AXIL 10-K & 10-Q changes, risk factors and insider trading

Investing in our securities involves a high degree of risk. The following are material factors known to us that could adversely affect our business, financial condition, or operating results, as well as adversely affect the value of an investment in our common stock. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. If any of the following risks actually occur,materialize, our business, financial condition, operating results, or prospects could be materially and adversely affected. Disclosure of risks should not be interpreted to imply that the risks have not already materialized, and there may be additional risks that are not presently material or known. References to past events are provided by way of examples only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. You should carefully consider the risks described below, together with all of the other information contained in this Annual Report on Form Form 10-K and our other filings with the SEC, before making an investment decision.

Our future operations and growth depends on successful execution execution of our strategic initiatives and market acceptance of our products. Our ability to grow depends on our ability to execute our growth strategy, which includes expanding into retail channels and international markets.markets and expanding our sales team. These initiatives require significant commitments of management and capital investments and involve operational complexity. Failure to effectively execute our growth strategy could result in missed opportunities and financial losses, which could have a material adverse effect on our business, financial condition, or results of operations. In addition, if our existing or new products fail to achieve or maintain market acceptance, we may be unable to remain competitive and our business, results of operations, and financial condition could be harmed.

Our business and the products we sell are subject to complex and evolving regulations. We are required to comply with various laws and regulations at the local, regional, state, federal, and international levels. These laws and regulations change frequently, and such changes can impose significant costs and other burdens of compliance on our business. Any changes in regulations, the imposition of additional regulations, or the enactment of any new legislation that affects employment/labor, trade, product safety, transportation/logistics, energy costs, health care, tax, environmental issues, including the impact of climate change, or compliance with applicable anti-bribery laws, among other things, could have an adverse impact on our financial condition and results of operations. In addition, changes in enforcement priorities by governmental agencies charged with enforcing existing laws and regulations could increase our cost of doing business. Furthermore, our products are regulated by various U.S. and international authorities. As a result, our products could be subject to recalls and other remedial actions. Product safety, labeling, and licensing concerns may result in us voluntarily removing selected products from our inventory. Recalls or the voluntary removal of our products cancould result in lost sales, potential harm to our reputation, increased customer service costs, and legal expenses. In addition, changes in labeling, safety, or marketing laws may increase compliance costs or limit our ability to sell certain products. Non-compliance with any of these laws could result in fines, product recalls, or reputational damage, which could have a material adverse effect on our business, results of operations, and financial condition.

Changes in U.S. and international trade policies, including tariffs and import rules, could increase our costs and disrupt operations. We source a significant portion of our products and components from international suppliers, and we sell our products in a number of countries. U.S.The current trade environment remains highly fluid and internationaluncertain. tradeThe policyU.S. isgovernment has imposed, modified, and in certain cases temporarily suspended significant tariffs subjecton togoods ongoingimported changes,from includingChina adjustmentsand other countries, and further changes to tariff rates,policy enforcementmay practices,occur with limited notice. Due to the uncertainty surrounding the ultimate scope and import rules and regulations. For example beginning August 29, 2025, all inbound shipments, regardlessduration of value, may be subject toapplicable tariffs, duties,during andfiscal customsyear processing2026 fees.the Company reversed charges only on those These changes could result in higher landedtariff costs for which it received refunds. Subsequent to fiscal year end, the Company received approximately $910,000, the full amount of refunds of duties previously paid under the International Emergency Economic Powers Act (“IEEPA”), including interest. Future tariff increases, the imposition of reciprocal tariffs or trade restrictions by other countries, the elimination of existing exemptions, or adverse changes to trade agreements could materially increase our products,landed increasedcosts, administrativecompress burden,margins, and potentialrequire supplyus chainto delays.raise prices or absorb additional expenses. If we are unable to offset these cost increases or pass them on to customers, our margins and financial results could be materially adversely impacted.

We may not be able to maintain effective internal control over financial reporting. As a public company, we are required to design, implement, and maintain effective internal control over financial reporting in accordance with the Sarbanes–OxleySarbanes-Oxley Act, including ongoing evaluation, remediation of deficiencies, and adaptation adaptation to changes in our operations, systems, and regulations. We regularly assess risks, monitor controls, and implement enhancements to help ensure the accuracy and timeliness of our financial reporting; however, we cannot guarantee that our controls will prevent or detect detect all errors or noncompliance. Failure to maintain effective controls could result in material misstatements, financial restatements, regulatory regulatory scrutiny, increased costs, and loss of investor confidence.

