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<p style="margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font: 14pt Times New Roman, Times, Serif"><b>UNITED
STATES</b>&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font: 14pt Times New Roman, Times, Serif"><b>SECURITIES
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font: 12pt Times New Roman, Times, Serif"><b>Washington,
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">OR</span></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">For
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

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<tr>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">(State
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">(I.R.S.
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</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>&#160;&#160;</b></span></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;(Address
of principal executive offices, including zip code)</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b><span id="xdx_90D_edei--CityAreaCode_c20201101__20210731_zldlCUwUvbZ8"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="dei:CityAreaCode">(833)</ix:nonNumeric></span>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;(Registrant&#8217;s
telephone number, including area code)</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>N/A</b></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">(Former
name, former address, and former fiscal year, if changed since last report)</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">Securities
registered pursuant to Section 12(b) of the Act:</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
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<tr style="background-color: #CCEEFF">
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</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">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. <span id="xdx_90E_edei--EntityCurrentReportingStatus_c20201101__20210731_zDLwAY5444Ok"><span style="-sec-ix-hidden: xdx2ixbrl0030">YES</span></span> &#9746; NO &#9744;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif"></span></p>

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    <div style="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr><td style="text-align: center; width: 100%">&#160;</td></tr></table></div>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">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 (&#167;232.405 of this chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit such files). <span id="xdx_908_edei--EntityInteractiveDataCurrent_c20201101__20210731_zBQPUSJWeEjc"><span style="-sec-ix-hidden: xdx2ixbrl0031">YES</span></span> &#9746; NO &#9744;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">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 &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221;
&#8220;smaller reporting company,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 29%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Large
    Accelerated filer</span></td>
    <td style="width: 23%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">&#9744;</span></td>
    <td style="width: 25%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Accelerated
    filer</span></td>
    <td style="width: 23%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">&#9744;</span></td></tr>
<tr>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span id="xdx_907_edei--EntityFilerCategory_c20201101__20210731_za3VDm5RQ062"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric></span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">&#9746;</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Smaller reporting
    company</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span id="xdx_909_edei--EntitySmallBusiness_c20201101__20210731_zjy3HitFovPk"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" format="ixt:booleantrue" name="dei:EntitySmallBusiness">&#9746;</ix:nonNumeric></span></span></td></tr>
<tr>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Emerging growth
    company</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span id="xdx_90C_edei--EntityEmergingGrowthCompany_c20201101__20210731_zV0EkvLVgLgg"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" format="ixt:booleantrue" name="dei:EntityEmergingGrowthCompany">&#9746;</ix:nonNumeric></span></span></td></tr>
</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">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 <span id="xdx_902_edei--EntityExTransitionPeriod_c20201101__20210731_zrbVj1XACsjk"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" format="ixt:booleanfalse" name="dei:EntityExTransitionPeriod">&#9744;</ix:nonNumeric></span></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES &#9744; <span id="xdx_905_edei--EntityShellCompany_c20201101__20210731_znExbwnAhXXk"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" format="ixt:booleanfalse" name="dei:EntityShellCompany">NO</ix:nonNumeric></span> &#9746;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">APPLICABLE
ONLY TO CO</span>RPORATE ISSUERS:</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Indicate the number of shares outstanding
of each of the issuer&#8217;s classes of common stock, as of the latest practicable date:</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><span id="xdx_908_edei--EntityCommonStockSharesOutstanding_iI_c20210909_zvLgjTmopTz8"><ix:nonFraction name="dei:EntityCommonStockSharesOutstanding" contextRef="AsOf2021-09-09" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">23,628,187</ix:nonFraction> </span>shares
of common stock, $0.001 par value, outstanding as of September 9, 2021</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>

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    <div style="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr><td style="text-align: center; width: 100%">&#160;</td></tr></table></div>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>KAIVAL BRANDS INNOVATIONS GROUP, INC.</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>FORM 10-Q</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>TABLE OF CONTENTS</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="border-bottom: black 1pt solid; width: 9%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><b>Item</b></span></td>
    <td style="width: 82%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="border-bottom: black 1pt solid; width: 9%; padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><b>Page</b></span></td></tr>
<tr>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="padding-right: 1.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_001">Cautionary Note Concerning Forward-Looking Statements</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">ii</span></td></tr>
<tr style="background-color: White">
    <td colspan="2" style="padding-right: 1.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><b>PART I</b></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><b>Financial Information</b></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 1.</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Financial Statements</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_002">Unaudited Consolidated Balance Sheets</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">1</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_003">Unaudited Consolidated Statements of Operations</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">2</span></td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_004">Unaudited Consolidated Statements of Changes in Stockholders&#8217; Equity</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">3</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_006">Unaudited Consolidated Statements of Cash Flows</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">5</span></td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="#a_007">Notes to Unaudited Consolidated Financial Statements</a></span></td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">6</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 2</span></td>
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<tr style="background-color: White">
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 3</span></td>
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<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 4</span></td>
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">21</span></td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">22</span></td></tr>
<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 1.</span></td>
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">22</span></td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 1A.</span></td>
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">22</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 2.</span></td>
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">22</span></td></tr>
<tr style="background-color: White">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 3</span></td>
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">22</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Item 6</span></td>
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<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; text-align: center; line-height: 107%">&#160;</td></tr>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b><span id="a_001"></span>CAUTIONARY NOTE CONCERNING FORWARD-LOOKING
STATEMENTS</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain statements and information in
this Quarterly Report on Form 10-Q for the three and nine months ended July 31, 2021 (the &#8220;Quarterly Report&#8221;) may constitute
&#8220;forward-looking statements&#8221; within the meaning of Section 27A of the Securities Act of 1933, as amended (the &#8220;Securities
Act&#8221;), Section 21E of the Securities Exchange Act of 1934, as amended (the &#8220;Exchange Act&#8221;), and the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or
developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures,
commencement of business operations, business strategy, statements related to the expected effects on our business from the novel
coronavirus (&#8220;COVID-19&#8221;) pandemic, and other similar matters are forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as &#8220;may&#8221; &#8220;will,&#8221; &#8220;should,&#8221; &#8220;expect,&#8221;
&#8220;plan,&#8221; &#8220;anticipate,&#8221; &#8220;believe,&#8221; &#8220;estimate,&#8221; &#8220;predict,&#8221; &#8220;potential,&#8221;
or &#8220;continue,&#8221; or other comparable terminology. These forward-looking statements are based largely on our current expectations
and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements
are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially
from those expressed in the forward-looking statements including, but not limited to, the duration and scope of the COVID-19 pandemic
and impact on the demand for the products we distribute; our ability to obtain the products from the manufacturer; actions governments,
businesses, and individuals take in response to the pandemic, including restrictions on onsite commercial interactions; the impact
of the COVID-19 pandemic and action taken in response to the pandemic on global and regional economies and economic activity; the
pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global
economic conditions or low levels of economic growth; our inability to sustain profitable sales growth; changes in government regulations
or laws that affect our business; significant changes in our relationships with our distributor or sub-distributors; and circumstances
or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our
current and planned business initiatives. In light of these risks and uncertainties, all of the forward-looking statements made
herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated
by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Kaival Brands Innovations Group, Inc.</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b><span id="a_002"></span>Consolidated Balance Sheets</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Unaudited)</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

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    <td style="padding: 0 0 0 30pt; text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td id="xdx_496_20201231_zaos6zt8Ptnd" style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr id="xdx_400_eus-gaap--Assets_iTI_mtCzqGl_zn724bPzv21g" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40C_eus-gaap--LiabilitiesAndStockholdersEquityAbstract_iB_zcp7ldApLGSh" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">LIABILITIES AND STOCKHOLDERS&#8217; EQUITY CURRENT LIABILITIES:</td>
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    <td style="text-align: left">&#160; &#160;</td>
    <td style="text-align: right">&#160; &#160;</td>
    <td style="text-align: left">&#160; &#160;</td>
    <td>&#160; &#160;</td>
    <td style="text-align: left">&#160; &#160;</td>
    <td style="text-align: right">&#160; &#160;</td>
    <td style="text-align: left">&#160; &#160;</td>
</tr>
<tr id="xdx_400_eus-gaap--AccountsPayableRelatedPartiesCurrent_i01I_maCztFY_zRLYAYmgbsL9" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_401_eus-gaap--AccountsPayableTradeCurrent_i01I_maCztFY_zmMthZzCN9z7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:AccountsPayableTradeCurrent" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">284,303</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0076">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40B_eus-gaap--AccruedLiabilitiesCurrent_i01I_maCztFY_zlQAKfVyjKQh" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 30pt; text-align: left">Accrued expenses</td><td>&#160;</td>
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<tr id="xdx_408_eus-gaap--AccruedIncomeTaxesCurrent_i01I_maCztFY_zBe7E4cjWJWc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 30pt; text-align: left">Income tax accrual</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0081">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_40A_eus-gaap--DeferredRevenueCurrent_i01I_maCztFY_zHhIVWY0NxNf" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 30pt; text-align: left">Deferred revenue</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0084">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_406_eus-gaap--OperatingLeaseLiabilityCurrent_i01I_maCztFY_z1z36SUY7Iy" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 30pt; text-align: left">Operating lease obligation &#8211; short term</td><td>&#160;</td>
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<tr id="xdx_40C_eus-gaap--LiabilitiesCurrent_i01TI_mtCztFY_maCziPR_zPehP9mt0Tjl" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 20pt; text-align: left">Total current liabilities</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:LiabilitiesCurrent" contextRef="AsOf2020-12-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,438,327</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40F_eus-gaap--LiabilitiesNoncurrentAbstract_i01B_z89ju97Qgph4" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 20pt; text-align: left">LONG TERM LIABILITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40C_eus-gaap--OperatingLeaseLiabilityNoncurrent_i02I_maCziPR_zTl6BHEIQLUa" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityNoncurrent" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">49,675</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityNoncurrent" contextRef="AsOf2020-12-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">59,204</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr id="xdx_406_eus-gaap--Liabilities_iTI_mtCziPR_maCznIY_zvi5igO46qli" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">TOTAL LIABILITIES</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:Liabilities" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">17,528,918</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_404_eus-gaap--StockholdersEquityAbstract_iB_zpkjRVwYQWd6" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 20pt; text-align: left">STOCKHOLDERS&#8217; EQUITY:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_405_eus-gaap--PreferredStockValue_i01I_maCzBBU_zK5pKB4UyMx7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 30pt; text-align: left">Preferred stock <span id="xdx_907_eus-gaap--PreferredStockSharesAuthorized_c20210731_pdd" title="Preferred stock, shares authorized"><span id="xdx_900_eus-gaap--PreferredStockSharesAuthorized_c20201031_pdd" title="Preferred stock, shares authorized"><ix:nonFraction name="us-gaap:PreferredStockSharesAuthorized" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesAuthorized" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">5,000,000</ix:nonFraction></ix:nonFraction></span></span>
shares authorized; Series A Convertible Preferred stock ($<span id="xdx_90F_eus-gaap--PreferredStockParOrStatedValuePerShare_c20210731__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, par value"><span id="xdx_906_eus-gaap--PreferredStockParOrStatedValuePerShare_c20201031__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, par value"><ix:nonFraction name="us-gaap:PreferredStockParOrStatedValuePerShare" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember" decimals="INF" unitRef="USDPShares"><ix:nonFraction name="us-gaap:PreferredStockParOrStatedValuePerShare" contextRef="AsOf2020-10-31_us-gaap_SeriesAPreferredStockMember" decimals="INF" unitRef="USDPShares">.001</ix:nonFraction></ix:nonFraction></span></span>
par value, <span id="xdx_908_eus-gaap--PreferredStockSharesAuthorized_c20210731__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares authorized"><span id="xdx_904_eus-gaap--PreferredStockSharesAuthorized_c20201031__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares authorized"><ix:nonFraction name="us-gaap:PreferredStockSharesAuthorized" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesAuthorized" contextRef="AsOf2020-10-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">3,000,000</ix:nonFraction></ix:nonFraction></span></span>
shares authorized, <span id="xdx_90D_eus-gaap--PreferredStockSharesIssued_c20210731__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares issued"><span id="xdx_905_eus-gaap--PreferredStockSharesOutstanding_c20210731__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares outsanding"><span id="xdx_907_eus-gaap--PreferredStockSharesIssued_c20201031__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares issued"><span id="xdx_90D_eus-gaap--PreferredStockSharesOutstanding_c20201031__us-gaap--StatementClassOfStockAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares outsanding"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesOutstanding" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2020-10-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesOutstanding" contextRef="AsOf2020-10-31_us-gaap_SeriesAPreferredStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">3,000,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction></span></span></span></span> issued
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:PreferredStockValue" contextRef="AsOf2020-12-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40C_eus-gaap--CommonStockValue_i01I_maCzBBU_zlQ3kq3BGS1g" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 30pt">Common stock ($<span id="xdx_904_eus-gaap--CommonStockParOrStatedValuePerShare_c20210731_pdd" title="Common stock, par value"><span id="xdx_90D_eus-gaap--CommonStockParOrStatedValuePerShare_c20201031_pdd" title="Common stock, par value"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2021-07-31" decimals="INF" unitRef="USDPShares"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2020-10-31" decimals="INF" unitRef="USDPShares">.001</ix:nonFraction></ix:nonFraction></span></span>
