Axil Brands, Inc.
For the period ended Aug 31, 2026. Filed Oct 6, 2026.
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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, 2026 · Filed Oct 6, 2026
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 2026-02-28; filed 2026-04-08.
0001520138-26-000104
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-08-31; filed 2026-10-06.
0001520138-26-000410
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 68 previous paragraphs and 52 current paragraphs.
18 unchanged; 18 reworded; 16 added; 30 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 2 previous and 3 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 (16)
Current report
Business Update
Current report
On August 26, 2026, we announced the launch of the XCOR II, the next-generation successor to our flagship AXIL wireless earbud line, which became available on September 15, 2026. The XCOR II introduces several product enhancements over its predecessor, including advanced active noise reduction, an enhanced immersive soundstage, a redesigned lower-profile form factor, and a charging case supporting four full charges. As of the announcement date, August 26, 2026, we had secured initial orders exceeding $2.8 million from retail and distribution partners, and shipments commenced in September 2026. As of September 30, 2026, orders for the XCOR II exceeded $3.6 million, and we had fulfilled the majority of pre-orders and backlog. We expect the XCOR II launch to be a meaningful driver of net sales in future periods; however, there can be no assurance that initial order volume will translate into sustained demand, and actual results may be affected by risks related to our ability to fulfill orders, competitive dynamics, and broader market and economic conditions.
Current report
***Reviv3 ProCare strategic partnership.***On August 25, 2026, we entered into agreements to issue shares of Reviv3, the subsidiary through which we are driving the strategic development and planned relaunch of our Reviv3 hair and skin care business, to three strategic partners. Reviv3 issued an aggregate of 12,501 shares of its common stock to these partners in exchange for services provided to Reviv3. This brings experienced partners directly into the business at what we view as a pivotal moment, as we prepare for the rebranding and relaunch of the Reviv3 brand and the onboarding of additional distributors and retailers in selected domestic and international markets. Because our partners are compensated with an ownership stake, their success is tied directly to the success of the brand, aligning their incentives with the performance of the brand. The structure also allowed us to secure this expertise while preserving cash for growth investments, and AXIL retains a 74.998% controlling interest in Reviv3 and continues to consolidate its results. The noncontrolling holders hold a 25.002% equity interest in Reviv3 and will share in that percentage of Reviv3’s future results. Reviv3 does not currently intend to pay dividends, and any distributions to its stockholders are at the discretion of Reviv3’s board of directors, which the Company controls. As a result, we expect the noncontrolling holders to realize the value of their interest principally upon sale of Reviv3 or another liquidity event. We recorded a non-cash compensation charge of $137,511 in the quarter for the value of the shares issued, as discussed under “Results of Operations” below. In accordance with ASC 810-10-45-23, the carrying amount of the noncontrolling interest was also adjusted to reflect the Company’s new ownership percentage of Reviv3’s net assets, with the difference recognized as an increase to the Company’s additional paid-in capital; this equity adjustment did not affect net income. See Note 8 - Equity to the condensed consolidated financial statements. There can be no assurance that this partnership, or the rebranding efforts, will result in increased sales or profitability of Reviv3 or the Company.
Current report
***Recovery of IEEPA tariff duties and ongoing tariffs.***As previously disclosed in our Annual Report on Form 10-K, as of May 31, 2026 we had paid approximately $900,000 of duties under the International Emergency Economic Powers Act (“IEEPA”) on imported goods, and following the U.S. Supreme Court’s February 2026 decision that IEEPA does not authorize such tariffs, U.S. Customs and Border Protection (“CBP”) developed a refund process. During the three months ended August 31, 2026, we received aggregate refunds of $907,067 in cash from CBP, including interest. Of this amount, $550,929 related to customs duties previously charged to cost of revenues on goods sold as of the refund date and was recognized as a reduction of cost of revenues in the first quarter of fiscal 2027, $321,059 related to customs duties capitalized in inventory that remained on hand and was recorded as a reduction of Inventories, and $35,079 related to interest, which is included in other income, net. See Note 9 – Commitments and Contingencies to the condensed consolidated financial statements. No IEEPA refund claims remain outstanding. These refunds are non-recurring and are not indicative of our underlying operating performance.
