Axil Brands, Inc 10-K for FY2025
Axil Brands, Inc. (AXIL)
About this 10-K
Axil Brands, Inc filed this 10-K on August 21, 2025, covering the fiscal year ended May 31, 2025 (FY2025).
Headline figures
Fiscal year ended May 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $26.26M
- down 4.5% from $27.5M a year earlier
- Net income
- $854.99K
- down 57.3% from net income of $2M a year earlier
- Diluted EPS
- $0.10
- down 52.4% from $0.21 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE FISCAL YEAR ENDED
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Zip Code) | ||
| (Address of Principal Executive Offices) |
(
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The |
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:
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Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
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If securities are registered pursuant to Section
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Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Act). YES ☐
As of November 29, 2024 the last business day of
the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common
equity held by non-affiliates was $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Shares Outstanding | ||
| Title of Class | August 18, 2025 | |
| Common Stock |
Documents incorporated by reference:
Table of Contents
| i |
Cautionary Note Regarding Forward-Looking Information
This Annual Report on Form 10-K, in particular Part II Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations, including expected growth; the economy in general or the future of the beauty and hair care industry and the hearing protection and ear bud business, all of which are subject to various risks and uncertainties.
There are a number of factors that could cause our actual results to differ from those indicated in the forward-looking statements, many of which are outside of our control. They include: the impact of unstable market and general economic conditions on our business, financial condition and stock price, including inflationary cost pressures, increased tariffs and other trade restrictions and barriers, interest rate changes, decreased discretionary consumer spending, supply chain disruptions and constraints, labor shortages, ongoing economic disruption, the possibility of an economic recession and other macroeconomic factors, geopolitical events and uncertainty, including the effects of the Ukraine-Russia conflict, and conflict in the Middle East; and other downturns in the business cycle or the economy; our financial performance and liquidity, including our ability to successfully generate sufficient revenue to support our operations; our expectations regarding our financing arrangements and our ability to obtain additional capital if and as needed, including potential difficulties of obtaining financing due to market conditions resulting from geopolitical conditions and other economic factors; risks related to our operations and international markets, such as fluctuations in currency exchange rates, different regulatory environments, trade barriers and sanctions, exchange controls, and social and political instability; changes in the regulatory environment in which we operate, including environmental, health and safety regulations, including those related to sustainability; our ability to protect and defend our intellectual property; continuity and security of information technology infrastructure and the potential impact of cybersecurity breaches or disruptions to our management information systems; widespread outages, interruptions or other failures of operational, communication, and other systems; competition; our ability to retain our management and employees and the potential impact of labor shortages; demands on management resources; availability and cost of the raw materials we use to manufacture our products, including the impacts of inflationary cost pressures, tariffs, and ongoing supply chain disruptions and constraints, which have been, and may continue to be, exacerbated by the Russia-Ukraine conflict, the conflict in the Middle East and other geopolitical conflicts; additional tax expenses or exposures; product liability claims; the potential outcome of any legal or regulatory proceedings, including ongoing litigation, the disposition of which may have an adverse effect upon our business, financial condition, or results of operations; our ability to engage in acquisitions, investments, partnerships, strategic alliances or dispositions when desired; global or regional catastrophic events, including the effects of natural disasters, which may be worsened by the impact of climate change; effectiveness of our marketing strategy, demand for and market acceptance of our products, as well as our ability to successfully anticipate consumer trends; and to realize anticipated benefits from our efforts to expand into new geographic markets and product lines and into offline sales; labor relations; the potential impact of sustainability matters; implementation of environmental remediation matters; our ability to maintain effective internal control over financial reporting; and risks related to our common stock, including our ability to maintain our stock exchange listing.
When used in this Annual Report on Form 10-K and other reports, statements, and information we have filed with the Securities and Exchange Commission (the “SEC”), in our press releases, presentations to securities analysts or investors, or in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “can,” “may,” “will,” “expect,” “should,” “could,” “would,” “continue,” “anticipate,” “intend,” “likely,” “estimate,” “project,” “propose,” “plan,” “design,” “potential,” “focus” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Annual Report on Form 10-K that are not statements of historical fact may be deemed to be forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this Annual Report on Form 10-K. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. We do not assume the obligation to update any forward-looking statement, except as required by applicable law. You should carefully evaluate such statements in light of factors described in this annual report.
| ii |
The terms “we,” “us,” “our,” “AXIL,” and “the Company” refer to AXIL Brands, Inc. and, where applicable, its consolidated subsidiaries.
This report also contains estimates and other statistical data obtained from publicly available information, including industry publications, relating to market size and growth and other data about our industry. Industry publications generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy and completeness of the information. Similarly, while we believe that the statistical data and industry data are reliable, we have not independently verified the data. We have not sought the consent of the sources to refer to their reports appearing or incorporated by reference in this report. We did not commission any third party for collecting or providing data used in this report.
| iii |
PART I
ITEM 1. BUSINESS.
General
AXIL is engaged in the manufacturing, marketing, sale, and distribution of innovative hearing and audio enhancement and protection products, as well as professional-grade hair and skin care products under various trademarks and brands. Previously, on June 16, 2022, the Company acquired substantially all of the assets of Axil & Associated Brands Corp. (“A&A”), a leader in hearing and audio enhancement and protection, which marked our initial entry into the hearing technology market. On February 14, 2024, the Company changed its name from “Reviv3 Procare Company” to “AXIL Brands, Inc.” to better reflect the breadth of our operations. On May 5, 2025, the Company incorporated a new wholly owned subsidiary, Sharper Vision Marketing Inc., which will offer marketing services, in an effort to capitalize on its internal marketing expertise and convert a historical cost center into a strategic advantage.
The Company is not, and has never been, a shell company. AXIL operates on a fiscal year ending May 31.
Our Segments
Following the A&A acquisition, we conduct our business primarily through two operating segments: hearing enhancement and protection, and hair and skin care. See Note 13 to our Consolidated Financial Statements in this report for financial information for these segments. We concentrate on attracting new customers and retaining existing customers to increase our total revenue. For the fiscal year ended May 31, 2025, the hearing enhancement and protection segment and the hair and skin care segment accounted for approximately 94% and 6% of our revenue, respectively. Our newly incorporated subsidiary established on May 5, 2025, relating to marketing services, did not have any material activity for the year ended May 31, 2025.
Our Strategy
The Company's strategy centers on driving growth by expanding market share within existing channels and developing new ones through both online and traditional platforms. The Company’s primary focus is optimizing its e-commerce strategies, building sales teams to meet the needs of distribution channels, and enhancing value through strategic partnerships.
The Company’s innovation strategy continues to prioritize technological improvements in the hearing enhancement and protection sector. The Company is actively evaluating opportunities to expand into adjacent verticals that leverage its existing consumer-facing capabilities. As part of this strategy, AXIL established a marketing services subsidiary on May 5, 2025, to internalize a function that has historically represented a significant operating expense. This move is intended to allow the Company to both optimize its internal marketing efficiency and explore revenue opportunities by offering these services to third-party clients. AXIL plans to continue to prioritize investments that strengthen its core hearing protection and personal care businesses while strategically expanding into service-based revenue streams.
Hearing Enhancement and Protection Segment
AXIL designs, manufactures, markets, and distributes advanced hearing enhancement and protection products for a wide range of applications and industries. Our product portfolio includes earplugs, earmuffs, earbuds, and outdoor speakers, many of which incorporate Bluetooth and wireless audio technologies. These products serve consumers in sporting goods, tactical, industrial, and recreational markets, as well as military, law enforcement, and federal agencies.
We currently offer 25 products across 46 stock keeping units (SKUs), with plans to expand the line. Product development is guided by consumer preferences and brand alignment, supported by third-party design services. Sales are primarily direct-to-consumer through our website (www.goaxil.com), as well as through third-party e-commerce platforms, dealers, and national retail chains.
Our key offerings include:
| · | GS Extreme® – Bluetooth-enabled earbuds for sound enhancement and hearing protection |
| · | XCOR® True Wireless – Digital earbuds with touch control |
| · | TRACKR™ Blu – Bluetooth audio earmuffs with advanced sound enhancement and protection |
| · | X-PRO – Passive ear protection |
| -1- |
AXIL holds three active patents, one patent pending, and six registered trademarks related to this segment. For additional detail, see “Intellectual Property.” As the segment grows, we continue to enter new distribution and licensing agreements across target markets, including construction, aviation, agriculture, forestry, fitness, power sports, target shooting, motorcycling, and live event environments. We currently operate primarily in the U.S., with a growing presence in Canada, Europe, Australia, New Zealand, Asia and Africa.
The Company is growing the business as it continues to enter into new distribution and licensing agreements. There is focus on public safety and security markets, as well as entertainment venues. Sales are primarily driven by paid advertising, the expansion of our distribution network, and strategic partnerships, with continued growth expected, including in offline sales. The Company continues to expand our marketing footprint in organic social, affiliate, and search engine optimization. The Company has increased its focus on opportunities in domestic and international distribution and retail sales and is allocating resources to expand its sales team, based on capital performance and available opportunities.
Hearing Enhancement and Protection Competition:
The hearing enhancement and protection products are in a distinct market that overlaps between the consumer electronics and the hearing protection device sectors. We believe the global hearing protection devices market is growing due to the greater awareness of hearing loss. According to the Center for Disease Control and Prevention, 53% of noise-exposed workers report not wearing hearing protection. Demand for innovative products for hearing protection is rising as consumers seek devices that are both comfortable and offer superior hearing protection.
The hearing protection and enhancement segment competes with ISOtunes, Walker’s, SureFire, Sordin and others. Many of our competitors in this market have more broadly diversified product lines, well established supply and distribution systems, loyal customer bases and significant financial, marketing, research and development, and other resources. We believe our principal competitive advantages include: brand recognition; product technology and innovation; product quality and safety; price; breadth of product lines; network of technology and content partners; access to third party retailers; sales channels, distributors, retailers and OEM partners; and patent protection.
Hair and Skin Care Segment
AXIL’s hair and skin care segment involves the outsourced manufacturing, marketing, and distribution of professional-grade products under the Reviv3 Procare® brand. We currently offer eight products across sixteen SKUs, with plans to expand the line in response to evolving customer needs. Our manufacturing is fulfilled through third-party co-packers and partners.
The product line includes shampoos, conditioners, scalp treatments, styling aids, and skin health solutions designed to promote healthy hair follicles and scalp function. Products are formulated to work as a system or individually, and include solutions for cleansing, conditioning, repair, protection, and volume enhancement.
Sales are driven by a multi-channel strategy including:
| · | Direct-to-consumer via our e-commerce site and third-party platforms |
| · | Domestic and international distributors |
| · | Professional salon partnerships |
We currently maintain 12 exclusive distribution agreements across the U.S., Canada, Europe, and Asia, and hold one registered trademark in this segment. In addition to expanding core distribution, we are actively exploring growth through co-branding, private-label partnerships, and enhanced digital marketing initiatives.
Hair and Skin Care Competition:
According to Fortune Business Insights, the global hair care market is projected to reach approximately $113.9 billion in 2025 to $213.5 billion by 2032, reflecting continued demand driven by consumer interest in premium, clean, and specialized products. In the United States alone, the hair care market is expected to reach $17.3 billion in 2025 to $20.6 billion in 2030, according to Mordor Intelligence.
The hair and skin care segment competes with Keranique, Zenagen, Revita and others. Many of our competitors in this market have more broadly diversified product lines, well established supply and distribution systems, loyal customer bases and significant financial, marketing, research and development and other resources. We believe our principal competitive advantages include product quality, online marketing, and drug-free solutions for healthy scalp and hair.
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Key Customers
For the hearing enhancement and protection segment which accounted for 94% of consolidated net sales, no customers accounted for more than 10% of our net sales in the fiscal year ended May 31, 2025. Approximately 80% of our consolidated net sales were direct-to-consumer via Shopify and Amazon for the fiscal year ended May 31, 2025.
As is customary in the industry, none of our customers is under any obligation to continue purchasing products from us in the future.
Key Suppliers
Similar to other specialty retailers, we purchase a significant portion of our total inventory from a limited number of vendors. During fiscal year 2025, two vendors accounted for 90% of total purchases in our hearing enhancement and protection segment, with one vendor representing 67% and the other 23%. In our hair and skin care segment, a single vendor accounted for 79% of total purchases and a second vendor accounted for 19% of total purchases. The loss of any one or more of these key vendors or our failure to establish and maintain relationships with these and other vendors could have a material adverse effect on our results of operations and financial condition. Our relationships with our vendors allowed us to maintain a competitive in-stock position.
Customer Service and Support
Key elements of our customer service approach are listening to customers, empathizing with their concerns, responding timely to their requests, and following up with them to make sure any issues have been properly addressed. In order to ensure that sufficient quality of service is provided, we use a customer service platform that integrates all of our systems to provide complete and timely data and tracks all support tickets and conversations with customers. Our customer service manager performs regular monthly reviews of performance metrics and reviews processes.
Governmental Regulation
We are subject to a variety of laws, rules and regulations in numerous jurisdictions within the U.S., Canada, Europe, Australia, New Zealand, and Africa. These laws, rules and regulations cover several diverse areas including consumer health and safety, and employee health and safety. These U.S. federal, state, and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. The compliance costs and operational burdens imposed by these laws and regulations could be significant. As a result of the often rapidly evolving changes, the application, interpretation, and enforcement of these and other laws and regulations are often uncertain and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current policies and practices. We are committed to conducting our business in accordance with applicable laws, rules and regulations.
Environmental Matters: We believe that we are in compliance with applicable foreign, federal, state, and local laws, rules and regulations relating to the protection of the environment, and that continued compliance will not have any material effect on our capital expenditures, earnings, or competitive position.
Intellectual Property
We intend to protect our technology by filing patent applications for the technologies that we consider important to our business. We also rely on trademarks, trade secrets, copyrights and unpatented know-how to protect our proprietary rights.
We recognize the value of our intellectual property and have taken, and will continue to take, appropriate measures to safeguard it against misappropriation. There can be no assurance, however, that such actions will provide meaningful protection from competition. In the absence of intellectual property protection, we may be vulnerable to competitors who attempt to copy or imitate our products or processes.
While we believe that our patents and other proprietary rights are important to our business, we also believe that, due to the rapid pace of technological change in the markets we serve, the successful manufacture and sale of our products also depends upon our engineering, manufacturing, marketing and servicing skills.
It is our practice to require that all of our employees and third-party product development consultants assign to us all rights to inventions or other discoveries relating to our business that were made while working for us. In addition, all employees and third-party product development consultants agree not to disclose any private or confidential information relating to our technology, trade secrets or intellectual property.
| -3- |
At May 31, 2025, we held three active U.S. patents and had one pending U.S. patent application covering various aspects of our technology. Our U.S. patents expire at various times beginning in 2035 and extending through 2038. During the fiscal year ended May 31, 2025, no new U.S. patents were issued to us and no U.S. patents expired.
We have seven federally registered trademarks for which we consider to be of material importance to our business. The registrations for these trademarks are in good standing with the U.S. Patent & Trademark Office. Our trademark registrations must be renewed at various times, and we intend to renew our trademarks, as necessary, for the foreseeable future.
In addition, we own reviveprocare.com and www.goaxil.com. As with phone numbers, we do not have and cannot acquire any property rights to an Internet address. The regulation of domain names in the United States and in other countries is also subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we might not be able to maintain our domain names or obtain comparable domain names, which could harm our business.
Seasonality
While our business is not subject to substantial seasonal fluctuations, we do experience typical variations in consumer demand around certain holidays and promotional periods. These fluctuations are consistent with industry norms and do not materially impact our overall operating results.
Human Capital Management
As of May 31, 2025, we had approximately ten full-time employees, all of whom were employed in the United States and none employed outside the United States. None of our employees are covered by collective bargaining agreements or work councils. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. Overall, we consider our employee relations to be good and believe our culture to be central to the success of the Company.
Health and Safety: The health and safety of our employees is of utmost importance to us. We are continuing to enhance our safety program with additional training and internal risk and hazard assessments. We conduct policy and procedure reviews to ensure compliance with health and safety guidelines and regulatory requirements. We provide protective gear (e.g., eye protection, masks, and gloves) as required by applicable standards and as appropriate. Our goal is to achieve a level of work-related injuries as close to zero as possible through continuous investment in our safety program.
Compensation and Benefits: Our compensation and benefits program is designed to attract and reward individuals who demonstrate the ability and desire to enhance our workplace culture, support our values, drive our operational and strategic goals, and create long-term value for our stockholders.
Our Office and Corporate History
Our principal executive office is located at 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212. Our telephone number is (888) 638-8883. Axil Brands, Inc. was incorporated in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC, which was organized on July 31, 2013.
Available Information
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our filings with the SEC are available on the SEC’s website at www.sec.gov. We also maintain websites at reviveprocare.com and www.goaxil.com. We make available, free of charge, in the Investors section of our website, documents we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports. We make this information available as soon as reasonably practicable after we electronically file such materials with, or furnish such information to, the SEC. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC. Any reference to our websites in this Form 10-K is intended to be an inactive textual reference only. Copies of such documents are available in print at no charge to any stockholder who makes a request. Such requests should be made to our corporate secretary at our corporate headquarters, 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212.
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ITEM 1A. RISK FACTORS.
Investing in our securities involves a high degree of risk. The following are material factors known to us that could adversely affect our business, financial condition, or operating results, as well as adversely affect the value of an investment in our common stock. If any of the following risks actually occur, our business, financial condition, operating results, or prospects could be materially and adversely affected. Disclosure of risks should not be interpreted to imply that the risks have not already materialized, and there may be additional risks that are not presently material or known. You should carefully consider the risks described below, together with all of the other information contained in this Annual Report on Form 10-K and our other filings with the SEC, before making an investment decision.
Risks Related to Our Business and Operations
Our future growth depends on successful execution of our strategic initiatives and market acceptance of our products. Our ability to grow depends on our ability to execute our growth strategy, which includes expanding into retail channels and international markets. These initiatives require significant commitments of management and capital investments and involve operational complexity. Failure to effectively execute our growth strategy could result in missed opportunities and financial losses, which could have a material adverse effect on our business, financial condition, or results of operations. In addition, if our existing or new products fail to achieve or maintain market acceptance, we may be unable to remain competitive and our business, results of operations, and financial condition could be harmed.
Risks Related to Our Supply Chain and Cost Structure
We are subject to inflationary pressures and supply chain risks. Increases in raw material costs, transportation delays, or disruptions in supplier relationships could increase expenses or limit our ability to deliver products on time. Any inability to source sufficient raw materials for our business in a timely and cost-effective manner, or at all, could significantly impair our ability to fulfill customer orders and sell our products, which could negatively impact margins and customer satisfaction.
Inaccurate forecasting may lead to excess inventory or stockouts. To ensure adequate inventory supply, we must forecast inventory needs and place orders sufficiently in advance with our suppliers based on our estimates of future demand for particular products. Our ability to meet customer demand depends on accurate sales forecasting, which could be affected by many factors, including changes in consumer preferences for our and our competitors’ products. If we overestimate demand, we may carry obsolete or excess inventory, which could result in inventory write-downs or write-offs. If we underestimate demand, we may miss sales opportunities and have unfulfilled orders, which could negatively impact our customer relationships and result in lost revenues.
We rely on a limited number of suppliers for certain key components and raw materials. Our ability to manufacture and deliver products depends on a small number of third-party suppliers, some of whom provide proprietary or difficult-to-substitute materials. Any disruption, delay, capacity constraint, or deterioration in the financial condition of these suppliers could adversely impact our operations. We may not be able to quickly secure alternative sources for key components and raw materials on commercially reasonable terms, which could lead to production delays, increased costs, or inability to meet customer demand.
Risks Related to Legal and Regulatory Matters
Our business and the products we sell are subject to complex and evolving regulations. We are required to comply with various laws and regulations at the local, regional, state, federal, and international levels. These laws and regulations change frequently, and such changes can impose significant costs and other burdens of compliance on our business. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation that affects employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax, environmental issues, including the impact of climate change, or compliance with applicable anti-bribery laws, among other things, could have an adverse impact on our financial condition and results of operations. In addition, changes in enforcement priorities by governmental agencies charged with enforcing existing laws and regulations could increase our cost of doing business. Furthermore, our products are regulated by various U.S. and international authorities. As a result, our products could be subject to recalls and other remedial actions. Product safety, labeling, and licensing concerns may result in us voluntarily removing selected products from our inventory. Recalls or the voluntary removal of our products can result in lost sales, potential harm to our reputation, increased customer service costs, and legal expenses. In addition, changes in labeling, safety, or marketing laws may increase compliance costs or limit our ability to sell certain products. Non-compliance with any of these laws could result in fines, product recalls, or reputational damage, which could have a material adverse effect on our business, results of operations, and financial condition.
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Changes in U.S. and international trade policies, including tariffs and import rules, could increase our costs and disrupt operations. We source a significant portion of our products and components from international suppliers, and we sell our products in a number of countries. U.S. and international trade policy is subject to ongoing changes, including adjustments to tariff rates, enforcement practices, and import rules and regulations. For example beginning August 29, 2025, all inbound shipments, regardless of value, may be subject to tariffs, duties, and customs processing fees. These changes could result in higher landed costs for our products, increased administrative burden, and potential supply chain delays. If we are unable to offset these cost increases or pass them on to customers, our margins and financial results could be materially adversely impacted.
We may not be able to maintain effective internal control over financial reporting. As a public company, we are required to design, implement, and maintain effective internal control over financial reporting in accordance with the Sarbanes–Oxley Act, including ongoing evaluation, remediation of deficiencies, and adaptation to changes in our operations, systems, and regulations. We regularly assess risks, monitor controls, and implement enhancements to help ensure the accuracy and timeliness of our financial reporting; however, we cannot guarantee that our controls will prevent or detect all errors or noncompliance. Failure to maintain effective controls could result in material misstatements, financial restatements, regulatory scrutiny, increased costs, and loss of investor confidence.
