UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2025

☐

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: 001-41958

AXIL Brands, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		47-4125218
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

9150 Wilshire Boulevard, Suite 245, Beverly Hills, California		90212
(Address of Principal Executive Offices)		(Zip Code)

(888) 638-8883

(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
Common Stock, $0.0001 par value per share		AXIL		The NYSE American LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 the 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	☐
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 2, 2026, there were 6,802,717 shares of the registrant’s common stock, $0.0001 par value, outstanding.

AXIL BRANDS, INC. AND SUBSIDIARIES

INDEX

		Page
Cautionary Note Regarding Forward Looking Statements		ii

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7

Item 4.	Controls and Procedures	7

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	8

Item 1A.	Risk Factors	8

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8

Item 3.	Defaults Upon Senior Securities	8

Item 4.	Mine Safety Disclosures	8

Item 5.	Other Information	8

Item 6.	Exhibits	9

Signatures		10

-i-

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and in particular Part I, Item 2 “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; and 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, unemployment rates, 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. In this Quarterly Report on Form 10-Q, AXIL Brands, Inc. (“AXIL Brands, Inc.,” “AXIL,” the “Company,” “we,” “us,” and “our”) has identified material factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

-ii-

AXIL BRANDS, INC. AND SUBSIDIARIES

INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30 , 2025

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Financial Statements:

Consolidated Balance Sheets - As of November 30, 2025 (Unaudited) and May 31, 2025	F-1

Consolidated Statements of Operations - For the three and six months ended November 30, 2025 and 2024 (Unaudited)	F-2

Consolidated Statements of Changes in Stockholders’ Equity - For the three months ended November 30, 2025 and 2024 (Unaudited)	F-3

Consolidated Statements of Changes in Stockholders’ Equity - For the six months ended November 30, 2025 and 2024 (Unaudited)	F-4

Consolidated Statements of Cash Flows – For the six months ended November 30, 2025 and 2024 (Unaudited)	F-5

Condensed Notes to Unaudited Consolidated Financial Statements	F-6

-1-

AXIL BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	November 30, 2025		May 31, 2025
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	4,975,968	$	4,769,854
Accounts receivable, net		2,439,850		1,003,945
Inventory, net		4,719,150		2,533,658
Due from related party		-		222
Prepaid expenses and other current assets		471,003		947,969

Total Current Assets		12,605,971		9,255,648

OTHER ASSETS:
Property and equipment, net		398,582		412,261
Intangible assets, net		423,012		403,591
Right of use assets		466,820		579,121
Deferred tax asset		172,334		46,239
Other assets		20,720		20,720
Goodwill		2,152,215		2,152,215

Total Other Assets		3,633,683		3,614,147

TOTAL ASSETS	$	16,239,654	$	12,869,795

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,843,104	$	866,573
Customer deposits		668,101		67,412
Contract liabilities, current		630,924		757,355
Notes payable, current		3,488		3,574
Due to related party		147,550		-
Lease liabilities, current		203,367		212,543
Income tax liability		718,505		310,369
Other current liabilities		364,433		244,998

Total Current Liabilities		4,579,472		2,462,824

LONG TERM LIABILITIES:
Lease liabilities, long term		301,012		404,669
Note payable, long term		134,817		136,655
Contract liabilities, long term		145,234		205,939

Total Long Term Liabilities		581,063		747,263

Total Liabilities		5,160,535		3,210,087

Commitments and contingencies (see Note 10)

STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value; 28,000,000 shares authorized; 24,873,500 and 27,773,500 shares issued and outstanding as of November 30, 2025 and May 31, 2025, respectively		2,487		2,777
Common stock, $0.0001 par value: 15,000,000 shares authorized; 6,802,717 and 6,657,717 shares issued and outstanding as of November 30, 2025 and May 31, 2025, respectively		681		666
Additional paid-in capital		9,316,056		8,935,547
Retained Earnings		1,759,895		720,718

Total Stockholders' Equity		11,079,119		9,659,708

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	16,239,654	$	12,869,795

See accompanying condensed notes to these unaudited consolidated financial statements.