Current report
Separately, following the U.S. Supreme Court’s February 2026 decision, a tariff surcharge of at least 10% on all imports, subject to certain exceptions, was imposed under Section 122 of the Trade Act of 1974, effective February 24, 2026. Effective upon the expiration of these tariffs in July 2026, new tariff rates generally ranging from 10% to 12.5% on most imports from certain countries, with higher rates on certain imports, were imposed pursuant to Section 301 of the Trade Act of 1974. The scope and duration of current and future tariff measures remain uncertain and could continue to impact the Company’s cost of goods and results of operations.
Current report
***Retail distribution.***Our relationships with big box retail chains and other retail partners continue to broaden, and we continue to receive purchase orders from these partners. Orders in this channel are placed on our customers' own timelines rather than a fixed calendar, so their size and timing can vary from quarter to quarter and results in any one period may not be indicative of future periods.
Current report
Fiscal 2027 outlook. We expect fiscal 2027 to reflect growth in both net revenues and net income compared to fiscal 2026, with the impact becoming more evident beginning in the second quarter of fiscal 2027. This expectation is based primarily on (i) the launch of the XCOR II, which became available on September 15, 2026; (ii) anticipated continued expansion of our retail and wholesale coverage, which we expect to reduce the effect that the timing of any single order has on our quarterly results; and (iii) the planned relaunch of the Reviv3 brand and onboarding of additional distributors and retailers in selected domestic and international markets. These expectations are forward-looking statements and are subject to risks and uncertainties, including demand for our products, the timing and size of retail orders, our ability to fulfill orders, tariffs and other macroeconomic conditions, our ability to successfully complete the relaunch of the Reviv3 brand and achieve the expected benefits, and the other factors described under "Cautionary Note Regarding Forward-Looking Statements." Actual results may differ materially.
Current report
Our results of operations are summarized below.
Current report
Net revenues decreased by $765,835 or 11.2%, from $6,856,218 for the three months ended August 31, 2025 to $6,090,383 for the three months ended August 31, 2026. The decrease was primarily attributable to a material order from a big box retail chain in our hearing enhancement and protection segment that was fulfilled in the three months ended August 31, 2025 that did not recur during the three months ended August 31, 2026. In addition, orders for our first-generation XCOR product slowed during the quarter as customers prepared for the launch of the XCOR II. We believe our relationships with big box retail chains are well established and will continue to grow, supported by the strategic supply agreements we secured and the expanded retail placement we achieved during fiscal 2026. We expect revenues from big box retail chains to fluctuate from quarter to quarter, and we believe period-over-period comparisons in this channel are best viewed over a longer horizon than a single quarter.
Current report
We disaggregate net revenues into three sales channels, which correspond to the way management evaluates commercial performance and to the categories presented in Note 12 – Business Segment and Geographic Area Information to our consolidated financial statements: (i) Direct-to-consumer (“DTC”), comprising sales through our owned e-commerce sites and third-party online marketplaces; (ii) retail and wholesale, comprising sales to national retail chains, specialty retailers, dealers, distributors and international distribution partners; and (iii) marketing services, comprising fee-based performance marketing services provided to third-party clients through Sharper Vision Marketing Inc.