Risks Related to Our Capital and Securities
We may need additional capital, which may not be available or may dilute existing stockholders. To support our operations or strategic plans, we may need to raise capital through equity or debt financings. There can be no assurance that such additional funding will be available on terms attractive to us, or at all. If we cannot secure funding on acceptable terms, or at all, we may be forced to delay growth initiatives, which could have an adverse effect on our business, financial condition, and results of operations. If additional funding is raised through the issuance of equity or convertible securities, holders of our common stock could suffer significant dilution, and any new shares we issue could have rights, preferences, and privileges superior to those of our common stock.
The issuance of convertible securities may dilute our common stockholders. We have previously issued Series A Convertible Preferred Stock in connection with acquisitions. Conversions of these preferred shares into common stock, or the issuance shares in connection with other convertible securities that we may issue in the future, could significantly dilute common stockholders and negatively affect the market price of our common stock.
Our common stock price may be volatile and as a result may not be attractive to investors. Our stock price has been and may continue to be volatile due to a variety of factors, many of which are beyond our control, including, but not limited to, the following:
| · | our actual or anticipated financial performance; |
| · | changes in the supply or demand of our products; |
| · | our ability to execute our growth strategy; |
| · | speculation about our business in the press or investor community; |
| · | the degree of trading liquidity in our common stock, including our ability to remain listed on the NYSE American; |
| · | stock market price and volume fluctuations of other publicly traded companies, and in particular, companies that are in our industry; |
| · | investor perceptions of our industry or our prospects; |
| · | macroeconomic trends and conditions; |
| · | announcements by us or our competitors of new product offerings, significant acquisitions, or strategic partnerships; or |
| · | additions and departures of key personnel. |
In addition, the stock market may experience significant price and volume fluctuations, which may be unrelated to the operating performance of particular companies but could cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our Company or its performance.
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Risks Related to Technology and Cybersecurity
A failure of our IT systems or a cybersecurity breach could disrupt our business. We rely on IT infrastructure, including hardware, networks, software, digital platforms and third-party systems to operate our business and communicate with customers. These uses give rise to cybersecurity risks, including security breaches, system disruption, theft, and inadvertent release of information. We have implemented measures to prevent and mitigate cybersecurity breaches. To date, we are not aware of any cybersecurity incidents that have had or are reasonably expected to have a material adverse effect on our operations. However, we or our third-party service providers may experience cybersecurity incidents in the future. There can be no assurance that our operations will not be materially adversely impacted by future cybersecurity incidents, and there is a risk that we may incur significant costs in protecting against or remediating cyberattacks or other cybersecurity breaches. A significant IT failure, data breach, or cyberattack could harm our reputation, disrupt operations, and expose us to legal or regulatory liabilities. In addition, the theft, destruction, loss, misappropriation, release of sensitive or confidential information, or interference with the IT infrastructures of third parties on which we rely, including suppliers and customers, could result in a disruption to our supply chain, which could adversely affect our business, financial condition, or results of operations. We also incur costs in order to comply with cybersecurity or data privacy regulations or with requirements imposed by business partners. Data privacy and cybersecurity laws in the United States and internationally are constantly changing, and the implementation of these laws has become more complex. Any security breach, whether successful or not, would harm our reputation and could damage our competitive position and cause the loss of customers. In addition, any such breach, or any material failure on our part to comply with applicable laws, could subject us to litigation, government investigation or enforcement actions or other regulatory sanctions, regulatory penalties or fines, or costly response measures.
Risks Related to Macroeconomic and External Conditions
Economic downturns or shifts in consumer behavior may reduce consumer demand for our products. Unfavorable economic factors that are beyond our control, including those impacting discretionary spending, may reduce consumer demand for our products. These factors include, but are not limited to, economic uncertainty, including potential recession, inflation, tariffs, supply chain disruptions, foreign currency exchange rate fluctuations, and changing tax rates and policies. Any one or a combination of these factors could adversely affect consumer spending and preferences. If consumer demand for our products decreases, our revenue and profitability may be materially and adversely impacted.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 1C. CYBERSECURITY.
Cybersecurity is an important part of our Enterprise
Risk Management (“ERM”) program, and the Company seeks to address cybersecurity risks through a comprehensive, cross-functional
approach.
Our executive management team is responsible for assessing and managing risks from cybersecurity threats to the Company. In addition, in light of the pervasive and increasing threat from cyberattacks, the Board and the Audit Committee, with input from management, assesses the Company’s cybersecurity threats and the measures implemented by the Company in an effort to mitigate and prevent cyberattacks. The Audit Committee consults with management regarding ongoing cybersecurity initiatives, and requests management to report to the full Board regularly on their assessment of the Company’s cybersecurity program and risks. Both the Audit Committee and the full Board receive regular quarterly reports from management on cybersecurity risks and timely reports regarding any significant cybersecurity incident, as well as ongoing updates regarding any such incident until it has been addressed.
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ITEM 2. PROPERTIES.
We lease approximately 2,793 rentable square feet of office space at 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212, serving as our principal offices. The lease commenced on November 1, 2024, and expires on January 31, 2029. Monthly base rent is $11,168 for the first 12 months, with scheduled increases thereafter. Rent is abated in months 2, 15, and 30. We believe this office space is in good condition and adequately supports our administrative and corporate functions.
We also lease approximately 6,050 square feet of office and warehouse space at 777 S. Auto Mall Drive, Unit 107, American Fork, Utah 84003, under a sublease agreement that began on October 1, 2024, and continues through September 30, 2027. Base rent is $7,684 per month for the first 12 months, with escalations thereafter. Rent is abated for three months in the first year. Additional estimated monthly charges of $1,210 are assessed for common area maintenance, taxes, and insurance. This facility supports operations for our two primary segments.
We believe that these facilities are in good condition, adequately maintained, and suitable to meet our current business needs.
ITEM 3. LEGAL PROCEEDINGS.
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.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock trades on the NYSE American, under the symbol “AXIL.”
Securities outstanding and holders of record
On August 18, 2025, the total common shares issued and outstanding were 6,657,717 and we had 167 stockholders of record of our common stock.
Dividend Policy
We have never paid any cash dividends on our common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends on our common stock will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, applicable restrictions in our Certificate of Incorporation, applicable restrictions in our Bylaws, contractual limitations, and other factors that our Board deems relevant.
Recent Sales of Unregistered Securities
There were no unregistered securities issued during the fourth quarter of 2025.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our financial statements and the notes thereto included in this Report under Item 8 Financial Statements and Supplementary Data. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. Please see the section entitled “Cautionary Note Regarding Forward-Looking Information” above for more information regarding the risks associated with forward-looking information.
Overview
The Company is engaged in the manufacturing, marketing, sale and distribution of high-tech, innovative hearing and audio enhancement and protection products that provide cutting-edge solutions for people with varied applications across many industries and professional quality hair and skin care products under various trademarks and brands.
We have two reportable segments: hair and skin care, and hearing enhancement and protection. In addition, we have recently incorporated a wholly owned subsidiary with the intent to offer marketing services. This new subsidiary is expected to support third-party clients by leveraging our direct-to-consumer expertise to deliver performance-driven marketing solutions.
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.
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Our overall business strategy is to establish market awareness of our products through our direct-to-consumer campaigns. Our strategy centers on driving growth by expanding market share within existing channels and developing new ones through both online and traditional platforms. Our primary focus is optimizing our e-commerce strategies, building sales teams to meet the needs of distribution channels, and enhancing value through strategic partnerships. The Company is also working to expand its offline retail presence and enter into new international markets. We believe the increase in awareness will allow us to increase distribution and gain customers through our distribution partners’ retail establishments, with the goal of helping us achieve growth in market share and diversify our sales channels; however, we cannot provide any assurances that such increases will occur, or that we will realize the anticipated benefits of our actions.
Business Update
The Company entered into a strategic supply arrangement with a national membership-based retail chain, marking a significant milestone in our wholesale channel expansion strategy. Under this agreement, the retailer placed a substantial initial purchase order that is expected to be fulfilled across the first and early second quarter of fiscal 2026. While there can be no assurances that additional purchase orders will be placed or as to the timing of the fulfillment of any orders, this development is anticipated to drive meaningful revenue growth and enhance brand visibility across a broader customer base.
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.
In May 2025, we received prominent media recognition in leading military publications—including Military Times, Air Force Times, Marine Corps Times, and Navy Times—highlighting our advanced hearing protection and enhancement technology and elevating brand credibility among professional and tactical audiences.
In the fourth quarter of fiscal 2025, the Company experienced a temporary disruption in operations as a result of newly imposed international tariffs that affected our supply chain. While these external factors led to an increase in cost of goods sold and contributed to softer-than-expected sales during the quarter, management implemented a series of internal operational efficiencies that successfully mitigated the broader financial impact.
We continue to make steady progress on our supply chain transition strategy, which is intended to build a more resilient and responsive supply chain, in response to elevated U.S. tariffs and broader geopolitical risks. Key operational milestones are being met as planned, including the ongoing relocation of senior manufacturing leadership to the United States and early-stage development of domestic production capabilities. We believe these initiatives will position us well to navigate the evolving trade environment and support long-term competitiveness. We remain focused on execution and expect to provide additional updates as key phases of our domestic manufacturing build-out progress are completed.
While we continue to experience near-term cost pressure related to imported components, our mitigation strategies — including selective sourcing adjustments and pricing initiatives — remain on track. We believe the majority of the tariff-related impact was concentrated in the fourth quarter, and we do not expect a material ongoing effect into fiscal 2026 based on the tariffs currently in place. If tariff rates change or other changes in trade policy are implemented, the expected impact on our operations could change.
On July 4, 2025, legislation commonly referred to as The One Big Beautiful Bill Act of 2025 (the “OBBBA”) was enacted in the U.S. The OBBBA makes permanent the extension of certain provisions of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. Additionally, the OBBBA makes changes to certain U.S. corporate tax provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.
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Results of Operations
Our results of operations are summarized below.
| Fiscal Year Ended May 31, 2025 | Fiscal Year Ended May 31, 2024 | |||||||
| Sales, net | $ | 26,257,522 | $ | 27,498,539 | ||||
| Cost of sales | $ | 7,615,954 | $ | 7,321,838 | ||||
| Gross profit | $ | 18,641,568 | $ | 20,176,701 | ||||
| Total operating expenses | $ | 17,480,203 | $ | 18,673,321 | ||||
| Income from operations | $ | 1,161,365 | $ | 1,503,380 | ||||
| Net income after tax | $ | 854,988 | $ | 2,003,134 | ||||
We calculate EBITDA by taking net income calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), and adjusting for income taxes, interest income or expense, and depreciation and amortization. We calculate adjusted EBITDA as EBITDA, further adjusted for stock-based compensation. Adjusted EBITDA is also presented as a percentage of revenue, which is calculated by dividing the non-GAAP Adjusted EBITDA for a period by revenue for the same period. Other companies may calculate EBITDA and adjusted EBITDA differently, limiting the usefulness of these measures for comparative purposes. We believe that these non-GAAP measures of financial results provide useful information regarding certain financial and business trends relating to our financial condition and results of operations, and management considers EBITDA and adjusted EBITDA important indicators in evaluating our business on a consistent basis across various periods for trend analyses. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our financial statements and are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Investors should review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measure included below. Investors should not rely on any single financial measure to evaluate our business.
| Fiscal Year Ended May 31, 2025 | Fiscal Year Ended May 31, 2024 | |||||||
| Net income (GAAP) | $ | 854,988 | $ | 2,003,134 | ||||
| Provision (benefit) for income taxes | 453,828 | (220,205 | ) | |||||
| Interest income, net | (135,915 | ) | (177,833 | ) | ||||
| Depreciation and amortization | 148,498 | 130,610 | ||||||
| Total EBITDA (Non-GAAP) | 1,321,399 | 1,735,706 | ||||||
| Adjustments: | ||||||||
| Stock-based compensation | 1,108,934 | 267,183 | ||||||
| Total Adjusted EBITDA (Non-GAAP) | $ | 2,430,333 | $ | 2,002,889 | ||||
| Sales, net (GAAP) | $ | 26,257,522 | $ | 27,498,539 | ||||
| Adjusted EBITDA as a percentage of Sales, net (Non-GAAP) | 9.3 | % | 7.3 | % | ||||
Net sales for the year ended May 31, 2025 decreased by $1,241,017 or 4.5%, as compared to the year ended May 31, 2024. This decrease was primarily due to reduced advertising expenditure, which adversely affected direct to consumer sales, partially offset by an increase in sales through our distribution channels. The net effect in the reduction of advertising expense was a positive impact to operating income. Additionally, the year-over-year decline in revenue during the fourth quarter was partially attributable to a temporary disruption in operations related to international tariff changes, which impacted product availability and timing of sales.
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Cost of sales includes primarily the cost of products, freight-in costs, 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 year ended May 31, 2025, the overall cost of sales increased by $294,116 or 4.0%, as compared to the year ended May 31, 2024. Cost of sales as a percentage of net revenues for the year ended May 31, 2025 was 29.0% as compared to 26.6% for the year ended May 31, 2024. The increase in cost of sales, as a percentage of sales, was primarily attributable to an increase in sales to distributors in both our hair and skin care products and our hearing enhancement and protection segments, bearing lower margins in addition to elevated input and logistics costs resulting from tariff-related supply chain disruption in the fourth quarter.
Gross profit decreased by $1,535,133 or 7.6% from $20,176,701 in the year ended May 31, 2024 to $18,641,568 for the year ended May 31, 2025. Gross profit as a percentage of sales for the year ended May 31, 2025 was 71.0%, as compared to 73.4% for the year ended May 31, 2024. The decrease in the gross profit margin for year ended May 31, 2025 was primarily attributable to an increase in cost of sales as a percentage of revenue, and an increase in discounts as a percentage of revenue.
Operating expenses consisted of marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses decreased by $1,193,118 or 6.4% from $18,673,321 in the year ended May 31, 2024 to $17,480,203 in the year ended May 31, 2025. Operating expenses as a percentage of net revenues for the year ended May 31, 2025 was 66.6% compared to 67.9% for the year ended May 31, 2024. Included in operating expenses were non-cash stock-based compensation of $1,108,934 and $267,183 in the years ended May 31, 2025 and May 31, 2024, respectively. The decrease in operating expenses was primarily due to a net decrease in advertising expenses, and a forgiveness of accounts payable amounting to approximately $220,000 partially offset by an increase of stock-based compensation of $841,751. Furthermore, professional and consulting fees decreased in the fourth quarter of 2025 as management implemented cost optimization measures in response to changes in U.S. trade policy as part of the Company’s efforts to mitigate potential adverse impacts and enhance operational resilience.
Income from operations for the year ended May 31, 2025, was $1,161,365 compared to income of $1,503,380 for the year ended May 31, 2024. The decrease in income from operations of $342,015 or 22.8% was primarily related to an increase in stock-based compensation expense partially offset by significantly lower advertising costs, along with a non-recurring gain from the forgiveness of approximately $220,000 in accounts payable.
For the year ended May 31, 2025, provision for income tax expense was $453,828. For the year ended May 31, 2024, we had an income tax benefit of $220,205.
As a result of the above, we reported a net income of $854,988 and $2,003,134 for the years ended May 31, 2025 and May 31, 2024, respectively.
Adjusted EBITDA increased by $427,444 or 21.3% from $2,002,889 for the year ended May 31, 2024 to $2,430,333 for the year ended May 31, 2025. Adjusted EBITDA as a percentage of sales, net for the years ended May 31, 2025 and May 31, 2024, was 9.3% and 7.3%, respectively. Adjusted EBITDA increased primarily due to a substantial reduction in advertising expense, which outweighed the associated decline in revenue, and was further supported by a one-time gain from the forgiveness of approximately $220,000 in accounts payable.
Basic and diluted earnings per share for the year ended May 31, 2025 were approximately $0.13 and $0.10, respectively, compared to $0.57 and $0.21 in the prior years. The prior-year EPS included a one-time gain of $1,329,588 related to preferred stock redemption; excluding that non-recurring benefit, the year-over-year decline in EPS was more moderate and corresponds to the lower net income in full year ended May 31, 2025.
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Liquidity and Capital Resources
We are currently engaged in product sales and development. Although we earned net income and have cash provided by operations in the fiscal years ended May 31, 2025 and 2024, 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.
We plan to manage expenses relative to expected revenue and may reinvest near-term cash to support revenue growth. Following the acquisition of A&A’s assets in June 2022, 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.
In fiscal year 2025, we entered into two new operating lease agreements: one for a corporate office in Beverly Hills, California, and another for a warehouse facility in American Fork, Utah. These leases began in the second quarter of fiscal 2025 and are scheduled to run through January 2029 and September 2027, respectively. The total initial lease liability and corresponding right-of-use asset recognized was approximately $767,000. As of May 31, 2025, the total lease liability was approximately $617,000, with a weighted average remaining lease term of 3.3 years and a discount rate of 13.1%. Lease costs totaled approximately $193,000 in fiscal 2025 and are recorded in general and administrative expenses. Future lease payments are expected to be funded through operating cash flows. We believe our current liquidity is sufficient to meet these obligations.
Cash Flows for the fiscal years ended May 31, 2025 and 2024
The following table provides detailed information about our net cash flows:
For the Ended | For the Ended | |||||||
| Cash Flows | ||||||||
| Net cash provided by operating activities | $ | 1,928,661 | $ | 2,677 | ||||
| Net cash used in investing activities | (394,298 | ) | (160,525 | ) | ||||
| Net cash used in financing activities | (18,385 | ) | (1,420,958 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | $ | 1,515,978 | $ | (1,578,806 | ) | |||
Operating Activities
Net cash provided by operating activities for the year ended May 31, 2025, was $1,928,661, compared to $2,677 for the year ended May 31, 2024. This improvement primarily resulted from our strategic decision to increase inventory levels as of May 31, 2024 to accommodate new product variations and packaging aimed at expanding into new markets. Inventory sold during the year ended May 31, 2025 contributed positively to cash flows. Additionally, cash flow improved due to the substantial decrease in advertising expense which had an immediate impact on cash flows, and a forgiveness of accounts payable during the year ended May 31, 2025, resulting in an improvement of operating cash flows of approximately $220,000, partially offset by timing of net changes in operating assets and liabilities excluding inventory.
Investing Activities
Net cash flows used in investing activities for the year ended May 31, 2025 was $394,298 due to the purchase of intangibles relating to increased product testing and property and equipment for the Company’s business. For the year ended May 31, 2024, net cash flows used in investing activities were $160,525, primarily attributable to the cash used in the purchase of property and equipment primarily relating to our expansion into new product lines.
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Financing Activities
Net cash flows used in financing activities for the year ended May 31, 2025 was $18,385 compared to $1,420,958 used in financing activities for the year ended May 31, 2024. The decrease in financing activities related primarily to repurchases of preferred stock amounting to $1,246,490 in the year ended May 31, 2024 that did not occur in the year ended May 31, 2025.
As of May 31, 2025, we had a secured Economic Injury Disaster Loan outstanding, administered pursuant to the CARES Act in the principal amount of $140,229, with a maturity date of May 18, 2050. The Company continues to pay interest and principal on the loan.
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.
Off-Balance Sheet Arrangements
As of May 31, 2025, 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.
Critical Accounting Policies and Estimates
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 about the effects of matters that are inherently uncertain. The critical accounting policies and practices used by the Company for the year ended May 31, 2025 financial statements relate to the policies and practices the Company uses to account for:
Accounts receivable and allowance for doubtful accounts
The Company has a policy of providing an allowance for doubtful accounts 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 bad debt expense and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
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Revenue recognition
We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of the product is transferred to the customer, typically upon shipment. In determining the transaction price, we consider discounts, promotional incentives, and expected returns. These estimates require judgment based on historical experience and current market conditions. Changes in customer behavior or promotional strategies could impact the timing and amount of revenue recognized.
Goodwill
Goodwill represents the excess of the consideration paid over the fair value of net assets acquired in a business combination. We evaluate goodwill for impairment at least annually during the fourth quarter, or more frequently if circumstances or events suggest potential impairment. Throughout the year, we monitor for indicators that might trigger an interim impairment review. Our testing may begin with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If a quantitative test is performed, fair value is estimated based on the amount a market participant would pay in a hypothetical sale of the reporting unit. When the fair value exceeds the carrying value, goodwill is considered to be not impaired. If the carrying value exceeds fair value, an impairment charge is recorded for the amount of the excess, limited to the total carrying amount of goodwill.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this Item 7A.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company and the related report of the Company’s independent registered public accounting firm thereon have been filed under Item 15 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Principal Executive Officer, and Chief Financial Officer (“CFO”) and Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2025. Based on this evaluation of disclosure controls and procedures as of May 31, 2025, our CEO and CFO concluded that our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of May 31, 2025 using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework issued in 2013. Based on the assessment, our management has concluded that as of May 31, 2025, our internal control over financial reporting was effective based on those criteria.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act that occurred during the fiscal quarter ended May 31, 2025 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
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ITEM 9B. OTHER INFORMATION.
Rule 10b5-1 Trading Plans
During the quarter ended May 31, 2025,
2025 Annual Meeting of Stockholders
The Company’s 2025 Annual Meeting of Stockholders is scheduled to be held on December 17, 2025. Stockholders of record as of October 22, 2025 will be entitled to receive notice of, and vote at, the 2025 Annual Meeting of Stockholders.
Executive Employment Agreements
On August 18, 2025, the Company entered into employment agreements (each, an “Agreement” and, collectively, the “Agreements”) with each of Jeff Toghraie, the Company’s Chief Executive Officer and Chairman, and Jeff Brown, the Company’s Chief Financial Officer and Chief Operating Officer and a director (each, an “Executive”) in order to memorialize the terms and conditions of each Executive’s continued employment in his respective position. Each Agreement will remain in effect until the Executive’s employment terminates for any reason in accordance with the terms of the Agreement.