F-1

AXIL BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 2025 AND 2024

(UNAUDITED)


	For the Three Months Ended						For the Six Months Ended
	November 30,						November 30,
	2025			2024			2025			2024

Sales, net	$	8,134,859		$	7,732,574		$	14,991,077		$	13,583,846

Cost of sales		2,598,622			2,234,527			4,819,906			3,932,151

Gross profit		5,536,237			5,498,047			10,171,171			9,651,695

OPERATING EXPENSES:
Sales and marketing		3,125,270			3,377,760			5,911,139			6,047,231
Compensation and related taxes		336,990			276,674			541,518			467,322
Professional and consulting		676,730			736,169			1,476,244			1,684,018
General and administrative		494,176			434,573			927,461			920,955

Total Operating Expenses		4,633,166			4,825,176			8,856,362			9,119,526

INCOME FROM OPERATIONS		903,071			672,871			1,314,809			532,169

OTHER INCOME (EXPENSE):
Other income		3,746			2,041			5,064			4,307
Interest income		32,485			27,340			70,064			55,971
Interest expense and other finance charges		(1,304	)		(1,296	)		(2,587	)		(1,296	)

Other income, net		34,927			28,085			72,541			58,982

INCOME BEFORE PROVISION FOR INCOME TAXES		937,998			700,956			1,387,350			591,151

Provision for income taxes		233,115			67,250			348,173			67,250

NET INCOME	$	704,883		$	633,706		$	1,039,177		$	523,901

NET INCOME PER COMMON SHARE:
Basic	$	0.10		$	0.10		$	0.16		$	0.08
Diluted	$	0.09		$	0.08		$	0.13		$	0.06

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		6,744,444			6,450,226			6,691,326			6,303,002
Diluted		8,234,071			8,168,657			8,238,259			8,194,882

See accompanying condensed notes to these unaudited consolidated financial statements.

F-2

AXIL BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED NOVEMBER 30, 2025 AND 2024

(UNAUDITED)

For the three months ended November 30, 2025


											Additional				Total
	Preferred Stock						Common Stock				Paid-in		Retained		Stockholders'
	Shares			Amount			Shares		Amount		Capital		Earnings		Equity
Balance, August 31, 2025		27,773,500		$	2,777			6,657,717	$	666	$	9,134,759	$	1,055,012	$	10,193,214

Stock options expense		-			-			-		-		158,543		-		158,543

Stock-based compensation		-			-			-		-		22,479		-		22,479

Preferred shares converted to common stock		(2,900,000	)		(290	)		145,000		15		275		-		-

Net income for the three months ended November 30, 2025		-			-			-		-		-		704,883		704,883

Balance, November 30, 2025		24,873,500		$	2,487			6,802,717	$	681	$	9,316,056	$	1,759,895	$	11,079,119

For the three months ended November 30, 2024

											Retained
									Additional		Earnings/			Total
	Preferred Stock				Common Stock				Paid-in		(Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit)			Equity
Balance, August 31, 2024		31,133,500	$	3,113		6,464,852	$	647	$	8,124,160	$	(244,075	)	$	7,883,845

Stock options expense		-		-		-		-		138,423		-			138,423

Stock-based compensation		-		-		2,000		-		166,177		-			166,177

Net income for the three months ended November 30, 2024		-		-		-		-		-		633,706			633,706

Balance, November 30, 2024		31,133,500	$	3,113		6,466,852	$	647	$	8,428,760	$	389,631		$	8,822,151

See accompanying condensed notes to these unaudited consolidated financial statements.

F-3

AXIL BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2025 AND 2024

(UNAUDITED)

For the six months ended November 30, 2025

											Additional				Total
	Preferred Stock						Common Stock				Paid-in		Retained		Stockholders'
	Shares			Amount			Shares		Amount		Capital		Earnings		Equity
Balance, May 31, 2025		27,773,500		$	2,777			6,657,717	$	666	$	8,935,547	$	720,718	$	9,659,708

Stock options expense		-			-			-		-		335,031		-		335,031

Stock-based compensation		-			-			-		-		45,203		-		45,203

Preferred shares converted to common stock		(2,900,000	)		(290	)		145,000		15		275		-		-

Net income for the six months ended November 30, 2025		-			-			-		-		-		1,039,177		1,039,177

Balance, November 30, 2025		24,873,500		$	2,487			6,802,717	$	681	$	9,316,056	$	1,759,895	$	11,079,119

For the six months ended November 30, 2024

													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		42,251,750		$	4,225			5,908,939	$	591	$	7,825,240	$	(134,270	)	$	7,695,786

Stock options expense		-			-			-		-		211,055		-			211,055

Stock-based compensation		-			-			2,000		-		391,409		-			391,409

Preferred shares converted to common stock		(11,118,250	)		(1,112	)		555,913		56		1,056		-			-

Net income for the six months ended November 30, 2024		-			-			-		-		-		523,901			523,901

Balance, November 30, 2024		31,133,500		$	3,113			6,466,852	$	647	$	8,428,760	$	389,631		$	8,822,151

See accompanying condensed notes to these unaudited consolidated financial statements.