Current report
Operating expenses increased by $371,506, or 8.8%, from $4,223,196 in the three months ended August 31, 2025 to $4,594,702 in the three months ended August 31, 2026. Operating expenses as a percentage of net revenues for the three months ended August 31, 2026 was 75.4%, compared to 61.6% for the three months ended August 31, 2025. Included in operating expenses were non-cash stock-based compensation and stock option expense of $322,393 and $199,212 in the three months ended August 31, 2026 and 2025, respectively. The amount for the three months ended August 31, 2026 includes a $137,511 non-cash charge related to the Reviv3 share issuance described above, which was included in general and administrative expenses. Employee-related compensation costs increased during the three months ended August 31, 2026, primarily due to our Chief Executive Officer beginning to receive a salary near the end of the three months ended August 31, 2025 and an increase in our Chief Financial Officer’s compensation, partially offset by a reduction in compensation costs attributable to employees whose work during the three months ended August 31, 2026 related to the research and development of our products and was classified accordingly. Costs for independent contractors decreased, as work performed by these contractors during the three months ended August 31, 2026 that related to the research and development of our products was likewise classified as research and development expense. As a result, we recognized $459,631 of research and development expenses in the three months ended August 31, 2026, for which there was no comparable expense in the prior-year period. The overall increase in operating expenses was primarily attributable to the increase in sales and marketing expenses related to the launch of XCOR II, the Reviv3 share issuance charge described above, and increases in compensation partially offset by decreases in other general and administrative costs.
Current report
Income from operations for the three months ended August 31, 2026 was $437,027, compared to $411,738 for the three months ended August 31, 2025. The increase in income from operations of $25,289, or 6.1%, was primarily related to customs refunds received, partially offset by lower revenues due to timing of orders by big box retail chains and higher operating expenses related to the increase in sales and marketing related to the launch of XCOR II, the Reviv3 share issuance charge described above, and increases in fees for management.
Current report
Of the $420,571 of net income for the three months ended August 31, 2026, a net loss of $1,021 was attributable to the noncontrolling interest in Reviv3 arising from the share issuance described above, resulting in net income attributable to the Company of $421,592, an increase of $87,298, or 26.1%, compared to net income attributable to the Company of $334,294 for the three months ended August 31, 2025, which reflected no noncontrolling interest.
Current report
Adjusted EBITDA increased by $152,486, or 22.6%, from $674,355 for the three months ended August 31, 2025 to $826,841 for the three months ended August 31, 2026. Adjusted EBITDA as a percentage of net revenues for the three months ended August 31, 2026 and 2025 was 14.1% and 9.8%, respectively. Adjusted EBITDA increased primarily due to the custom refunds received partially offset by lower revenues due to timing of orders from big box retail chains.
Current report
Net cash provided by operating activities for the three months ended August 31, 2026, was $3,762,759 compared to net cash used in operating activities of $739,194 for the three months ended August 31, 2025. The increase was related to receivables from material orders from a big-box retail chain at the end fiscal 2026 which were subsequently paid in the first quarter of fiscal 2027.
Current report
Critical Accounting Policies and Estimates
Removed paragraphs (30)
Previous report
On February 24, 2026, we formed Reviv3 ProCare Company, a wholly owned subsidiary, as part of a broader initiative to support the potential strategic separation or other transaction involving the hair and skin care business. These initiatives are intended to enhance long-term growth and strategic flexibility.
Previous report
On February 20, 2026, the U.S. Supreme Court held that IEEPA does not authorize the imposition of certain tariffs previously assessed on imports. Following that decision, the U.S. Court of International Trade issued orders directing CBP to liquidate unliquidated entries and reliquidate certain non-final liquidated entries without regard to IEEPA duties, while CBP develops a new automated refund process to administer potential refunds, and the court continues to oversee CBP’s progress through required status reports.
Previous report
The Company has paid IEEPA duties on certain import transactions historically. While these court decisions create the possibility of refunds, the amount and timing of any potential recovery remains uncertain and depends on, among other factors, (i) the liquidation status and finality of the Company’s relevant import entries under U.S. customs laws (including statutory time frames for reliquidation and administrative protests), and (ii) the scope, timing, validation rules, and phased implementation of CBP’s refund process, which CBP has indicated will initially exclude certain complex entry scenarios.