Mr. Toghraie will receive an annual base salary of $275,000, and Mr. Brown will receive an annual base salary of $225,000. Each Executive will be eligible for an annual bonus with a target bonus opportunity of not less than 40% of his respective base salary. Each Executive may elect to receive his salary and/or the annual bonus in shares of the Company’s common stock. Each Executive is eligible to participate in long-term incentive programs of the Company, as may be made available at the discretion of the Board. Additionally, each Executive is eligible for paid vacation in accordance with the Company’s policy and is entitled to participate in the employee benefit plans offered by the Company to its senior executives. In the event of a Change of Control (as defined in the Agreements), Mr. Toghraie and Mr. Brown will receive 500,000 and 175,000 fully vested shares of the Company’s common stock (subject to adjustment), respectively. In the event the Company terminates the Executive’s employment without Cause (as defined in the Agreement) or if the Executive resigns for Good Reason (as defined in the Agreement), the Executive will receive accrued compensation and a severance payment equal to a multiple (three times, for Mr. Toghraie, or two times, for Mr. Brown) the sum of his base salary plus the greater of the average annual bonus paid for the prior three fiscal years or his target annual bonus, subject to a release of claims. Upon termination for Cause, resignation without Good Reason, death, or Disability (as defined in the Agreements), the Executive will receive only his accrued compensation. The Agreements also contain customary provisions regarding confidentiality and assignment of work product, as well as provisions relating to indemnification and D&O insurance coverage.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information about our Directors and Executive Officers
The Board is divided into three classes: Class I, Class II and Class III. Each director will serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected and such director’s successor is elected and qualified, or until such director’s earlier death, resignation, disqualification or removal from office.
The names, ages and positions of our present directors and executive officers as of August 18, 2025 are set forth below:
| NAME | AGE | DIRECTOR CLASS | POSITION | |||||
| Jeff Toghraie | 58 | Class III director, with a term expiring at the 2027 annual meeting of stockholders | Chief Executive Officer and Chairman of the Board | |||||
| Jeff Brown | 43 | Class III director, with a term expiring at the 2027 annual meeting of stockholders | Chief Financial Officer, Chief Operating Officer, and Director | |||||
| Manu Ohri | 69 | Class II director, with a term expiring at the 2025 annual meeting of stockholders | Director | |||||
| Peter Dunne | 84 | Class II director, with a term expiring at the 2025 annual meeting of stockholders | Director | |||||
| Nancy Hundt | 57 | Class I director, with a term expiring at the 2026 annual meeting of stockholders | Director | |||||
Jeff Toghraie – Chief Executive Officer and Chairman of the Board of Directors
Jeff Toghraie has served as our Chief Executive Officer and as a member of and chairman of our Board since June 2015. Mr. Toghraie joined Intrepid Global Advisors, which provides advisory services, in October 2010 and is a managing director and principal of that firm. Mr. Toghraie has been involved with various privately held development stage companies as a director and/or in advisory positions for more than 20 years.
Mr. Toghraie brings more than 20 years of experience in our industry. His background working with development stage companies and extensive business and operational experience provide us with the expertise to implement complex and innovative strategies and makes him uniquely suited to serve on our Board.
Jeff Brown – Chief Financial Officer, Chief Operating Officer, and Director
Jeff Brown has served as our Chief Financial Officer since May 2024 and Chief Operating Officer since March 2017 and as a member of our Board since February 2024. Mr. Brown also serves as the co-owner, Chairman of the board of directors and Chief Financial Officer of BZ Capital Strategies, which provides consulting services and serves as an investment vehicle. Previously, from July 2016 to March 2017, Mr. Brown held consulting positions at Polar Solar Inc., a company responsible for making commercial solar panels available to the residential market, and Mind Fitness Lab, a technology company that developed and distributed mobile applications for mental health professionals. From June 2012 until July 2015, he was the President of RNA Pro, a company that distributed agricultural supplements. He holds a master’s degree in business administration from Pepperdine University and a bachelor’s degree in political science from University of California, Irvine.
Mr. Brown brings over 15 years of operational experience in our industry. His experience, deep industry knowledge, and comprehensive understanding of the execution and operational needs of a fast-growing business allow him to provide targeted and forward-thinking insight to our Board.
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Peter Dunne – Director
Peter Dunne has been a member of our Board since February 2024. From March 2010 until December 2023, Mr. Dunne served as president of Peter Dunne Investments, LLC, a corporate advisory firm, where he served as an advisor and consultant to several U.S. and international firms on the viability of entering the Asia markets. Prior to heading his international consulting firm, Mr. Dunne acted as a transactional advisor to a number of high-profile mergers and acquisitions, including the financing and development of the Forum at Caesars Palace in Las Vegas, the acquisition of the Ralph Lauren headquarters in New York City, the acquisition of the Beverly Wilshire Hotel, and the acquisition of the Four Seasons Hotels in New York and Milan. He holds a bachelor’s degree in business administration from St. John’s University.
Mr. Dunne brings more than 20 years of experience in strategic planning. Mr. Dunne’s extensive involvement in strategic planning across a variety of domestic and international consumer and retail industries brings a unique and valuable perspective to our Board.
Manu Ohri – Director
Manu Ohri has been a member of our Board since February 2024. Mr. Ohri provides consulting and advisory services to various companies. Mr. Ohri previously served as chief financial officer of GT Biopharma, Inc., a clinical stage biopharmaceutical company, from February 2022 to June 2024. Prior to that, from January 2010 to December 2016, Mr. Ohri served as a management consultant for Anarjay Concepts, Inc., where he provided management consulting and business advisory services to privately-held and publicly traded companies. From January 2017 until June 2019, Mr. Ohri served as chief financial officer and as a member of the board of directors of ToughBuilt Industries, Inc., which designs and distributes tools and accessories to the home improvement community and the building industry. Mr. Ohri is a Certified Public Accountant and Chartered Global Management Accountant with over seven years of experience with Deloitte & Touche, LLP and PricewaterhouseCoopers, LLP. He holds a master’s degree in business administration from the University of Detroit and a bachelor’s degree in commerce from the University of Delhi. Mr. Ohri previously served as a director of Shengda Network Technology, Inc.
Mr. Ohri has over 30 years of experience working with boards of directors and financial institutions and with compliance with U.S. and international financial accounting and reporting standards, investor relations, mergers and acquisitions, strategic planning, and team-building and project management. He brings to our Board a diverse array of skills, experience, and industry knowledge.
Nancy Hundt – Director
Nancy Hundt has been a member of our Board since May 2015. She has served as chief operating officer of Academy Optical, Inc., a prescription eyewear retailer, since February 2019. Prior to that, from September 2009 to February 2019, Ms. Hundt served as director of operations for Academy Optical, Inc. Additionally, Ms. Hundt has served as a representative of the American Board of Opticianry, an optical industry retail group, since October 1991.
Ms. Hundt brings to our Board more than 30 years of strategic planning and advising experience in the retail industry. She has a diverse background as a consultant and retail sales expert, and she has a strong understanding of our business strategy.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers were involved in any legal proceedings described in Item 401(f) of Regulation S-K in the past 10 years.
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Board Committees
Our Board currently consists of five directors. Our Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each member of each standing committee of our Board qualifies as an independent director in accordance with the applicable rules of the SEC and NYSE American. Each standing committee operates pursuant to a written charter adopted by our Board, each of which is posted on the Investors section of our website at www.goaxil.com. Our Board may establish other committees as it deems necessary or appropriate from time to time.
The following table provides current committee membership for each of the committees of the Board as of August 18, 2025:
| Name | Audit | Compensation | Nominating and Corporate Governance | |||
| Jeff Toghraie | ||||||
| Jeff Brown | ||||||
| Peter Dunne | X | X | X* | |||
| Nancy Hundt | X | X* | X | |||
| Manu Ohri+ | X* | X | X | |||
* Committee chairperson.
+ Audit committee financial expert.
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Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, employees, and officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). The full text of our Code of Business Conduct and Ethics is posted on the Investors section of our website at www.goaxil.com. Any substantive amendment of the Code of Business Conduct and Ethics, and any waiver of the Code of Business Conduct and Ethics for executive officers or directors, will be made only after approval by the Board or the Audit Committee or the Nominating and Corporate Governance Committee of the Board, and will be disclosed on our website. In addition, any such amendment or waiver will be disclosed within four days on a Form 8-K filed with the SEC if then required by applicable rules and regulations, including the rules of the NYSE American, which currently require a Form 8-K to be filed disclosing any waiver of the Code of Business Conduct and Ethics for directors and officers.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. To our knowledge, based on solely a review of these reports filed with the SEC, we believe that all Section 16 filing requirements applicable to our executive officers, directors and greater than 10% stockholders were complied with during the fiscal year ended May 31, 2025.
Insider Trading Policy
The Company’s Insider Trading Policy provides
guidelines to officers, directors, employees and agents of the Company with respect to transactions in the Company’s securities.
It is also the policy of the Company that the Company will not engage in transactions in Company securities, or adopt any securities repurchase plans, while in possession of material non-public information relating to the Company or its securities other than in compliance with applicable law.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by us for the last two fiscal years ended May 31, 2025, and 2024, to our named executive officers (each, an “NEO”), who, for the fiscal year ended May 31, 2025, were Jeff Toghraie, our Chief Executive Officer and Chairman (Principal Executive Officer), and Jeff Brown, our Chief Operating Officer and Chief Financial Officer.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($)(1) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) | |||||||||||||||||||||||||||
Jeff Toghraie Chief Executive Officer and Chairman |
2025 | — | — | — | 1,403,500 | (2) | — | — | 227,100 | (3) | 1,630,600 | |||||||||||||||||||||||||
| 2024 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Jeff Brown Chief Operating Officer, Chief Financial Officer, and Director |
2025 | 144,000 | — | — | 1,002,500 | (2) | — | — | 120,000 | (4) | 1,266,500 | |||||||||||||||||||||||||
| 2024 | 144,000 | 67,000 | — | — | — | — | — | 211,000 | ||||||||||||||||||||||||||||
| (1) | The value of option awards in this table represents the fair value of such awards granted or modified during the fiscal year, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The assumptions used to determine the valuation of the awards are discussed in Note 9—Stockholders’ Equity to our financial statements included herein. |
| (2) | On October 8, 2024, the Compensation Committee of the Board approved the grant of 350,000 options to purchase the Company’s common stock to Mr. Toghraie and 250,000 options to purchase the Company’s common stock to Mr. Brown. The options were granted effective October 14, 2024 and have an exercise price of $4.01 per share, a term of 10 years from the grant date, and vest and become exercisable in 48 equal monthly installments over the four-year period from date of grant, subject to the executive’s continued service with the Company. |
| (3) | Consists of consulting fees paid by the Company to Intrepid Global Advisors, Inc., of which Mr. Toghraie is the managing director, |
| (4) | Consists of consulting fees paid by the Company to BZ Capital Strategies, of which Mr. Brown is the co-owner, Chairman and Chief Financial Officer. |
Our Chief Executive Officer, Jeff Toghraie, and our Chief Financial Officer and Chief Operating Officer, Jeff Brown, did not have formal employment agreements with the Company in place as of May 31, 2025. Mr. Toghraie was entitled to an annual performance bonus, health benefits and equity awards at the discretion of the Board. Mr. Brown received a base salary of $144,000 per year and is entitled to annual performance bonus, paid vacation, optional health benefits and equity awards at the discretion of the Board.
On August 18, 2025, the Company entered into the Agreements with each of Jeff Toghraie, the Company’s Chief Executive Officer and Chairman, and Jeff Brown, the Company’s Chief Financial Officer and Chief Operating Officer and a director in order to memorialize the terms and conditions of each Executive’s continued employment in his respective position. Each Agreement will remain in effect until the Executive’s employment terminates for any reason in accordance with the terms of the Agreement.
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Mr. Toghraie will receive an annual base salary of $275,000, and Mr. Brown will receive an annual base salary of $225,000. Each Executive will be eligible for an annual bonus with a target bonus opportunity of not less than 40% of his respective base salary. Each Executive may elect to receive his salary and/or the annual bonus in shares of the Company’s common stock. Each Executive is eligible to participate in long-term incentive programs of the Company, as may be made available at the discretion of the Board. Additionally, each Executive is eligible for paid vacation in accordance with the Company’s policy and is entitled to participate in the employee benefit plans offered by the Company to its senior executives. In the event of a Change of Control (as defined in the Agreements), Mr. Toghraie and Mr. Brown will receive 500,000 and 175,000 fully vested shares of the Company’s common stock (subject to adjustment), respectively. In the event the Company terminates the Executive’s employment without Cause (as defined in the Agreement) or if the Executive resigns for Good Reason (as defined in the Agreement), the Executive will receive accrued compensation and a severance payment equal to a multiple (three times, for Mr. Toghraie, or two times, for Mr. Brown) the sum of his base salary plus the greater of the average annual bonus paid for the prior three fiscal years or his target annual bonus, subject to a release of claims. Upon termination for Cause, resignation without Good Reason, death, or Disability (as defined in the Agreements), the Executive will receive only his accrued compensation. The Agreements also contain customary provisions regarding confidentiality and assignment of work product, as well as provisions relating to indemnification and D&O insurance coverage.
As of May 31, 2025, we did not have any retirement, pension, or profit sharing plans for the benefit of our executive officers and directors.
As of May 31, 2025, the Company did not maintain any arrangement with any of the NEOs that would entitle an NEO to any compensation in connection with the NEO’s resignation, retirement or other termination or in connection with a change of control of the Company. In August 2025, the Company entered into the Agreements, which provide for the compensation described above. In addition, under the Amended and Restated 2022 Equity Incentive Plan (as amended and restated, the “Plan”), upon the occurrence of a change of control (as defined in the Plan), unless otherwise provided in an award agreement: (i) all outstanding stock options will become immediately exercisable in full; (ii) all outstanding performance shares will vest in full as if the applicable performance conditions were achieved in full, subject to certain adjustments, and will be paid out as soon as practicable; and (iii) all restricted stock will immediately vest in full. Subject to the Plan’s terms, the Compensation Committee or 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 to 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.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding equity awards held by the NEOs as of May 31, 2025:
| Option Awards | ||||||||||||||||
| Name | Grant Date | Number of securities underlying unexercised options (#) exercisable |
Number of securities underlying unexercised options (#) unexercisable |
Option exercise price ($) |
Option expiration date | |||||||||||
| 5/10/2022 | — | 4/20/2032 | ||||||||||||||
| 10/14/2024 | 291,667 | (1) | 10/31/2034 | |||||||||||||
| 5/10/2022 | — | 4/20/2032 | ||||||||||||||
| 10/14/2024 | 208,333 | (1) | 10/31/2034 | |||||||||||||
| (1) | These options vest and become exercisable in 48 equal monthly installments beginning on October 31, 2024. |
Policies and Practices Related to the Grant of Certain Equity Awards
Director Compensation
The following table sets forth the compensation paid by us to our non-employee directors for the fiscal year ended May 31, 2025, which consisted of the value of restricted stock awards of 5,000 shares of the Company’s common stock granted to our non-employee directors during that fiscal year. We did not pay any other compensation to our non-employee directors during the fiscal year ended May 31, 2025. Mr. Toghraie and Mr. Brown do not receive any separate compensation for their services as director.
| Name | Fees Earned or ($) |
Stock Awards ($)(1) |
All Other ($) |
Total ($) |
|||||
| Peter Dunne | — | 20,750 | — | 20,750 | |||||
| Nancy Hundt | — | 20,750 | — | 20,750 | |||||
| Manu Ohri | — | 20,750 | — | 20,750 |
| (1) | Reflects the grant date fair value of 5,000 shares of restricted common stock granted to each of our non-employee directors on January 13, 2025, which vest on January 13, 2026, except as otherwise provided in the applicable award notice. The value of stock awards in this table represents the fair value of such awards granted or modified during the fiscal year, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718. The assumptions used to determine the valuation of the awards are discussed in Note 9—Stockholders’ Equity to our financial statements included herein. As of May 31, 2025, each of the non-employee directors held a total of 5,000 unvested shares of the Company’s restricted common stock. |
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth the ownership, as of August 18, 2025, of our common stock by each person known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock, our directors, our named executive officers, and our directors and current executive officers as a group. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose.
Shares of our common stock that are subject to options currently exercisable or exercisable within 60 days of August 18, 2025 and to outstanding shares of convertible preferred stock are deemed to be outstanding for computing the percentage ownership of the person holding these options or shares of preferred stock and the percentage ownership of any group in which the holder is a member, but are not deemed outstanding for computing the percentage of any other person.
We have based our calculation of the percentage of beneficial ownership on 6,657,717 shares of our common stock outstanding on August 18, 2025.
Unless otherwise noted below, the address for each of the stockholders in the table below is c/o Axil Brands, Inc., 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212.
| Name of Beneficial Owner | Number of Shares Beneficially Owned |
Percent | ||
| 5% Stockholders: | ||||
| Jeff Toghraie, Chief Executive Officer and Chairman(1) | 3,537,038 | 46.1% | ||
| Don Frank Nathaniel Vasquez(2) | 1,276,251 | 19.2% | ||
| Shircoo, Inc.(3) | 534,510 | 8.0% | ||
| Named Executive Officers and Directors (not otherwise included above): | ||||
| Jeff Brown, Chief Financial Officer, Chief Operating Officer and Director(4) | 287,643 | 4.2% | ||
| Peter Dunne, Director(5) | 31,250 | * | ||
| Nancy Hundt, Director(6) | 12,273 | * | ||
| Manu Ohri, Director(7) | 20,001 | * | ||
| * | ||||
| All Current Executive Officers and Directors as a Group (5 persons)(8) | 3,888,205 | 49.6% |
* Represents beneficial ownership of less than 1% of the outstanding common stock.
| (1) | Based on a Schedule 13D/A filed with the SEC on April 2, 2025 by Jeff Toghraie, Intrepid Global Advisors, Inc. (“Intrepid”), of which Mr. Toghraie is the managing director, and Don Frank Nathaniel Vasquez, and a Form 4 filed by Mr. Toghraie with the SEC on October 15, 2024. Mr. Toghraie may be deemed to beneficially own, in the aggregate, 3,537,038 shares of common stock, consisting of 1,246,700 shares of common stock held directly by Intrepid, over which Mr. Toghraie and Intrepid have shared voting and dispositive power; 1,275,000 shares of common stock held directly by Don Frank Nathaniel Vasquez, over which Mr. Toghraie and Intrepid have shared voting power with Mr. Vasquez, pursuant to a Voting Agreement and Irrevocable Proxy between Mr. Vasquez and Intrepid, pursuant to which Intrepid is authorized to vote and exercise all voting rights with respect to such shares; 242,500 shares of common stock issuable upon the exercise of options held by Mr. Toghraie that are exercisable within 60 days of August 18, 2025; and 772,838 shares of common stock that may be acquired upon the conversion of Series A Preferred Stock held directly by Intrepid, over which Mr. Toghraie and Intrepid have shared dispositive power. The terms of the Voting Agreement and Irrevocable Proxy will expire on the earlier of: (i) October 17, 2026, (ii) such date and time designated by Intrepid in a written notice to Mr. Vasquez or (iii) the written agreement of Intrepid and Mr. Vasquez to terminate such agreement. The Series A Preferred Stock is convertible into shares of common stock on a twenty-for-one basis, at the option of the holder at any time; provided, 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 rules and regulations thereunder. The principal business office of Intrepid is located at 325 N. Maple Drive, #5114, Beverly Hills, California 90210. |
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| (2) | Based on a Schedule 13D/A filed with the SEC on April 2, 2025 by Jeff Toghraie, Intrepid, and Don Frank Nathaniel Vasquez, Mr. Vasquez has sole voting power over 1,251 shares of common stock, sole dispositive power over 1,276,251 shares of common stock and shared voting power over 1,275,000 shares of common stock with Intrepid and Mr. Toghraie, pursuant to a Voting Agreement and Irrevocable Proxy between Mr. Vasquez and Intrepid, pursuant to which Intrepid is authorized to vote and exercise all voting rights with respect to such shares. The terms of the Voting Agreement and Irrevocable Proxy will expire on the earlier of: (i) October 17, 2026, (ii) such date and time designated by Intrepid in a written notice to Mr. Vasquez or (iii) the written agreement of Intrepid and Mr. Vasquez to terminate such agreement. The principal business address of Mr. Vasquez is 4700 Summerville Lane, Prosper, Texas 75078. |
| (3) | The principal address of Shircoo, Inc. is 2350 Allview Terrace East, Los Angeles, California 90068. |
| (4) | Based on a Schedule 13D/A filed with the SEC on January 13, 2025 by Jeff Brown and BZ Capital Strategies, of which Mr. Brown is the co-owner, Chairman and Chief Financial Officer, and a Form 4 filed by Mr. Brown with the SEC on January 13, 2025, Mr. Brown may be deemed to beneficially own, in the aggregate, 287,643 shares of common stock consisting of: (i) 15,143 shares of common stock held directly by Mr. Brown; (ii) 172,500 shares of common stock issuable upon the exercise of options held by Mr. Brown that are exercisable within 60 days of August 18, 2025; and (iii) 100,000 shares of common stock held directly by BZ Capital Strategies. The principal business address of BZ Capital Strategies is 200 N. Swall Drive, Unit 513, Beverly Hills, California 90211. |
| (5) | Includes 5,000 shares of unvested restricted stock, which will vest on January 13, 2026. |
| (6) | Includes 5,000 shares of unvested restricted stock, which will vest on January 13, 2026. |
| (7) | Includes 5,000 shares of unvested restricted stock, which will vest on January 13, 2026, and 10,000 shares held by Anarjay Concepts Inc., of which Mr. Ohri is the principal. |
| (8) | Includes 15,000 shares of unvested restricted common stock, options to purchase 415,000 shares of common stock that are exercisable within 60 days of August 18, 2025, and 772,838 shares of common stock that may be acquired upon the conversion of Series A Preferred Stock. This group includes all current directors and executive officers as of August 18, 2025. |
Equity Compensation Plan Information
The following table sets forth equity compensation plan information as of May 31, 2025:
| Plan category | Number of securities (a) |
Weighted-average (b) |
Number of securities (c) | |||||||||
| Equity compensation plans approved by security holders(1) | 902,750 | $ | 3.48 | 1,122,385 | ||||||||
| Equity compensation plans not approved by security holders | - | $ | - | - | ||||||||
| Total | 902,750 | $ | 3.48 | 1,122,385 | ||||||||
| (1) | Represents shares of common stock to be issued upon exercise of outstanding options to purchase common stock granted pursuant to the Plan as of May 31, 2025. The Plan provides for an annual increase on April 1 of each calendar year, beginning in 2022 and ending in 2031, subject to the approval of the Plan administrator on or prior to such date. Such 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 Plan’s administrator. The number of shares authorized for issuance under the Plan will not change unless the Plan’s administrator affirmatively approves an increase in the number of shares authorized for issuance prior to April 1 of the applicable year. All shares available for future issuance are under the Plan. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director Independence
We are subject to the corporate governance requirements of the NYSE American and apply the rules of the SEC and the NYSE American to evaluate the independence of our directors. The Board has determined that, of the five Board members, each of Mr. Dunne, Ms. Hundt, and Mr. Ohri qualifies as independent under the NYSE American listing standards. Accordingly, our Board is currently comprised of a majority of directors who qualify as independent directors under the rules adopted by the SEC and NYSE American, and all Board committee members are independent for the purposes of the committees on which they serve. In making such independence determinations, our Board considered the relationships that each non-employee director has with us and all other facts and circumstances that our Board deemed relevant in determining their independence.