par value, <span id="xdx_901_eus-gaap--CommonStockSharesAuthorized_c20210731_pdd" title="Common stock, shares authorized"><span id="xdx_90D_eus-gaap--CommonStockSharesAuthorized_c20201031_pdd" title="Common stock, shares authorized"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,000,000,000</ix:nonFraction></ix:nonFraction></span></span> shares authorized,
<span id="xdx_905_eus-gaap--CommonStockSharesIssued_c20210731_pdd" title="Common stock, shares issued"><span id="xdx_90D_eus-gaap--CommonStockSharesOutstanding_c20210731_pdd" title="Common stock, shares outstanding"><ix:nonFraction name="us-gaap:CommonStockSharesIssued" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesOutstanding" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">23,600,597</ix:nonFraction></ix:nonFraction></span></span> and <span id="xdx_902_eus-gaap--CommonStockSharesIssued_c20201031_pdd" title="Common stock, shares issued"><span id="xdx_905_eus-gaap--CommonStockSharesOutstanding_c20201031_pdd" title="Common stock, shares outstanding"><ix:nonFraction name="us-gaap:CommonStockSharesIssued" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesOutstanding" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">23,106,886</ix:nonFraction></ix:nonFraction></span></span>
issued and outstanding as of July 31, 2021 and October 31, 2020, respectively)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CommonStockValue" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,600</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:CommonStockValue" contextRef="AsOf2020-12-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,107</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_405_eus-gaap--AdditionalPaidInCapital_i01I_maCzBBU_zje4veNisdei" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Kaival Brands Innovations Group, Inc.</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;<b><span id="a_003"></span>Consolidated Statements of
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<tr id="xdx_408_ecustom--CostOfRevenueRelatedParty_i01_maCzgn5_zoteAah0pvf9" style="vertical-align: bottom; background-color: White">
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_404_eus-gaap--GrossProfit_i01T_mtCzJQS_maCz8Ra_z6ArUANxPuQ7" style="vertical-align: bottom; background-color: White">
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_409_eus-gaap--OperatingExpensesAbstract_iB_zKnUQ9BmDQ7d" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_400_eus-gaap--MarketingAndAdvertisingExpense_i01_maCzv8W_zarI5rovTUJe" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_40E_eus-gaap--GeneralAndAdministrativeExpense_i01_maCzv8W_z9NljFhMDQAd" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_40C_eus-gaap--OperatingExpenses_i01T_mtCzv8W_msCz8Ra_zgUUAQTdkK7d" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40A_eus-gaap--NonoperatingIncomeExpenseAbstract_iB_zJDogz8yzLsg" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40F_eus-gaap--InvestmentIncomeNet_i01_maCzJOn_zWHg4xUaheG" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_408_eus-gaap--NonoperatingIncomeExpense_i01T_mtCzJOn_maCz8Ra_znbOEIXOkGn8" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0240">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_405_eus-gaap--IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest_i01T_mtCz8Ra_maCzjH1_zppA2Oh13wu" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2021-05-012021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">3,437,306</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" contextRef="From2019-11-012020-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,991,910</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_400_eus-gaap--IncomeTaxExpenseBenefit_i01N_di_msCzjH1_zjZlnV7GZtVf" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Provision for income taxes</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:IncomeTaxExpenseBenefit" contextRef="From2021-05-012021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">300</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left"></td><td style="padding-bottom: 1pt">&#160;</td>
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_400_eus-gaap--NetIncomeLoss_iT_mtCzjH1_zmISyTmkBEjk" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Net income (loss)</td><td style="padding-bottom: 2.5pt">&#160;</td>
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<tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>&#160;&#160;&#160;</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Kaival Brands Innovations Group, Inc.</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b><span id="a_004"></span>Consolidated Statements of Changes
in Stockholders&#8217; Equity</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>For the Nine Months Ended July 31,
2021</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(Unaudited)</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

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<tr id="xdx_40D_ecustom--IssuanceOfCommonSharesForEmployeeCompensation_pp0p0_z3ghtwPJvOEj" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_40C_eus-gaap--ProfitLoss_pp0p0_zHPBDcEbQAJ2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Net income</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0305">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr id="xdx_435_c20210201__20210430_eus-gaap--StockholdersEquity_iS_zdIvNx4romEi" style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold">Balances, January 31, 2021</td><td>&#160;</td>
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<tr id="xdx_407_ecustom--IssuanceOfCommonSharesForEmployeeCompensation_pp0p0_zU86poYyS4H5" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of common shares for employee compensation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0319">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98A_ecustom--IssuanceOfCommonSharesForEmployeeCompensationInShares_c20210201__20210430__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_zM4A3vO6v7D4" title="Issuance of common shares for employee compensation (in shares)" style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensationInShares" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">64,583</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">65</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2021-02-012021-04-30_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">647,396</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0322">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2021-02-012021-04-30" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">647,461</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_404_ecustom--CommonSharesSettledAndCancelled_pp0p0_zsp0CpsVrtm1" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Common shares settled and cancelled</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0327">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_980_ecustom--CommonSharesSettledAndCancelledInShares_c20210201__20210430__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_zsCKtLcfU5x" title="Common shares settled and cancelled (in shares)" style="text-align: right">(<ix:nonFraction name="kavl:CommonSharesSettledAndCancelledInShares" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" sign="-" unitRef="Shares">20,505</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="kavl:CommonSharesSettledAndCancelled" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">21</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="kavl:CommonSharesSettledAndCancelled" contextRef="From2021-02-012021-04-30_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">47,443</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0330">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="kavl:CommonSharesSettledAndCancelled" contextRef="From2021-02-012021-04-30" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">47,464</ix:nonFraction></td><td style="text-align: left">)</td></tr>
<tr id="xdx_40B_eus-gaap--StockGrantedDuringPeriodValueSharebasedCompensation_pp0p0_zIQTnVeLi8v7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of common shares for compensation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0335">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_981_eus-gaap--StockIssuedDuringPeriodSharesShareBasedCompensation_c20210201__20210430__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_zdkvje2DsQMg" title="Issuance of common shares for compensation (in shares)" style="text-align: right"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensation" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">216,924</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockGrantedDuringPeriodValueSharebasedCompensation" contextRef="From2021-02-012021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">217</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockGrantedDuringPeriodValueSharebasedCompensation" contextRef="From2021-02-012021-04-30_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">6,494,338</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0338">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockGrantedDuringPeriodValueSharebasedCompensation" contextRef="From2021-02-012021-04-30" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">6,494,555</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40B_ecustom--StockOptionExpense_pp0p0_zUIHlhi32yxd" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Stock option expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0343">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0344">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:StockOptionExpense" contextRef="From2021-02-012021-04-30_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">579,699</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0346">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:StockOptionExpense" contextRef="From2021-02-012021-04-30" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">579,699</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_401_eus-gaap--ProfitLoss_pp0p0_z7Qhn35q4kQi" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Net