F-4

AXIL BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2025 AND 2024

(UNAUDITED)


	2025			2024

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,039,177		$	523,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		129,601			47,335
Provision for credit losses		37,979			27,954
Stock-based compensation		380,234			602,464
Gain on forgiveness of account payable		-			(218,699	)
Deferred income taxes		(126,095	)		109,796
Change in operating assets and liabilities:
Accounts receivable		(1,473,884	)		(962,337	)
Inventory		(2,185,492	)		729,534
Prepaid expenses and other current assets		476,966			80,524
Accounts payable		976,529			870,357
Other current liabilities		1,127,728			165,959
Contract liabilities		(187,136	)		(72,614	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		195,607			1,904,174

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intangibles		(98,530	)		(41,840	)
Purchase of property and equipment		(36,811	)		(65,783	)

NET CASH USED IN INVESTING ACTIVITIES		(135,341	)		(107,623	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of note payable		(1,924	)		(3,252	)
Repayments to a related party		(3,071,300	)		(3,865,430	)
Advances from a related party		3,219,072			4,032,152

NET CASH PROVIDED BY FINANCING ACTIVITIES		145,848			163,470

NET INCREASE IN CASH		206,114			1,960,021

CASH - Beginning of period		4,769,854			3,253,876

CASH - End of period	$	4,975,968		$	5,213,897

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	2,462		$	2,908
Income taxes	$	70,862		$	132,500

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Initial recognition of right of use assets recognized as lease liability	$	-		$	767,269

See accompanying condensed notes to these unaudited consolidated financial statements.

F-5

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 1 – Organization

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

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

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

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the management, all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of November 30, 2025 and November 30, 2024 and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments. Certain information and note disclosures normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2025 filed on August 21, 2025. The results of operations for the three and six months ended November 30, 2025, are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2026. The unaudited consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.

F-6

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Use of estimates

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

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. In the financing section of the accompanying consolidated statements of cash flows, Advances from related party and Repayments to related party are presented on a gross basis, which were previously presented on a net basis.

Cash and cash equivalents

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

Accounts receivable and allowance for credit losses

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

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist primarily of cash prepayments to vendors for inventory, operational and corporate expenditure, and prepayments for trade shows and marketing events which will be utilized within a year, and prepayments on credit cards and other current assets relating to the right to recover assets (for the cost of goods sold) associated with the right of returns for products sold. Prepayments to vendors for inventory was $264,650 and $643,131 as of November 30, 2025 and May 31, 2025, respectively.

F-7

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

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-8

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company sells a variety of electronic hearing and enhancement products and hair and skin care 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 Company generated revenues for extended warranty which is recognized over time on a ratable basis over the warranty period.

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. 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 November 30, 2025, and May 31, 2025, contract liabilities amounted to $776,158 and $963,294, respectively. As of November 30, 2025, and May 31, 2025, contract liabilities associated with unfulfilled performance obligations for warranty services offered for a period of two and three years was $613,632 and $841,771, respectively; and contract liabilities associated with unfulfilled performance obligations for customers’ right of return was $155,788 and $117,560, respectively. Our contract liabilities related to warranties are expected to be recognized over a period of one year to three years. Approximately $455,273 is expected to be recognized in the remainder of fiscal year 2026, $265,127 is expected to be recognized in fiscal year 2027, $52,389 in fiscal year 2028 and $3,369 in fiscal year 2029. Contract liabilities associated with gift cards purchased by customers amounted to $6,738 and $3,963, respectively, as of November 30, 2025 and May 31, 2025.

F-9

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

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, customs duties, and depreciation of equipment used to bring inventory to its saleable condition.

