing services is recognized over time as services are performed, consistent with the pattern of transfer of control.

Contract liabilities represent payments received from customers prior to the Company satisfying the related performance obligations. These balances primarily relate to unredeemed gift cards, deferred warranty revenue associated with extended service warranties, and advance payments from customers.

The following table presents the activity in the Company’s contract liabilities for the nine months ended February 28, 2026. Revenue recognized during the period includes amounts that were included in the contract liability balance at the beginning of the period.

The following table summarizes the expected recognition of deferred warranty revenue as of February 28, 2026:

Cost of Sales

The components of cost of sales include the cost of the product, shipping fees, customs duties, and depreciation of equipment used to bring inventory to its saleable condition.

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in marketing and selling expense were $319,491 and $253,573 for the three months ended February 28, 2026 and February 28, 2025, respectively. Shipping costs included in marketing and selling expense were $724,872 and $768,625 for the nine months ended February 28, 2026 and February 28, 2025, respectively.

Marketing, selling and advertising

Sales, marketing and advertising costs are expensed as incurred.

Fair value measurements and fair value of financial instruments

The Company accounts for assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The estimated fair value of certain financial instruments, including prepaid expenses, deposits, accounts payable and accrued expenses are carried on a historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Goodwill

Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company tests goodwill for impairment for its reporting units on an annual basis, or when events occur, or circumstances indicate the fair value of a reporting unit is below its carrying value.

The Company performs its annual goodwill impairment assessment on May 31st of each year or as impairment indicators dictate.

When evaluating the potential impairment of goodwill, management first assesses a range of qualitative factors, including but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for the Company’s products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and the overall financial performance for each of the Company’s reporting units. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then proceed to the quantitative impairment testing methodology primarily using the income approach (discounted cash flow method).

Under the quantitative method we compare the carrying value of the reporting unit, including goodwill, with its fair value, as determined by its estimated discounted cash flows. If the carrying value of a reporting unit exceeds its fair value, then the amount of impairment to be recognized is the amount by which the carrying amount exceeds the fair value.

When required, we arrive at our estimates of fair value using a discounted cash flow methodology which includes estimates of future cash flows to be generated by specifically identified assets, as well as selecting a discount rate to measure the present value of those anticipated cash flows. Estimating future cash flows requires significant judgment and includes making assumptions about projected growth rates, industry-specific factors, working capital requirements, weighted average cost of capital, and current and anticipated operating conditions. The use of different assumptions or estimates for future cash flows could produce different results.

Income Taxes

The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”) which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.

Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed.

We recorded an income tax expense of $64,306 for the three months ended February 28, 2026 and $53,085 income tax expense for the three months ended February 28, 2025. We recorded an income tax expense of $412,479 for the nine months ended February 28, 2026 and $120,335 income tax expense for the nine months ended February 28, 2025.

The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2022, 2023 and 2024 Corporate Income Tax Returns are subject to IRS examination.

Impairment of long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment loss during the three and nine months ended February 28, 2026 and February 28, 2025.

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

For non-employee stock option-based awards, the Company follows ASU 2018-7, which substantially aligns share-based compensation for employees and non-employees.

Net income per share of common stock

Basic net income per share is computed by dividing the net income by the weighted average number of common shares during the period. Diluted net income per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period.

The dilutive common stock equivalent shares consist of preferred stock, stock options, and restricted stock awards and were computed under the treasury stock method, using the average market price during the period.

The following table sets forth the computations of basic and diluted net income per common share:

Lease Accounting

The Company accounts for leases in accordance with ASC 842,Leases, which requires recognition of right-of-use (“ROU”) assets and lease liabilities for substantially all leases, including those previously classified as operating leases.

The Company treats a contract as a lease when it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For all leases with terms greater than 12 months, the Company recognizes a ROU asset and a corresponding lease liability at the lease commencement date. The lease liability is measured at the present value of the lease payments not yet paid, discounted using the Company’s incremental borrowing rate. The ROU asset is measured as the lease liability adjusted for any initial direct costs, prepaid rent, or lease incentives.