Related Party Transactions
The following is a description of transactions or series of transactions since June 1, 2023, to which we were or will be a party, in which:
| · | the amount involved in the transaction exceeds the lesser of (i) $120,000 or (ii) 1% of the average of our total assets at year end for the last two completed fiscal years; and |
| · | in which any of our executive officers, directors, director nominees or holders of 5% or more of any class of our voting capital stock, or any immediate family member of any of the foregoing, had or will have a direct or indirect material interest. |
The Company reviews and approves all related party transactions.
The Company’s Chief Executive Officer and Chairman, Jeff Toghraie, is the managing director of Intrepid. Intrepid has, from time to time, provided advances to the Company for working capital purposes. Intrepid was paid approximately $227,100 in consulting fees for the year ended May 31, 2025 and $0 for the year ended May 31, 2024. At May 31, 2025, the Company had an amount receivable from Intrepid of $222 relating to an overpayment, and as of May 31, 2024, an amount payable of $11,798. During the year ended May 31, 2025, advances from Intrepid were $6,950,210 and repayments to Intrepid were $6,962,230. During the year ended May 31, 2024, advances from Intrepid were $8,939,403 and repayments to Intrepid were $9,085,677. Advances made from Intrepid are short-term in nature and non-interest bearing. Additionally, pursuant to a voting agreement, effective June 16, 2022, as amended effective November 7, 2022, with A&A and Intrepid, the Company was subject to certain limitations on our ability to sell its capital stock until June 2024.
The Company’s Board member, Chief Financial Officer, and Chief Operating Officer is the co-owner, Chairman and Chief Financial Officer, and has a controlling interest in BZ Capital Strategies. BZ Capital Strategies was paid $120,000 in consulting fees for the year ended May 31, 2025 and $0 for the year ended May 31, 2024.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Pursuant to the Audit Committee Charter, the Audit Committee is required to pre-approve all auditing services and permitted non-audit services to be performed for us by our independent registered public accounting firm, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act that are approved by the Audit Committee prior to the completion of the audit). For fiscal years 2025, all services performed by our independent auditors were pre-approved by the Audit Committee.
Fees
The following table sets forth the fees paid to Salberg & Company, P.A., for the fiscal years ended May 31, 2025 and 2024:
| Fiscal Year Ended May 31, 2025 |
Fiscal Year Ended May 31, 2024 | |||||||
| Audit fees (1) | $ | 132,800 | $ | 126,000 | ||||
| Audit related fees (2) | 2,500 | — | ||||||
| Tax fees | — | — | ||||||
| All other fees | — | — | ||||||
| Total | $ | 135,300 | $ | 126,000 | ||||
| (1) | These fees relate to the audit of our annual financial statements and the review of our interim quarterly financial statements. |
| (2) | These fees relate to audit related consulting. |
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
AXIL BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2025 and 2024
CONTENTS
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
AXIL Brands, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AXIL Brands, Inc. and subsidiaries (the “Company”) as of May 31, 2025 and 2024, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended May 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of May 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for each of the two years in the period ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Salberg & Company, P.A.
We have served as the Company’s auditor since 2017.
August 21, 2025
2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7326
Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com • info@salbergco.com
Member National Association of Certified Valuation Analysts • Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
| F-1 |
AXIL BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| May 31, 2025 | May 31, 2024 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Due from related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| OTHER ASSETS: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right of use asset | ||||||||
| Deferred tax asset | ||||||||
| Other assets | ||||||||
| Goodwill | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Contract liabilities- current | ||||||||
| Note payable - current | ||||||||
| Due to related party | ||||||||
| Lease liability, current | ||||||||
| Income tax liability | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| LONG TERM LIABILITIES: | ||||||||
| Lease liability, long term | ||||||||
Note payable, long term | | |||||||
| Contract liabilities- long term | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (see Note 10) | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
Preferred stock, $ par value; and shares authorized as of May 31, 2025 and May 31, 2024, respectively; and shares issued and outstanding as of May 31, 2025 and May 31, 2024, respectively | ||||||||
| Common stock, $ par value: and shares authorized as of May 31, 2025 and May 31, 2024, respectively; and shares issued and outstanding as of May 31, 2025 and May 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained Earnings (Accumulated deficit) | ( | ) | ||||||
| Total Stockholders' Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
See accompanying notes to these consolidated financial statements.
| F-2 |
AXIL BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 2025 AND 2024
| 2025 | 2024 | |||||||
| Sales, net | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | $ | $ | ||||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing | $ | $ | ||||||
| Compensation and related taxes | ||||||||
| Professional and consulting | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | $ | $ | ||||||
| INCOME FROM OPERATIONS | $ | $ | ||||||
| OTHER INCOME (EXPENSE): | ||||||||
| Gain on settlement | ||||||||
| Other income | ||||||||
| Interest income | ||||||||
| Interest expense and other finance charges | ( | ) | ( | ) | ||||
| Other income (expense), net | $ | $ | ||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | $ | $ | ||||||
| Provision (benefit) for income taxes | ( | ) | ||||||
| NET INCOME | $ | $ | ||||||
| Deemed dividend on preferred stock buyback | $ | $ | ||||||
| Net income available to common shareholders | $ | $ | ||||||
| NET INCOME PER COMMON SHARE: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
See accompanying notes to these consolidated financial statements.
| F-3 |
AXIL BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 2025 AND 2024
| For the year ended May 31, 2025 | Retained | |||||||||||||||||||||||||||
| Common Stock | Additional | Earnings/ | Total | |||||||||||||||||||||||||
| Preferred Stock | Issued/Issuable | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, May 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock options expense | — | — | ||||||||||||||||||||||||||
| Stock based compensation | — | |||||||||||||||||||||||||||
| Preferred shares converted to common | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net income for the year ended May 31, 2025 | — | — | ||||||||||||||||||||||||||
| Balance, May 31, 2025 | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| For the year ended May 31, 2024 | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, May 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Restricted stock awards | — | |||||||||||||||||||||||||||
| Stock options expense | — | — | ||||||||||||||||||||||||||
| Preferred stock buyback | ( | ) | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||
| Net income for the year ended May 31, 2024 | — | — | ||||||||||||||||||||||||||
| Balance, May 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See accompanying notes to these consolidated financial statements.
| F-4 |
AXIL BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2025 AND 2024
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| (Recovery)/provision for credit losses | ( | ) | ||||||
| (Reversal of inventory obsolescence)/Inventory Obsolescence | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Gain on forgiveness of account payable | ( | ) | ||||||
| Gain on settlement | ( | ) | ||||||
| Deferred income taxes | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Other current liabilities | ( | ) | ||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of intangibles | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repurchase of preferred stock | ( | ) | ||||||
| Repayment of equipment financing | ( | ) | ||||||
| Repayment of note payable | ( | ) | ( | ) | ||||
Advances from a related party | | |||||||
| Repayments to a related party | ( | ) | ( | ) | ||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH - Beginning of year | ||||||||
| CASH - End of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: | ||||||||
| Initial recognition of right of use assets recognized as lease liability | $ | $ | ||||||
See accompanying notes to these consolidated financial statements.
| F-5 |
AXIL BRANDS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2025 AND 2024
Note 1 – Organization
As part of AXIL Brands, Inc.’s (together with its subsidiaries, the “Company,” “we,” “us” or “our”) ongoing rebranding efforts, the Company changed its name from Reviv3 Procare Company to AXIL Brands, Inc. effective February 14, 2024. Reviv3 was incorporated in the State of Delaware on May 21, 2015 as a reorganization of Reviv3 Procare, LLC which was organized on July 31, 2013. The Company’s corporate headquarters are located at 9150 Wilshire Boulevard, Suite 245, Beverly Hills, California 90212. Its phone number is (888) 638-8883. In March 2022, the Company incorporated a subsidiary “Reviv3 Acquisition Corporation” (now known as “AXIL Distribution Company”) and in June 2022, completed the acquisition of certain assets of Axil & Associated Brands Corp. (“A&A”). In addition, on May 5, 2025, the Company incorporated a new wholly owned subsidiary, Sharper Vision Marketing Inc., which did not have any material activity for the year ended May 31, 2025.
The Company is engaged in the manufacturing, marketing, sale and distribution of high-tech hearing and audio enhancement and protection products that provide cutting edge solutions for consumers, with varied applications across many industries; as well as professional quality hair and skin care products. These product lines are both sold throughout the United States, Canada, Europe and Asia. On February 14, 2024, the Company successfully completed efforts to uplist from the over-the-counter, or OTC, markets to the NYSE American stock exchange (“NYSE American”).
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements for the fiscal years ended May 31, 2025 and 2024 have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include the accounts of the Company and its consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Reverse Stock Split
Effective as of January 16, 2024, the Company effected
a reverse stock split (the “Reverse Stock Split”) of the Company’s issued shares of common stock at a ratio of
Use of estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the 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 doubtful accounts, 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 reclassifications have been made to the prior
year to conform with the current year reporting. For the year ended May 31, 2024, $
| F-6 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
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 is 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 and prepayments for trade shows and marketing events which will be utilized within
a year, prepayments on credit cards and 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 was $
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 two-year or three-year limited warranty on its hearing enhancement and hearing protection products. The Company records the costs of repairs and replacements, as they are incurred, to the cost of sales.
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.
| F-7 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
The Company sells a variety of hair and skin care products and electronic hearing and enhancement products. The Company recognizes revenue for the agreed upon sales price when a purchase order is received from the customer and subsequently the product is shipped to the customer, which satisfies the performance obligation. Consideration paid to the customer to promote and sell the Company’s products is typically recorded as a reduction in revenues.
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. Product performance obligations include shipment of products and related accessories and service performance obligations include extended warranty coverage.
However, as the historical redemption rate under our warranty policy has been low, the option is not accounted for as a separate performance obligation. The Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer.
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 to be contractually billed to the customer while variable consideration includes the 30-days and 60-days right of return that applies to the hearing protection and enhancement segment and hair and skin care segment, respectively. To estimate product returns, the Company analyzes historical return levels, current economic trends, and changes in customer demand. Based on this information, the Company reserves a percentage of product sale revenue and accounts for the estimated impact as a reduction in the transaction price.
Allocate the transaction price to the performance obligations in the contract. For contracts that contain multiple performance obligations, the Company allocates the transaction price to the performance obligations on a relative standalone selling price basis.
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 for services (extended warranty) is recognized over time on a ratable basis over the warranty period.
As of May 31, 2025 and May 31, 2024, contract liabilities
amounted to $
| F-8 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Cost of Sales
The components of cost of sales include the cost of the product, shipping fees 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 $
Marketing, selling and advertising
Sales, marketing and advertising costs are expensed as incurred.
Customer Deposits
Customer deposits consisted of prepayments from customers to the Company. The Company will recognize the prepayments as revenue upon delivery of products in compliance with its revenue recognition policy.
Fair value measurements and fair value of financial instruments
The Company adopted ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. 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. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. 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:
| Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. |
| Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
| Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
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 at 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.
| F-9 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
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.
| F-10 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
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
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.
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. For the years ended May 31, 2025 and 2024, certain stock options, preferred shares and restricted stock awards were excluded from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net income.
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:
| Schedule of net loss per share | ||||||||
| For the Year Ended | ||||||||
| May 31, | May 31, | |||||||
| 2025 | 2024 | |||||||
| Net income | $ | $ | ||||||
| Gain on redemption of preferred shares | ||||||||
| Income available to common shareholders | $ | $ | ||||||
| Weighted average basic shares | ||||||||
| Dilutive securities: | ||||||||
| Convertible preferred stock | ||||||||
| Stock options | ||||||||
| Restricted stock awards | ||||||||
| Weighted average dilutive shares | ||||||||
| Earnings per share: | ||||||||
| Basic | $ | $ | ||||||
| Diluted | $ | $ | ||||||
| F-11 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Lease Accounting
The Company adopted Accounting Standards Codification Topic 842, Leases, on June 1, 2019, using the modified retrospective transition method. Under this standard, the Company is required to recognize 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 two reportable segments: (a) the sale of hearing protection and hearing enhancement products, and (b) the sale of hair and skin care products. There were no changes to the Company’s reportable segments during the year ended May 31, 2025. A new legal entity was incorporated during the fiscal year; however, it has not been reported as a separate segment as it had no operations during the reporting period.
The Company also provides disclosures of revenue and long-lived assets by geographic area in accordance with ASC 280. See Note 13 – “Business Segment and Geographic Area Information” for additional information.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This guidance requires additional annual and interim disclosures for reportable segments. This new standard does not affect the recognition, measurement or financial statement presentation. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU effective June 1, 2024. The adoption of the guidance did not have a material impact on the accompanying consolidated financial statements.
| F-12 |
Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requiring additional rate-reconciliation categories, annual income tax payments by jurisdiction, and foreign vs. domestic pre-tax income. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company has not early adopted this guidance. The Company is currently evaluating the impact of this standard on its future income tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Note 3 – Accounts Receivable, net
Accounts receivable, net consisted of the following:
| Schedule of accounts receivable | ||||||||
| May 31, 2025 | May 31, 2024 | |||||||
| Customers receivable | $ | $ | ||||||
| Merchant processor receivable | ||||||||
| Less: Allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivables, net | $ | $ | ||||||
During the year ended May 31, 2025, the Company recognized
a net recovery from credit losses of $
Note 4 – Inventory, net
Inventory, net consisted of the following:
| Schedule of inventory | ||||||||
| May 31, 2025 | May 31, 2024 | |||||||
| Finished Goods | $ | $ | ||||||
| Raw Materials | ||||||||
| Inventory, net | $ | $ | ||||||
At May 31, 2025 and 2024, inventory held at third
party locations amounted to $
| F-13 |
Note 5 – Property and Equipment
Property and equipment, stated at cost, consisted of the following:
| Schedule of property and equipment | ||||||||||
| Estimated Life | May 31, 2025 | May 31, 2024 | ||||||||
| Promotional display racks | $ | $ | ||||||||
| Furniture and fixtures | ||||||||||
| Computer equipment | ||||||||||
| Plant equipment | ||||||||||
| Office equipment | ||||||||||
| Automobile | ||||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||||
| Total Property, plant and equipment, net | $ | $ | ||||||||
Depreciation expense totaled $
Note 6 – Intangible Assets
Intangible assets consisted of the following:
| Schedule of intangible assets | ||||||||||
| Estimated Life | May 31, 2025 | May 31, 2024 | ||||||||
| Licensing rights | $ | $ | ||||||||
| Customer relationships | ||||||||||
| Trade names | ||||||||||
| Website | ||||||||||
| Product certification testing | ||||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
Amortization expense amounted to $
Goodwill was $
Intellectual Property
As of May 31, 2025, 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.
| F-14 |
Note 7 – Other Current Liabilities
Other current liabilities were comprised of the following:
| Schedule of other current liabilities | ||||||||
| May 31, 2025 | May 31, 2024 | |||||||
| Credit Cards | $ | $ | ||||||
| Sales Tax Payable | ||||||||
| Royalty Payment Accrual | ||||||||
| Accrued expenses | ||||||||
| Total other current liabilities | $ | $ | ||||||
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 $
| Schedule of notes payable | ||||||||
| May 31, 2025 | May 31, 2024 | |||||||
| Economic Injury Disaster Loan Program (EIDL) | $ | $ | ||||||
| Total | ||||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
The amounts of loan payments due in the next fiscals year ended May 31, are as follows:
| Schedule of notes payments due in the next twelve months | ||||
| Total | ||||
| 2026 | $ | |||
| 2027 | | |||
| 2028 | | |||
| 2029 | | |||
| 2030 | | |||
Thereafter | | |||
| Total | $ | |||
During the fiscal year ended May 31, 2019, the Company
purchased a forklift under an installment purchase plan. The loan amount was $
| F-15 |
Note 9 – Stockholders’ Equity
Shares Authorized
As of May 31, 2025 and 2024, the authorized capital of the Company consisted of and shares of common stock, par value $ per share, respectively, and and shares of preferred stock, par value $ per share, respectively.
On April 8, 2025, the Board of Directors approved,
and the holders of a majority of the
Effective as of January 16, 2024, the Company effected
the Reverse Stock Split of the Company’s issued shares of common stock at a ratio of
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 shares of non-voting Series A Preferred Stock, which, following the 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 $
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.
The conversion provisions of the Company’s Series A Preferred Stock were proportionately adjusted in connection with the Reverse Stock Split, and the number of shares of Series A Preferred Stock issued and outstanding was not affected by the Reverse Stock Split.
| F-16 |
Note 9 – Stockholders’ Equity (continued)
On March 5, 2024, the Company entered into repurchase
agreements with certain stockholders of the Company to purchase in the aggregate shares of Series A Preferred Stock
of the Company (equivalent, in aggregate, to 10,387,413 shares of the Company’s common stock on an as converted basis) for the
aggregate cash consideration of $
During the year ended May 31, 2025, certain stockholders of preferred shares converted their preferred stock into shares of common stock.
As of May 31, 2025 and 2024, and shares of Series A Preferred Stock were issued and outstanding, respectively.
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 shares of Series A Preferred Stock that were previously repurchased by the Company or converted into shares of common stock prior to such date.
Common Stock
As of May 31, 2025, shares of common stock were issued and outstanding.
See Preferred Stock and Restricted Stock Awards and Restricted Shares Issued sections within this note for additional information regarding common stock issued during the years May 31, 2025 and 2024.
The Reverse Stock Split (See Note 2), did not change the par value of the common stock, modify any voting rights or other terms of the common stock, or change the number of authorized shares of the Company. Any fractional shares remaining after the Reverse Stock Split were rounded up to the nearest whole share.
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. On October 8, 2024, the Board of Directors approved the amendment and restatement of the Plan in order to increase the number of shares authorized for issuance under the Plan by 800,000 shares, any or all of which may be issued pursuant to grants of “incentive stock options” (within the meaning of Section 422 of the Internal Revenue Code). 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.
| F-17 |
Note 9 – Stockholders’ Equity (continued)
The total number of shares initially authorized for issuance under the Plan was shares. The Plan has since been amended to increase the number of shares authorized for issuance under the Plan to 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 life for stock options granted to employees. 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.
| F-18 |
Note 9 – Stockholders’ Equity (continued)
On January 2, 2025, the Company issued stock options
to one employee to purchase, in aggregate, up to
On November 13, 2024, the Company issued stock options
to one employee to purchase, in aggregate, up to
On October 14, 2024, the Company issued to two Company
officers stock options to purchase, in the aggregate, up to
During the year ended May 31, 2024, the
Company issued stock options, to two consultants, to purchase, in the aggregate, up to
The following table presents the range of assumptions used to estimate the fair value of the stock options granted during year ended May 31, 2025:
| Schedule of stock option assumptions | ||||||
| 2025 | ||||||
| Risk free interest rate | % - | % | ||||
| Expected life | - years | |||||
| Expected volatility | % - | % | ||||
| Expected dividend | ||||||
The following table summarizes the activities for the Company’s stock option activity for the years ended May 31, 2025 and 2024:
| Schedule of summarizes relating to the Company’s stock | ||||||||||||
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Term | ||||||||||
| Outstanding as of June 1, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Outstanding as of May 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised/Forfeited | ||||||||||||
| Outstanding as of May 31, 2025 | $ | |||||||||||
| Less: Unvested at May 31, 2025 | ) | |||||||||||
| Vested at May 31, 2025 | $ | |||||||||||
During the year ended May 31, 2025, the Company expensed
$
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period. As of the May 31, 2025, the aggregate intrinsic value was $.
| F-19 |
Note 9 – Stockholders’ Equity (continued)
Restricted Stock Awards and Restricted Shares Issued
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 13, 2025, the Company granted each of its three non-employee director Board members 5,000 restricted stock awards for an aggregate
of 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 $
Effective April 10, 2025, the Company issued
shares of restricted stock to a consultant. Fifty percent of the shares vested immediately upon grant, and the remaining shares are scheduled
to vest on November 30, 2025, subject to the consultant’s continued service through that date. The total grant date fair value
of the award was $
Effective May 28, 2024, a former officer entered into a Separation Agreement and Release (the “Release”), which includes a standard release of claims and confidentiality and non-disparagement provisions. As consideration for signing the Release, the Company entered into a Consulting Agreement, dated May 28, 2024, with the former officer (the “Consulting Agreement”), pursuant to which the former officer agreed to provide transition services to the Company through October 31, 2024, unless the Consulting Agreement is terminated earlier. Pursuant to the Consulting Agreement, as compensation for services as a consultant, the former officer was granted 30,000 shares of restricted common stock valued at $298,800, which vested upon grant.