Shipping and Handling Costs

The Company accounts for shipping and handling fees in accordance with ASC 606. While amounts charged to customers for shipping products are included in revenues, the related costs of shipping products to customers are classified in marketing and selling expenses as incurred. Shipping costs included in marketing and selling expense were $179,377 and $265,138 for the three months ended November 30, 2025 and November 30, 2024, respectively. Shipping costs included in marketing and selling expense were $405,381 and $515,052 for the six months ended November 30, 2025 and November 30, 2024, respectively.

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

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

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 on a historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

F-10

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Goodwill

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

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

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

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

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

F-11

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

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.

Impairment of long-lived assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment loss during the three and six months ended November 30, 2025 and November 30, 2024.

F-12

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Stock-based compensation

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

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

Net income per share of common stock

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

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

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

Schedule of net loss per share
	For the Three Months Ended				For the Six Months Ended
	November 30,		November 30,		November 30,		November 30,
	2025		2024		2025		2024

Net income	$	704,883	$	633,706	$	1,039,177	$	523,901

Weighted average basic shares		6,744,444		6,450,226		6,691,326		6,303,002
Dilutive securities:
Convertible preferred stock		1,283,016		1,556,675		1,335,845		1,702,912
Stock options		184,879		156,033		191,052		176,394
Restricted stock awards		21,732		5,723		20,036		12,574
Weighted average dilutive shares		8,234,071		8,168,657		8,238,259		8,194,882

Earnings per share:
Basic	$	0.10	$	0.10	$	0.16	$	0.08
Diluted	$	0.09	$	0.08	$	0.13	$	0.06

F-13

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies (continued)

Lease Accounting

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

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

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

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

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

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

Segment Reporting

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

The Company has determined that it operates in 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 six months ended November 30, 2025. A new legal entity was incorporated during fiscal year 2025; however, it has not been reported as a separate segment as it did not have significant operations during this reporting period.

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

Recently Adopted Accounting Pronouncements

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

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

F-14

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 3 – Accounts Receivable, net

Accounts receivable, net consisted of the following:

Schedule of accounts receivable
	November 30, 2025			May 31, 2025
Customer receivables	$	1,771,093		$	922,616
Merchant processor receivables		820,572			185,719
Less: Allowance for credit losses		(151,815	)		(104,390	)
Total Accounts receivables, net	$	2,439,850		$	1,003,945

During the three months ended November 30, 2025 and 2024, the Company recognized a provision for credit losses of $38,137 and $9,169, respectively. During the six months ended November 30, 2025 and 2024, the Company recorded a provision for credit losses of $37,979 and $27,954, respectively.

Note 4 – Inventory, net

Inventory, net consisted of the following:

Schedule of inventory
	November 30, 2025		May 31, 2025
Finished Goods	$	4,565,062	$	2,509,840
Raw Materials		154,088		23,818
Total Inventory	$	4,719,150	$	2,533,658

As of November 30, 2025 and May 31, 2025, inventory held at third party locations amounted to $957,686 and $109,706, respectively. As of November 30, 2025 and May 31, 2025, inventory in-transit amounted to $324,100 and $174,564, respectively.

Note 5 – Property and Equipment

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

Schedule of property and equipment
	Estimated Life	November 30, 2025			May 31, 2025
Promotional display racks	2 years	$	62,944		$	62,944
Furniture and fixtures	5 years		86,499			57,137
Computer equipment	3 years		18,558			18,558
Plant equipment	5-10 years		397,478			390,028
Office equipment	5-10 years		8,838			8,838
Automobile	5 years		24,347			24,347
Less: Accumulated depreciation			(200,082	)		(149,591	)
Total Property and equipment, net		$	398,582		$	412,261

Depreciation expense amounted to $25,720 and $11,405 for the three months ended November 30, 2025 and November 30, 2024, respectively. Depreciation expense amounted to $50,491 and $21,298 for the six months ended November 30, 2025 and November 30, 2024, respectively.

F-15

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 6 – Intangible Assets

The intangible assets consisted of the following:

Schedule of intangible assets
	Estimated Life	November 30, 2025			May 31, 2025
Licensing rights	3 years	$	33,120		$	22,080
Customer relationships	3 years		70,000			70,000
Trade names	10 years		275,000			275,000
Website	5 years		100,000			100,000
Product certification testing	3 years		268,305			180,815
Less: Accumulated amortization			(323,413	)		(244,304	)
Total Intangible assets, net		$	423,012		$	403,591

Amortization expense amounted to $41,794 and $23,035 for the three months ended November 30, 2025 and November 30, 2024, respectively. Amortization expense amounted to $79,110 and $26,037 for the six months ended November 30, 2025 and November 30, 2024, respectively.