We may need additional capital, which may not be available or may dilute existing stockholders. To support our operations or strategic plans, we may need to raise capital through equity or debt financings. There can be no assurance that such additional funding will be available on terms attractive to us, or at all. all. If we cannot secure funding on acceptable terms, or at all, we may be forced to delay growth or other strategic initiatives, which could have an adverse effect on our business, financial condition, and results of operations. If additional funding is raised through the issuance of equity or convertible securities, holders of our common stock could suffer significant dilution, and any new shares we issue could have rights, preferences, and privileges superior to those of our common stock.

The issuance of convertible securities may dilute dilute our common stockholders. We have previously issued Series A Convertible Preferred Stock in connection with acquisitions. Conversions of these preferred shares into common stock, or the issuance of shares in connection with other convertible securities that we may issue in the future, could significantly dilute common stockholders and negatively affect the market price of our common stock.

In addition, the stock market in general may experience significant significant price and volume fluctuations, which may be unrelated to the operating performance of particular companies but could cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our Company or its performance.

A failure of our IT systems or a cybersecurity breach could disrupt our business. We rely on IT infrastructure, including hardware, networks, software, digital platforms and third-party systems to operate our business and communicate with customers. These uses give rise to cybersecurity risks, including security breaches, system disruption, theft, and inadvertent release of information. We have implemented measures to prevent and mitigate cybersecurity breaches. breaches. To date, we are not aware of any cybersecurity incidents that have had or are reasonably expected to have a material adverse effect on our operations. However, we or our third-party service providers may experience cybersecurity incidents in the future. In addition, as artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and craft increasingly sophisticated cybersecurity attacks, and vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party providers. While we have implemented various security measures, we cannot guarantee that such measures will be effective or sufficient to prevent a cyberattack, and future cyberattacks could still occur and could go undetected and persist for an extended period of time. There can be no assurance that our operations will not be materially adversely impacted by future cybersecurity incidents, and there is a risk that we may incur significant costs in protecting against or remediating cyberattacks or other cybersecurity breaches. A significant IT failure, data breach, or cyberattack could harm our reputation, disrupt operations, and expose us to legal or regulatory liabilities. In addition, the theft, destruction, loss, misappropriation, release of sensitive or confidential information, or interference with the IT infrastructures of third parties on which we rely, including suppliers and customers, could result in a disruption to our supply chain, which could adversely affect our business, financial condition, or results of operations. We also incur costs in order to comply with cybersecurity or data privacy regulations or with requirements imposed by business partners. Data privacy and cybersecurity laws in the United States and internationally are constantly changing, and the implementation of these laws has become more complex. Any security breach, whether successful or not, would harm our reputation and could damage our competitive position and cause the loss of customers. In addition, any such breach, or any material failure on our part to comply with applicable laws, could subject us to litigation, government investigation or enforcement actions or other regulatory sanctions, regulatory penalties or fines, or costly response measures.

Economic downturns or shifts in consumer behavior may reduce consumer demand for our products. Unfavorable economic factors that are beyond our control, including those impacting discretionary discretionary spending, may reduce consumer demand for our products. These factors include, but are not limited to, economic uncertainty, including including potential recession, inflation, , interest rate uncertainty, tariffs, supply chain and labor disruptions, unemployment rates, labor and materials shortages, banking instability, political and social unrest, geopolitical events and uncertainty, foreign currency exchange rate fluctuations, and changing tax rates and policies. Any one or a combination of these factors could adversely affect consumer spending and preferences. If consumer demand for our products decreases, our revenue and profitability may be materially and adversely impacted.

The Company is engaged in the manufacturing, marketing, sale and distribution of high-tech, innovative hearing and audio enhancement and protection products that provide cutting-edge solutions for people with varied applications across many industries andindustries, professional quality hair and skin care products under various trademarks and brands.brands, and the delivery of marketing services to support both its owned brands and third-party clients.