loss</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0349">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0350">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0351">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2021-02-012021-04-30_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">4,258,927</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2021-02-012021-04-30" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">4,258,927</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr id="xdx_431_c20210501__20210731_eus-gaap--StockholdersEquity_iS_zF6J2JsBD2m" style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold">Balances,&#160;April 30, 2021</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98C_eus-gaap--SharesOutstanding_iS_pip0_c20210501__20210731__us-gaap--StatementEquityComponentsAxis__custom--ConvertiblePreferredStockSeriesAMember_z6lQA1LNZVZf" title="Balance at beginning" style="text-align: right"><ix:nonFraction name="us-gaap:SharesOutstanding" contextRef="AsOf2021-04-30_custom_ConvertiblePreferredStockSeriesAMember" format="ixt:numdotdecimal" decimals="INF" scale="0" unitRef="Shares">3,000,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2021-04-30_custom_ConvertiblePreferredStockSeriesAMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_989_eus-gaap--SharesOutstanding_iS_c20210501__20210731__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_z1N5USqqeFR1" title="Balance at beginning (in shares)" style="text-align: right"><ix:nonFraction name="us-gaap:SharesOutstanding" contextRef="AsOf2021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">23,566,975</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2021-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">23,567</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2021-04-30_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">9,373,480</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2021-04-30_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">174,829</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2021-04-30" format="ixt:numdotdecimal" decimals="0" unitRef="USD">9,225,218</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_401_ecustom--IssuanceOfCommonSharesForEmployeeCompensation_pp0p0_zgClyUZ0bei4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of common shares for employee compensation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0365">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_984_ecustom--IssuanceOfCommonSharesForEmployeeCompensationInShares_c20210501__20210731__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_znN361l0gv83" title="Issuance of common shares for employee compensation (in shares)" style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensationInShares" contextRef="From2021-05-012021-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">56,250</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2021-05-012021-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">56</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>&#160;&#160;</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
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<tr style="vertical-align: bottom">
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<tr style="vertical-align: bottom">
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</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&#160;<b>(Unaudited)</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
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<tr style="vertical-align: bottom">
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<tr id="xdx_431_c20191101__20200131_eus-gaap--StockholdersEquity_iS_zuUsThh1YPD4" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; background-color: White">
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<tr id="xdx_406_ecustom--ExpensesPaidOnBehalfOfCompanyAndContributedToCapital_iP3us-gaap--SharesOutstanding_pp0p0_z2zUoKr10YI2" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_409_eus-gaap--ProfitLoss_pp0p0_zzgZzLb1t2bb" style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0419">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0420">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2019-11-012020-01-31_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" scale="0" sign="-" unitRef="USD">12,933</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr id="xdx_43B_c20200201__20200430_eus-gaap--StockholdersEquity_iS_zcfjeLkemtml" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-indent: -9pt; padding-left: 9pt">Balances, January 31, 2020</td><td>&#160;</td>
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<tr id="xdx_409_ecustom--ExpensesPaidOnBehalfOfCompanyAndContributedToCapital_pp0p0_z1TMFDpetMte" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Expenses paid on behalf of the Company and contributed to capital</td><td>&#160;</td>
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<tr id="xdx_408_eus-gaap--ProfitLoss_pp0p0_zz2ttof5mzT7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Net income</td><td style="padding-bottom: 1pt">&#160;</td>
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0439">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0440">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0441">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2020-02-012020-04-30_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,128,987</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr id="xdx_437_c20200501__20200731_eus-gaap--StockholdersEquity_iS_z9rVXfFXYef7" style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Balance, April 30, 2020</td><td style="padding-bottom: 2.5pt">&#160;</td>
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    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-04-30_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">47,697</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
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    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-04-30" format="ixt:numdotdecimal" decimals="0" unitRef="USD">1,098,325</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
<tr id="xdx_403_ecustom--IssuanceOfCommonSharesForEmployeeCompensation_pp0p0_zxOm2RDCOr56" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Issuance of common shares for compensation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0454">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td id="xdx_98D_ecustom--IssuanceOfCommonSharesForEmployeeCompensationInShares_c20200501__20200731__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_zDpsbJH9l2ef" title="Issuance of common shares for employee compensation (in shares)" style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensationInShares" contextRef="From2020-05-012020-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">344,215</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2020-05-012020-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">344</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2020-05-012020-07-31_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">319,812</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0457">&#8212;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="kavl:IssuanceOfCommonSharesForEmployeeCompensation" contextRef="From2020-05-012020-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">320,156</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_403_eus-gaap--ProfitLoss_i01_pp0p0_zaREuipVYl8h" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Net income</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0462">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0463">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0464">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2020-05-012020-07-31_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,605,015</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right"><ix:nonFraction name="us-gaap:ProfitLoss" contextRef="From2020-05-012020-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,605,015</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
<tr id="xdx_432_c20200501__20200731_eus-gaap--StockholdersEquity_iE_zt4R8Sfgqp96" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Balance, July 31, 2020</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">&#160;</td><td id="xdx_982_eus-gaap--SharesOutstanding_iE_c20200501__20200731__us-gaap--StatementEquityComponentsAxis__custom--ConvertiblePreferredStockSeriesAMember_zXAS00ZQWKVd" style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0473">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0468">&#8212;</span></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">&#160;</td><td id="xdx_984_eus-gaap--SharesOutstanding_iE_c20200501__20200731__us-gaap--StatementEquityComponentsAxis__us-gaap--CommonStockMember_zGkTPq0VLlje" title="Balance at end (in shares)" style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:SharesOutstanding" contextRef="AsOf2020-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">48,041,263</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-07-31_us-gaap_CommonStockMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">48,041</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-07-31_us-gaap_AdditionalPaidInCapitalMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">327,611</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-07-31_us-gaap_RetainedEarningsMember" format="ixt:numdotdecimal" decimals="0" unitRef="USD">3,647,844</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 2.5pt">&#160;</td>
    <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right"><ix:nonFraction name="us-gaap:StockholdersEquity" contextRef="AsOf2020-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">4,023,496</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
</table>


<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&#160;<b>Kaival Brands