Goodwill was $2,152,215 as of November 30, 2025 and May 31, 2025.

Intellectual Property

As of November 30, 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.

Note 7 – Other Current Liabilities

Other current liabilities were comprised of the following:

Schedule of other current liabilities
	November 30, 2025		May 31, 2025
Sales tax payable	$	274,411	$	218,828
Accrued expenses		90,022		24,307
Credit cards		-		1,863
Total other current liabilities	$	364,433	$	244,998

Note 8 – Notes Payable

During the fiscal year ended May 31, 2020, a commercial bank granted to the Company a loan (the “Loan”) in the amount of $150,000, which is administered under the authority and regulations of the U.S. Small Business Administration pursuant to the Economic Injury Disaster Loan Program (the “EIDL”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Loan, which is evidenced by a note dated May 18, 2020, bears interest at an annual rate of 3.75% and is payable in installments of $731 per month, beginning May 18, 2021 until May 18, 2050. The Company has to maintain a hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Proceeds from loans granted under the CARES Act are intended to be used for payroll, costs to continue employee group health care benefits, rent, utilities, and certain other qualified costs (collectively, “qualifying expenses”). The Company used the loan proceeds for qualifying expenses. During the fiscal year ended May 31, 2022, the Company received a loan forgiveness for $10,000 and an additional $10,000 of borrowing under the program. The Company recorded interest expense related to the Loan, on the accompanying consolidated financial statements, of $1,275 and $1,296, during the three months ended November 30, 2025 and November 30, 2024, respectively, and $2,587 and $1,296, during the six months ended November 30, 2025 and November 30, 2024, respectively. The Company is currently in compliance with the terms of the loan and has presented the long-term payments in accordance with the agreement.

Schedule of notes payable
	November 30, 2025			May 31, 2025
Economic Injury Disaster Loan Program (EIDL)	$	138,305		$	140,229
Total		138,305			140,229
Less: Current portion		(3,488	)		(3,574	)
Non-current portion	$	134,817		$	136,655

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

Schedule of notes payments due in the next twelve months
	Total
2026 (six months remaining)	$	1,650
2027		3,712
2028		3,852
2029		3,999
2030		4,152
Thereafter		120,940
Total	$	138,305

F-16

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 9 – Stockholders’ Equity

Shares Authorized

As of November 30, 2025 and May 31, 2025, the authorized capital of the Company consisted of 15,000,000 shares of common stock, par value $0.0001 per share and 28,000,000 shares of preferred stock, par value $0.0001 per share.

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

Preferred Stock

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

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

F-17

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 9 – Stockholders’ Equity (continued)

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

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

As of November 30, 2025 and May 31, 2025, 24,873,500 and 27,773,500 shares of Series A Preferred Stock, respectively, were issued and outstanding.

No shares of Series A Preferred Stock were issued during the six months ended November 30, 2025 and 2024.

During the six months ended November 30, 2025, certain stockholders of 2,900,000 preferred shares converted their preferred stock into 145,000 shares of common stock.

During the six months ended November 30, 2024, certain stockholders of 11,118,250 preferred shares converted their preferred stock into 555,913 shares of common stock.

Common Stock

As of November 30, 2025 and May 31, 2025, 6,802,717 and 6,657,717 shares of common stock, respectively, 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 six months ended November 30, 2025 and 2024.

F-18

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 9 – Stockholders’ Equity (continued)

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.

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

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

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

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

F-19

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 9 – Stockholders’ Equity (continued)

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.

During the six months ended November 30, 2025, the Company did not issue stock options.

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

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

During the three months ended August 31, 2024, the Company issued stock options, to two consultants, to purchase, in the aggregate, up to 24,000 shares of its common stock, at an exercise price equal to the Company’s closing price on the NYSE American on the date of grant. The options are valued at approximately $195,960 and expire in ten years from the date of grant.