The Company’s incremental borrowing rate reflects the rate of interest it would have to pay to borrow on a collateralized basis over a similar lease term and for an asset of similar value. The implicit rate in the lease is used when it is readily determinable.

ROU assets represent the Company’s right to use the leased asset over the lease term, while lease liabilities represent the obligation to make lease payments. Lease expense is recognized on a straight-line basis over the lease term. Variable lease payments, which depend on factors such as usage or future events, are expensed as incurred and do not result in remeasurement of the lease liability.

The Company reviews ROU assets for impairment consistent with the policy for long-lived assets. Recoverability is assessed whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable. The review is based on estimated future undiscounted cash flows expected from the use of the asset.

The Company’s lease agreements do not include residual value guarantees or restrictive covenants. The Company does not act as a lessor and does not have any finance leases at this time.

Segment Reporting

The Company follows the provisions of ASC Topic 280,Segment Reporting. Operating segments are defined as components of the business for which discrete financial information is available and regularly reviewed by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources. The Company’s Chief Executive Officer serves as the CODM.

The Company has determined that it operates in three reportable segments: (i) the sale of hearing protection and hearing enhancement products, (ii) the sale of hair and skin care products, and (iii) marketing services.

During fiscal year 2025, the Company formed a new legal entity, Sharper Vision Marketing Inc., which provides marketing services. Beginning in the three months ended February 28, 2026, the Company determined that this business meets the criteria for separate disclosure as a reportable segment due to increased activity and the availability of discrete financial information reviewed by the CODM. Accordingly, the Company has presented this business as a separate reportable segment for the current period. Prior to this change, the results of this business were included within “All Other.”

The Company also provides disclosures of revenue, significant segment expense categories, and long-lived assets by geographic area, in accordance with ASC 280 and ASU 2023-07. See Note 13 – “Business Segment and Geographic Area Information” for additional information.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require enhanced annual income tax disclosures, including more detailed information about the effective tax rate reconciliation and disaggregation of income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and must be applied on a prospective basis with the option for retrospective application.

The Company adopted this standard effective June 1, 2025, the beginning of its fiscal year 2026. The adoption of ASU 2023-09 did not have a material impact on the Company’s consolidated financial statements but will result in expanded income tax disclosures in the Company’s annual financial statements for the fiscal year ending May 31, 2026.

In December 2025, the FASB issued ASU 2025-05, which simplifies the measurement of expected credit losses for current accounts receivable and contract assets under ASC 326 by permitting the use of historical experience and current conditions without requiring forecasts of future economic conditions.

The Company is currently evaluating the impact of this standard on its consolidated financial statements.

Note 3 –Accounts Receivable, net

Accounts receivable, net consisted of the following:

The following table presents the activity in the allowance for credit losses related to accounts receivable for the nine months ended February 28, 2026:

During the three months ended February 28, 2026 and 2025, the Company recognized a provision for credit losses of $9,979 and $3,880, respectively. During the nine months ended February 28, 2026 and 2025, the Company recorded a provision for credit losses of $47,958 and $31,834, respectively.

Note 4 –Inventory, net

Inventory, net consisted of the following:

As of February 28, 2026 and May 31, 2025, inventory held at third party locations amounted to $1,231,932 and $109,706, respectively. As of February 28, 2026 and May 31, 2025, inventory in-transit amounted to $256,817 and $174,564, respectively.

**Note 5 –Property and Equipment, net **

Property and equipment, stated at cost, consisted of the following:

Depreciation expense amounted to $27,285 and $18,703 for the three months ended February 28, 2026 and February 28, 2025, respectively. Depreciation expense amounted to $77,776 and $40,001 for the nine months ended February 28, 2026 and February 28, 2025, respectively.