Effective February 14, 2024, the Company granted
each of its three non-employee director Board members 5,000 restricted stock awards for an aggregate of 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 $
Effective November 13, 2024, the Company issued
shares of restricted common stock to a consultant for services relating to expansion of the Company into new markets. The shares were
valued at $
The fair value of the stock grants is being recorded over the term of the service related to each grant. During the year ended May 31, 2025, the Company expensed $ related to restricted stock awards and restricted stock expense, of which $476,375 was included in General and administrative and $8,000 in Sales and marketing, on the accompanying consolidated statements of operations. During the year ended May 31, 2024, the Company expensed $ related to restricted stock awards and restricted stock expense, which was included in General and administrative in the accompanying consolidated statements of operations.
| F-20 |
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
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 is $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.
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
$
The weighted average remaining term and discount
rate for the Company’s operating leases as of May 31, 2025, was
Supplemental balance sheet information related to leases was as follows:
| Schedule of supplemental balance sheet information | ||||||||
| Assets | May 31, 2025 | May 31, 2024 | ||||||
| Right of use assets | $ | $ | ||||||
| Accumulated reduction | ( | ) | ( | ) | ||||
| Operating lease assets, net | $ | $ | ||||||
| Liabilities | ||||||||
| Lease liability | $ | $ | ||||||
| Accumulated reduction | ( | ) | ( | ) | ||||
| Total lease liability, net | ||||||||
| Current portion | ( | ) | ( | ) | ||||
| Non-current portion | $ | $ | ||||||
Maturities of operating lease liabilities were as follows as of May 31, 2025:
| Schedule of maturities of operating lease liabilities | ||||
| Operating Lease (fiscal year-end) | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
| F-21 |
Note 10 – Commitments and Contingencies (continued)
Accounts Payable
During the year ended May 31, 2025, the Company
renewed its relationship with an entity, and as a result of the agreement, $
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. Intrepid was paid approximately
$
The Company’s Board Member, Chief Financial
Officer, and Chief Operating Officer is the co-owner, Chairman and Chief Financial Officer, and has a controlling interest in BZ Capital
Strategies. BZ Capital Strategies was paid $
| F-22 |
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 $
Concentration of Revenue, Accounts Receivable, Product Line, and Supplier – Hearing Enhancement and Protection Products
The majority of hearing enhancement and protection products are sold direct-to-consumer. There was no single customer that accounted for greater than 10% of total sales of segment sales and consolidated sales for the years ended May 31, 2025 and 2024.
During the fiscal year ended May 31, 2025, hearing
enhancement and protection sales to customers outside the United States represented approximately
During the fiscal years ended May 31, 2025 and 2024 sales of hearing enhancement and protection products were comprised of the following:
| Schedule of sales by product line | ||||||||
| For The Fiscal Years Ended May 31, | ||||||||
| Hearing Enhancement and Protection Products | 2025 | 2024 | ||||||
| In-ear protection devices | % | % | ||||||
| Over-ear protection devices | % | % | ||||||
| Accessories and others | % | % | ||||||
| Total | % | % | ||||||
As of May 31, 2025, two customers accounted for accounts
receivable greater than 10% of segment account receivable, aggregating to
Manufacturing is outsourced primarily overseas via
a number of third-party vendors. The two largest vendors accounted for
Concentration of Revenue, Accounts Receivable, Product Line, and Supplier – Hair and Skin Care Products
During the fiscal year ended May 31, 2025, hair and
skin care product sales to one customer which represented over 10% of total segment sales, aggregating to
During the fiscal year ended May 31, 2025, hair and
skin care product sales to customers outside the United States represented approximately
During the fiscal year ended May 31, 2025, hair and
skin care product sales by product line which each represented over 10% of the segment sales consisted of approximately
| F-23 |
Note 12 – Concentrations (continued)
During the fiscal years ended May 31, 2025 and 2024, sales for the hair and skin care product lines comprised of the following:
| Schedule of sales by product comprised | ||||||||
| For the Fiscal Years ended | ||||||||
| Hair and Skin Care Products | May 31, 2025 | May 31, 2024 | ||||||
| Shampoos and Conditioners | % | % | ||||||
| Ancillary Products | % | % | ||||||
| Total | % | % | ||||||
At May 31, 2025, accounts receivable for hair and
skin care products that accounted for more than 10% of the segment’s total accounts receivable aggregated to
Hair and skin care product purchased inventories
and products from two vendors represented approximately
| F-24 |
Note 13 – Business Segment and Geographic Area Information
Business Segments
The Company operates in two reportable segments: Hearing Enhancement and Protection and Hair and Skin Care. The segments are determined based on the nature of the products sold and how the business is managed. On May 5, 2025, the Company incorporated a new wholly owned subsidiary, Sharper Vision Marketing Inc., which did not have any material activity for the year ended May 31, 2025.
The Chief Operating Decision Maker (“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 is Income from Operations and is included in the table below.
The Company’s segment information is as follows:
| Schedule of segment information | ||||||||||||||||||||||||
| For the years ended, | ||||||||||||||||||||||||
| May 31, 2025 | May 31, 2024 | |||||||||||||||||||||||
| Hearing enhancement and protection | Hair and skin care | Consolidated | Hearing enhancement and protection | Hair and skin care | Consolidated | |||||||||||||||||||
| Sales, net | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||
| Gross profit | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Operating expenses (Adjusted for non-cash items): | ||||||||||||||||||||||||
| Sales and marketing | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Compensation and related taxes | ||||||||||||||||||||||||
| Professional and consulting | ||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||
| Total segment expenses adjusted for non-cash items | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Segment non-cash operating income | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Corporate expenses (1) | ||||||||||||||||||||||||
| Income from Operations | $ | $ | ||||||||||||||||||||||
| Total Assets (2) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Payments for property and equipment and intangible assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| (1) |
For the year ended May 31, 2024, the former CFO's compensation related solely to public company responsibilities and is therefore entirely included in corporate expenses.
| (2) |
Geographic Area Information
During the fiscal years ended May 31, 2025 and 2024,
approximately
| F-25 |
Note 14 – Income Taxes
The Company is subject to U.S. federal rate of
The income taxes expense (benefit) for years ended May 31, 2025 and 2024 consists of the following:
| Schedule of income taxes expense (benefit) | ||||||||
| For The Fiscal Years Ended May 31, | ||||||||
| 2025 | 2024 | |||||||
| Current | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Deferred | ||||||||
| Federal | ( | ) | ||||||
| State | ( | ) | ||||||
| Income tax expense (benefit) | $ | $ | ( | ) | ||||
The following table reconciles the Company’s income tax expense (benefit) at the U.S. federal statutory rate to the actual income tax expense (benefit) for the years ended May 31, 2025 and 2024:
| Schedule of federal income tax | ||||||||
| For The Fiscal Years Ended May 31, | ||||||||
| 2025 | 2024 | |||||||
| Tax expense (benefit) computed at statutory rate of 21% | $ | $ | ||||||
| State tax expense (benefit) blended rate | ( | ) | ||||||
| Permanent differences | ||||||||
| Deferred tax true up | ( | ) | ||||||
| Other | ( | ) | ( | ) | ||||
| Tax expense (benefit) | $ | $ | ( | ) | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at May 31, are as follows:
| Schedule of deferred tax assets and liabilities | ||||||||
| As of May 31, | ||||||||
| 2025 | 2024 | |||||||
| Deferred tax assets | ||||||||
| Property, Plant and Equipment | $ | ( | ) | $ | ||||
| Intangibles | ( | ) | ||||||
| Net operating loss | ||||||||
| Stock-based compensation | ||||||||
| Others | ( | ) | ||||||
| Total gross deferred tax assets | ||||||||
| Less: Deferred tax asset valuation allowance | ||||||||
| Deferred tax liabilities | ||||||||
| Total net deferred tax assets | $ | $ | ||||||
There was no valuation allowance at May 31, 2025 and 2024.
As of May 31, 2025, the Company had California net operating loss (“NOL”) carryforwards of $1,289,587. These NOLs are available to offset future taxable income, subject to applicable limitations. California NOLs are generally subject to a 20-year carryforward period. As of May 31, 2025, the Company did not have any federal or Utah NOL carryforwards.
During the year ended May 31, 2025, the
| F-26 |
(b) Exhibits
| -30- |
| * | Management compensatory plan or arrangement. |
| + | The schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K and the Company agrees to furnish to the SEC a copy of any omitted schedules or exhibits upon request. |
ITEM 16. Form 10-K Summary
None.
| -31- |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AXIL BRANDS, INC. | ||
| Date: August 21, 2025 | BY: | /s/ Jeff Toghraie |
| Jeff Toghraie | ||
| Chief Executive Officer and Chairman of the Board of Directors (principal executive officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date |
| /s/ Jeff Toghraie | Chief Executive Officer and Chairman of the Board of Directors (principal executive officer) | August 21, 2025 |
| Jeff Toghraie | ||
| /s/ Jeff Brown | Chief Financial Officer, Chief Operating Officer and Director (principal accounting officer and principal financial officer) | August 21, 2025 |
| Jeff Brown | ||
| /s/ Peter Dunne | Director | August 21, 2025 |
| Peter Dunne | ||
| /s/ Nancy Hundt | Director | August 21, 2025 |
| Nancy Hundt | ||
| /s/ Manu Ohri | Director | August 21, 2025 |
| Manu Ohri |
| -32- |
Exhibit 4.1
DESCRIPTION OF AXIL BRANDS, INC. COMMON STOCK
August 2025
The following summarizes the terms and provisions of the common stock of AXIL Brands, Inc., a Delaware corporation (the “Company”), which common stock is registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The following summary does not purport to be complete and is qualified in its entirety by reference to the Company’s Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and Bylaws, as amended (the “Bylaws”), which the Company has previously filed with the Securities and Exchange Commission, and applicable Delaware law.
Authorized Capital
The Company’s authorized capital stock consists of 15,000,000 shares of common stock, $0.0001 par value per share (the “Common Stock”), and 28,000,000 shares of preferred stock, $0.0001 par value per share (the “Preferred Stock”).
Under Delaware law, stockholders generally are not personally liable for a corporation’s acts or debts.
Common Stock
Dividend Rights
Subject to preferences that may be applicable to any then-outstanding shares of Preferred Stock, the holders of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s Board of Directors out of legally available funds.
Voting Rights
Holders of Common Stock are entitled to one vote for each share. There is no cumulative voting with respect to the election of directors. Directors are elected by a plurality of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise required by law or the Company’s Certificate of Incorporation or Bylaws, all other matters brought to a vote of the holders of Common Stock are determined by the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote. Except as otherwise required by law or as may be provided with respect to any other outstanding class or series of the Company’s Preferred Stock, the holders of shares of Common Stock possess the exclusive voting power.
Liquidation
In the event of the Company’s liquidation, dissolution or winding up, the holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the Company’s known debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of Preferred Stock.
Rights and Preferences
All outstanding shares of Common Stock are duly authorized, fully paid and non-assessable. Holders of Common Stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences, and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that the Company may designate in the future.
Quotation
The Common Stock is listed on the NYSE American stock exchange under the symbol “AXIL.”
Preferred Stock
The Board of Directors has the authority, without further action by the holders of Common Stock, to issue up to 28,000,000 shares of Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of Common Stock. The issuance of Preferred Stock could adversely affect the voting power of holders of Common Stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of Preferred Stock could have the effect of delaying, deferring, or preventing a change of control of the Company or other corporate action. As of May 31, 2025, the Company had designated 27,773,500 shares of the Preferred Stock as Series A Preferred Stock (“Series A Preferred”), all of which were outstanding.
Series A Preferred
The Series A Preferred are convertible into shares of Common Stock on a twenty-for-one basis, at the option of the holder; provided, that the holder may not convert that number of shares of Series A Preferred which would cause the holder to become the beneficial owner of more than 5% of the Common Stock, as determined in accordance with Sections 13(d) and (g) of the Exchange Act and the applicable rules and regulations thereunder. Holders of the Series A Preferred have no dividend rights; however, no dividends or other distributions will be declared or paid on the Common Stock unless dividends at the same rate have been paid or declared on the Series A Preferred, based on the number of shares of Common Stock into which the Series A Preferred may then be converted. The Series A Preferred has no voting rights and is not subject to redemption. The Series A Preferred ranks senior to the Common Stock with respect to payments upon the liquidation, dissolution and winding up of the Company. The number of shares of Series A Preferred, and the Common Stock conversion ratio, are subject to adjustment upon the declaration of a dividend on the Common Stock payable in shares of Common Stock, any split of the Common Stock or any combination or recapitalization of the outstanding Common Stock into a different number of shares.
Anti-Takeover Effects of Provisions of Delaware Law, the Company’s Certificate of Incorporation and Bylaws and Other Agreements
Certificate of Incorporation and Bylaws
The Company’s Certificate of Incorporation and Bylaws provide that the Company’s Bylaws may be altered, amended, repealed or replaced by the Board of Directors without stockholder approval, to the extent permitted by law; provided, however, that an amendment to the Bylaws adopted by stockholders that specifies the votes necessary for the election of directors will not be further amended or repealed by the Board of Directors.
The Company’s Certificate of Incorporation provides for the Company’s Board of Directors to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because the Company’s stockholders do not have cumulative voting rights, its stockholders holding a majority of the shares of Common Stock outstanding will be able to elect all of its directors. In addition, the Company’s Bylaws allow the Company’s directors to establish the size of the Board of Directors and fill vacancies on the Board, including those created by an increase in the number of directors (subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances). The Company’s Bylaws also establish advance notice procedures for stockholders to submit proposals and nominations of candidates for election to the Board of Directors to be brought before a stockholders’ meeting. The combination of the classification of the Board of Directors, the lack of cumulative voting, the ability of the Board of Directors to fill vacancies, and the advance notice provisions make it difficult for the Company’s existing stockholders to replace its Board of Directors, as well as for another party to obtain control of the Company by replacing its Board of Directors. In addition, the Company’s Board of Directors has the power to retain and discharge its officers, which could make it more difficult for existing stockholders or another party to effect a change in management. Further, the authorization of undesignated Preferred Stock makes it possible for the Company’s Board of Directors to issue Preferred Stock with voting or other rights or preferences that could impede the success of any attempt to change the Company’s control.
| 2 |
The provisions described above may have the effect of deterring hostile takeovers or delaying changes in the Company’s control or management.
Delaware Anti-Takeover Law
The Company is subject to Section 203 of the Delaware General Corporation Law (“Section 203”), which generally prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder unless:
| · | prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; |
| · | upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or |
| · | on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. |
In general, Section 203 defines “business combination” to include the following:
| · | any merger or consolidation involving the corporation and the interested stockholder; |
| · | any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of such corporation, to or with the interested stockholder, of assets of the corporation, which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation; |
| · | subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; |
| · | subject to certain exceptions, any transaction involving the corporation that has the effect, directly or indirectly, of increasing the interested stockholder’s proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation; and |
| · | any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of such corporation), of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. |
In general, Section 203 defines an “interested stockholder” as an entity or person that, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.
| 3 |
Authorized and Unissued Shares
The Company’s authorized and unissued shares of Common Stock are available for future issuance without stockholder approval except as may otherwise be required by applicable regulations or Delaware law. The Company may issue additional shares for a variety of purposes, including future offerings to raise additional capital, to fund acquisitions and as director, employee and consultant compensation. The existence of authorized but unissued shares of Common Stock could render more difficult, or discourage an attempt, to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise.
The issuance of shares of authorized and unissued Preferred Stock by the Company could have certain anti-takeover effects under certain circumstances, and could enable the Board of Directors to render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer or other business combination transaction directed at the Company by, among other things, placing shares of Preferred Stock with investors who might align themselves with the Board of Directors.
| 4 |
Exhibit 10.19
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”) is effective as of the 18th day of August, 2025 (the “Effective Date”), between AXIL Brands, Inc. (the “Company”) and Jeff Toghraie (“Executive”). In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall continue to employ Executive, and Executive accepts such continued employment with the Company, upon the terms and subject to the conditions set forth in this Agreement, for the period beginning on the Effective Date and ending on the Date of Termination (as defined in Section 4(e) of this Agreement) (the “Term”).
2. Position and Duties; Location.
(a) Position and Duties. During the Term, Executive shall be employed by the Company as Chief Executive Officer. Executive shall report solely to the Board of Directors of the Company (the “Board”) and shall have such duties, responsibilities and authorities as are customarily associated with his position and such additional duties and responsibilities consistent with his position as may, from time to time, be properly and lawfully assigned to him by the Board.
(b) Board Service. During the Term, the Board shall cause Executive to be nominated to serve as a member of the Board for each year during the Term that Executive’s Board position is slated for reelection. Executive agrees that his service during the Term as a member of the Board shall be without additional compensation.
(c) Engaging in Other Activities. During the Term, Executive shall devote substantially all of his business time, energies and talents to serving as Chief Executive Officer of the Company, and shall perform his duties conscientiously and faithfully, subject to the reasonable and lawful directions of the Board and in accordance with the policies, rules and decisions adopted from time to time by the Company and the Board. During the Term, it shall not be a violation of this Agreement for Executive to (i) serve on civic or charitable boards, (ii) with the consent of the Board, which consent shall not be unreasonably withheld, serve on other corporate boards, and (iii) manage his personal investments, so long as such activities (individually or in the aggregate) do not significantly interfere with the performance of Executive’s responsibilities under this Agreement or Executive’s fiduciary duties to the Company.
(d) Location. Executive shall perform his duties and responsibilities hereunder principally at the Company’s corporate headquarters, which currently is in Beverly Hills, California; provided that Executive may be required under reasonable business circumstances to travel outside of such location in connection with performing his duties under this Agreement.
(e) Affiliates. Executive agrees to serve, at the Board’s request and without additional compensation, as an officer and director of each of the Company’s affiliates. As used in this Agreement, the term “affiliate” shall mean any entity controlled by, controlling, or under common control with, the Company.
1
(f) Clawback Policy. Executive acknowledges that, notwithstanding any provision of this Agreement to the contrary, any incentive-based compensation earned by, payable to, or paid to Executive shall be subject to forfeiture or repayment as may be provided under the Company’s Clawback Policy, as the same may be amended from time to time.
3. Compensation and Benefits.
(a) Base Salary. During the Term, the Company shall pay Executive an annualized base salary (“Base Salary”) at a rate of $275,000, payable in regular installments in accordance with the Company’s normal payroll practices. During the Term, the Base Salary shall be reviewed by the Board at such time as the salaries of other senior executives of the Company are reviewed generally. The Base Salary shall not be reduced, other than in connection with an across-the-board salary reduction which applies in a comparable manner to other senior executives of the Company. If so increased (or reduced), then such adjusted salary will thereafter be the Base Salary for all purposes under this Agreement.
(b) Annual Bonus. For each fiscal year of the Company during the Term, Executive shall be eligible to receive an annual bonus, with a target bonus opportunity that is not less than 40% of his Base Salary (the “Annual Bonus”). The Annual Bonus for any fiscal year, if earned, will be paid to Executive by the Company in accordance with the terms, and subject to the conditions, of the Company’s Annual Bonus program as applicable from time to time to senior executives of the Company, generally.
(c) Opportunity to Receive Base Salary and Annual Bonus in Stock. The Company shall establish procedures to permit Executive to elect, at a time and in a manner determined by the Company and in any event prior to the applicable payment date, to receive any portion Executive’s Base Salary or Annual Bonus in vested shares of the Company’s common stock, to be delivered on the same date that the applicable Base Salary or Annual Bonus amount otherwise would be payable to Executive in cash, and with the number of shares so deliverable to be determined by dividing the applicable amount of Base Salary or Annual Bonus otherwise payable in cash on the relevant date (absent Executive’s election to receive shares) by the closing price per share of the Company’s common stock on such date (less any shares retained by the Company to cover applicable tax withholding). Any shares of the Company’s common stock delivered by the Company pursuant to this Section 3(c) shall be awarded under, and counted against the available share reserve of, a stockholder-approved equity compensation program of the Company.
(d) Long-Term Incentive Programs. The Executive shall be eligible to participate in any long-term incentive award programs as may be made available by the Board (or the Compensation Committee thereof) from time to time in its discretion, including any long-term incentive programs made available from time to time to senior executives of the Company, generally.
(e) Vacation. During the Term, Executive shall be eligible for paid vacation in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally; provided that Executive shall be entitled to no less than thirty (30) paid vacation days per calendar year.
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(f) Expense Reimbursement. Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by Executive during the Term in connection with carrying out his duties hereunder in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally.
(g) Benefits. During the Term, and except as otherwise provided in this Agreement, Executive shall be eligible to participate in all welfare, fringe benefit, insurance (with coverage for members of Executive’s immediate family), retirement and other benefit plans, practices, policies and programs, maintained by the Company and its affiliates applicable to senior executives of the Company generally, in each case as amended from time to time.
(h) Indemnification and Insurance. Subject to any restrictions that may be imposed under the Company’s Clawback Policy, the Company shall indemnify Executive to the full extent provided for in its corporate charter, bylaws or any other indemnification policy or procedure as in effect from time to time and applicable to its other directors and senior executives and to the maximum extent that the Company indemnifies any of its other directors and senior executives, and he will be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and senior executives against all costs, charges, liabilities and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its affiliates or his serving or having served any other enterprise, plan or trust as a director, officer, employee or fiduciary at the request of the Board (other than any dispute, claim or controversy arising under or relating to this Agreement).
