10-K: AXIL Brands Reports FY25 Net Income Decline Amid Tariff Impact

Sentiment:

Annual Report 21 August 2025 8:00 AM

AXIL Brands, Inc. reported a net income of $854,988 for fiscal year 2025, a decrease from the prior year, primarily due to reduced advertising spend and tariff impacts, while strategically expanding its wholesale channels and internal marketing capabilities.

Delay expectedExperienced a temporary disruption in operations during the fourth quarter of fiscal year 2025 as a result of newly imposed international tariffs, which affected product availability and timing of sales.

Capital raiseThe company states, 'If needed, we may seek additional capital, although there is no assurance that financing will be available on acceptable terms or at all.''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.''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.'

Worse than expectedNet income decreased significantly from $2,003,134 in fiscal year 2024 to $854,988 in fiscal year 2025.Net sales decreased by 4.5% year-over-year.Gross profit decreased by 7.6% and gross profit margin declined.Income from operations decreased by 22.8%.Basic and diluted EPS declined substantially.

Summary

Net sales decreased by 4.5% to $26,257,522 in fiscal year 2025, down from $27,498,539 in fiscal year 2024.
Gross profit decreased by 7.6% to $18,641,568 in fiscal year 2025, with the gross profit margin declining to 71.0% from 73.4%.
Total operating expenses decreased by 6.4% to $17,480,203 in fiscal year 2025.
Income from operations decreased by 22.8% to $1,161,365 in fiscal year 2025.
Net income after tax was $854,988 in fiscal year 2025, a significant decrease from $2,003,134 in fiscal year 2024.
Adjusted EBITDA increased by 21.3% to $2,430,333 in fiscal year 2025, and as a percentage of sales, it rose to 9.3% from 7.3%.
Basic earnings per share (EPS) was $0.13 and diluted EPS was $0.10 for fiscal year 2025, compared to $0.57 and $0.21, respectively, in the prior year (which included a one-time gain).
Cash provided by operating activities significantly improved to $1,928,661 in fiscal year 2025 from $2,677 in fiscal year 2024.
A new wholly-owned subsidiary, Sharper Vision Marketing Inc., was incorporated on May 5, 2025, to offer marketing services.
A strategic supply arrangement with a national membership-based retail chain was secured, with a substantial initial purchase order expected to be fulfilled in Q1 and early Q2 fiscal year 2026.
The company experienced a temporary disruption in Q4 fiscal year 2025 due to newly imposed international tariffs, affecting cost of goods sold and sales.

Sentiment

Score: 4

Explanation: While the company demonstrated improved operational efficiency through increased Adjusted EBITDA and cash from operations, the significant decline in net income, sales, and gross profit, coupled with ongoing tariff impacts and reliance on limited suppliers, indicates underlying challenges. Strategic initiatives are positive but their impact is yet to be fully realized. The explicit mention of potential need for capital and the severe consequences of failing to raise it adds a layer of concern.

Positives

Adjusted EBITDA increased by 21.3% to $2,430,333 in fiscal year 2025, demonstrating improved operational efficiency.
Adjusted EBITDA as a percentage of sales improved to 9.3% in fiscal year 2025 from 7.3% in the prior year, driven by substantial reduction in advertising expense and a one-time gain from accounts payable forgiveness.
Net cash provided by operating activities significantly increased to $1,928,661 in fiscal year 2025, up from $2,677 in fiscal year 2024, indicating stronger cash generation from core operations.
Entered into a strategic supply arrangement with a national membership-based retail chain, expected to drive meaningful revenue growth and enhance brand visibility in fiscal year 2026.
Incorporated Sharper Vision Marketing Inc. to internalize marketing functions, aiming to optimize internal efficiency and explore third-party revenue opportunities.
Expanded the leadership team in June 2025 by hiring a senior contractor to lead growth initiatives in the hair and skin care division.
Received prominent media recognition in leading military publications, elevating brand credibility for hearing protection and enhancement technology.
Implemented a proactive supply chain transition strategy, including relocating senior manufacturing leadership to the U.S. and developing domestic production capabilities, to build resilience against geopolitical risks and tariffs.
Management believes the majority of the tariff-related impact was concentrated in the fourth quarter of fiscal year 2025 and does not expect a material ongoing effect into fiscal year 2026 based on current tariffs.
Maintained effective disclosure controls and procedures and internal control over financial reporting as of May 31, 2025.