Previous report
As of February 28, 2026, we have not recorded a receivable related to potential tariff refunds and cannot reasonably estimate the amount or timing of any refunds. If refunds are received in future periods, they could have a favorable impact on cash flows and results of operations in the period of receipt or realization; however, there can be no assurance that the Company will recover any material portion of the IEEPA duties paid.
Previous report
We have 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 our accounting policies. These amounts represent total amounts paid and should not be interpreted as an estimate of potential refunds or recoveries.
Previous report
In addition, following the U.S. Supreme Court’s decision, as described above, 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 U.S. President also indicated a desire to increase such tariffs to 15% and to seek to extend such tariffs under other statutes. The imposition of such tariffs may continue to strain international trade relations and increase the risk that foreign governments implement retaliatory tariffs on goods imported from the U.S. In addition, the scope and durability of existing and future tariff measures remain uncertain.
Previous report
In December 2025, we announced the securing of a new nationwide retail distribution partnership with a major U.S. retailer, positioning next-generation hearing protection products for broad in-store availability beginning in fiscal 2026. We believe our expanded retail footprint strengthens our market presence and supports broader consumer adoption of our hearing protection solutions.
Previous report
In September 2025, we announced a partnership with a major national salon chain across Canada to offer our full Reviv3 Procare® line, a collaboration that significantly expands our brand’s professional reach through one of the country’s most influential haircare networks.
Previous report
In June 2025, the Company expanded its leadership team by hiring a senior contractor to lead growth initiatives in our hair and skin care division. This individual brings extensive experience in brand development and channel expansion. His appointment reflects our commitment to scaling this business segment and capitalizing on emerging industry growth.
Previous report
We also gained media recognition in leading military publications, includingMilitary Times, Air Force Times, Marine Corps Times, andNavy Times, highlighting our hearing protection and enhancement technology. We believe this visibility strengthens our credibility among professional and tactical users.
Previous report
On July 4, 2025, legislation commonly referred to as The One Big Beautiful Bill Act of 2025 (“OBBBA”) was enacted in the U.S., making permanent certain provisions of the Tax Cuts and Jobs Act and introducing changes to corporate tax provisions. We are currently assessing the impact of OBBBA on our consolidated financial statements.
Previous report
Outlook
Previous report
Based on our current expectations and assumptions regarding continued retail expansion, we expect revenue for the fourth quarter of fiscal 2026 to be in the range of $8 million to $10 million, representing approximately 39% to 74% year-over-year growth. We anticipate our gross margins for the fourth quarter of fiscal 2026 to be in the range of 67% to 71%. For the full fiscal year 2026, we expect revenue in the range of $30.2 million to $32.2 million, which implies 15% to 23% growth compared to fiscal 2025.
Previous report
We are providing this outlook based on current expectations; however, we have not historically provided guidance and may not continue to do so. These statements are forward-looking and subject to risks and uncertainties, including those related to our retail expansion, consumer demand, and gross margins, as well as those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025, which should be read in conjunction with this Form 10-Q.
Previous report
Net sales increased by $371,663, or 5.4%, to $7,294,030 for the three months ended February 28, 2026, compared to $6,922,367 for the prior-year period. The increase was primarily driven by continued growth in demand for our hearing enhancement and protective equipment products. This growth was partially offset by lower sales in our hair and skin care segment, which were impacted by the absence of a significant distributor order that was fulfilled in the prior-year period.
Previous report
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 $444,263 or 10.1% from $4,383,319 in the three months ended February 28, 2025 to $4,827,582 in the three months ended February 28, 2026. Operating expenses as a percentage of net revenues for the three months ended February 28, 2026 was 66.2% compared to 63.3% for the three months ended February 28, 2025. Included in operating expenses were non-cash stock-based compensation of $180,369 and $258,053 in the three months ended February 28, 2026 and 2025, respectively. Operating expenses increased primarily due to higher sales and marketing expenses of approximately $400,000, reflecting increased investment in retail sales promotional initiatives and efforts to enhance overall brand awareness.