(i) Certain Expenses. Subject to any restrictions that may be imposed under the Company’s Clawback Policy, the Company agrees to pay, as incurred, to the fullest extent permitted by law, or reimburse Executive if such payment is not legally permitted, for all reasonable legal fees and expenses that Executive may in good faith incur as a result of any contest by the Company or the Executive of the validity or enforceability of or liability under, or otherwise involving, any provision of this Agreement; provided, however, that Executive shall reimburse the Company for any such payments made by the Company in connection with a contest by the Company if a court of competent jurisdiction or an arbitrator shall determine that Executive did not act in good faith in connection with such contest.
4. Termination of Employment.
(a) Death and Disability. Executive’s employment shall terminate automatically upon Executive’s death. If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, then the Company may give written notice to Executive in accordance with Section 10 of this Agreement of the Company’s intention to terminate Executive’s employment; provided that such notice is provided no later than 120 calendar days following the determination of Executive’s Disability. In such event, Executive’s employment shall terminate effective on the 30th calendar day after receipt of such notice by Executive (the “Disability Effective Date”), provided that, within the 30 calendar days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” shall mean the inability of Executive to perform the essential duties of Executive’s position by reason of any medically determined physical or mental impairment that is reasonably expected to result in death or that lasts for 120 consecutive calendar days in any one-year period, all as determined by an independent licensed physician mutually acceptable to the Company and Executive or Executive’s legal representative.
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(b) Cause. Executive’s employment with the Company may be terminated by the Company with or without Cause. For purposes of this Agreement, “Cause” means Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company or its subsidiaries, or any affiliate, customer or vendor; (iii) personal dishonesty, incompetence, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with Executive’s duties or willful failure to perform Executive’s responsibilities in the best interests of the Company or its subsidiaries; (v) illegal use or distribution of drugs; (vi) violation of any material rule, regulation, procedure or policy of the Company or its subsidiaries, the violation of which could have a material detriment to the Company; or (vii) material breach of Section 7 of this Agreement, all as reasonably determined by the Board, which determination will be conclusive.
(c) Good Reason. Executive’s employment with the Company may be terminated by Executive with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without Executive’s consent: (i) a material reduction by the Company of Executive’s title, duties, responsibilities or reporting relationship set forth in Section 2(a); (ii) a material reduction by the Company of Executive’s Base Salary (other than as permitted in Section 3(a) of this Agreement) or Executive’s target Annual Bonus opportunity; (iii) a failure to nominate Executive for re-election as a member of the Board (but for the avoidance of doubt, neither the failure by the Company’s stockholders to elect or re-elect Executive as a member of the Board, nor Executive’s resignation from the Board following such failure, shall be deemed to constitute Good Reason for purposes of this Agreement); (iv) the relocation of Executive’s principal place of employment outside of the Los Angeles, California metropolitan area, provided that Executive may be required to travel on business to the extent necessary to efficiently perform his duties under this Agreement, and such business travel shall not constitute Good Reason hereunder; or (v) any other material breach of this Agreement by the Company. A termination of Executive’s employment by Executive shall not be deemed to be for Good Reason unless (x) Executive gives notice to the Company of the existence of the event or condition constituting Good Reason within 30 calendar days after such event or condition initially occurs or exists, and (y) the Company fails to cure such event or condition within 30 calendar days after receiving such notice. Additionally, Executive must terminate his employment within 120 calendar days after the initial occurrence of the circumstance constituting Good Reason for such termination to be “Good Reason” hereunder.
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(d) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 10. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 calendar days after the giving of such notice). The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Company or Executive, respectively, hereunder or preclude the Company or Executive, respectively, from asserting such fact or circumstance in enforcing the Company’s or Executive’s rights hereunder.
(e) Date of Termination. “Date of Termination” means (i) if Executive’s employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within 30 calendar days after such notice, as the case may be, (ii) if Executive’s employment is terminated by the Company other than for Cause or Disability, or if Executive voluntarily resigns without Good Reason, the date on which the terminating party notifies the other party that such termination shall be effective, provided that on a voluntary resignation without Good Reason, the Company may, in its sole discretion, make such termination effective on any date it elects in writing between the date of the notice and the proposed date of termination specified in the notice, (iii) if Executive’s employment is terminated by reason of death, the date of death of Executive, or (iv) if Executive’s employment is terminated by the Company due to Disability, the Disability Effective Date.
(f) Resignation from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of Executive’s employment by the Company for any reason, Executive shall immediately resign from all positions that he holds or has ever held with the Company and its affiliates, except as otherwise may be requested by the Board. Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Board, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.
5. Severance and Change of Control Protections.
(a) Termination Without Cause or For Good Reason. If, during the Term, the Company terminates Executive’s employment without Cause (and not as a result of Executive’s death or Disability), or the Executive terminates his employment with the Company for Good Reason, then:
(i) The Company shall pay or provide the following payments and benefits to Executive (or to Executive’s authorized representative or estate, as applicable) (A) any Base Salary and Annual Bonus earned but unpaid through the Date of Termination, any unpaid expense reimbursements (subject to, and in accordance with, Section 3(f) of this Agreement), and, to the extent required by law, any unused vacation that accrued through the Date of Termination, with all such amounts to be paid no more than thirty (30) days after Executive’s Date of; and (B) any vested benefits to which Executive may be entitled under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”); and
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(ii) Subject to Section 6 hereof, the Company shall pay, or cause to be paid, to Executive (or to Executive’s authorized representative or estate, as applicable) severance an amount equal to three (3) times the sum of (A) Executive’s Base Salary (as in effect immediately prior to the Termination Date and disregarding any reduction that constitutes Good Reason for the Executive’s termination of employment) and (B) the average Annual Bonus paid to Executive for the preceding three fiscal years (or, if greater, Executive’s target Annual Bonus amount as in effect immediately prior to the Termination Date and disregarding any reduction that constitutes Good Reason for the Executive’s termination of employment). Any such severance payment shall be made in cash, in a single lump sum payment within thirty (30) days after the Release (as defined in Section 6) becomes effective and irrevocable in accordance with its terms.
(b) Other Terminations. If, during the Term, the Company terminates Executive’s employment for Cause, or if Executive voluntarily terminates his employment without Good Reason, or if Executive’s employment terminates as a result of his death or Disability, then the Company shall pay or provide to Executive the Accrued Benefits, payable in accordance with Section 5(a)(i) of this Agreement, and no further amounts shall be payable to Executive under this Section 5 after the Date of Termination.
(c) Change of Control.
(i) In the event of a Change of Control during the Term of the Agreement (and subject to Executive’s continued employment until the date of such Change of Control), the Company shall deliver 500,000 vested shares of the Company’s common stock to Executive, effective immediately prior to such Change of Control (less any shares retained by the Company to cover applicable tax withholding). Any shares of the Company’s common stock delivered by the Company pursuant to this Section 5(c)(i) shall be awarded under, and counted against the available share reserve of, a stockholder-approved equity compensation program of the Company. In the event of an equity restructuring (within the meaning restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor or replacement accounting standard), such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the 500,000 share number set forth above in this Section 5(c)(i) shall be appropriately adjusted by the Board, without any need for consent by Executive, in order to prevent the dilution or enlargement of Executive’s rights under this Section 5(c)(i).
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(ii) For purposes of this Agreement, a “Change of Control” means (i) consummation of a merger or consolidation of the Company with any other corporation or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the sale or transfer (other than as security for obligations of the Company) of substantially all the assets of the Company to any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, other than a person that directly or indirectly controls, is controlled by, or is under common control with, the Company; or (iii) in the absence of prior approval by the Board, the acquisition of more than 20% of the Company’s voting capital stock by any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company.
(d) Section 280G. In the event it shall be determined that any payment or distribution by the Company or any of its affiliates to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (the “Total Payments”), is or will be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the Total Payments shall be reduced to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), if the net after-tax benefit to Executive after reducing Executive’s Total Payments to the Safe Harbor Cap is greater than the net after-tax (including the Excise Tax) benefit to Executive without such reduction. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the distribution of shares of the Company’s common stock pursuant to Section 5(c)(i) of this Agreement, then by reducing any severance otherwise payable pursuant to Section 5(a)(ii) of this Agreement, then by reducing any other payment or benefit that triggers such Excise Tax in the following order: (i) reduction of cash payments; (ii) cancellation of accelerated vesting of performance-based equity awards (based on the reverse order of the date of grant); (iii) cancellation of accelerated vesting of other equity awards (based on the reverse order of the date of grant); and (iv) reduction of any other payments or benefits due to Executive (with benefits or payments in any group having different payment terms being reduced on a pro-rata basis). All mathematical determinations, and all determinations as to whether any of the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code), that are required to be made under this paragraph, including determinations as to whether the Total Payments to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made at the Company’s expense by a nationally recognized accounting firm mutually acceptable to the Company and Executive.
6. Release. Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to make any payment or provide any severance benefit under Section 5(a)(ii) of this Agreement unless: (a) Executive (or Executive’s legal representative) timely executes a release of claims agreement on a form provided by the Company, (b) Executive does not revoke the Release, and (c) the Release becomes effective and irrevocable in accordance with its terms within sixty (60) days after the termination of Executive’s employment.
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7. Work Product and Confidential Information.
(a) Executive agrees that all inventions, drawings, improvements, developments, methods, processes, programs, designs and all similar or related information which relates to the Company’s or any of its affiliates’ actual or anticipated business or research and development or existing or future products or services and which are conceived, developed, contributed to or made by Executive (either solely or jointly with others) while employed by or serving as a consultant to the Company or any of its affiliates (“Work Product”) shall be the sole and exclusive property of the Company or any such affiliate. Executive will promptly disclose such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
(b) For purposes of this Agreement, “Confidential Information” means information disclosed to Executive or known by Executive as a result of employment by the Company, not generally known to the trade or industry in which the Company or its affiliates are engaged, about products, processes, technologies, machines, customers, clients, employees, services and strategies of the Company and its affiliates, including, but not limited to, inventions, research, development, manufacturing, purchasing, financing, computer software, computer hardware, automated systems, engineering, marketing, merchandising, selling, sales volumes or strategies, number or location of sales representatives, names or significance of the Company’s customers or clients or their employees or representatives, preferences, needs or requirements, purchasing histories, or other customer or client-specific information. Such Confidential Information is and shall continue to be the property of the Company.
(c) Executive recognizes that Confidential Information is of great value to the Company, that the Company has legitimate business interests in protecting its confidential information, and that the disclosure to anyone not authorized to receive such information will cause immediate and irreparable injury to the Company. Except as required by law or in the performance of his duties for the Company, unless Executive first secures the Company’s written consent, Executive will not divulge, disclose, use, copy, disseminate or publish any Confidential Information. Executive understands and agrees that the obligations not to disclose, use, disseminate or publish Confidential Information shall continue after termination of employment for any reason.
(d) Executive agrees that upon the Date of Termination, or at any other time that the Company may request, for whatever reason, Executive shall deliver (and in the event of Executive’s death or Disability, his representative shall deliver) to the Company all computer equipment or backup files of or relating to the Company or its affiliates, all memoranda, correspondence, customer data, notes, plans, records, reports, manuals, photographs, computer tapes and software and other documents and data (and all copies thereof) relating to Confidential Information, Work Product, or the business of the Company or its affiliates which Executive has in his possession, custody or control. If the Company requests, Executive (or his representative) agrees to provide written confirmation that Executive has returned all such materials.
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(e) Notwithstanding the foregoing, nothing in this Agreement shall prohibit Executive from reporting possible violations of federal, state or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state or local law or regulation, or from receiving any whistleblower award for any such information provided to any government agency. Executive does not need the prior authorization of the Company to make any such reports or disclosures, and Executive is not required to notify the Company if Executive should make any such reports or disclosures.
(f) Executive agrees and acknowledges that money damages may not be an adequate remedy for any breach of the provisions of this Section 7 and that the Company may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Section. Nothing in this Section 7(f) will be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the other provisions of this Section 7 that may be pursued or availed of by the Company.
8. Cooperation in Investigations and Proceedings. During the Term and for a period of three (3) years thereafter, Executive shall cooperate with the Company and its affiliates, upon the Company’s reasonable request, with respect to any internal investigation or administrative, regulatory or judicial proceeding involving matters occurring, in whole or in part, during such employment with the Company and within the scope of Executive’s duties and responsibilities to the Company during his employment with the Company (including, without limitation, Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s reasonable request to give testimony without requiring service of a subpoena or other legal process, and turning over to the Company all relevant Company documents which are or may have come into Executive’s possession during his employment). In requesting Executive’s cooperation, the Company shall take into account his other personal and professional obligations. Executive shall be reimbursed for the reasonable expenses Executive incurs in connection with any such cooperation and/or assistance. Any such reimbursements shall be paid to Executive no later than the 15th day of the month immediately following the month in which such expenses were incurred (subject to Executive’s timely submission to the Company of proper documentation with respect thereto).
9. Survival. Subject to any limits on applicability contained therein, Sections 2(f), 3(h), 3(i), 4(f), 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 18 and 19 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Term or this Agreement.
10. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight carrier or mailed by first class mail, return receipt requested, to the recipient. Notices to Executive shall be sent to the address of Executive most recently provided to the Company. Notices to the Company should be sent to AXIL Brands, Inc., 9150 Wilshire Boulevard, Ste. 245, Beverly Hills, California 90212, Attention: Board of Directors. Any notice under this Agreement will be deemed to have been given when so delivered, sent or mailed.
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11. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way.
13. Withholding of Taxes. The Company and its affiliates may withhold from any amounts payable or benefits provided under this Agreement all federal, state, municipal or other taxes as the Company and its affiliates are required to withhold pursuant to any law or government regulation or ruling.
14. Counterparts. This Agreement may be executed in separate counterparts (including by electronic signature), each of which counterparts shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.
15. Successors and Assigns.
(a) This Agreement is personal to Executive, and, without the prior written consent of the Company, shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 15(c), without the prior written consent of Executive, this Agreement shall not be assignable by the Company.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.
16. Choice of Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Delaware, without regard to conflicts of law principles.
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17. Voluntary Agreement. Executive and the Company represent and agree that each has reviewed all aspects of this Agreement, has carefully read and fully understands all provisions of this Agreement, and is voluntarily entering into this Agreement. Each party represents and agrees that such party has had the opportunity to review any and all aspects of this Agreement with legal, tax or other adviser(s) of such party’s choice before executing this Agreement.
18. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
19. Section 409A Compliance.
(a) In General. Section 409A of the Code (“Section 409A”), imposes payment restrictions on “nonqualified deferred compensation” (i.e., potentially including payments owed to Executive upon termination of employment). Failure to comply with the restrictions of Section 409A could result in negative tax consequences to Executive, including immediate taxation, interest and a 20% additional income tax. It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A. Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for one or more separation pay exceptions to Section 409A, to the maximum extent possible. If neither of these exceptions applies, and if Executive is a “specified employee” within the meaning of Section 409A, then notwithstanding any provision in this Agreement to the contrary and to the extent required to comply with Section 409A, all amounts that would otherwise be paid or provided during the first 6 months following Executive’s “separation from service” (within the meaning of Section 409A) shall instead be accumulated through and paid or provided (without interest) on the first business day following the 6-month anniversary of Executive’s separation from service.
(b) Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and Executive is no longer providing services (at a level that would preclude the occurrence of a “separation from service” within the meaning of Section 409A) to the Company or its affiliates as an employee or consultant, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 409A. Notwithstanding any other provision of this Agreement to the contrary, but only to the extent necessary to comply with Section 409A, if the period in which the Release must be provided and become effective and irrevocable in accordance with its terms begins in one calendar year and ends in a second calendar year, payment of any nonqualified deferred compensation shall be made or commence in the later of such two calendar years.
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(c) Reimbursements and In-Kind Benefits. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as may be permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last business day of Executive’s taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.
| AXIL BRANDS, INC. | EXECUTIVE | |
| /s/ Jeff Brown | /s/ Jeff Toghraie | |
| By: Jeff Brown | Jeff Toghraie |
Its: Chief Financial Officer and
Chief Operating Officer
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Exhibit 10.20
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”) is effective as of the 18th day of August, 2025 (the “Effective Date”), between AXIL Brands, Inc. (the “Company”) and Jeff Brown (“Executive”). In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall continue to employ Executive, and Executive accepts such continued employment with the Company, upon the terms and subject to the conditions set forth in this Agreement, for the period beginning on the Effective Date and ending on the Date of Termination (as defined in Section 4(e) of this Agreement) (the “Term”).
2. Position and Duties; Location.
(a) Position and Duties. During the Term, Executive shall be employed by the Company as Chief Financial Officer and Chief Operating Officer. Executive shall report to the Chief Executive Officer of the Company and shall have such duties, responsibilities and authorities as are customarily associated with his position and such additional duties and responsibilities consistent with his position as may, from time to time, be properly and lawfully assigned to him by the Chief Executive Officer or the Board of Directors of the Company (the “Board”).
(b) Board Service. During the Term, the Board shall cause Executive to be nominated to serve as a member of the Board for each year during the Term that Executive’s Board position is slated for reelection. Executive agrees that his service during the Term as a member of the Board shall be without additional compensation.
(c) Engaging in Other Activities. During the Term, Executive shall devote substantially all of his business time, energies and talents to serving as Chief Financial Officer and Chief Operating Officer of the Company, and shall perform his duties conscientiously and faithfully, subject to the reasonable and lawful directions of the Board and in accordance with the policies, rules and decisions adopted from time to time by the Company and the Board. During the Term, it shall not be a violation of this Agreement for Executive to (i) serve on civic or charitable boards, (ii) with the consent of the Board, which consent shall not be unreasonably withheld, serve on other corporate boards, and (iii) manage his personal investments, so long as such activities (individually or in the aggregate) do not significantly interfere with the performance of Executive’s responsibilities under this Agreement or Executive’s fiduciary duties to the Company.
(d) Location. Executive shall perform his duties and responsibilities hereunder principally at the Company’s corporate headquarters, which currently is in Beverly Hills, California; provided that Executive may be required under reasonable business circumstances to travel outside of such location in connection with performing his duties under this Agreement.
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(e) Affiliates. Executive agrees to serve, at the Board’s request and without additional compensation, as an officer and director of each of the Company’s affiliates. As used in this Agreement, the term “affiliate” shall mean any entity controlled by, controlling, or under common control with, the Company.
(f) Clawback Policy. Executive acknowledges that, notwithstanding any provision of this Agreement to the contrary, any incentive-based compensation earned by, payable to, or paid to Executive shall be subject to forfeiture or repayment as may be provided under the Company’s Clawback Policy, as the same may be amended from time to time.
3. Compensation and Benefits.
(a) Base Salary. During the Term, the Company shall pay Executive an annualized base salary (“Base Salary”) at a rate of $225,000, payable in regular installments in accordance with the Company’s normal payroll practices. During the Term, the Base Salary shall be reviewed by the Board at such time as the salaries of other senior executives of the Company are reviewed generally. The Base Salary shall not be reduced, other than in connection with an across-the-board salary reduction which applies in a comparable manner to other senior executives of the Company. If so increased (or reduced), then such adjusted salary will thereafter be the Base Salary for all purposes under this Agreement.
(b) Annual Bonus. For each fiscal year of the Company during the Term, Executive shall be eligible to receive an annual bonus, with a target bonus opportunity that is not less than 40% of his Base Salary (the “Annual Bonus”). The Annual Bonus for any fiscal year, if earned, will be paid to Executive by the Company in accordance with the terms, and subject to the conditions, of the Company’s Annual Bonus program as applicable from time to time to senior executives of the Company, generally.
(c) Opportunity to Receive Base Salary and Annual Bonus in Stock. The Company shall establish procedures to permit Executive to elect, at a time and in a manner determined by the Company and in any event prior to the applicable payment date, to receive any portion Executive’s Base Salary or Annual Bonus in vested shares of the Company’s common stock, to be delivered on the same date that the applicable Base Salary or Annual Bonus amount otherwise would be payable to Executive in cash, and with the number of shares so deliverable to be determined by dividing the applicable amount of Base Salary or Annual Bonus otherwise payable in cash on the relevant date (absent Executive’s election to receive shares) by the closing price per share of the Company’s common stock on such date (less any shares retained by the Company to cover applicable tax withholding). Any shares of the Company’s common stock delivered by the Company pursuant to this Section 3(c) shall be awarded under, and counted against the available share reserve of, a stockholder-approved equity compensation program of the Company.
(d) Long-Term Incentive Programs. The Executive shall be eligible to participate in any long-term incentive award programs as may be made available by the Board (or the Compensation Committee thereof) from time to time in its discretion, including any long-term incentive programs made available from time to time to senior executives of the Company, generally.
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(e) Vacation. During the Term, Executive shall be eligible for paid vacation in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally; provided that Executive shall be entitled to no less than thirty (30) paid vacation days per calendar year.
(f) Expense Reimbursement. Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by Executive during the Term in connection with carrying out his duties hereunder in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally.
(g) Benefits. During the Term, and except as otherwise provided in this Agreement, Executive shall be eligible to participate in all welfare, fringe benefit, insurance (with coverage for members of Executive’s immediate family), retirement and other benefit plans, practices, policies and programs, maintained by the Company and its affiliates applicable to senior executives of the Company generally, in each case as amended from time to time.
(h) Indemnification and Insurance. Subject to any restrictions that may be imposed under the Company’s Clawback Policy, the Company shall indemnify Executive to the full extent provided for in its corporate charter, bylaws or any other indemnification policy or procedure as in effect from time to time and applicable to its other directors and senior executives and to the maximum extent that the Company indemnifies any of its other directors and senior executives, and he will be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and senior executives against all costs, charges, liabilities and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its affiliates or his serving or having served any other enterprise, plan or trust as a director, officer, employee or fiduciary at the request of the Board (other than any dispute, claim or controversy arising under or relating to this Agreement).
(i) Certain Expenses. Subject to any restrictions that may be imposed under the Company’s Clawback Policy, the Company agrees to pay, as incurred, to the fullest extent permitted by law, or reimburse Executive if such payment is not legally permitted, for all reasonable legal fees and expenses that Executive may in good faith incur as a result of any contest by the Company or the Executive of the validity or enforceability of or liability under, or otherwise involving, any provision of this Agreement; provided, however, that Executive shall reimburse the Company for any such payments made by the Company in connection with a contest by the Company if a court of competent jurisdiction or an arbitrator shall determine that Executive did not act in good faith in connection with such contest.