Innovations Group, Inc.</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><b><span id="a_006"></span>Consolidated Statements of Cash Flows</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0"><b>(Unaudited)</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0">&#160;&#160;</p>

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<tr style="vertical-align: bottom; background-color: White">
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<tr style="vertical-align: bottom">
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<tr id="xdx_406_eus-gaap--NetCashProvidedByUsedInOperatingActivitiesAbstract_iB_zBZbJt7IRXji" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_408_eus-gaap--NetIncomeLoss_i01_maCzRM5_zdQILKxuWhu5" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_401_eus-gaap--AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivitiesAbstract_i01B_zq2pxKwwRg2j" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; background-color: White">
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<tr id="xdx_403_eus-gaap--AllocatedShareBasedCompensationExpense_i02_maCzRM5_zjkeQUWf5nFc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_40B_eus-gaap--StockOptionPlanExpense_i02_maCzRM5_ziou27k2iWp" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_407_ecustom--RouOperatingLeaseExpense_i02_maCzRM5_zLxeFRFemPJc" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_40E_eus-gaap--ProceedsFromContributionsFromAffiliates_i02_maCzRM5_zk908f2TOKfc" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 20pt; text-align: left">Expenses contributed to capital</td><td>&#160;</td>
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<tr id="xdx_40F_eus-gaap--IncreaseDecreaseInOperatingCapitalAbstract_i02B_zgg2sybIrd52" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 20pt; text-align: left">Changes in current assets and liabilities:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_402_eus-gaap--IncreaseDecreaseInAccountsReceivable_i03N_di_msCzRM5_z6lEk9yUygVc" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsReceivable" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">6,322,852</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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<tr id="xdx_409_eus-gaap--IncreaseDecreaseInAccountsReceivableRelatedParties_i03N_di_msCzRM5_zO0BVZ27oGd7" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_403_eus-gaap--IncreaseDecreaseInInventories_i03N_di_msCzRM5_zrTOUuj9NGRc" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_401_eus-gaap--IncreaseDecreaseInPrepaidExpense_i03N_di_msCzRM5_ze7O8UqdPWN5" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr id="xdx_40A_eus-gaap--IncreaseDecreaseInCustomerDeposits_i03_maCzRM5_z3bnzCONpwud" style="vertical-align: bottom; background-color: White">
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<tr id="xdx_406_eus-gaap--IncreaseDecreaseInOperatingLiabilities_i03_maCzRM5_zBWfsWgVqRXe" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInOperatingLiabilities" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">8,547</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0517">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40F_eus-gaap--IncreaseDecreaseInAccountsPayableRelatedParties_i03_maCzRM5_zp9M1qF2Lx61" style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">15,404,401</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr id="xdx_409_eus-gaap--IncreaseDecreaseInAccountsPayable_i03_maCzRM5_zluwyi6AJava" style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding: 0 0 0 30pt; text-align: left">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction name="us-gaap:IncreaseDecreaseInAccountsPayable" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">284,303</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0523">&#8212;</span></td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_400_eus-gaap--IncreaseDecreaseInAccruedTaxesPayable_i03_maCzRM5_zaUEKXyyK1rl" style="vertical-align: bottom; background-color: White">
    <td style="padding: 0 0 0 30pt; text-align: left">Accrued taxes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccruedTaxesPayable" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">1,331,856</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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<tr id="xdx_409_eus-gaap--IncreaseDecreaseInAccruedLiabilities_i03_maCzRM5_zPCerGuDott3" style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:IncreaseDecreaseInAccruedLiabilities" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">693,818</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr id="xdx_40D_eus-gaap--NetCashProvidedByUsedInOperatingActivities_iT_mtCzRM5_maCzB7a_zrbJS4KpHI1k" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Net cash (used in) provided by operating activities</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="us-gaap:NetCashProvidedByUsedInOperatingActivities" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" sign="-" unitRef="USD">6,281,578</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40A_eus-gaap--NetCashProvidedByUsedInFinancingActivitiesAbstract_iB_z7K0RmD4K1Zg" style="vertical-align: bottom; background-color: White">
    <td style="text-decoration: underline; font-weight: bold; text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
<tr id="xdx_40A_ecustom--SettledRsuSharesWithCash_i01N_di_msCzOt9_zI2zQPULVkQ3" style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Settled RSU shares with cash</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">(<ix:nonFraction name="kavl:SettledRsuSharesWithCash" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" unitRef="USD">201,688</ix:nonFraction></td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt">&#160;</td>
    <td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right"><span style="-sec-ix-hidden: xdx2ixbrl0538">&#8212;</span></td><td style="padding-bottom: 1pt; text-align: left">&#160;</td></tr>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 54pt">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral
part of these unaudited consolidated financial statements.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b>KAIVAL BRANDS INNOVATIONS GROUP,
INC.&#160;</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b><span id="a_007"></span>Notes to Unaudited Consolidated Financial
Statements</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:BusinessDescriptionAndBasisOfPresentationTextBlock"><p id="xdx_804_eus-gaap--BusinessDescriptionAndBasisOfPresentationTextBlock_zdv7vNSPlwZc" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Note 1 &#8211; <span id="xdx_824_zS2dUh9Xdt9e">Organization and Description of Business</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Kaival Brands Innovations Group, Inc.
(the &#8220;Company,&#8221; the &#8220;Registrant,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221;), formerly known
as Quick Start Holdings, Inc., was incorporated on September 4, 2018 in the State of Delaware.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Description of Business</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is focused on growing and
incubating innovative and profitable products into mature, dominant brands. In March 2020, the Company commenced business operations
as a result of becoming the exclusive distributor of certain electronic nicotine delivery systems (&#8220;ENDS&#8221;) and related
components (the &#8220;Products&#8221;) manufactured by Bidi Vapor, LLC, a Florida limited liability company (&#8220;Bidi&#8221;),
a related party company that is also owned by Nirajkumar Patel, the Chief Executive Officer of the Company.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 9, 2020, the Company entered
into an exclusive distribution agreement (the &#8220;Distribution Agreement&#8221;) with Bidi, a related party company, which Distribution
Agreement was amended and restated on May 21, 2020 and again on April 20, 2021 (collectively the &#8220;A&amp;R Distribution Agreement&#8221;)
in order to clarify some of the provisions. Pursuant to the A&amp;R Distribution Agreement, Bidi granted the Company an exclusive
worldwide right to distribute the Products for sale and resale to both retail level customers and non-retail level customers.&#160;Currently,
the Products consist primarily of the &#8220;BIDI<sup>&#174;</sup> Stick&#8221; and, once launched, the &#8220;BIDI<sup>&#174;</sup>
Pouch&#8221;.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the A&amp;R Distribution
Agreement, the Company entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and restated
by the parties in order to clarify certain provisions (all such agreements, as amended and restated, are collectively referred
to as the &#8220;A&amp;R Sub-Distribution Agreements&#8221;), whereby the Company appointed the counterparties as non-exclusive
sub-distributors. Pursuant to the A&amp;R Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale the Products
in such quantities as they should need to properly service non-retail customers within the continental United States (the &#8220;Territory&#8221;).</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">On August 31, 2020, the Company formed Kaival Labs, Inc.,
a Delaware corporation (herein referred to as &#8220;Kaival Labs&#8221;), as a wholly owned subsidiary of the Company.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 16, 2021, the Company filed
a Certificate of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of
Delaware to effect a <span id="xdx_90C_eus-gaap--StockholdersEquityReverseStockSplit_c20210701__20210716_z0VgxlG8OZP1" title="Reverse stock split"><ix:nonNumeric contextRef="From2021-07-012021-07-16" name="us-gaap:StockholdersEquityReverseStockSplit">1-for-12</ix:nonNumeric></span> reverse stock split (the &#8220;Reverse Stock Split&#8221;) of the shares of the Company&#8217;s
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Eastern time on July 20, 2021. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares
of Common Stock that would have otherwise resulted from the Reverse Stock Split will be rounded up to the nearest whole number.