Previous report
Income from operations for the three months ended February 28, 2026, was $214,239 compared to $583,109 for the three months ended February 28, 2025. The decrease in income from operations of $368,870 related primarily to an increase in sales and marketing costs.
Previous report
Adjusted EBITDA decreased by $419,752 or 47.1% from $890,546 for the three months ended February 28, 2025 to $470,794 for the three months ended February 28, 2026. Adjusted EBITDA as a percentage of sales, net for the three months ended February 28, 2026 and 2025, was 6.5% and 12.9%, respectively. Adjusted EBITDA decreased primarily due to an approximately $400,000 increase in sales and marketing expenses, reflecting continued investment in our direct-to-consumer channel and broader brand-building initiatives aimed at driving long-term revenue growth.
Previous report
For the Nine Months Ended February 28, 2026 Compared to the Nine Months Ended February 28, 2025
Previous report
Net sales increased by $1,778,894 or 8.7% from $20,506,213 in the nine months ended February 28, 2025 to $22,285,107 for the nine months ended February 28, 2026. The increase in net sales was primarily driven by a material order from our retail channels.
Previous report
The overall cost of sales increased by $1,184,025 or 20.1% from $5,888,090 in the nine months ended February 28, 2025 to $7,072,115 in the nine months ended February 28, 2026. Cost of sales as a percentage of net revenues for the nine months ended February 28, 2026 was 31.7% as compared to 28.7% for the comparable period in 2025. Cost of sales as a percentage of sales increased, primarily driven by a higher mix of lower-margin sales to distributors in our hair and skin care segment and increased sales to a leading national membership-based retail chain in our hearing enhancement and protection equipment, which carries tighter margins than our direct-to-consumer channel, as well as higher customs duties.
Previous report
Gross profit for the nine months ended February 28, 2026 and 2025 was $15,212,992 and $14,618,123, respectively. Gross profit as a percentage of sales for the nine months ended February 28, 2026, was 68.3% as compared to 71.3% for the comparable period in 2025. The decrease in the gross profit margin for the nine months ended February 28, 2026 was primarily due to lower margins related to a material order with a leading national membership-based retail chain and higher customs duties.
Previous report
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 $181,099 or 1.3% from $13,502,845 in the nine months ended February 28, 2025 to $13,683,944 in the nine months ended February 28, 2026. Operating expenses as a percentage of net revenues for the nine months ended February 28, 2026, were 61.4% compared to 65.8% for the nine months ended February 28, 2025. Included in operating expenses were non-cash stock-based compensation of $560,603 and $860,517 in the nine months ended February 28, 2026 and 2025, respectively. Operating expenses increased primarily due to higher sales and marketing expenses, reflecting increased investment in direct-to-consumer initiatives and brand awareness. This increase was partially offset by improved operating efficiencies, including lower professional and consulting fees and reduced stock-based compensation, as well as the absence of a $220,000 accounts payable forgiveness recognized in the prior-year period that did not recur.
Previous report
Income from operations for the nine months ended February 28, 2026, was $1,529,048 compared to income of $1,115,278 for the nine months ended February 28, 2025. The increase in income from operations of $413,770 or 37.1% was primarily driven by a material order from a leading national membership-based retail chain, partially offset by increased operating expenses and by a forgiveness of accounts payable of approximately $220,000, included in General and administrative on the accompanying consolidated statement of operations, that did not recur in the nine months ended February 28, 2026.
Previous report
As a result of the above, we reported a net income of $1,242,223 and $1,100,563 for the nine months ended February 28, 2026 and 2025, respectively.