Note 6 –Intangible Assets, net

The intangible assets consisted of the following:

Amortization expense amounted to $27,085 and $26,963 for the three months ended February 28, 2026 and February 28, 2025, respectively. Amortization expense amounted to $106,195 and $53,000 for the nine months ended February 28, 2026 and February 28, 2025, respectively.

Goodwill was $2,152,215 as of February 28, 2026 and May 31, 2025.

Intellectual Property

As of February 28, 2026, the Company held three active U.S. patents and one pending U.S. patent application relating to its core technologies. These patents expire at various times between 2035 and 2038. The Company also owns seven federally registered trademarks in the United States, which it considers to be of material importance to its business. All trademark registrations are currently in good standing and are renewed as required.

The Company historically has not capitalized costs associated with internally developed patents or trademarks, as they did not meet the criteria for capitalization under U.S. GAAP. As such, no intangible assets related to intellectual property has been recorded on the accompanying consolidated balance sheets.

Note 7 –Other Current Liabilities

Other current liabilities were comprised of the following:

Note 8 –Notes Payable

During the fiscal year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $150,000, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is payable in installments of $731 per month, beginning May 18, 2021 until May 18, 2050. The Company has to maintain a hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company used the loan proceeds for qualifying expenses. During the fiscal year ended May 31, 2022, the Company received a loan forgiveness for $10,000 and an additional $10,000 of borrowing under the program. The Company recorded interest expense related to the Loan, on the accompanying consolidated financial statements, of $1,435 and $1,271, during the three months ended February 28, 2026 and February 28, 2025, respectively, and $4,022 and $2,567, during the nine months ended February 28, 2026 and February 28, 2025, respectively. The Company is currently in compliance with the terms of the Loan and has presented the long-term payments in accordance with the agreement.

The amounts of Loan payments due in the next fiscal years ended May 31, are as follows:

Note 9 –Stockholders’ Equity

Shares Authorized

As of February 28, 2026 and May 31, 2025, the authorized capital of the Company consisted of 15,000,000 shares of common stock, par value $0.0001 per share and 28,000,000 shares of preferred stock, par value $0.0001 per share.

On April 8, 2025, the Board of Directors approved, and the holders of a majority ofthe Company’s outstanding voting securities approved by written consent, an amendment to the Company’s Certificate of Incorporation to reduce the authorized shares of common stock from 450,000,000 to 15,000,000, authorized shares of preferred stock from 300,000,000 to 28,000,000, and designated shares of Series A Preferred Stock from 250,000,000 to 27,773,500. The par value and rights of the shares remained unchanged. The amendment became effective upon filing with the Delaware Secretary of State on May 19, 2025.

Preferred Stock

The preferred stock may be issued from time to time in one or more series. The Board is expressly authorized to provide for the issuance of all or any of the shares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter, for each such series, such voting powers, full or limited, or no voting powers and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution adopted by the Board providing the issuance of such shares. The Board is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issue of shares of that series. In case the number of shares of any such series shall be so decreased, the decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

During the fiscal year ended May 31, 2023, the Company issued 250,000,000 shares of non-voting Series A Preferred Stock, which, following the January 2024 reverse stock split of the Company’s common stock, are convertible into shares of the Company’s common stock at a twenty-to-one ratio. These 250,000,000 shares of non-voting Series A Preferred Stock were valued at the fair market value of $3,100,000 at issuance.

The holders of shares of Series A Preferred Stock have no rights to dividends with respect to such shares. No dividends or other distributions shall be declared or paid on the common stock unless and until dividends at the same rate shall have been paid or declared and set apart upon the Series A Preferred Stock, based upon the number of shares of common stock into which the Series A Preferred Stock may then be converted. Upon the dissolution, liquidation, or winding up of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock are entitled to receive out of the assets of the Company the sum of $0.0001 per share before any payment or distribution shall be made on our shares of common stock. The Series A Preferred Stock shall not be subject to redemption at the option, election or request of the Company or any holder or holders of the Series A Preferred Stock. The shares of Series A Preferred Stock are convertible at the option of the holder thereof, into one fully paid and nonassessable share of common stock for each 20 shares of Series A Preferred Stock; provided, however, that the holder may not convert that number of shares of Series A Preferred Stock which would cause the holder to become the beneficial owner of more than 5% of the Company’s common stock as determined in accordance with Sections 13(d) and (g) of the Exchange Act and the applicable rules and regulations thereunder.