Through our hearing enhancement and protection segment, we design, innovate, engineer, manufacture, market and service specialized systems in hearing enhancement, hearing protection, wireless audio, and communication. Through our hair and skin care segment, we manufacture, market, sell, and distribute professional quality hair and skin care products. Our marketing services segment is conducted through our wholly owned subsidiary, Sharper Vision Marketing Inc., which was formed to leverage our direct-to-consumer expertise in support of both our internal brands and third-party clients. This segment is focused on delivering performance-driven marketing solutions and represents an expansion of our capabilities to drive growth and enhance brand visibility.

Cost of salesrevenues primarily includes primarily the cost of products, freight-in costs, customs duties, and depreciation related to fixed assets that are used in the production and distribution process to bring goods to their saleable condition and location. For the year ended May 31, 2025,2026, the overall cost of salesrevenues increased by $294,116 $1,851,869 or 4.0%,24.3%, as compared to the year ended May 31, 2024.2025. Cost of salesrevenues as a percentage of net revenues for the year ended May 31, 2025 2026 was 29.0%30.7% as compared to 26.6% 29.0% for the year ended May 31, 2024.2025. The increase in costCost of sales,revenues as a percentage of sales,sales wasincreased, primarily attributabledriven by to an increase inincreased sales to distributorsbig box retail chains in both our hair and skin care products and our hearing enhancement and protection segments,segment, bearingwhich carry tighter margins than our direct-to-consumer channel. The effect of this mix shift was partially offset by lower margins innet additioncustoms toduties, elevatedincluding inputrefunds andof logisticsduties costsreceived resulting from tariff-related supply chain disruption induring the fourth quarter. year.

Gross profit decreasedincreased by $1,535,133$2,738,179 or 7.6%14.7% from $20,176,701$18,641,568 in the year ended May 31, 20242025 to $18,641,568$21,379,747 for the year ended May 31, 2025.2026. Gross profit as a percentage of sales for the year ended May 31, 20252026 was 71.0%,69.3%, as compared to 73.4%71.0% for the year ended May 31, 2024.2025. The decrease in the gross profit margin for forthe year ended May 31, 20252026 was primarily attributabledriven by lower margins on material orders from big box retail chains, reflecting the growth of our retail and wholesale channel from approximately 21% of consolidated net revenues in fiscal year 2025 to anapproximately increase35% in costfiscal year of2026, salespartially asoffset aby percentagelower ofproduct revenue,costs and anlower increasenet in discountscustoms asduties, aincluding percentagerefunds of revenue.received.

Income from operations for the year ended May 31, 2025,2026, was $1,161,365$2,977,043 compared to income of $1,503,380$1,161,365 for the year ended May 31, 2024.2025. The decreaseincrease in income from operations of $342,015$1,815,678 or 22.8%156.3% was primarily relateddriven toby anmaterial increaseorders infrom stock-basedbig compensationbox expenseretail chain orders, partially offset by significantlyincreased loweroperating advertisingexpenses costs,and along withby a non-recurringforgiveness gainof fromaccounts the forgivenesspayable of approximately $220,000 in accountsfiscal payable.2025 that did not recur in the year ended May 31, 2026.

For the year ended May 31, 2026 and 2025, provision for income tax expense was $453,828.$440,310 Forand the$453,828, year ended May 31, 2024, we had an income tax benefit of $220,205.respectively.

Adjusted EBITDA increased by $427,444$1,609,078 or 21.3% 66.2% from $2,002,889 for the year ended May 31, 2024 to $2,430,333 for the year ended May 31, 2025.2025 to $4,039,411 for the year ended May 31, 2026. Adjusted EBITDA as a percentage of sales,revenues, net net for the years ended May 31, 20252026 and May 31, 2024,2025, was 9.3%13.1% and 7.3%,9.3%, respectively. Adjusted EBITDA increased primarily due toas a substantialresult reductionof inmaterial advertisingorders expense,from whichbig outweighedbox theretail associatedchains, declinepartially inoffset revenue,by increased operating expenses and was further supported by a one-time gain from the forgiveness of accounts payable of approximately $220,000 in accountsfiscal payable.2025, that did not recur in the year ended May 31, 2026.