Previous report
Adjusted EBITDA increased by $223,681 or 10.8% from $2,076,821 in the nine months ended February 28, 2025 to $2,300,502 in the nine months ended February 28, 2026. Adjusted EBITDA as a percentage of sales, net for the nine months ended February 28, 2026 and 2025, were 10.3% and 10.1%, respectively. Adjusted EBITDA improved due to a material order from our retail channels, partially offset by a forgiveness of accounts payable of approximately $220,000 that did not recur in the current period.
Previous report
We are actively evaluating strategic alternatives for the hair and skin care business, including a potential spin-off, sale, or initial public offering, which could occur within the next two years depending on operational performance and market conditions. These initiatives could impact the Company’s capital structure, ownership of the hair and skin care business, and future liquidity.
Previous report
Net cash provided by operating activities for the nine months ended February 28, 2026, was $790,330, compared to $1,734,230 for the nine months ended February 28, 2025. The decrease was driven primarily by a significant inventory purchase associated with a material order from our retail channels.
Previous report
As of February 28, 2026, we had a secured Economic Injury Disaster Loan outstanding, administered pursuant to the CARES Act in the principal amount of $138,459, with a maturity date of May 18, 2050. The Company continues to pay interest and principal on the loan.
Previous report
Significant Accounting Policies and Estimates
Reworded paragraphs (18)
Previous wording
Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in herein and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Please see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional information.
Current wording
Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us herein and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Please see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional information.
Previous wording
Beginning in the three months ended February 28, 2026, we operate in three reportable segments: (i) hearing enhancement and protection, (ii) hair and skin care, and (iii) marketing services.
Current wording
Since the three months ended February 28, 2026, we operate in three reportable segments: (i) hearing enhancement and protection, (ii) hair and skin care, and (iii) marketing services.
Previous wording
Through our hearing enhancement and protection segment, we design, innovate, engineer, manufacture, market and service specialized systems in hearing enhancement, hearing protection, wireless audio, and communication. Through our hair and skin care segment, we manufacture, market, sell, and distribute professional quality hair and skin care products. Our marketing services segment is conducted through our wholly owned subsidiary, Sharper Vision Marketing Inc., which was formed to leverage our direct-to-consumer expertise in support of both our internal brands and third-party clients. This segment is focused on delivering performance-driven marketing solutions and represents an expansion of our capabilities to drive growth and enhance brand visibility.
Current wording
Through our hearing enhancement and protection segment, we design, innovate, engineer, manufacture, market and service specialized systems in hearing enhancement, hearing protection, wireless audio, and communication. Through our hair and skin care segment, we manufacture, market, sell, and distribute professional quality hair and skin care products. Our hair and skin care segment is operated through our majority-owned subsidiary, Reviv3 ProCare Company (“Reviv3”). Our marketing services segment is conducted through our wholly owned subsidiary, Sharper Vision Marketing Inc., which was formed to leverage our direct-to-consumer expertise in support of both our internal brands and third-party clients. This segment is focused on delivering performance-driven marketing solutions and represents an expansion of our capabilities to drive growth and enhance brand visibility.
Previous wording
In addition to growing our overall distribution and retail footprint, the Company has reached a significant milestone in its wholesale channel strategy by securing several strategic supply agreements with leading national retail chains. These agreements have already generated multiple purchase orders in the first half of calendar 2026. While there can be no assurance that additional purchase orders will be received or regarding the timing or volume of fulfillment, we expect this expanded national retail presence to drive meaningful revenue growth and significantly enhance brand visibility among a much wider customer base.
Current wording
In addition to growing our overall distribution and retail footprint, the Company has reached a significant milestone in its wholesale channel strategy by securing several strategic supply agreements with big box retail chains. These agreements generated multiple purchase orders in fiscal 2026. While there can be no assurance that additional purchase orders will be received or regarding the timing or volume of fulfillment of any such orders, we expect this expanded national retail presence to drive meaningful revenue growth and significantly enhance brand visibility among a much wider customer base.