Effective March 24, 2025, the Company’s board of directors ratified certain past actions which provided that all shares of preferred stock that were repurchased by the Company along with those that were converted into shares of common stock would be considered retired. The Company retired 222,226,500 Series A preferred shares that were previously repurchased by the Company or converted into shares of common stock prior to such date.

As of February 28, 2026 and May 31, 2025,24,873,500 and 27,773,500 shares of Series A Preferred Stock, respectively, were issued and outstanding.

No shares of Series A Preferred Stock were issued during the nine months ended February 28, 2026 and 2025.

During the nine months ended February 28, 2026, certain stockholders of 2,900,000 preferred shares converted their preferred stock into 145,000 shares of common stock.

During the nine months ended February 28, 2025, certain stockholders of 14,478,250 preferred shares converted their preferred stock into 723,913 shares of common stock.

Common Stock

As of February 28, 2026 and May 31, 2025,6,817,717 and 6,657,717 shares of common stock, respectively, were issued and outstanding.

See “Preferred Stock” and “Restricted Stock Awards” sections within this note for additional information regarding common stock issued during the nine months ended February 28, 2026 and 2025.

Stock Options

Effective February 14, 2024, the Board amended the Company’s original 2022 Equity Incentive Plan (as amended, the “Plan”), which was originally approved on March 21, 2022. The effective date of the amended Plan was October 31, 2023. The amendment and restatement of the Plan became effective December 18, 2024, following shareholder approval.

Under the Plan, equity-based awards may be made to employees, officers, directors, non-employee directors and consultants of the Company and its Affiliates (as defined in the Plan) in the form of (i) Incentive Stock Options (to eligible employees only); (ii) Nonqualified Stock Options; (iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any combination of the foregoing. The Plan will terminate upon the close of business on March 20, 2032, unless terminated earlier in accordance with the terms of the Plan. The Board serves as the Plan administrator and may amend or terminate the Plan without stockholder approval, subject to certain exceptions.

The total number of shares initially authorized for issuance under the Plan was 500,000 shares. The Plan has since been amended to increase the number of shares authorized for issuance under the Plan to 2,050,000 shares of common stock. The Plan provides for an annual increase on April 1 of each calendar year, beginning in 2022 and ending in 2031, subject to Board approval prior to such date. Such potential increase may be equal to the lesser of (i) 4% of the total number of shares of the Company’s common stock outstanding on May 31 of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Board. The number of shares authorized for issuance under the Plan will not change unless the Board affirmatively approves an increase in the number of shares authorized for issuance prior to April 1 of the applicable year. Shares surrendered or withheld to pay the exercise price of a stock option or to satisfy tax withholding requirements will not be added back to the number of shares available under the Plan. To the extent that any shares of common stock awarded or subject to issuance or purchase pursuant to awards under the Plan are not delivered or purchased, or are reacquired by the Company, for any reason, including a forfeiture of restricted stock or failure to earn performance shares, or the termination, expiration or cancellation of a stock option, or any other termination of an award without payment being made in the form of shares of common stock will be added to the number of shares available for awards under the Plan. The number of shares available for issuance under the Plan will be adjusted for any increase or decrease in the number of outstanding shares of common stock resulting from payment of a stock dividend on common stock, a stock split or subdivision or combination of shares of common stock, or a reorganization or reclassification of common stock, or any other change in the structure of shares of common stock, as determined by the Board. Shares available for awards under the Plan will consist of authorized and unissued shares.

Two types of options may be granted under the Plan: (1) Incentive Stock Options, which may only be issued to eligible employees of the Company and are required to have exercise price of the option not less than the fair market value of the common stock on the grant date, or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110% of the fair market value of the common stock on the grant date; and (2) Non-qualified Stock Options, which may be issued to participants under the Plan and which may have an exercise price less than the fair market value of the common stock on the grant date, but not less than par value of the stock.