In connection with the Reverse Stock Split, the Board of Directors (the &#8220;Board&#8221;) approved appropriate and proportional
adjustments to all outstanding securities or other rights convertible or exercisable into shares of Common Stock, including, without
limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and per-share amounts
reflected throughout our consolidated financial statements and other financial information in this Quarterly Report have been adjusted
to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of the
Common Stock was not affected by the Reverse Stock Split.</p>

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<ix:exclude><p id="xdx_23C_zI0lqptUMHhc" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><span style="text-decoration: underline"><b></b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="text-decoration: underline"><b>COVID-19 Impact</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In January 2020, the World
Health Organization (the &#8220;WHO&#8221;) announced a global health emergency because of a new strain of coronavirus (&#8220;COVID-19&#8221;)
originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company&#8217;s operations have not been significantly
impacted. No impairments have been recorded and no triggering events or changes in circumstances had occurred. While the spread of COVID-19
has begun to slow and social restrictions have begun to ease, the full impact of the COVID-19 pandemic continues to evolve and remains
uncertain. As such, the full magnitude of the COVID-19 pandemic, and the resulting impact, if any, on the Company&#8217;s financial condition,
liquidity, and future results of operations is uncertain. Management is actively monitoring the global situation on the Company&#8217;s
financial condition, liquidity, operations, suppliers, industry, and customers. Reduced demand for products or impaired ability to meet
customer demand (including as a result of disruptions at the Company&#8217;s suppliers) could have a material adverse effect on its business
operations and financial performance. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread,
the Company is not presently able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition,
or liquidity for the current fiscal year. As of the date of this filing, the Company&#8217;s recently commenced business operations have
not been materially impacted, however, we have encountered some logistical delays related to product launches and distribution in international
markets. The Company was also indirectly impacted by supply chain issues and regulatory oversight.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock"><p id="xdx_804_eus-gaap--SignificantAccountingPoliciesTextBlock_za5ofj8Pmp9g" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 2 &#8211; <span id="xdx_824_zAkHrjnHh7Ie">Basis of Presentation
and Significant Accounting Policies</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><p id="xdx_84D_eus-gaap--ConsolidationPolicyTextBlock_zePVgyjVxHN1" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="xdx_869_zlinev5YhLuh">Principles of Consolidation</span></span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The consolidated financial statements
include the financial statements of the Company&#8217;s wholly-owned subsidiary, Kaival Labs. Intercompany transactions are eliminated.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock"><p id="xdx_84A_eus-gaap--BasisOfAccountingPolicyPolicyTextBlock_zM0alERdRZ04" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><span style="text-decoration: underline"><span id="xdx_860_z9MrID5t2Gt7">Basis of Presentation</span></span></b></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying unaudited interim consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (&#8220;GAAP&#8221;) and the rules of the Securities and Exchange Commission (&#8220;SEC&#8221;) and should be
read in conjunction with the audited financial statements and notes thereto contained in the Company&#8217;s most recent Annual
Financial Statements filed with the SEC on Annual Report on Form 10-K on February 12, 2021 (the &#8220;2020 Annual Report&#8221;).
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim period presented have been reflected herein. The results of operations
for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated
financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the
most recent fiscal period, as reported in the 2020 Annual Report have been omitted.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:UseOfEstimates"><p id="xdx_846_eus-gaap--UseOfEstimates_zApja1Jgnsj1" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><span style="text-decoration: underline"><span id="xdx_86D_zebDzC1kVbXb">Use of Estimates</span></span></b></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial
statements not misleading have been included. Actual results could differ from those estimates.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The Company
measures the cost of services received in exchange for an award of equity instruments (share-based payments, or SBP) based on the
grant-date fair value of the award. That cost is recognized over the period during which a recipient is required to provide service
in exchange for the SBP award&#8212;the requisite service period (vesting period). For SBP awards subject to conditions, compensation
is not recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated
using the Black-Scholes-Merton option-pricing model. Compensation expense for SBP awards granted to nonemployees is remeasured
each period as the underlying options vest.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The fair value
of each option granted during the period ended July 31, 2021 and 2020 was estimated on the date of grant using the Black-Scholes-Merton
option-pricing model with the weighted average assumptions in the following table:</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0.5in">&#160;</p>

<ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:ScheduleOfShareBasedPaymentAwardStockOptionsValuationAssumptionsTableTextBlock"><table cellspacing="0" cellpadding="0" id="xdx_883_eus-gaap--ScheduleOfShareBasedPaymentAwardStockOptionsValuationAssumptionsTableTextBlock_zBnH7aD7xqmf" summary="xdx: Disclosure - Basis of Presentation and Significant Accounting Policies (Details)" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom; background-color: white">
    <td style="padding-right: 0.8pt; line-height: 107%"><span id="xdx_8B9_zqFVCcCnTXD6" style="display: none">Schedule of assumptions used</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: right; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: right; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="vertical-align: bottom">
    <td style="width: 58%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="width: 8%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="border-bottom: black 1pt solid; width: 1%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="border-bottom: black 1pt solid; width: 11%; padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">2021</span></td>
    <td style="width: 1%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="width: 8%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="border-bottom: black 1pt solid; width: 1%; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="border-bottom: black 1pt solid; width: 11%; padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">2020</span></td>
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<tr style="vertical-align: bottom; background-color: white">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td id="xdx_988_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedDividendRate_dp_c20201101__20210731_zHOAEniXIjH" title="Expected dividend yield" style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedDividendRate" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">0</ix:nonFraction></span></td>
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td id="xdx_98E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedDividendRate_c20191101__20200731_pdd" title="Expected dividend yield" style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span style="-sec-ix-hidden: xdx2ixbrl0585">&#8212;</span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="vertical-align: bottom">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">&#8212;</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="vertical-align: bottom; background-color: white">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Expected volatility</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span id="xdx_901_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate_dp_c20201101__20210731__srt--RangeAxis__srt--MinimumMember_zonM7qgSmPOj" title="Expected volatility"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate" contextRef="From2020-11-012021-07-31_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">294.57</ix:nonFraction></span>%-<span id="xdx_90D_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate_dp_c20201101__20210731__srt--RangeAxis__srt--MaximumMember_zKoRRmx3fCfa" title="Expected volatility"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate" contextRef="From2020-11-012021-07-31_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">301.53</ix:nonFraction></span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">%</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td id="xdx_984_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate_c20191101__20200731_pdd" title="Expected volatility" style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span style="-sec-ix-hidden: xdx2ixbrl0593">&#8212;</span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="vertical-align: bottom">