4. Termination of Employment.
(a) Death and Disability. Executive’s employment shall terminate automatically upon Executive’s death. If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, then the Company may give written notice to Executive in accordance with Section 10 of this Agreement of the Company’s intention to terminate Executive’s employment; provided that such notice is provided no later than 120 calendar days following the determination of Executive’s Disability. In such event, Executive’s employment shall terminate effective on the 30th calendar day after receipt of such notice by Executive (the “Disability Effective Date”), provided that, within the 30 calendar days after such receipt, Executive shall not have returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” shall mean the inability of Executive to perform the essential duties of Executive’s position by reason of any medically determined physical or mental impairment that is reasonably expected to result in death or that lasts for 120 consecutive calendar days in any one-year period, all as determined by an independent licensed physician mutually acceptable to the Company and Executive or Executive’s legal representative.
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(b) Cause. Executive’s employment with the Company may be terminated by the Company with or without Cause. For purposes of this Agreement, “Cause” means Executive’s (i) conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company or its subsidiaries, or any affiliate, customer or vendor; (iii) personal dishonesty, incompetence, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with Executive’s duties or willful failure to perform Executive’s responsibilities in the best interests of the Company or its subsidiaries; (v) illegal use or distribution of drugs; (vi) violation of any material rule, regulation, procedure or policy of the Company or its subsidiaries, the violation of which could have a material detriment to the Company; or (vii) material breach of Section 7 of this Agreement, all as reasonably determined by the Board, which determination will be conclusive.
(c) Good Reason. Executive’s employment with the Company may be terminated by Executive with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without Executive’s consent: (i) a material reduction by the Company of Executive’s title, duties, responsibilities or reporting relationship set forth in Section 2(a); (ii) a material reduction by the Company of Executive’s Base Salary (other than as permitted in Section 3(a) of this Agreement) or Executive’s target Annual Bonus opportunity; (iii) a failure to nominate Executive for re-election as a member of the Board (but for the avoidance of doubt, neither the failure by the Company’s stockholders to elect or re-elect Executive as a member of the Board, nor Executive’s resignation from the Board following such failure, shall be deemed to constitute Good Reason for purposes of this Agreement); (iv) the relocation of Executive’s principal place of employment outside of the Los Angeles, California metropolitan area, provided that Executive may be required to travel on business to the extent necessary to efficiently perform his duties under this Agreement, and such business travel shall not constitute Good Reason hereunder; or (v) any other material breach of this Agreement by the Company. A termination of Executive’s employment by Executive shall not be deemed to be for Good Reason unless (x) Executive gives notice to the Company of the existence of the event or condition constituting Good Reason within 30 calendar days after such event or condition initially occurs or exists, and (y) the Company fails to cure such event or condition within 30 calendar days after receiving such notice. Additionally, Executive must terminate his employment within 120 calendar days after the initial occurrence of the circumstance constituting Good Reason for such termination to be “Good Reason” hereunder.
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(d) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 10. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 calendar days after the giving of such notice). The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Company or Executive, respectively, hereunder or preclude the Company or Executive, respectively, from asserting such fact or circumstance in enforcing the Company’s or Executive’s rights hereunder.
(e) Date of Termination. “Date of Termination” means (i) if Executive’s employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein within 30 calendar days after such notice, as the case may be, (ii) if Executive’s employment is terminated by the Company other than for Cause or Disability, or if Executive voluntarily resigns without Good Reason, the date on which the terminating party notifies the other party that such termination shall be effective, provided that on a voluntary resignation without Good Reason, the Company may, in its sole discretion, make such termination effective on any date it elects in writing between the date of the notice and the proposed date of termination specified in the notice, (iii) if Executive’s employment is terminated by reason of death, the date of death of Executive, or (iv) if Executive’s employment is terminated by the Company due to Disability, the Disability Effective Date.
(f) Resignation from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of Executive’s employment by the Company for any reason, Executive shall immediately resign from all positions that he holds or has ever held with the Company and its affiliates, except as otherwise may be requested by the Board. Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Board, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.
5. Severance and Change of Control Protections.
(a) Termination Without Cause or For Good Reason. If, during the Term, the Company terminates Executive’s employment without Cause (and not as a result of Executive’s death or Disability), or the Executive terminates his employment with the Company for Good Reason, then:
(i) The Company shall pay or provide the following payments and benefits to Executive (or to Executive’s authorized representative or estate, as applicable) (A) any Base Salary and Annual Bonus earned but unpaid through the Date of Termination, any unpaid expense reimbursements (subject to, and in accordance with, Section 3(f) of this Agreement), and, to the extent required by law, any unused vacation that accrued through the Date of Termination, with all such amounts to be paid no more than thirty (30) days after Executive’s Date of; and (B) any vested benefits to which Executive may be entitled under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”); and
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(ii) Subject to Section 6 hereof, the Company shall pay, or cause to be paid, to Executive (or to Executive’s authorized representative or estate, as applicable) severance an amount equal to two (2) times the sum of (A) Executive’s Base Salary (as in effect immediately prior to the Termination Date and disregarding any reduction that constitutes Good Reason for the Executive’s termination of employment) and (B) the average Annual Bonus paid to Executive for the preceding three fiscal years (or, if greater, Executive’s target Annual Bonus amount as in effect immediately prior to the Termination Date and disregarding any reduction that constitutes Good Reason for the Executive’s termination of employment). Any such severance payment shall be made in cash, in a single lump sum payment within thirty (30) days after the Release (as defined in Section 6) becomes effective and irrevocable in accordance with its terms.
(b) Other Terminations. If, during the Term, the Company terminates Executive’s employment for Cause, or if Executive voluntarily terminates his employment without Good Reason, or if Executive’s employment terminates as a result of his death or Disability, then the Company shall pay or provide to Executive the Accrued Benefits, payable in accordance with Section 5(a)(i) of this Agreement, and no further amounts shall be payable to Executive under this Section 5 after the Date of Termination.
(c) Change of Control.
(i) In the event of a Change of Control during the Term of the Agreement (and subject to Executive’s continued employment until the date of such Change of Control), the Company shall deliver 175,000 vested shares of the Company’s common stock to Executive, effective immediately prior to such Change of Control (less any shares retained by the Company to cover applicable tax withholding). Any shares of the Company’s common stock delivered by the Company pursuant to this Section 5(c)(i) shall be awarded under, and counted against the available share reserve of, a stockholder-approved equity compensation program of the Company. In the event of an equity restructuring (within the meaning restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor or replacement accounting standard), such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the 175,000 share number set forth above in this Section 5(c)(i) shall be appropriately adjusted by the Board, without any need for consent by Executive, in order to prevent the dilution or enlargement of Executive’s rights under this Section 5(c)(i).
(ii) For purposes of this Agreement, a “Change of Control” means (i) consummation of a merger or consolidation of the Company with any other corporation or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (ii) the sale or transfer (other than as security for obligations of the Company) of substantially all the assets of the Company to any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, other than a person that directly or indirectly controls, is controlled by, or is under common control with, the Company; or (iii) in the absence of prior approval by the Board, the acquisition of more than 20% of the Company’s voting capital stock by any person within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company.
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(d) Section 280G. In the event it shall be determined that any payment or distribution by the Company or any of its affiliates to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (the “Total Payments”), is or will be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then the Total Payments shall be reduced to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), if the net after-tax benefit to Executive after reducing Executive’s Total Payments to the Safe Harbor Cap is greater than the net after-tax (including the Excise Tax) benefit to Executive without such reduction. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the distribution of shares of the Company’s common stock pursuant to Section 5(c)(i) of this Agreement, then by reducing any severance otherwise payable pursuant to Section 5(a)(ii) of this Agreement, then by reducing any other payment or benefit that triggers such Excise Tax in the following order: (i) reduction of cash payments; (ii) cancellation of accelerated vesting of performance-based equity awards (based on the reverse order of the date of grant); (iii) cancellation of accelerated vesting of other equity awards (based on the reverse order of the date of grant); and (iv) reduction of any other payments or benefits due to Executive (with benefits or payments in any group having different payment terms being reduced on a pro-rata basis). All mathematical determinations, and all determinations as to whether any of the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code), that are required to be made under this paragraph, including determinations as to whether the Total Payments to Executive shall be reduced to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made at the Company’s expense by a nationally recognized accounting firm mutually acceptable to the Company and Executive.
6. Release. Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to make any payment or provide any severance benefit under Section 5(a)(ii) of this Agreement unless: (a) Executive (or Executive’s legal representative) timely executes a release of claims agreement on a form provided by the Company, (b) Executive does not revoke the Release, and (c) the Release becomes effective and irrevocable in accordance with its terms within sixty (60) days after the termination of Executive’s employment.
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7. Work Product and Confidential Information.
(a) Executive agrees that all inventions, drawings, improvements, developments, methods, processes, programs, designs and all similar or related information which relates to the Company’s or any of its affiliates’ actual or anticipated business or research and development or existing or future products or services and which are conceived, developed, contributed to or made by Executive (either solely or jointly with others) while employed by or serving as a consultant to the Company or any of its affiliates (“Work Product”) shall be the sole and exclusive property of the Company or any such affiliate. Executive will promptly disclose such Work Product to the Company and perform all actions requested by the Company (whether during or after employment) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments).
(b) For purposes of this Agreement, “Confidential Information” means information disclosed to Executive or known by Executive as a result of employment by the Company, not generally known to the trade or industry in which the Company or its affiliates are engaged, about products, processes, technologies, machines, customers, clients, employees, services and strategies of the Company and its affiliates, including, but not limited to, inventions, research, development, manufacturing, purchasing, financing, computer software, computer hardware, automated systems, engineering, marketing, merchandising, selling, sales volumes or strategies, number or location of sales representatives, names or significance of the Company’s customers or clients or their employees or representatives, preferences, needs or requirements, purchasing histories, or other customer or client-specific information. Such Confidential Information is and shall continue to be the property of the Company.
(c) Executive recognizes that Confidential Information is of great value to the Company, that the Company has legitimate business interests in protecting its confidential information, and that the disclosure to anyone not authorized to receive such information will cause immediate and irreparable injury to the Company. Except as required by law or in the performance of his duties for the Company, unless Executive first secures the Company’s written consent, Executive will not divulge, disclose, use, copy, disseminate or publish any Confidential Information. Executive understands and agrees that the obligations not to disclose, use, disseminate or publish Confidential Information shall continue after termination of employment for any reason.
(d) Executive agrees that upon the Date of Termination, or at any other time that the Company may request, for whatever reason, Executive shall deliver (and in the event of Executive’s death or Disability, his representative shall deliver) to the Company all computer equipment or backup files of or relating to the Company or its affiliates, all memoranda, correspondence, customer data, notes, plans, records, reports, manuals, photographs, computer tapes and software and other documents and data (and all copies thereof) relating to Confidential Information, Work Product, or the business of the Company or its affiliates which Executive has in his possession, custody or control. If the Company requests, Executive (or his representative) agrees to provide written confirmation that Executive has returned all such materials.
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(e) Notwithstanding the foregoing, nothing in this Agreement shall prohibit Executive from reporting possible violations of federal, state or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state or local law or regulation, or from receiving any whistleblower award for any such information provided to any government agency. Executive does not need the prior authorization of the Company to make any such reports or disclosures, and Executive is not required to notify the Company if Executive should make any such reports or disclosures.
(f) Executive agrees and acknowledges that money damages may not be an adequate remedy for any breach of the provisions of this Section 7 and that the Company may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Section. Nothing in this Section 7(f) will be deemed to limit the Company’s remedies at law or in equity for any breach by Executive of any of the other provisions of this Section 7 that may be pursued or availed of by the Company.
8. Cooperation in Investigations and Proceedings. During the Term and for a period of three (3) years thereafter, Executive shall cooperate with the Company and its affiliates, upon the Company’s reasonable request, with respect to any internal investigation or administrative, regulatory or judicial proceeding involving matters occurring, in whole or in part, during such employment with the Company and within the scope of Executive’s duties and responsibilities to the Company during his employment with the Company (including, without limitation, Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s reasonable request to give testimony without requiring service of a subpoena or other legal process, and turning over to the Company all relevant Company documents which are or may have come into Executive’s possession during his employment). In requesting Executive’s cooperation, the Company shall take into account his other personal and professional obligations. Executive shall be reimbursed for the reasonable expenses Executive incurs in connection with any such cooperation and/or assistance. Any such reimbursements shall be paid to Executive no later than the 15th day of the month immediately following the month in which such expenses were incurred (subject to Executive’s timely submission to the Company of proper documentation with respect thereto).
9. Survival. Subject to any limits on applicability contained therein, Sections 2(f), 3(h), 3(i), 4(f), 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 18 and 19 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Term or this Agreement.
10. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight carrier or mailed by first class mail, return receipt requested, to the recipient. Notices to Executive shall be sent to the address of Executive most recently provided to the Company. Notices to the Company should be sent to AXIL Brands, Inc., 9150 Wilshire Boulevard, Ste. 245, Beverly Hills, California 90212, Attention: Chief Executive Officer. Any notice under this Agreement will be deemed to have been given when so delivered, sent or mailed.
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11. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way.
13. Withholding of Taxes. The Company and its affiliates may withhold from any amounts payable or benefits provided under this Agreement all federal, state, municipal or other taxes as the Company and its affiliates are required to withhold pursuant to any law or government regulation or ruling.
14. Counterparts. This Agreement may be executed in separate counterparts (including by electronic signature), each of which counterparts shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.
15. Successors and Assigns.
(a) This Agreement is personal to Executive, and, without the prior written consent of the Company, shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 15(c), without the prior written consent of Executive, this Agreement shall not be assignable by the Company.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.
16. Choice of Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Delaware, without regard to conflicts of law principles.
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17. Voluntary Agreement. Executive and the Company represent and agree that each has reviewed all aspects of this Agreement, has carefully read and fully understands all provisions of this Agreement, and is voluntarily entering into this Agreement. Each party represents and agrees that such party has had the opportunity to review any and all aspects of this Agreement with legal, tax or other adviser(s) of such party’s choice before executing this Agreement.
18. Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
19. Section 409A Compliance.
(a) In General. Section 409A of the Code (“Section 409A”), imposes payment restrictions on “nonqualified deferred compensation” (i.e., potentially including payments owed to Executive upon termination of employment). Failure to comply with the restrictions of Section 409A could result in negative tax consequences to Executive, including immediate taxation, interest and a 20% additional income tax. It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A. Specifically, any taxable benefits or payments provided under this Agreement are intended to be separate payments that qualify for the “short-term deferral” exception to Section 409A to the maximum extent possible, and to the extent they do not so qualify, are intended to qualify for one or more separation pay exceptions to Section 409A, to the maximum extent possible. If neither of these exceptions applies, and if Executive is a “specified employee” within the meaning of Section 409A, then notwithstanding any provision in this Agreement to the contrary and to the extent required to comply with Section 409A, all amounts that would otherwise be paid or provided during the first 6 months following Executive’s “separation from service” (within the meaning of Section 409A) shall instead be accumulated through and paid or provided (without interest) on the first business day following the 6-month anniversary of Executive’s separation from service.
(b) Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and Executive is no longer providing services (at a level that would preclude the occurrence of a “separation from service” within the meaning of Section 409A) to the Company or its affiliates as an employee or consultant, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 409A. Notwithstanding any other provision of this Agreement to the contrary, but only to the extent necessary to comply with Section 409A, if the period in which the Release must be provided and become effective and irrevocable in accordance with its terms begins in one calendar year and ends in a second calendar year, payment of any nonqualified deferred compensation shall be made or commence in the later of such two calendar years.
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(c) Reimbursements and In-Kind Benefits. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as may be permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last business day of Executive’s taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.
| AXIL BRANDS, INC. | EXECUTIVE | |
| /s/ Jeff Toghraie | /s/ Jeff Brown | |
| By: Jeff Toghraie | Jeff Brown | |
| Its: Chief Executive Officer |
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Exhibit 19.1
INSIDER TRADING POLICY
and Guidelines with Respect to
Certain Transactions in Company Securities
***
This Insider Trading Policy (“Policy”) provides guidelines to officers, directors, employees and agents of AXIL Brands, Inc., a Delaware corporation, and its subsidiaries (collectively, the “Company”) with respect to transactions in the Company’s securities. The Company has adopted this Policy and the procedures set forth herein to help prevent insider trading and to assist the Company’s officers, directors, employees and agents in complying with their obligations under the federal securities laws. Officers, directors, employees and agents are individually responsible for understanding and complying with this Policy.
Applicability of Policy
This Policy applies to all transactions in the Company’s securities, including common stock, restricted stock, restricted stock units, options and warrants to purchase common stock and any other debt or equity securities the Company may issue from time-to-time, such as bonds, preferred stock and convertible debentures, as well as to derivative securities relating to the Company’s securities, whether or not issued by the Company, such as exchange-traded options. This Policy expressly applies to gifts.
This Policy applies to all officers, directors, employees and agents of the Company and members of their immediate families who reside with them (including a spouse, a child, a child away at college, stepchildren, grandchildren, parents, stepparents, grandparents, siblings and in-laws) or anyone else who lives in their household and family members who live elsewhere, but whose transactions in Company securities are directed by such officers, directors, employees and agents or subject to their influence and control, such as parents or children who seek advice from such persons before they engage in transactions in Company securities (collectively referred to as “Family Members”). This Policy also applies to any entities that persons covered by this Policy influence or control, including any corporations, partnerships or trusts (collectively referred to as “Controlled Entities”).
This Policy also imposes specific black-out period and pre-clearance procedures on officers, directors and certain other designated employees who receive or have access to Material Non-Public Information (defined below) regarding the Company and/or are subject to the reporting provisions and trading restrictions of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The current “Insider Trading Compliance Officer” referred to herein is the Chief Executive Officer of the Company.
Material Non-Public Information
“Material Non-Public Information” is any corporate news or information that has not been previously disclosed to the public and which could have an impact on the Company’s share price. That said, it is not possible to define all categories of Material Non-Public Information. However, information should be regarded as “material” if it would be considered important to a reasonable investor in making a voting decision or an investment decision to buy, hold or sell securities. Any information that could be expected to affect the market price of the Company’s securities, whether such information is positive or negative, should be considered “material.” Because transactions that receive scrutiny will be evaluated after the fact with the benefit of hindsight, when it is unclear whether particular information is “material,” then such information should be treated as “material” and transactions should be avoided.
While it may be difficult under this standard to determine whether particular information is “material,” there are various categories of information that are particularly sensitive and, as a general rule, should always be considered “material.” Examples of such “material” information may include:
| · | Financial results; |
| · | Projections of future earnings or losses, or other earnings guidance; |
| · | Changes to previously announced earnings guidance, or the decision to suspend earnings guidance; |
| · | News of a pending or proposed merger, acquisition or tender offer; |
| · | News of a pending or proposed acquisition or disposition of significant assets; |
| · | News of a pending or proposed joint venture; |
| · | News of a Company restructuring; |
| · | Significant related party transactions; |
| · | Actions of regulatory agencies; |
| · | Notification that the auditor’s reports may no longer be relied upon; |
| · | News of a pending or proposed acquisition or disposition of a subsidiary; |
| · | Impending bankruptcy or financial liquidity problems; |
| · | Gain or loss of a significant customer or supplier; |
| · | Significant pricing changes or release of a significant new product; |
| · | Stock splits and stock repurchase programs; |
| · | New equity or debt offerings or issuances; |
| · | Bank borrowings or other financing transactions out of the ordinary course; |
| · | Significant litigation exposure due to actual or threatened litigation; |
| · | The imposition of a ban on trading in the Company’s securities or the securities of another company or the extension or termination of such restriction; |
| · | The effects of any natural disaster, terrorist event or other catastrophic event on the Company’s business, including any epidemic or pandemic; |
| · | A significant cybersecurity event, such as a data breach, or any other significant disruption in the Company’s operations or loss, potential loss, breach or unauthorized access of its property or assets, whether at its facilities or through its information technology infrastructure; and |
| · | Changes in the executive management team. |
When Information is Considered Public
Information that has not been disclosed to the public is generally considered to be nonpublic information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed through the Dow Jones “broad tape,” newswire services, a broadcast on widely-available radio or television programs, publication in a widely-available newspaper, magazine or news website, or public disclosure documents filed with the Securities and Exchange Commission (“SEC”) that are available on the SEC’s website. By contrast, information would likely not be considered widely disseminated if it is available only to employees of the Company, or if it is only available to a select group of third parties.
Once information is widely disseminated, it is still necessary to afford the investing public with sufficient time to absorb the information. As a general rule, information should not be considered fully absorbed by the marketplace until after the second full business day after the day on which the information is released. If, for example, the Company were to make an announcement on a Monday, transactions in the Company’s securities should not be engaged in until Thursday. Depending on the particular circumstances, the Company may determine that a longer or shorter period should apply to the release of specific material nonpublic information.
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General Policy
It is the Policy of the Company to oppose the unauthorized disclosure of any Material Non-Public Information acquired in the workplace and the use of Material Non-Public Information in engaging in securities transactions and any other violation of applicable securities laws. There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure), or small transactions, are not exempted from this Policy. The securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for adhering to the highest standards of conduct.