Negatives

Net sales decreased by 4.5% in fiscal year 2025, primarily due to reduced advertising expenditure impacting direct-to-consumer sales.
Gross profit decreased by 7.6% and the gross profit margin declined from 73.4% to 71.0%, attributed to lower-margin distributor sales and elevated input/logistics costs from tariffs.
Net income after tax significantly decreased by 57.3% from $2,003,134 in fiscal year 2024 to $854,988 in fiscal year 2025.
Income from operations decreased by 22.8% in fiscal year 2025.
Basic and diluted earnings per share declined substantially, although the prior year included a non-recurring gain from preferred stock redemption.
Experienced a temporary disruption in operations during the fourth quarter of fiscal year 2025 due to newly imposed international tariffs, which impacted product availability and timing of sales.
Stock-based compensation expense increased significantly to $1,108,934 in fiscal year 2025 from $267,183 in fiscal year 2024, partially offsetting cost optimization measures.
Relies on a limited number of key suppliers, with two vendors accounting for 90% of total purchases in the hearing enhancement and protection segment and two vendors for 98% in the hair and skin care segment, posing a risk of disruption.

Risks

Future growth is dependent on the successful execution of strategic initiatives and market acceptance of products, which require significant management and capital investments.
Subject to inflationary pressures and supply chain risks, including increases in raw material costs, transportation delays, or disruptions in supplier relationships.
Inaccurate forecasting of inventory needs can lead to excess inventory, resulting in write-downs, or stockouts, leading to missed sales opportunities and lost revenues.
Reliance on a small number of third-party suppliers for key components and raw materials could lead to production delays, increased costs, or inability to meet customer demand if disruptions occur.
The business and products are subject to complex and evolving local, regional, state, federal, and international regulations, which can impose significant compliance costs and operational burdens.
Changes in U.S. and international trade policies, including tariffs and import rules, could increase costs and disrupt operations, particularly given reliance on international suppliers.
Product safety, labeling, and licensing concerns may result in product recalls, reputational harm, increased customer service costs, and legal expenses.
Failure to maintain effective internal control over financial reporting could result in material misstatements, financial restatements, regulatory scrutiny, increased costs, and loss of investor confidence.
May need additional capital in the future, which may not be available on attractive terms or at all, potentially forcing delays in growth initiatives or curtailment of operations.
Issuance of equity or convertible securities for future funding could significantly dilute existing stockholders and negatively affect the common stock price.
The common stock price may be volatile due to various factors, including financial performance, market speculation, liquidity, macroeconomic trends, and competitive announcements.
A failure of IT systems or a cybersecurity breach could disrupt business, harm reputation, and expose the company to legal or regulatory liabilities.
Economic downturns or shifts in consumer behavior, including reduced discretionary spending, inflation, and foreign currency fluctuations, may reduce consumer demand for products.
Subject to Section 203 of the Delaware General Corporation Law, which generally prohibits business combinations with interested stockholders for three years, acting as an anti-takeover measure.
Provisions in the Certificate of Incorporation and Bylaws, such as a classified Board, lack of cumulative voting, and the Board's ability to fill vacancies, could deter hostile takeovers or changes in control/management.
The authorization of undesignated Preferred Stock makes it possible for the Board to issue shares with voting or other rights that could impede a change of control.

Future Outlook

The company expects to continue generating net income and positive cash flow in the fiscal year ending May 31, 2026, believing it has sufficient liquidity for at least one year. It plans to manage expenses relative to expected revenue and may reinvest near-term cash to support revenue growth. The company anticipates continued growth in the hearing enhancement and protection segment, including in offline sales, and is increasing its focus on domestic and international distribution and retail sales by expanding its sales team. The strategic supply arrangement with a national membership-based retail chain is expected to drive meaningful revenue growth and enhance brand visibility in Q1 and early Q2 fiscal year 2026. While near-term cost pressure from imported components persists, the company believes the majority of the tariff-related impact was concentrated in Q4 fiscal year 2025 and does not expect a material ongoing effect into fiscal year 2026 based on current tariffs. The company is currently assessing the impact of 'The One Big Beautiful Bill Act of 2025' on its consolidated financial statements.