The Board may grant or sell restricted stock to participants (i.e., shares that are subject to a subject to restrictions or limitations as to the participant’s ability to sell, transfer, pledge or assign such shares) under the Plan. Except for these restrictions and any others imposed by the Board, upon the grant of restricted stock, the recipient generally will have rights of a stockholder with respect to the restricted stock. During the applicable restriction period, the recipient may not sell, exchange, transfer, pledge or otherwise dispose of the restricted stock. The Board may also grant awards of common stock to participants under the Plan, as well as awards of performance shares, which are awards for which the payout is subject to achievement of such performance objectives established by the Board. Performance shares may be settled in cash.

Each equity-based award granted under the Plan will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the Board may determine, consistent with the provisions of the Plan.

Subject to the Plan’s terms, the Board has full power and authority to determine whether, to what extent and under what circumstances any outstanding award will be terminated, canceled, forfeited or suspended. Awards that are subject to any restriction or have not been earned or exercised in full by the recipient will be terminated and canceled if such recipient is terminated for cause, as determined by the Board in its sole discretion.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected term, expected risk-free interest rate over the expected option term and expected dividend yield rate over the expected option term. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.

The Company utilizes the simplified method to estimate the expected term of stock options granted to employees, as permitted under SEC Staff Accounting Bulletin No. 107. Under this method, the expected term is calculated as the midpoint between the vesting date and the contractual term of the award. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

During the nine months ended February 28, 2026, the Company did not issue stock options.

On January 2, 2025, the Company issued stock options to one employee to purchase, in aggregate, up to 5,000 shares of its common stock, at an exercise price of $4.00 per share valued at $20,000 and expiring on December 31, 2034. The options vest quarterly over a year beginning on March 1, 2025.

On November 13, 2024, the Company issued stock options to one consultant to purchase, in aggregate, up to 5,000 shares of its common stock, at an exercise price of $4.00 per share valued at $20,000 and expiring on October 31, 2034. The options vest quarterly over a year beginning on February 28, 2025.

On October 14, 2024, the Company issued to two Company officers stock options to purchase, in the aggregate, up to 600,000 shares of its common stock, at an exercise price of $4.01 per share valued at $2,406,000 and expiring in ten years from the date of grant. The options vest over forty-eight equal monthly installments starting on the grant date.

During the three months ended August 31, 2024, the Company issued stock options, to two consultants, to purchase, in the aggregate, up to 24,000 shares of its common stock, of which 12,000 options were granted at an exercise price of $5.94 and 12,000 options were granted at an exercise price of $10.67. The options were valued at approximately $195,960 and vested in the three months ended August 31, 2025. The options will expire in ten years from the date of grant.

The following table summarizes the activities for the Company’s stock option activity for the nine months ended February 28, 2026:

During the nine months ended February 28, 2026, the Company expensed $493,485 with respect to options, of which $451,125 was included in General and administrative, and $42,360 in Sales and marketing, respectively, in the accompanying consolidated statements of operations. During the nine months ended February 28, 2025, the Company expensed $416,935 with respect to options, of which $280,584 was included in General and administrative, and $136,351 in Sales and marketing, respectively, in the accompanying consolidated statements of operations.

As of February 28, 2026, unrecognized stock option expense was $1,575,024 expected to vest over a weighted average period of 2.6 years.

Restricted Stock Awards

The Company’s non-employee directors participate in the Company’s non-employee director compensation arrangements. Under the terms of those arrangements and pursuant to the Plan, on January 15, 2026, the Company granted each of its three non-employee director Board members 5,000 restricted stock awards for an aggregate of 15,000 shares of the Company’s common stock that will vest on the one-year anniversary of the grant, subject to the respective director’s continued service as a member of the Board, with a total grant date fair value of $119,550 based on the stock price on the grant date.