Specific Policies
Engaging in Transactions on Material Non-Public Information
It is the policy of the Company that no director, officer or other employee or agent of the Company (or any other person designated by this Policy or by the Insider Trading Compliance Officer as subject to this Policy) who is aware of Material Non-Public Information relating to the Company may, directly, or indirectly through Family Members, Controlled Entities or other persons or entities:
| · | Engage in transactions in the Company’s securities, except as otherwise specified in this Policy; |
| · | Disclose Material Non-Public Information to persons within the Company whose jobs do not require them to have that information, or outside of the Company to other persons, including, but not limited to, family, friends, business associates, investors and consulting firms, unless any such disclosure is made in accordance with the Company’s policies regarding the protection or authorized external disclosure of information regarding the Company; or |
| · | Assist anyone engaged in the above activities. |
Tipping
No employee, officer, director or agent of the Company shall disclose or pass on (“tip”) Material Non-Public Information to any other person, including a Family Member or friend, nor shall such person make recommendations or express opinions on the basis of Material Non-Public Information as to engaging in transactions in the Company’s securities.
Confidentiality of Non-Public Information
Non-public information relating to the Company is the property of the Company and the unauthorized disclosure of such information is forbidden.
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Potential Criminal and Civil Liability and/or Disciplinary Actions
Engaging in transactions in securities while aware of Material Non-Public Information, or the disclosure of Material Non-Public Information to others who then engage in transactions in Company securities, is prohibited by federal and state laws. Insider trading violations are pursued vigorously by the SEC, U.S. Attorneys and state enforcement authorities, as well as the laws of foreign jurisdictions. Punishment for insider trading violations is severe and could include significant fines and imprisonment. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other “controlling persons” if they fail to take reasonable steps to prevent insider trading by company personnel.
In addition, an individual’s failure to comply with this Policy may subject the individual to Company-imposed sanctions, including dismissal for cause, whether or not the employee’s failure to comply results in a violation of law. Needless to say, a violation of law, or even an SEC investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career.
Mandatory Guidelines
| · | Trading Blackout Period. To ensure compliance with this Policy and applicable federal securities laws, and to avoid even the appearance of trading on the basis of inside information, the Company requires that officers, directors and all employees in the accounting and finance departments of the Company or other persons otherwise designated by the Company’s Insider Trading Compliance Officer (and Family Members and Controlled Entities of the foregoing) (collectively, “Designated Insiders”) be subject to the Blackout Period prohibitions described below, because of their access to the Company’s internal financial statements or other Material Non-Public Information regarding the Company’s performance during annual and quarterly fiscal periods. Designated Insiders are obligated to refrain from engaging in transactions in the Company’s securities during the Blackout Periods established below. |
Each of the following periods will constitute a “Blackout Period”:
| o | The period commencing on the fifteenth (15th) calendar day of the third (3rd) fiscal month of each Company’s fiscal quarter (i.e., February 15, May 15, August 15, and November 15, as applicable) and ending at the close of business on the second (2nd) Trading Day following the date of public disclosure of the financial results for such fiscal quarter. As used in this Policy, the term “Trading Day” shall mean a day on which national stock exchanges are open for trading. |
| o | If such public disclosure occurs on a Trading Day before the markets close, then that day shall be considered the first (1st) Trading Day. If such public disclosure occurs after the markets close on a Trading Day, then the date of public disclosure shall not be considered the first (1st) Trading Day following the date of public disclosure. |
| o | In addition to the periodic Blackout Periods described above, the Company may announce “special” Blackout Periods from time-to-time. Typically, this will occur when there are non-public developments that would be considered material for insider trading law purposes, such as, among other things, developments relating to regulatory proceedings or a major corporate transaction. Depending on the circumstances, a “special” Blackout Period may apply to all Designated Insiders or only a specific group of Designated Insiders. The Insider Trading Compliance Officer will provide written notice to Designated Insiders subject to a “special” Blackout Period. Any person made aware of the existence of a “special” Blackout Period should not disclose the existence of the Blackout Period to any other person. The failure of the Company to designate a person as being subject to a “special” Blackout Period will not relieve that person of the obligation not to trade while aware of Material Non-Public Information. |
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As used in this Policy, the term “Blackout Period” shall mean all periodic Blackout Periods and all “special” Blackout Periods announced by the Company.
The purpose behind the Blackout Period is to help establish a diligent effort to avoid any improper transactions. Engaging in transactions in the Company’s securities outside a Blackout Period should not be considered a “safe harbor” and all employees, officers and directors and other persons subject to this Policy should use good judgment at all times. Even outside a Blackout Period, any person possessing Material Non-Public Information concerning the Company should not engage in any transactions in the Company’s securities until such information has been known publicly for at least two (2) Trading Days after the date of announcement. Although the Company may from time-to-time impose special Blackout Periods, because of developments known to the Company and not yet disclosed to the public, each person is individually responsible at all times for compliance with the prohibitions against insider trading.
The Blackout Period restrictions do not apply to those transactions to which this Policy does not apply, as described under the heading “Certain Exceptions,” or to transactions conducted pursuant to approved Rule 10b5-1 Plans (as defined below), as described under the heading “Rule 10b5-1 Plans.”
Pre-Clearance of Trades
The Company has determined that all executive officers and directors and their Family Members and Controlled Entities must refrain from engaging in transactions in the Company’s securities without first complying with the Company’s “pre-clearance” process. In addition, all Company personnel are required to notify, and obtain pre-approval from, the Insider Trading Compliance Officer prior to entering into, modifying or terminating a Rule 10b5-1 Plan (providing a copy of such plan and any supporting documentation). Each executive officer or director must contact the Company’s Insider Trading Compliance Officer not less than two (2) business days prior to commencing any transaction in the Company’s securities. This pre-clearance requirement applies to any transaction or transfer involving the Company’s securities, including a stock plan transaction such as an option exercise, or a gift, transfer to a trust or any other transfer, but does not apply to shares sold under a previously approved Rule 10b5-1 Plan.
| · | The Insider Trading Compliance Officer must pre-clear each proposed transaction. The Insider Trading Compliance Officer is not under any obligation to approve a transaction submitted for pre-clearance, and may determine not to permit a transaction. |
| · | The Insider Trading Compliance Officer shall obtain pre-clearance of any transactions from the Company’s outside legal counsel. |
| · | To facilitate the process, the Company has prepared a pre-clearance form, attached hereto as Exhibit A, to be completed and provided to the Insider Trading Compliance Officer. The Insider Trading Compliance Officer will assist with the approval process. |
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| · | No transaction may be processed until the requesting employee, officer or director has received the approved Pre-Clearance Request Form, even if two (2) Trading Days have passed since the Pre-Clearance Request Form was submitted. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company securities and should not inform any other person of the restriction. |
| · | The Company may also find it necessary, from time-to-time, to require compliance with the pre-clearance process from employees or agents designated as Designated Insiders. |
| · | Any person who wishes to implement a trading plan under SEC Rule 10b5-1 must first pre-clear the plan with the Insider Trading Compliance Officer, as described under “Rule 10b5-1 Plans”.. |
Rule 10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company securities that meets certain conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1, transactions in Company securities may occur without regard to certain insider trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must be approved by the Insider Trading Compliance Officer (or, if the Insider Trading Compliance Officer desires to enter into a Rule 10b5-1 Plan, the Company’s outside legal counsel) and meet the requirements of Rule 10b5-1.
In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is not aware of material nonpublic information, and the person who enters into such Rule 10b5-1 Plan must act in good faith with respect to such plan. Directors and officers must include a representation in their Rule 10b5-1 Plan certifying that: (i) they are not aware of any material non-public information; and (ii) they are adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions in Rule 10b-5. Once the Rule 10b5-1 Plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price(s) at which they are to be traded or the date(s) of the trade(s). The Rule 10b5-1 Plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party.
Any Rule 10b5-1 Plan must be submitted for approval prior to the entry into the Rule 10b5-1 Plan and any subsequent modification or termination. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be required.
After a Rule 10b5-1 Plan is approved, the person must wait for a cooling-off period before the first trade is made under the plan, the length of which will be determined by the Insider Trading Compliance Officer, in accordance with the SEC’s rules and with the input and assistance of the Company’s outside legal counsel, with notice of such determination provided by the Insider Trading Compliance Officer to the Chair of the Audit Committee. Pursuant to the SEC’s rules, a Rule 10b5-1 Plan must include a cooling-off period before trading can commence that, (1) for directors or officers, ends on the later of 90 days after the adoption or modification of the Rule 10b5-1 plan or two business days following the disclosure of the Company’s financial results in an SEC periodic report for the fiscal quarter in which the plan was adopted or modified (but in any event, the required cooling-off period is subject to a maximum of 120 days after adoption or modification of the plan), and (2) for persons other than directors or officers, ends 30 days following the adoption or modification of the Rule 10b5-1 Plan.
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Only one Rule 10b5-1 Plan should be in effect at any one time. Any Rule 10b5-1 Plans that would call for execution of a single trade are limited to one such plan in a consecutive 12-month period. Any modification of a Rule 10b5-1 Plan is the equivalent of entering into a new trading plan and cancelling the old trading plan. Company personnel seeking to establish, modify or terminate a Rule 10b5-1 Plan must contact the Insider Trading Compliance Officer.
Individual Responsibility
Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and not to engage in transactions in Company securities while in possession of Material Non-Public Information, regardless of whether a transaction is executed outside a Blackout Period or is pre-cleared by the Company. Persons subject to this policy must not engage in illegal trading and must avoid the appearance of improper trading. Each individual is responsible for making sure that he or she complies with this Policy, and that any Family Member or Controlled Entity whose transactions are subject to this Policy also comply with this Policy. The restrictions and procedures are intended to help avoid inadvertent instances of improper insider trading, but appropriate judgment should always be exercised by each employee, officer and director in connection with any trade in the Company’s securities. An employee, officer or director may, from time-to-time, have to forego a proposed transaction in the Company’s securities even if he or she or it planned to make the transaction before learning of the Material Non-Public Information and even though the insider believes he or she or it may suffer an economic loss or forego anticipated profit by waiting.
Certain Exceptions
| · | Stock Options Exercises. For purposes of this Policy, the Company considers the exercise of stock options acquired pursuant to the Company’s stock option plans (but not the sale of the underlying stock) to be exempt from this Policy. This Policy also does not apply to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to satisfy tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted “cashless” exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option. |
| · | Restricted Stock and Restricted Stock Unit Awards. This Policy does not apply to the vesting of restricted stock or restricted stock units, or the exercise of a tax withholding right pursuant to which a person elects to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted stock or restricted stock units. The Policy does apply, however, to any market sale of restricted stock or of shares of stock acquired upon the vesting of restricted stock units. |
| · | 401(k) Plan. This Policy does not apply to purchases of Company stock in the Company’s 401(k) plan resulting from periodic contributions of money to the plan pursuant to payroll deduction elections. This Policy does apply, however, to certain elections that may be made under the 401(k) plan, including: (a) an election to increase or decrease the percentage of periodic contributions that will be allocated to the Company stock fund, if any; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against a 401(k) plan account if the loan will result in a liquidation of some or all of a participant’s Company stock fund balance; and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund. |
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| · | Employee Stock Purchase Plan. This Policy does not apply to purchases of Company stock in the Company’s employee stock purchase plan, if any, resulting from periodic contributions of money to the plan pursuant to the elections made at the time of enrollment in the plan. This Policy also does not apply to purchases of Company stock resulting from lump sum contributions to the plan, provided, that, the participant elected to participate by lump-sum payment at the beginning of the applicable enrollment period. This Policy does apply to a participant’s election to participate in or increase his or her or its participation in the plan, and to a participant’s sales of Company stock purchased pursuant to the plan. |
| · | Dividend Reinvestment Plan. This Policy does not apply to purchases of Company stock under the Company’s dividend reinvestment plan, if any, resulting from reinvestment of dividends paid on Company securities. This Policy does apply, however, to voluntary purchases of Company stock that result from additional contributions a participant chooses to make to the plan, and to a participant’s election to participate in the plan or increase his or her level of participation in the plan. This Policy also applies to the sale of any Company stock purchased pursuant to the plan. |
In addition, transactions in mutual funds that are invested in Company securities are not transactions subject to this Policy.
Applicability of Policy to Inside Information of Other Companies
This Policy and the guidelines described herein also apply to Material Non-Public Information of other companies, including the Company’s customers, vendors or suppliers, when that information is obtained in the course of employment with, or other services performed on behalf of, the Company. It is the policy of the Company that no director, officer or other employee or agent of the Company (or any other person designated as subject to this Policy) who, in the course of working for the Company, learns of Material Non-Public Information about a company (1) with which the Company does business, such as the Company’s vendors, customers, suppliers and distributors, (2) in which the Company has significant investments, or (3) that is involved in a potential transaction or business relationship with Company may engage in transactions in that company’s securities until the information becomes public or is no longer material. Civil and criminal penalties, including up to and termination of employment, may result from trading on inside information regarding the Company’s business partners. All employees should treat the Company’s business partners’ Material Non-Public Information with the same care required with respect to information related directly to the Company.
Section 16 Liability - Directors and Officers
Certain officers and all directors of the Company must also comply with the reporting obligations and limitations on short-swing profit transactions set forth in Section 16 of the Exchange Act. The practical effect of these provisions is that any officer or director who purchases and sells the Company’s securities within a six-month period must disgorge all profits to the Company whether or not he or she or it had knowledge of any Material Non-Public Information. Under these provisions, and so long as certain other criteria are met, neither the receipt of stock, stock units or stock options or other awards under the Company’s stock plans, nor the exercise of options nor the receipt of stock under the Company’s employee stock purchase plan, dividend reinvestment plan or the Company’s 401(k) retirement plan is deemed a purchase that can be matched against a sale for Section 16(b) short-swing profit disgorgement purposes; however, the sale of any such shares so obtained is a sale for these purposes. Moreover, no such officer or director may ever make a short sale of the Company’s common stock which is unlawful under Section 16(c) of the Exchange Act. The rules on recovery of short-swing profits are absolute and do not depend on whether a person has Material Non-Public Information.
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Special and Prohibited Transactions
The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of transactions. It therefore is the Company’s policy that any persons covered by this Policy may not engage in any of the following transactions, or should otherwise consider the Company’s preferences as described below.
Short-Term Trading
Short-term trading of Company securities may be distracting to the person and may unduly focus the person on the Company’s short-term stock market performance instead of the Company’s long-term business objectives. For these reasons, any officer or director subject to Section 16 of the Exchange Act who purchases Company securities in the open market may not sell any Company securities of the same class during the six months following the purchase (or vice versa). All employees are encouraged to adhere to the same restriction.
Short Sales
Short sales of Company securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the part of the seller that the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s performance. For these reasons, short sales of Company securities are prohibited. In addition, Section 16(c) of the Exchange Act prohibits officers and directors from engaging in short sales. (Short sales arising from certain types of hedging transactions are governed by the paragraph below captioned “Hedging Transactions.”)
Publicly Traded Options
A transaction in options is, in effect, a bet on the short-term movement of the Company’s stock and therefore creates the appearance that the employee, officer or director is trading based on Material Non-Public Information. Transactions in options also may focus the trader’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in puts, calls or other derivative securities related to the Company, on an exchange or in any other organized market, are prohibited.
Hedging Transactions
Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit a director, officer or employee of the Company to continue to own Company securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee of the Company may no longer have the same objectives as the Company’s other stockholders. Therefore, directors, officers and employees and others subject to this Policy are prohibited from engaging in any such transactions involving Company securities or equity securities of any subsidiaries of the Company.
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Margin Accounts and Pledged Securities
Securities held in a margin account as collateral for a margin loan may be sold by the broker without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to engage in transactions in Company securities, directors, officers and other employees of the Company are prohibited from holding Company securities in a margin account or otherwise pledging Company securities as collateral for a loan, except with prior approval of the Insider Trading Compliance Officer. If the Insider Trading Compliance Officer wishes to request such pre-approval, the Insider Trading Compliance Officer is required to contact the Company’s outside legal counsel. The Insider Trading Compliance Officer shall inform the Chair of the Audit Committee of any such approvals. (Pledges of Company securities arising from certain types of hedging transactions are governed by the paragraph above captioned “Hedging Transactions.”)
Standing and Limit Orders
Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 plans) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director, officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit orders on Company securities. If a person subject to this Policy determines that they must use a standing order or limit order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures outlined in this Policy.
Post-Termination Transactions
This Policy continues to apply to transactions in Company securities even after termination of service to the Company or any of its subsidiaries. If an individual is in possession of Material Non-Public Information when his or her service terminates, that individual may not engage in transactions in Company securities until that information has become public or is no longer material. In addition, after termination of service to the Company, officers and directors subject to Section 16 of the Exchange Act remain subject to Section 16 “short swing” profit disgorgement rules for up to six (6) months after termination and are required to file Forms 4 to report any non-exempt transactions in Company securities (i.e., purchases and sales) occurring within six months after an “opposite-way” non-exempt transaction that occurred while they were still serving at the Company.
Communications with the Public
The Company is subject to the Regulation FD and must avoid selective disclosure of Material Non-Public Information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad public dissemination of the information immediately upon its release. Pursuant to Company policy, only the executive officers who have been authorized to engage in communications with the public may disclose information to the public regarding the Company and its business activities and financial affairs. The public includes, without limitation, research analysts, portfolio managers, financial and business reporters, news media and investors. In addition, because of the risks associated with the exchange of information through such communications media, employees are strictly prohibited from posting or responding to messages containing information regarding the Company on Internet “bulletin boards,” Internet “chat rooms” or in similar online forums, including social media. Employees who inadvertently disclose any Material Non-Public Information must immediately advise the Insider Trading Compliance Officer so the Company can assess its obligations under Regulation FD and other applicable securities laws. Please see the Company’s Corporate Communications Policy.
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Inquiries
Please direct questions as to any of the matters discussed in this Policy to the Company’s Insider Trading Compliance Officer at the following address:
AXIL Brands, Inc.
Attn: Jeff Toghraie
Address: 9025 Wilshire Blvd., Ste. 500, Beverly Hills, CA 90210
Telephone: (323) 683-3001
E-mail: jtoghraie@goaxil.com
Certifications
All employees, officers and directors of the Company must certify their understanding of, and intent to comply with, this Policy. Please return the enclosed certification immediately to:
AXIL Brands, Inc.
Attn: Jeff Toghraie
Address: 9025 Wilshire Blvd., Ste. 500, Beverly Hills, CA 90210
Telephone: (323) 683-3001
E-mail: jtoghraie@goaxil.com
Last revised October 8, 2024
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CERTIFICATIONS
I certify that:
I have received, read and understand the Company’s Insider Trading Policy. I understand that the Insider Trading Compliance Officer is available to answer any questions I have regarding the Insider Trading Policy.
I will comply with the Insider Trading Policy for as long as I am subject to the Policy.
Signature:
Print Name:
Date:
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PRE-CLEARANCE REQUEST FORM
| To: | AXIL Brands, Inc. (the “Company”) |
| Attn: | Insider Trading Compliance Officer |
| From: | [_____________] |
| Re: | Proposed transaction in the Company’s Securities |
This is to advise you that the undersigned intends to execute a transaction in the Company’s securities on _____________________, 20_____ and does hereby request that the Company pre-clear the transaction as required by the Company’s Insider Trading Policy (the “Policy”).
The general nature of the transaction is as follows (example: “open market purchase of 1,000 shares of common stock through NYSE”):
The undersigned is not in possession of Material Non-Public Information (as defined in the Insider Trading Policy) about the Company and will not engage in the transaction if the undersigned comes into possession of Material Non-Public Information about the Company between the date hereof and the proposed transaction date. I understand that Material Non-Public Information is information concerning the Company that (a) is not generally known to the public; and (b) if publicly known, would be likely to affect either the market price of Company securities or a person’s decision to buy, sell or hold Company securities.
If seeking approval for the entry or modification of Rule 10b-5 Plan, I certify that I am adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5, that I shall act in good faith with respect to such plan, and that I shall include, or cause to be included, requisite certifications in the Rule 10b5-1 Plan.
The undersigned has read and understands the Policy and certifies that to the best of the undersigned’s knowledge that the above proposed transaction will not violate the Policy.
The undersigned agrees to advise the Company promptly if, as a result of future developments, any of the foregoing information becomes inaccurate or incomplete in any respect. The undersigned understands that the Company may reasonably require additional information about the transaction, and agrees to provide such information upon request.
| Very truly yours, | |
| [Signature] | |
| [Print Name] |
| Approved: | ||
| Name: | ||
| Title: Insider Trading Compliance Officer | ||
| Date: |
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Exhibit 21.1
AXIL BRANDS, INC.
List of Subsidiaries
| Name of Subsidiary | Jurisdiction of Incorporation | |
| AXIL Distribution Company | Delaware | |
| Sharper Vision Marketing Inc. | Delaware |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (File Nos. 333-282571 and 333-283902) of Axil Brands, Inc. of our report dated August 21, 2025 on the consolidated financial statements of AXIL Brands, Inc., as of May 31, 2025 and 2024 and for each of the two years in the period ended May 31, 2025.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
August 21, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeff Toghraie, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Axil Brands, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 21, 2025 | By: | /s/ Jeff Toghraie |
| Name: | Jeff Toghraie | |
| Title: | Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeff Brown, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Axil Brands, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 21, 2025 | By: | /s/ Jeff Brown |
| Name: | Jeff Brown | |
| Title: | Chief Financial Officer (principal accounting officer and principal financial officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Axil Brands, Inc. (the “Company”) for the year ended May 31, 2025 (the “Report”), I, Jeff Toghraie, Chief Executive Officer, certify as follows:
| A) | the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and |
| B) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. |
This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: August 21, 2025 | By: | /s/ Jeff Toghraie |
| Name: | Jeff Toghraie | |
| Title: | Chief Executive Officer (principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Axil Brands, Inc. (the “Company”) for the year ended May 31, 2025 (the “Report”), I, Jeff Brown, Chief Financial Officer, certify as follows:
| A) | the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and |
| B) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report. |
This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Pursuant to Securities and Exchange Commission Release 33-8238, dated June 5, 2003, this certification is being furnished and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any registration statement of the Company filed under the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: August 21, 2025 | By: | /s/ Jeff Brown |
| Name: | Jeff Brown | |
| Title: | Chief Financial Officer (principal accounting officer and principal financial officer) |