Management Comments

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.
We are actively evaluating opportunities to expand into adjacent verticals that leverage our existing consumer-facing capabilities.
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.
Management implemented a series of internal operational efficiencies that successfully mitigated the broader financial impact [of tariffs].
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.
We believe these initiatives will position us well to navigate the evolving trade environment and support long-term competitiveness.
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.
Management remains focused on expanding product lines and our customer base to drive revenue.
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 believe our current liquidity is sufficient to meet these obligations [lease payments].
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.

Industry Context

The company operates in two distinct but overlapping markets: hearing enhancement and protection, and hair and skin care. The hearing enhancement and protection market is growing due to increased awareness of hearing loss and demand for innovative, comfortable, and superior protection devices. The company competes with established players like ISOtunes, Walkers, SureFire, and Sordin, many of whom have more diversified product lines and resources. The global hair care market is projected for significant growth, driven by consumer interest in premium, clean, and specialized products, with the U.S. market also showing strong growth. The company competes with brands such as Keranique, Zenagen, and Revita. The company's strategy to internalize marketing services and expand into new distribution channels aligns with broader industry trends of optimizing operational costs and seeking new revenue streams in competitive consumer markets.

Comparison to Industry Standards

Many competitors in the hearing enhancement and protection market (e.g., ISOtunes, Walkers, SureFire, Sordin) 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, suggesting AXIL Brands may be at a competitive disadvantage in these areas.
Competitors in the hair and skin care market (e.g., Keranique, Zenagen, Revita) also possess more diversified product lines, established supply and distribution systems, loyal customer bases, and significant resources.
AXIL Brands identifies its principal competitive advantages in hearing enhancement and protection as 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, OEM partners, and patent protection.
For the hair and skin care segment, competitive advantages are cited as product quality, online marketing, and drug-free solutions for healthy scalp and hair.
The company's direct-to-consumer sales via Shopify and Amazon accounted for approximately 80% of consolidated net sales in FY2025, indicating a strong e-commerce focus compared to traditional retail models.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer and Chairman of the Board	NA	Jeff Toghraie	2025-08-18	Formalized employment agreement with new compensation terms and change of control provisions.
Chief Financial Officer and Chief Operating Officer	NA	Jeff Brown	2025-08-18	Formalized employment agreement with new compensation terms and change of control provisions.
Senior Contractor, Hair and Skin Care Division	NA	NA	2025-06-01	Hired to lead growth initiatives and bring extensive experience in brand development and channel expansion.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Board Structure	The Board of Directors is divided into three classes with staggered three-year terms, with only one class elected at each annual meeting.	NA	This staggered board structure, combined with the lack of cumulative voting and the Board's ability to fill vacancies, makes it more difficult for stockholders to replace the Board and for another party to obtain control of the company.
Bylaw Amendments	The company's Bylaws may be altered, amended, repealed, or replaced by the Board of Directors without stockholder approval, except for amendments related to director election votes adopted by stockholders.	NA	Grants significant power to the Board to modify internal governance rules without direct stockholder consent, potentially impacting corporate control.
Authorized Capital Stock	On April 8, 2025, the Board and stockholders approved an amendment to reduce authorized common stock from 450,000,000 to 15,000,000 shares and preferred stock from 300,000,000 to 28,000,000 shares. The par value and rights remained unchanged.	2025-05-19	While reducing the authorized share count, the existence of authorized but unissued shares of Common Stock and Preferred Stock still allows for future issuance without stockholder approval (except as required by law), which could deter control attempts by enabling the Board to place shares with aligned investors.
Preferred Stock Authority	The Board of Directors has the authority to issue up to 28,000,000 shares of Preferred Stock in one or more series and to fix their rights, preferences, privileges, and restrictions without further action by common stockholders.	NA	The issuance of Preferred Stock could adversely affect the voting power of common stockholders, the likelihood of receiving dividends, and payments upon liquidation. It could also have the effect of delaying, deferring, or preventing a change of control of the company.
Anti-Takeover Provisions (Delaware Law)	The company is subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a public Delaware corporation from engaging in a business combination with an interested stockholder for three years unless specific conditions are met.	NA	This law is designed to deter hostile takeovers by making it more difficult for an interested stockholder (one owning 15% or more of voting stock) to complete certain business combinations.
Insider Trading Policy	The company has an Insider Trading Policy prohibiting short sales, publicly traded options, hedging transactions, and holding company securities in margin accounts or pledging them as collateral (with exceptions/approvals). It also requires pre-clearance for executive officers and directors for transactions in company securities.	2024-10-08	Enhances compliance with federal securities laws, aims to prevent insider trading, and maintains the company's reputation for high standards of conduct. The pre-clearance process adds a layer of control over executive and director trading.