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">Risk-free interest rate</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span id="xdx_90C_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate_dp_c20201101__20210731__srt--RangeAxis__srt--MinimumMember_z1t72hdIQMv5" title="Risk-free interest rate"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate" contextRef="From2020-11-012021-07-31_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">1.19</ix:nonFraction></span>%-<span id="xdx_904_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate_dp_c20201101__20210731__srt--RangeAxis__srt--MaximumMember_zidQmZXFRI7c" title="Risk-free interest rate"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate" contextRef="From2020-11-012021-07-31_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">1.63</ix:nonFraction></span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif">%</span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td id="xdx_989_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate_c20191101__20200731_pdd" title="Risk-free interest rate" style="padding-right: 0.8pt; text-align: right; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><span style="-sec-ix-hidden: xdx2ixbrl0599">&#8212;</span></span></td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
</table></ix:nonNumeric>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; background-color: white">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The expected
term of options granted represents the period of time that options granted are expected to be outstanding. The expected volatility
was based on the volatility in the trading of the Common Stock. The assumed discount rate was the default risk-free five-year interest
rate for US Treasury bills.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&#160;&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><p id="xdx_842_eus-gaap--RevenueRecognitionPolicyTextBlock_zVPCnrhFnNv6" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="xdx_860_zK16o3N7ZiBg">Revenue Recognition</span></span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted ASC 606,&#160;<i>Revenue
from Contracts with Customers</i>&#160;(Topic 606) (&#8220;ASC 606&#8221;), in the second quarter of fiscal year 2020, as this
was the first quarter that the Company generated revenues. Under ASC 606, the Company recognizes revenue when a customer obtains
control of promised goods, in an amount that reflects the consideration that the Company expects to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:
(1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as
the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that
the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer. In addition,
the Company accounts for rebates and volume discounts that customers will be using to purchase products in the future.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Products Revenue</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company generates products revenue
from the sale of the Products (as defined above) to non-retail customers. The Company recognizes revenue at a point in time based
on management&#8217;s evaluation of when performance obligations under the terms of a contract with the customer are satisfied
and control of the Products has been transferred to the customer. In most situations, transfer of control is considered complete
when the products have been shipped to the customer. The Company determined that a customer obtains control of the Product upon
shipment when title of such product and risk of loss transfer to the customer. The Company&#8217;s shipping and handling costs
are fulfillment costs and such amounts are classified as part of cost of sales. The Company offers credit sales arrangements to
non-retail (or wholesale) customers and monitors the collectability of each credit sales periodically.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_23B_zCVddr01Gsw8" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

<ix:exclude><!-- Field: Page; Sequence: 12; Value: 1 -->
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<ix:exclude><p id="xdx_236_zILclTMabre7" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

</ix:nonNumeric></ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock"><p id="xdx_808_eus-gaap--LesseeOperatingLeasesTextBlock_zc3gtt5rUGf" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 3 &#8211; <span id="xdx_82F_zD5QrjcMtimk">Leases</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company capitalizes all leased assets
pursuant to ASU 2016-02, &#8220;Leases (Topic 842),&#8221; which requires lessees to recognize right-of-use assets and lease
liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12
months and classified as either financing or operating leases. The Company does not have financing leases and only one operating
lease for office space. The operating lease is for a term of five <span id="xdx_907_eus-gaap--LesseeOperatingLeaseTermOfContract_iI_dtY_c20210731_zg1p6xBNq8Rl" title="Lease term" style="display: none"><ix:nonNumeric contextRef="AsOf2021-07-31" format="ixt-sec:duryear" name="us-gaap:LesseeOperatingLeaseTermOfContract">5</ix:nonNumeric></span>
years, beginning August 1, 2020, with rent of $<span id="xdx_90E_eus-gaap--PaymentsForRent_c20201101__20210731_pp0p0" title="Rent per month"><ix:nonFraction name="us-gaap:PaymentsForRent" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,000</ix:nonFraction></span>
payable monthly. As the operating lease does not provide for an implicit interest rate, we estimated a current borrowing rate of <span id="xdx_90F_eus-gaap--LesseeOperatingLeaseDiscountRate_iI_dp_c20210731_z1G1XJOagFxb" title="Current borrowing rate"><ix:nonFraction name="us-gaap:LesseeOperatingLeaseDiscountRate" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.5</ix:nonFraction></span>%
in determining the present value of the lease. As of July 31, 2021, the right-to-use (&#8220;ROU&#8221;) lease asset, net of
accumulated amortization, was $<span id="xdx_90E_eus-gaap--OperatingLeaseRightOfUseAsset_c20210731_pp0p0" title="Right to use lease asset"><ix:nonFraction name="us-gaap:OperatingLeaseRightOfUseAsset" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">59,246</ix:nonFraction></span>.
The initial recognition of the ROU operating lease was $<span id="xdx_90E_ecustom--RecognitionOfRouOperatingLease_c20201101__20210731_pp0p0" title="Recognition of ROU operating lease"><span id="xdx_90E_ecustom--RecognitionOfRouLiability_c20201101__20210731_pp0p0" title="Recognition of ROU liability"><ix:nonFraction name="kavl:RecognitionOfRouOperatingLease" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD"><ix:nonFraction name="kavl:RecognitionOfRouLiability" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">73,749</ix:nonFraction></ix:nonFraction></span></span>
for both the ROU asset and ROU liability. The amortization expense for ROU asset for the twelve months ended October 31, 2020 was
$<span id="xdx_90E_eus-gaap--OperatingLeaseRightOfUseAssetAmortizationExpense_c20191101__20201031_pp0p0" title="Amortization expense for right to use asset"><ix:nonFraction name="us-gaap:OperatingLeaseRightOfUseAssetAmortizationExpense" contextRef="From2019-11-012020-10-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,616</ix:nonFraction></span>
and one payment on the ROU liability was $<span id="xdx_904_ecustom--PaymentOfRouLiability_c20191101__20201031_pp0p0" title="Payment of ROU liability"><ix:nonFraction name="kavl:PaymentOfRouLiability" contextRef="From2019-11-012020-10-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">2,836</ix:nonFraction></span>.
The amortization expense for the nine months ended July 31, 2021 was $<span id="xdx_90F_eus-gaap--OperatingLeaseRightOfUseAssetAmortizationExpense_c20201101__20210731_pp0p0" title="Amortization expense for right to use asset"><ix:nonFraction name="us-gaap:OperatingLeaseRightOfUseAssetAmortizationExpense" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">10,887</ix:nonFraction></span>
and three payments on the ROU liability were $<span id="xdx_907_ecustom--PaymentOfRouLiability_c20201101__20210731_pp0p0" title="Payment of ROU liability"><ix:nonFraction name="kavl:PaymentOfRouLiability" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">8,547</ix:nonFraction></span>.