Basic and diluted earnings per share for the year ended May 31, 20252026 were approximately $0.13$0.40 and $0.10,$0.33, respectively, compared to $0.57$0.13 and $0.21$0.10 in the prior years. The prior-year EPS included a one-time gain of $1,329,588 related to preferred stock redemption; excluding that non-recurring benefit, the year-over-year decline in EPS was more moderate and corresponds to the lower net income in full year ended May 31, 2025.year.

We are currently engaged in product sales and development.development and services. Although we earned net income and have cash provided by operations in the fiscal years ended May 31, 20252026 and 2024,2025, we have experienced operating losses in prior periods. We expect to continue generating net income and to generate positive cash flow in the fiscal year ending May 31, 2027, 2026. Based on our current cash balances and anticipated operating cash flows,although we believecannot weprovide haveany sufficient liquidity to meet working capital needs for at least one year from the issuance date of the accompanying consolidated financial statements.assurance.

We plan to manage expenses relative to expected revenue and may reinvest near-term cash to support revenue growth. FollowingIn therecent acquisition of A&A’s assets in June 2022,years, we have generated sufficient cash to support our operations and required debt payments, and we expect this to continue, although we cannot provide any assurance. Management remains focused on expanding product lines and our customer base to drive revenue. However, future cash demands may exceed historical levels. If needed, we may seek additional capital, although there is no assurance that financing will be available on acceptable terms or at all. Subject to these uncertainties, based on our current cash balances and anticipated operating cash flows, we believe we have sufficient capital and liquidity to fund operations operations and meet working capital needs for at least one year from the issuance date of the accompanying consolidated financial statements.

Net cash flows used in financing activities for the year ended May 31, 20252026 was $18,385$87,830 compared to $1,420,958$18,385 used in financing activities for the year ended May 31, 2024.2025. The decreaseincrease in cash used in financing activities related primarily to repurchasesthe repayment of preferredour stocknote amountingpayable to $1,246,490 induring the year ended May 31, 2024 that did not occur in the year ended May 31, 2025.2026.

As of May 31, 2025, we had a secured Economic Injury Disaster Loan outstanding, administered pursuant to the CARES ActAct, in the principal amount of $140,229, with a maturity date of May 18, 2050. TheDuring the fiscal year ended May 31, 2026, the Company continues to pay interest and principal onrepaid the loan.outstanding balance of the loan in full. As of May 31, 2026, we have no outstanding borrowings.

We are dependent on our product sales and services to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock, preferred stock, stock, debt securities or entering into credit agreements or other borrowing arrangements with institutions or private individuals, to maintain maintain operations, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult difficult to obtain, more costly and more dilutive. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. We do not have anyno planspresent plan or commitment to seek obtain additional financing at this timefinancing, and we anticipate that our existing cash and cash equivalents and cash expected to be provided by operations will be sufficient to meet our working capital requirements.requirements for at least the next twelve months. However, if the need arises for additional cash, there can be no assurance that we will be able to raise the capital we need for our operations on favorable terms, or at all. We may not be able to obtain additional capital or generate sufficient revenues to fund our operations. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. 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.

Critical accounting policies and practices are those those that are both most important to the portrayal of the Company’s financial condition and results, and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The critical accounting policies and practices used by the Company for the year ended May 31, 2025 financial statements relate to the policies and practices the Company uses to account for:estimates.

Accounts receivable and allowance for doubtfulcredit accountslosses

The Company has a policy of providing an allowance for doubtfulcredit accountslosses 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 badprovision debtfor expensecredit losses and included in the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Although the forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in herein and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects. Please see “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional information.

Beginning inSince the three months ended February 28, 2026, we operate in three reportable segments: (i) hearing enhancement and protection, (ii) hair and skin care, and (iii) marketing services.

Through our hearing enhancement and protection segment, segment, we design, innovate, engineer, manufacture, market and service specialized systems in hearing enhancement, hearing protection, wireless wireless audio, and communication. Through our hair and skin care segment, we manufacture, market, sell, and distribute professional quality hair and skin care products. Our hair and skin care products.segment is operated through our majority-owned subsidiary, Reviv3 ProCare Company (“Reviv3”). Our marketing services segment is conducted through our wholly owned subsidiary, Sharper Vision Marketing Inc., Inc., which was formed to leverage our direct-to-consumer expertise in support of both our internal brands and third-party clients. This segment segment is focused on delivering performance-driven marketing solutions and represents an expansion of our capabilities to drive growth and enhance brand visibility.