As of February 28, 2026, there were 15,000 unvested restricted stock awards outstanding with a weighted-average grant-date fair value of $7.97, all of which are expected to vest in the within one year.

Effective January 13, 2025, the Company granted each of its three non-employee director Board members 5,000 restricted stock awards for an aggregate of 15,000 shares of the Company’s common stock, which vested on the one-year anniversary of the grant, subject to the respective director’s continued service as a member of the Board, with a total grant date fair value of $62,250.

Effective November 13, 2024, the Company issued 2,000 shares of restricted stock awards to a consultant for services relating to expansion of the Company into new markets. The shares were valued at $8,000 based on the Company’s closing price on the NYSE American on the date of grant. The shares vested upon grant and were expensed over the six month service period of the consultant beginning from the grant date.

The fair value of the stock grants is recorded over the term of the service related to each grant. During the nine months ended February 28, 2026, the Company expensed$67,118 related to restricted stock awards, which was included in General and administrative in the accompanying consolidated statements of operations. During the nine months ended February 28, 2025, the Company expensed $443,582 related to restricted stock awards, of which $438,892 was included in General and administrative in the accompanying consolidated statements of operations, and $4,690 in Sales and marketing, in the accompanying consolidated statements of operations.

As of February 28, 2026, unrecognized share-based compensation cost related to unvested restricted stock awards totaled $105,138, which is expected to be recognized over a weighted-average period of less than one year.

The following table summarizes the unvested restricted stock awards as of February 28, 2026:

Note 10 –Commitments and Contingencies

Leases

The Company had a lease agreement in connection with its previous office and warehouse facility in California under an operating lease which expired in October 2019. On December 1, 2019, the Company signed an extension of the lease for 3 years. The rent was $7,567 per month for the first year and increased by a certain amount each year. In November 2022, the Company entered into an extension of the lease for a two-year term beginning December 1, 2022. The rent was $6,098 per month for the first year and increased by a certain amount the following year. Upon expiration of the lease on December 1, 2024, the Company did not renew the lease.

On October 12, 2024, the Company entered into a lease in Beverly Hills, California for a term beginning November 1, 2024 and ending January 31, 2029. The base rent is $11,168 per month for the first twelve months and shall increase for each twelve-month period thereafter. The lease provides for rent abatement during months 2, 15, and 30.

On September 10, 2024, the Company entered into a sublease in American Fork, Utah for a three-year term beginning October 1, 2024. The base rent was $0 for the first three months and $7,684 per month for the next nine months. The rent shall increase for each twelve-month period, thereafter. An additional amount of $1,210 shall be due each month for the additional overheads. The Company previously leased warehouse space in Utah under a month-to-month lease agreement.

Note 10 – Commitments and Contingencies (continued)

The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company’s lease agreements do not have an explicit renewal option, and the termination options are available in the event of material breaches. Both leases are classified as operating leases under ASC 842.

The Company computed an initial lease liability of $767,269 for the two new lease agreements and an initial ROU asset in the same amount which was recorded on the books at the commencement of the leases. During the three months ended February 28, 2026 and February 28, 2025, the Company recorded operating lease costs in the amount of $63,161 and $66,108, respectively. During the nine months ended February 28, 2026 and February 28, 2025, the Company recorded operating lease costs in the amount of $189,482 and $133,847, respectively. Operating lease and short-term lease expenses are included in General and administrative expenses on the accompanying consolidated statements of operations.

The weighted average remaining term and discount rate for the Company’s operating leases as of February 28, 2026, was 2.7 years and 13.1%, respectively.