Legal Proceedings

The company is involved in various lawsuits and legal proceedings that arise in the ordinary course of business.
Management believes that the ultimate liability in connection with these matters is not expected to have a material adverse effect on the company's results of operations, financial position, or cash flows.
Amounts accrued for any individual matter are not material.
Legal proceedings are inherently uncertain, and there is no assurance that any expense, liability, or damages will be covered by insurance or will not exceed recognized amounts, potentially being material to results for a particular period.

Related Party Transactions

Jeff Toghraie, the company's CEO and Chairman, is the managing director of Intrepid Global Advisors. Intrepid was paid approximately $227,100 in consulting fees for the fiscal year ended May 31, 2025 (compared to $0 in FY2024).
As of May 31, 2025, the company had an amount receivable from Intrepid of $222 relating to an overpayment (compared to a $11,798 payable as of May 31, 2024).
Advances from Intrepid for working capital purposes totaled $6,950,210 in FY2025 and $8,939,403 in FY2024. Repayments to Intrepid were $6,962,230 in FY2025 and $9,085,677 in FY2024. These advances are short-term and non-interest bearing.
Jeff Brown, the company's Board Member, CFO, and COO, is the co-owner, Chairman, and CFO of BZ Capital Strategies. BZ Capital Strategies was paid $120,000 in consulting fees for the fiscal year ended May 31, 2025 (compared to $0 in FY2024).

Stakeholder Impact

**Shareholders**: Face potential dilution from future equity raises and stock price volatility. Anti-takeover provisions in corporate governance may limit their ability to influence control changes. However, strategic growth initiatives aim for long-term value creation.
**Employees**: Key executives (Jeff Toghraie, Jeff Brown) have new employment agreements providing compensation stability and incentives. The company emphasizes human capital management, health, and safety. Stock-based compensation is a component of overall remuneration.
**Customers**: Expansion into new distribution channels, such as the national membership-based retail chain, could increase product accessibility. However, temporary supply chain disruptions in Q4 FY2025 impacted product availability and sales timing.
**Suppliers**: The company's reliance on a limited number of key suppliers creates a concentration risk. The ongoing supply chain transition strategy aims to build resilience and diversify sourcing.
**Creditors**: The company has a secured Economic Injury Disaster Loan outstanding. Management believes current liquidity is sufficient to meet obligations, but future capital needs could impact creditor risk if not secured on favorable terms.

Next Steps

Fulfillment of a substantial initial purchase order from a national membership-based retail chain across Q1 and early Q2 fiscal year 2026.
Continued expansion into new distribution and licensing agreements across target markets, including construction, aviation, agriculture, forestry, fitness, power sports, target shooting, motorcycling, and live event environments.
Continued growth in offline sales.
Expansion of marketing footprint in organic social, affiliate, and search engine optimization.
Allocation of resources to expand the sales team for domestic and international distribution and retail sales.
Continued prioritization of investments to strengthen core hearing protection and personal care businesses.
Strategic expansion into service-based revenue streams through the marketing services subsidiary.
Ongoing relocation of senior manufacturing leadership to the United States.
Early-stage development of domestic production capabilities.
Assessment of the impact of 'The One Big Beautiful Bill Act of 2025' (OBBBA) on consolidated financial statements.
The 2025 Annual Meeting of Stockholders is scheduled for December 17, 2025.