In addition to growing our overall distribution and retail footprint, the Company has reached a significant milestone in its wholesale channel strategy by securing several strategic supply agreements with leadingbig nationalbox retail chains. These agreements have already generated multiple purchase orders in the first half of calendarfiscal 2026. While there can be no assurance that additional purchase orders will be received or regarding the timing or volume of fulfillment, fulfillment of any such orders, we expect this expanded national retail presence to drive meaningful revenue growth and significantly enhance brand visibility among a much wider customer base.

For the Threethree Monthsmonths Endedended FebruaryAugust 28,31, 2026 Comparedcompared to the Threethree Monthsmonths Endedended FebruaryAugust 28,31, 2025

Cost of salesrevenues primarily includes the cost of products, freight-in freight-in costs, customs duties, and depreciation related to fixed assets that are used in the production and distribution process to bring goods to their saleable condition and location. The overall cost of sales increased by $296,270 or 15.1% from $1,955,939 in the three months ended February 28, 2025 to $2,252,209 inFor the three months ended FebruaryAugust 28,31, 2026.2026, cost of revenues decreased by $1,162,630, or 52.3%, compared to the three months ended August 31, 2025. Cost of salesrevenues as a percentage of net revenues for the three months ended August February 28,31, 2026 was 30.9%17.4%, as compared to 28.3%32.4% for the three months ended FebruaryAugust 28,31, 2025. CostThe decrease was attributable in part to the $550,929 benefit recognized in the three months ended August 31, 2026 from the recovery of salespreviously paid IEEPA customs duties, as adiscussed above percentage ofand revenuein increasedNote primarily9 due– Commitments and Contingencies to increasedthe tariffs.condensed consolidated financial statements. Excluding this benefit, cost of revenues would have been $1,609,583, or 26.4% of net revenues. The remaining decrease reflects lower retail and wholesale volume and a higher mix of direct-to-consumer sales.

Gross profit increased by $75,393$396,795, or 1.5%8.6%, from $4,634,934 $4,966,428 in the three months ended FebruaryAugust 28,31, 2025 to $5,041,821$5,031,729 for the three months ended FebruaryAugust 28,31, 2026. Gross profit as a percentage of of sales for the three months ended FebruaryAugust 28,31, 2026 was 69.1%,82.6%, as compared to 71.7%67.6% for the three months ended FebruaryAugust 28,31, 2025.2025 Grossprimarily as a result of the recovery of previously paid IEEPA customs duties of $550,929. Excluding this benefit, gross profit as a percentage of salesnet decreasedrevenues primarilywas due to higher customs duties.73.6%.

Income from operations for the three months ended FebruaryAugust 28,31, 2026,2026 was $214,239$437,027, compared to $583,109$411,738 for the three months ended FebruaryAugust 28,31, 2025. The decreaseincrease in income from operations of $368,870$25,289, or 6.1%, was primarily related primarilyto customs refunds received, partially offset by lower revenues due to antiming of orders by big box retail chains and higher operating expenses related to the increase in sales and marketing costs.related to the launch of XCOR II, the Reviv3 share issuance charge described above, and increases in fees for management.

For the three months ended FebruaryAugust 28,31, 2026, provision for income tax expense was $64,306.$99,590, Forcompared to $115,058 for the three months ended FebruaryAugust 28,31, 2025, werepresenting had a provision for incomeeffective tax expense rates of $53,085.19.1% and 25.6%, respectively. The decrease in the effective tax rate was primarily due to increased tax exemptions related to research and development.

As a result of the above, we reported a net income of of $203,046 and $576,662$420,571 for the three months ended FebruaryAugust 28,31, 20262026, andcompared to net income of $334,294 for the three months ended August 31, 2025, respectively.an increase of $86,277, or 25.8%.

Adjusted EBITDA increased by $223,681$152,486, or 10.8%22.6%, from $674,355 for $2,076,821 in the ninethree months ended FebruaryAugust 28,31, 2025 to $2,300,502$826,841 infor the ninethree months ended FebruaryAugust 28,31, 2026. Adjusted EBITDA as a percentage of sales, net revenues for the ninethree months ended FebruaryAugust 28,31, 2026 and 2025,2025 werewas 10.3%14.1% and 10.1%,9.8%, respectively. Adjusted EBITDA improvedincreased primarily due to to athe materialcustom orderrefunds from our retail channels,received partially offset by alower forgivenessrevenues due to timing of accountsorders payablefrom ofbig approximatelybox $220,000retail that did not recur in the current period.chains.