Supplemental balance sheet information related to leases was as follows:

Maturities of operating lease liabilities were as follows as of February 28, 2026:

Note 10 – Commitments and Contingencies (continued)

Tarriff matters (IEEPA duties)

On February 20, 2026, the United States Supreme Court rendered a decision that the International Emergency Economic Powers Act ("IEEPA") does not authorize the U.S. President to impose tariffs. The Court's decision invalidated tariffs previously implemented by the U.S. Presidential Administration pursuant to IEEPA, including tariffs imposed in response to trade deficits. Following the decision, the U.S. President imposed a new tariff surcharge of not less than 10% under Section 122 of the Trade Act of 1974 on all imports, subject to certain exceptions. The tariffs under this statute took effect on February 24, 2026, and will remain in effect for 150 days (the maximum under the statute). The broader consequences of these actions remain uncertain given the evolving regulatory and international trade environment. It is unclear how policymakers may respond, including with respect to tariffs, trade agreements, and overall trade policy. Subsequent to the U.S. Supreme Court decision, the U.S. Court of International Trade issued orders directing U.S. Customs and Border Protection (“CBP”) to finalize some pending import transactions and revise certain past ones without applying the IEEPA tariffs, while the court supervises the creation of a process to issue refunds where appropriate.

The Company has historically paid IEEPA duties in connection with certain import transactions. The Company is evaluating the applicability of the court decisions and subsequent administrative process to its import entries, including the effect of procedural requirements under U.S. customs laws (including liquidation finality and the timing of administrative protests) and the scope and timing of the emerging administrative refund process.

Any potential recovery of IEEPA duties represents a gain contingency. Consistent with applicable U.S. GAAP, the Company has not recognized any receivable or gain related to potential refunds of IEEPA duties because the realization of any recovery is dependent on future events, and management cannot conclude that recovery is probable or reasonably estimable as of February 28, 2026.

The Company paid approximately $900,000 in IEEPA duties since April 2025, of which $321,059 is included in Inventory, net on the accompanying consolidated balance sheets as of February 28, 2026 and the remainder has been recorded in cost of sales over the period of which the inventory was sold consistent with the Company’s accounting policies. These amounts represent total amounts paid and should not be interpreted as an estimate of potential refunds or recoveries.

Contingencies

From time to time, we become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our financial statements. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record an accrual, consistent with applicable accounting guidance. In the opinion of management, while the outcome of such claims and disputes cannot be predicted with certainty, our ultimate liability in connection with these matters is not expected to have a material adverse effect on our results of operations, financial position or cash flows, and the amounts accrued for any individual matter are not material. However, legal proceedings are inherently uncertain, and there can be no assurance that any expense, liability, or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

Note 11 –Related Party Transactions

The Company’s Chairman and Chief Executive Officer, Jeff Toghraie, is the managing director of Intrepid Global Advisors (“Intrepid”). Intrepid has, from time to time, provided advances to the Company for working capital purposes and is paid consulting fees throughout the year. The Company recorded and paid approximately $50,000 and approximately $51,000 in consulting fees for the three months ended February 28, 2026 and February 28, 2025, respectively, and approximately $166,100 and approximately $178,000 for the nine months ended February 28, 2026 and February 28, 2025, respectively, related to consulting services provided by Intrepid. As of February 28, 2026, the Company had a payable to Intrepid of $169,203 for advances provided by Intrepid and as of May 31, 2025, an amount receivable from Intrepid of $222 related to an overpayment of advances made by Intrepid. During the nine months ended February 28, 2026, advances from Intrepid were $4,719,409 and repayments to Intrepid were $4,549,984. During the nine months ended February 28, 2025, advances from Intrepid were $5,601,537 and repayments to Intrepid were $5,584,759. Advances made from Intrepid are short-term in nature and non-interest bearing.

The Company’s Board Member, Chief Financial Officer, and Chief Operating Officer is the co-owner, Chairman and Chief Financial Officer of, and has a controlling interest in BZ Capital Strategies. The Company recorded and paid consulting fees to BZ Capital Strategies totaling $50,000 for the three months ended February 28, 2026 and $25,000 for the three months ended February 28, 2025, and $140,000 and $100,000 for the nine months ended February 28, 2026 and February 28, 2025, respectively.