Previous wording
Cost of sales includes the cost of products, freight-in costs, customs duties, and depreciation related to fixed assets that are used in the production and distribution process to bring goods to their saleable condition and location. The overall cost of sales increased by $296,270 or 15.1% from $1,955,939 in the three months ended February 28, 2025 to $2,252,209 in the three months ended February 28, 2026. Cost of sales as a percentage of net revenues for the three months ended February 28, 2026 was 30.9% as compared to 28.3% for the three months ended February 28, 2025. Cost of sales as a percentage of revenue increased primarily due to increased tariffs.
Current wording
Cost of revenues primarily includes the cost of products, freight-in costs, customs duties, and depreciation related to fixed assets that are used in the production and distribution process to bring goods to their saleable condition and location. For the three months ended August 31, 2026, cost of revenues decreased by $1,162,630, or 52.3%, compared to the three months ended August 31, 2025. Cost of revenues as a percentage of net revenues for the three months ended August 31, 2026 was 17.4%, as compared to 32.4% for the three months ended August 31, 2025. The decrease was attributable in part to the $550,929 benefit recognized in the three months ended August 31, 2026 from the recovery of previously paid IEEPA customs duties, as discussed above and in Note 9 – Commitments and Contingencies to the condensed consolidated financial statements. Excluding this benefit, cost of revenues would have been $1,609,583, or 26.4% of net revenues. The remaining decrease reflects lower retail and wholesale volume and a higher mix of direct-to-consumer sales.
Previous wording
Gross profit increased by $75,393 or 1.5% from $4,966,428 in the three months ended February 28, 2025 to $5,041,821 for the three months ended February 28, 2026. Gross profit as a percentage of sales for the three months ended February 28, 2026 was 69.1%, as compared to 71.7% for the three months ended February 28, 2025. Gross profit as a percentage of sales decreased primarily due to higher customs duties.
Current wording
Gross profit increased by $396,795, or 8.6%, from $4,634,934 in the three months ended August 31, 2025 to $5,031,729 for the three months ended August 31, 2026. Gross profit as a percentage of sales for the three months ended August 31, 2026 was 82.6%, as compared to 67.6% for the three months ended August 31, 2025 primarily as a result of the recovery of previously paid IEEPA customs duties of $550,929. Excluding this benefit, gross profit as a percentage of net revenues was 73.6%.
Previous wording
For the three months ended February 28, 2026, provision for income tax expense was $64,306. For the three months ended February 28, 2025, we had a provision for income tax expense of $53,085.
Current wording
For the three months ended August 31, 2026, provision for income tax expense was $99,590, compared to $115,058 for the three months ended August 31, 2025, representing effective tax rates of 19.1% and 25.6%, respectively. The decrease in the effective tax rate was primarily due to increased tax exemptions related to research and development.
Previous wording
As a result of the above, we reported a net income of $203,046 and $576,662 for the three months ended February 28, 2026 and 2025, respectively.
Current wording
As a result of the above, we reported net income of $420,571 for the three months ended August 31, 2026, compared to net income of $334,294 for the three months ended August 31, 2025, an increase of $86,277, or 25.8%.
Previous wording
Basic and diluted earnings per share for the three months ended February 28, 2026 were $0.03 and $0.02, respectively, compared to basic and diluted earnings per share of $0.09 and $0.07, respectively, for the three months ended February 28, 2025.
Current wording
Basic and diluted earnings per share for the three months ended August 31, 2026 were $0.06 and $0.05, respectively, compared to basic and diluted earnings per share of $0.05 and $0.04, respectively, for the three months ended August 31, 2025.
Previous wording
We are currently engaged in product sales and development. Although we have experienced operating losses in prior periods, we expect to continue generating net income and positive cash flow in the fiscal year ending May 31, 2026. Based on our current cash balances and anticipated operating cash flows, we believe we have sufficient liquidity to meet working capital needs for at least one year from the issuance date of the accompanying consolidated financial statements.