Basic and diluted earnings per share for the nine three months ended February 28,August 31, 2026 were $0.18$0.06 and $0.15,$0.05, respectively, compared to basic and diluted earnings per share of $0.17$0.05 and $0.13, $0.04, respectively, for the nine three months ended FebruaryAugust 28,31, 2025.

We are currently engaged in product sales and development.development and services. Although we earned net income in the fiscal years ended May 31, 2026 and 2025, we have experienced operating losses in prior periods. periods, weWe expect to continue generating net income and to generate positive cash flow in the fiscal year ending May 31, 2026.2027, Based on our current cash balances and anticipated operating cash flows, although we believecannot weprovide haveany sufficient liquidity to meet working capital needs for at least one year from the issuance date of the accompanying consolidated financial statements.assurance.

As of August 31, 2026, we had cash and cash equivalents of $7,928,587, working capital of $10,275,401 and no outstanding borrowings. We plan to manage expenses relative to expected revenue and and may reinvest near-term cash to support revenue growth. In recent years, we have generated sufficient cash to support our operations and required debt payments,operations, and we expect this to continue, although we cannot provide any assurance. Management remains focused on expanding product lines and our customer base to drive revenue. However, future cash demands may exceed historical levels. If needed, we may seek additional capital, although there is no assurance that financing will be available on acceptable terms or at all. Subject to these uncertainties, based on our current cash balances and anticipated operating cash flows, we believe we have sufficient capital and liquidity to fund operations and meet working capital needs for at least one year from the issuance date of the accompanying unaudited consolidated financial statements.

Cash Flows for the ninethree months ended FebruaryAugust 28,31, 2026 and 2025

Net cash provided by operating activities for the ninethree months ended FebruaryAugust 28,31, 2026, was $790,330,$3,762,759 compared to $1,734,230net cash used in operating activities of $739,194 for the ninethree months ended FebruaryAugust 28,31, 2025. The decreaseincrease was driven primarilyrelated byto receivables from material orders from a significant inventory purchase associated with a material order from ourbig-box retail channels.chain at the end fiscal 2026 which were subsequently paid in the first quarter of fiscal 2027.

Net cash flows used in investing activities for the ninethree months ended FebruaryAugust 28,31, 2026 and 2025, was $208,850 and $255,778, respectively,$165,213 due to the purchase of intangibles and property and equipment for our business. For the three months ended August 31, 2025, net cash flows used in investing activities was $94,497, primarily attributable to the cash used in the purchase of intangibles relating to our expansion into new product lines.

Net cash flows used in financing activities for the three months ended August 31, 2026 was $130,999 and related to net payments made to a related party. Net cash provided by financing activities for for the ninethree months ended FebruaryAugust 28,31, 20262025 was $167,655$150,461 primarily related to net advances made from a related party of $169,425. Net cash provided by financing activities for the nine months ended February 28, 2025 was $11,142.$151,491.

We are dependent on our product sales and services to fund our operations and may require additional capital in the future, such as pursuant to the sale of additional common stock, preferred stock, stock, debt securities or entering into credit agreements or other borrowing arrangements with institutions or private individuals, to maintain maintain operations, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult difficult to obtain, more costly and more dilutive. Our officers and directors have made no written commitments with respect to providing a source of liquidity in the form of cash advances, loans, and/or financial guarantees. We do not have anyno planspresent plan or commitment to seek obtain additional financing at this timefinancing, and we anticipate that our existing cash and cash equivalents and cash expected to be provided by operations will be sufficient to meet our working capital requirements. requirements for at least the next twelve months. However, if the need arises for additional cash, there can be no assurance that we will be able to raise the capital we need for our operations on favorable terms, or at all. We may not be able to obtain additional capital or generate sufficient revenues to fund our operations. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. 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.

As of FebruaryAugust 28,31, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results orof operations, liquidity, capital expenditures or capital resources that is material to investors.