Key Dates

Date	Description
2015-05-21	AXIL Brands, Inc. (f/k/a Reviv3 Procare Company) incorporated in Delaware.
2020-05-18	Economic Injury Disaster Loan (EIDL) note date.
2021-05-18	EIDL monthly payments began.
2022-06-16	Company acquired substantially all assets of Axil & Associated Brands Corp. (A&A), marking initial entry into the hearing technology market.
2022-11-07	Amendment to voting agreement with A&A and Intrepid Global Advisors became effective.
2024-01-16	Company effected a 1-for-20 reverse stock split.
2024-02-14	Company changed its name from Reviv3 Procare Company to AXIL Brands, Inc. and uplisted to the NYSE American stock exchange.
2024-03-05	Company entered into repurchase agreements for 207,748,250 shares of Series A Preferred Stock.
2024-05-31	Fiscal year ended.
2024-10-01	Sublease agreement for American Fork, Utah office and warehouse space began.
2024-10-08	Compensation Committee approved the grant of 350,000 options to Jeff Toghraie and 250,000 options to Jeff Brown.
2024-10-14	Options granted to Jeff Toghraie and Jeff Brown became effective.
2024-11-01	Beverly Hills, California corporate office lease commenced.
2024-11-13	Stock options issued to one employee (5,000 shares).
2024-11-29	Aggregate market value of voting and non-voting common equity held by non-affiliates was $16,457,496.
2024-12-18	Amended and Restated 2022 Equity Incentive Plan became effective following shareholder approval.
2025-01-02	Stock options issued to one employee (5,000 shares).
2025-01-13	Company granted 5,000 restricted stock awards to each of its three non-employee directors.
2025-03-01	Vesting began for options granted on January 2, 2025.
2025-03-24	Board of Directors ratified the retirement of 222,226,500 shares of Series A Preferred Stock.
2025-04-08	Board and stockholders approved an amendment to the Certificate of Incorporation to reduce authorized shares.
2025-04-10	Company issued 7,865 shares of restricted stock to a consultant.
2025-05-05	Company incorporated Sharper Vision Marketing Inc.
2025-05-19	Amendment to the Certificate of Incorporation became effective upon filing with the Delaware Secretary of State.
2025-05-31	Fiscal year ended.
2025-06-01	Company expanded leadership team by hiring a senior contractor for the hair and skin care division.
2025-07-04	The One Big Beautiful Bill Act of 2025 (OBBBA) was enacted in the U.S.
2025-08-18	Total common shares issued and outstanding were 6,657,717.
2025-08-18	Company entered into employment agreements with Jeff Toghraie and Jeff Brown.
2025-08-21	Filing date of the 10-K.
2025-08-29	All inbound shipments, regardless of value, may be subject to tariffs, duties, and customs processing fees.
2025-10-22	Record date for the 2025 Annual Meeting of Stockholders.
2025-12-17	Company's 2025 Annual Meeting of Stockholders scheduled.
2027-09-30	American Fork, Utah sublease expires.
2029-01-31	Beverly Hills, California office lease expires.
2035	Earliest U.S. patent expiration date.
2038	Latest U.S. patent expiration date.
2050-05-18	Economic Injury Disaster Loan (EIDL) maturity date.

Recommendation

hold

While the company faces headwinds with declining net sales and net income, the significant improvement in operating cash flow and Adjusted EBITDA, driven by cost optimization, is a positive sign of operational efficiency. The strategic entry into new wholesale channels and the focus on supply chain resilience indicate a proactive management approach. However, the reliance on a limited number of suppliers, the explicit mention of potential future capital raises with associated dilution risks, and the overall decline in top-line and bottom-line GAAP metrics warrant caution. Investors should hold to observe the execution of the new strategic initiatives and the impact of the supply chain adjustments in the coming fiscal year before making further investment decisions.

Keywords

Hearing protection, Audio enhancement, Hair care, Skin care, Consumer electronics, Personal care, E-commerce, Direct-to-consumer, Retail distribution, Supply chain, SEC filing, 10-K, Financial results, Corporate governance, Risk management, AXIL Brands

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