Current wording
We are currently engaged in product sales and development and services. Although we earned net income in the fiscal years ended May 31, 2026 and 2025, we have experienced operating losses in prior periods. We expect to continue generating net income and to generate positive cash flow in the fiscal year ending May 31, 2027, although we cannot provide any assurance.
Previous wording
We plan to manage expenses relative to expected revenue and may reinvest near-term cash to support revenue growth. In recent years, we have generated sufficient cash to support our operations and required debt payments, and we expect this to continue, although we cannot provide any assurance. Management remains focused on expanding product lines and our customer base to drive revenue. However, future cash demands may exceed historical levels. If needed, we may seek additional capital, although there is no assurance that financing will be available on acceptable terms or at all. Subject to these uncertainties, we believe we have sufficient capital and liquidity to fund operations for at least one year from the issuance date of the accompanying consolidated financial statements.
Current wording
As of August 31, 2026, we had cash and cash equivalents of $7,928,587, working capital of $10,275,401 and no outstanding borrowings. We plan to manage expenses relative to expected revenue and may reinvest near-term cash to support revenue growth. In recent years, we have generated sufficient cash to support our operations, and we expect this to continue, although we cannot provide any assurance. Management remains focused on expanding product lines and our customer base to drive revenue. However, future cash demands may exceed historical levels. If needed, we may seek additional capital, although there is no assurance that financing will be available on acceptable terms or at all. Subject to these uncertainties, based on our current cash balances and anticipated operating cash flows, we believe we have sufficient capital and liquidity to fund operations and meet working capital needs for at least one year from the issuance date of the accompanying unaudited consolidated financial statements.
Previous wording
Cash Flows for the nine months ended February 28, 2026 and 2025
Current wording
Cash Flows for the three months ended August 31, 2026 and 2025
Previous wording
Net cash flows used in investing activities for the nine months ended February 28, 2026 and 2025, was $208,850 and $255,778, respectively, due to the purchase of intangibles and property and equipment for our business.
Current wording
Net cash flows used in investing activities for the three months ended August 31, 2026 was $165,213 due to the purchase of intangibles and property and equipment for our business. For the three months ended August 31, 2025, net cash flows used in investing activities was $94,497, primarily attributable to the cash used in the purchase of intangibles relating to our expansion into new product lines.
Previous wording
Net cash flows provided by financing activities for the nine months ended February 28, 2026 was $167,655 primarily related to net advances made from a related party of $169,425. Net cash provided by financing activities for the nine months ended February 28, 2025 was $11,142.
Current wording
Net cash flows used in financing activities for the three months ended August 31, 2026 was $130,999 and related to net payments made to a related party. Net cash provided by financing activities for the three months ended August 31, 2025 was $150,461 primarily related to net advances from a related party of $151,491.
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, preferred stock, 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 to obtain, 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.
Current wording
We are dependent on our product sales and services to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock, preferred stock, 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 to obtain, 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 have no present plan or commitment to obtain additional financing, and we anticipate that our existing cash and cash equivalents and cash expected to be provided by operations will be sufficient to meet our working capital requirements for at least the next twelve months. 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.
Previous wording
As of February 28, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Current wording
As of August 31, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Previous wording
Significant accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates.
Current wording
Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates.
Previous wording
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.
Current wording
The Company estimates an allowance for expected credit losses over the contractual life of its accounts receivable in accordance with ASC 326. 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 written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
For the nine months ended February 28, 2026, provision for income tax expense was $412,479. For the nine months ended February 28, 2025, provision for income tax expense was $120,335.
Previous report — wording carried elsewhere
Basic and diluted earnings per share for the nine months ended February 28, 2026 were $0.18 and $0.15, respectively, compared to basic and diluted earnings per share of $0.17 and $0.13, respectively, for the nine months ended February 28, 2025.