Note 12 –Concentrations

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable and cash deposits, investments and cash equivalents instruments. The Company maintains its cash in bank deposits accounts. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of February 28, 2026 and May 31, 2025, the Company held cash of $4,768,989 and $4,019,854, respectively, in excess of federally insured limits. The Company has not experienced any losses in such accounts through February 28, 2026.

Concentration of Revenue, Accounts Receivable, and Supplier

During each of the three months ended February 28, 2026 and February 28, 2025, no single customer accounted for greater than 10% of consolidated net sales. During the nine months ended February 28, 2026, there was one customer representing 15% of consolidated net sales. There was no single customer that accounted for greater than 10% of consolidated net sales for the nine months ended February 28, 2025.

During the three months ended February 28, 2026 and 2025, approximately 96% and 93%, respectively, of our consolidated net sales were to customers located in the U.S. During the nine months ended February 28, 2026 and 2025, approximately 96% and 91%, respectively, of our consolidated net sales were to customers located in the U.S. All Company assets are located in the U.S.

As of February 28, 2026, gross accounts receivable from customers that accounted for more than 10% of consolidated gross accounts receivables were from one customer amounting to 29%. As of May 31, 2025, gross accounts receivable from customers that accounted for more than 10% of consolidated gross accounts receivables were from two customers amounting to 22% consisting of 11% each.

Manufacturing is outsourced primarily overseas via a number of third-party vendors. The three largest vendors accounted for 38%,38%, and 14%, respectively, of all purchases for the three months ended February 28, 2026. For the three months ended February 28, 2025, the two largest vendors accounted for 68% and 26%, respectively, of all purchases. For the nine months ended February 28, 2026, the largest vendor accounted for 77% of all purchases. For the nine months ended February 28, 2025, the two largest manufacturing vendors accounted for 65% and 27%, respectively.

Note 13 –Business Segment and Geographic Area Information

Business Segments

The Company operates in three reportable segments: Hearing Enhancement and Protection, Hair and Skin Care, and Marketing Services. The segments are determined based on the nature of the products and services provided and how the business is managed.

On May 5, 2025, the Company incorporated a new wholly owned subsidiary, Sharper Vision Marketing Inc., which provides marketing services. Beginning in the three months ended February 28, 2026, the Company determined that this business meets the criteria for separate disclosure as a reportable segment due to increased activity and the availability of discrete financial information reviewed by the Chief Operating Decision Maker (“CODM”). Prior to this determination, the results of this business were included within “All Other” in the Company’s segment reporting.

The CODM is the Company’s Chief Executive Officer. The CODM evaluates segment performance and allocates resources based primarily on a segment profit measure referred to as Segment non-cash operating income, which the Company has concluded is the measure of segment profitability. This non-GAAP measure is defined as operating income from segment operations before depreciation and amortization, stock-based compensation expense, and corporate expenses. Corporate expenses primarily include insurance, expenses related to operating as a public company—including fees paid to related parties for executive management services—corporate office rent, and stock-based compensation for management.

The CODM reviews Segment non-cash operating income for each segment regularly to assess performance and to make decisions regarding the allocation of resources.

A reconciliation of Segment non-cash operating income to the most directly comparable measure under U.S. GAAP, Income from Operations, is included in the table below.

Note 13 – Business Segment and Geographic Area Information (continued)

The Company’s segment information is as follows:

Note 13 – Business Segment and Geographic Area Information (continued)

As of February 28, 2026 and May 31, 2025, segment assets were as follows: hearing enhancement and protection were $10,063,595 and $8,109,272, respectively; hair and skin care were $5,011,653 and $4,760,523, respectively; and marketing services were $89,250 and $0, respectively.

Geographic Area Information

During the three months ended February 28, 2026 and 2025, approximately 96% and 93%, respectively, of our consolidated net sales were to customers located in the U.S. (based on the customer’s shipping address). During the nine months ended February 28, 2026 and 2025, approximately 96% and 91%, respectively, of our consolidated net sales were to customers located in the U.S. (based on the customer’s shipping address). All Company assets are located in the U.S.