F-20

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 9 – Stockholders’ Equity (continued)

The following table summarizes the activities for the Company’s stock option activity for the six months ended November 30, 2025:

Schedule of share based compensation stock options activity
	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Term		Intrinsic Value ⁽¹⁾
Outstanding as of May 31, 2025		902,750	$	3.48		8.7	$	1,382,078
Granted		-		-
Exercised/Forfeited		-		-
Outstanding as of November 30, 2025		902,750		3.48		8.2		1,547,140
Exercisable at November 30, 2025		475,250	$	2.99		7.5	$	1,079,430

(1)

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.

During the six months ended November 30, 2025, the Company expensed $335,031 with respect to options, of which $300,750 was included in General and administrative, and $34,281 in Sales and marketing, respectively, in the accompanying consolidated statements of operations. During the six months ended November 30, 2024, the Company expensed $211,055 with respect to options, of which $130,208 was included in General and administrative, and $80,847 in Sales and marketing, respectively, in the accompanying consolidated statements of operations

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 15,000 shares of the Company’s common stock that will vest on the one-year anniversary of the grant, subject to the respective director’s continued service as a member of the Board, with a total grant date fair value of $62,250 based on the stock price on the grant date. As of November 30, 2025, there were 15,000 unvested restricted stock awards outstanding with a weighted-average grant-date fair value of $4.15, all of which are expected to vest in the next fiscal quarter.

Effective November 13, 2024, the Company issued 2,000 shares of restricted common stock to a consultant for services relating to expansion of the Company into new markets. The shares were valued at $8,000 based on the Company’s closing price on the NYSE American on the date of grant. The shares vested upon grant and will be expensed over the six month service period of the consultant beginning from the grant date. As of November 30, 2025, there were no unvested shares of restricted stock outstanding.

The fair value of the stock grants is recorded over the term of the service related to each grant. During the six months ended November 30, 2025, the Company expensed $45,203 related to restricted stock awards and restricted stock expense, which was included in General and administrative in the accompanying consolidated statements of operations. During the six months ended November 30, 2024, the Company expensed $97,500 related to restricted stock awards, which was included in General and administrative in the accompanying Consolidated Statements of Operations, and $293,909 related to restricted stock expense of which $293,054 was included in General and administrative and $855 in Sales and marketing, respectively, in the accompanying Consolidated Statements of Operations.

As of November 30, 2025, there was no unrecognized share-based compensation cost related to unvested restricted stock. Unrecognized share-based compensation cost related to unvested restricted stock awards totaled $7,504, which is expected to be recognized over a weighted-average period of less than one year.

F-21

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 10 – Commitments and Contingencies

Leases

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

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

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

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

The Company computed an initial lease liability of $767,269 for the two new lease agreements and an initial ROU asset in the same amount which was recorded on the books at the commencement of the leases. During the three months ended November 30, 2025 and November 30, 2024, the Company recorded operating lease costs in the amount of $63,160 and $49,080, respectively. During the six months ended November 30, 2025 and November 30, 2024, the Company recorded operating lease costs in the amount of $126,321 and $67,739, respectively. Operating lease and short-term lease expenses are included in General and administrative expenses on the accompanying consolidated statements of operations.

The weighted average remaining term and discount rate for the Company’s operating leases as of November 30, 2025, was 2.9 years and 13.1%, respectively.

F-22

AXIL BRANDS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 2025

(Unaudited)

Note 10 – Commitments and Contingencies (continued)

Supplemental balance sheet information related to leases was as follows:

Schedule of supplemental balance sheet information
Assets	November 30, 2025			May 31, 2025
Right of use assets	$	729,324		$	861,294
Accumulated reduction		(262,504	)		(282,173	)
Operating lease assets, net	$	466,820		$	579,121

Liabilities
Lease liabilities	$	729,324		$	861,294
Accumulated reduction		(224,945	)		(244,082	)
Total lease liabilities, net		504,379			617,212
Current portion		(203,367	)		(212,543	)
Non-current portion	$	301,012		$	404,669

Maturities of operating lease liabilities were as follows as of November 30, 2025:

Schedule of maturities of operating lease liabilities
Operating Lease (fiscal year-end)

2026 (six months remaining)	$	119,722
2027		257,647
2028		206,270
2029		119,790
Total	$	703,429
Less: Imputed interest		(199,050	)
Present value of lease liabilities	$	504,379

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 mat

SEC Form 10-Q filed by AXIL Brands Inc.