At July 31, 2021, short-term ROU lease liability was $<span id="xdx_909_eus-gaap--OperatingLeaseLiabilityCurrent_c20210731_pp0p0" title="Short-term ROU lease liability"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityCurrent" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">12,691</ix:nonFraction></span>
and long-term liability was $<span id="xdx_900_eus-gaap--OperatingLeaseLiabilityNoncurrent_c20210731_pp0p0" title="Long term lease liability"><ix:nonFraction name="us-gaap:OperatingLeaseLiabilityNoncurrent" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">49,675</ix:nonFraction></span>,
totaling $<span id="xdx_900_eus-gaap--OperatingLeaseLiability_c20210731_pp0p0" title="Lease liability"><ix:nonFraction name="us-gaap:OperatingLeaseLiability" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">62,366</ix:nonFraction></span>. Operating
lease expense totaling $<span id="xdx_904_eus-gaap--OperatingLeaseExpense_c20201101__20210731_pp0p0" title="Operating lease expense"><ix:nonFraction name="us-gaap:OperatingLeaseExpense" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">11,000</ix:nonFraction></span>
for November 1, 2020 until July 2021 was accrued at July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

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<tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt"><span id="xdx_8BA_z5wDU4W5nIA6" style="display: none">Schedule of Future Minimum Rental Payments for Operating Leases</span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Long term lease obligations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</table></ix:nonNumeric>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><p id="xdx_806_eus-gaap--StockholdersEquityNoteDisclosureTextBlock_zx96E903m5J8" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 4 &#8211; <span id="xdx_828_zxwbmbG7mmXa">Stockholder Equity</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Preferred Shares Issued</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The authorized preferred stock of the
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A Preferred Stock (the &#8220;Series A Preferred Stock&#8221;). Each share of the Series A Preferred Stock are initially convertible
into 100 shares of Common Stock. <span id="xdx_908_ecustom--ReverseStockSplitDescription_c20201101__20210731_zsSScmIQgvH8" title="Reverse stock split description"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="kavl:ReverseStockSplitDescription">As a result of the Reverse Stock Split, the conversion rate was adjusted such that each share
of the Series A Preferred Stock are convertible into approximately 8.33 shares of Common Stock.</ix:nonNumeric></span> All <span id="xdx_901_eus-gaap--PreferredStockSharesIssued_c20210731__us-gaap--AwardTypeAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock, shares issued"><span id="xdx_909_eus-gaap--PreferredStockSharesOutstanding_c20210731__us-gaap--AwardTypeAxis__us-gaap--SeriesAPreferredStockMember_pdd" title="Preferred stock shares, outstanding"><ix:nonFraction name="us-gaap:PreferredStockSharesIssued" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember432939078" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:PreferredStockSharesOutstanding" contextRef="AsOf2021-07-31_us-gaap_SeriesAPreferredStockMember432939078" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">3,000,000</ix:nonFraction></ix:nonFraction></span></span> shares of Series
A Preferred Stock were issued and outstanding as of July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Common Shares Issued</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company implemented the Reverse
Stock Split, effective prior to the opening of the market on Tuesday, July 20, 2021. The Reverse Stock Split was implemented by
the Company in support of its application to list on the Nasdaq Capital Market (&#8220;Nasdaq&#8221;). As a result of the Reverse
Stock Split at the <span id="xdx_906_eus-gaap--StockholdersEquityReverseStockSplit_c20210701__20210716_zOaMEW5zaQFc" title="Reverse stock split"><ix:nonNumeric contextRef="From2021-07-012021-07-16" name="us-gaap:StockholdersEquityReverseStockSplit">1-for-12</ix:nonNumeric></span> ratio, every 12 shares of the Common Stock was exchanged for one share of the Common Stock. The Company has retroactively adjusted all share amounts and per share
data herein to give effect to the Reverse Stock Split.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The authorized Common Stock of the Company
consists of <span id="xdx_901_eus-gaap--CommonStockSharesAuthorized_iI_c20210731_zsmtgO1TSke8" title="Common stock shares, authorized"><ix:nonFraction name="us-gaap:CommonStockSharesAuthorized" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">1,000,000,000</ix:nonFraction></span> shares with a par value of $0<span id="xdx_902_eus-gaap--CommonStockParOrStatedValuePerShare_iI_c20210731_zH93JJw651ph" title="Common stock, par value"><ix:nonFraction name="us-gaap:CommonStockParOrStatedValuePerShare" contextRef="AsOf2021-07-31" decimals="INF" unitRef="USDPShares">.001</ix:nonFraction></span>. As a result of the Reverse Stock Split, effective July 20, 2021, and
the issuance of RSUs (as defined below) during May 2021 there were <span id="xdx_907_eus-gaap--CommonStockSharesIssued_iI_c20210731_zmuYm0nbrL2b" title="Common stock shares, issued"><span id="xdx_905_eus-gaap--CommonStockSharesOutstanding_iI_c20210731_zyUxT57IXGV" title="Common stock shares, outstanding"><ix:nonFraction name="us-gaap:CommonStockSharesIssued" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares"><ix:nonFraction name="us-gaap:CommonStockSharesOutstanding" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">23,600,597</ix:nonFraction></ix:nonFraction></span></span> shares of Common Stock issued and outstanding as
of July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_238_zDs6u4vdijg2" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

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<ix:exclude><p id="xdx_239_zcrUm6FTpVjb" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Restricted Stock Unit Awards</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31,
2021, <span id="xdx_90E_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockUnitsRSUMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenEmployeesMember_pdd" title="Restricted common stock issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures" contextRef="From2020-11-012021-07-31_us-gaap_RestrictedStockUnitsRSUMember_custom_SevenEmployeesMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">165,416</ix:nonFraction></span> shares of Common Stock were issued to eight employees of the Company pursuant to restricted stock unit (&#8220;RSU&#8221;)
agreements, resulting in $<span id="xdx_90F_eus-gaap--ShareBasedCompensation_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockUnitsRSUMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenEmployeesMember_pp0p0" title="Share based compensation"><ix:nonFraction name="us-gaap:ShareBasedCompensation" contextRef="From2020-11-012021-07-31_us-gaap_RestrictedStockUnitsRSUMember_custom_SevenEmployeesMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">740,695</ix:nonFraction></span> of share-based compensation. Of the shares issued to employees, <span id="xdx_90B_eus-gaap--SharesPaidForTaxWithholdingForShareBasedCompensation_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockUnitsRSUMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenEmployeesMember_pdd" title="Shares Withheld for Tax Withholding Obligation"><ix:nonFraction name="us-gaap:SharesPaidForTaxWithholdingForShareBasedCompensation" contextRef="From2020-11-012021-07-31_us-gaap_RestrictedStockUnitsRSUMember_custom_SevenEmployeesMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">60,758</ix:nonFraction></span> shares were withheld by
the Company to satisfy tax withholding obligations equal to $<span id="xdx_90C_eus-gaap--RestrictedStockValueSharesIssuedNetOfTaxWithholdings_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--RestrictedStockUnitsRSUMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenEmployeesMember_pp0p0" title="Restricted Stock, Value, Shares Issued Net of Tax Withholdings"><ix:nonFraction name="us-gaap:RestrictedStockValueSharesIssuedNetOfTaxWithholdings" contextRef="From2020-11-012021-07-31_us-gaap_RestrictedStockUnitsRSUMember_custom_SevenEmployeesMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">201,688</ix:nonFraction></span>.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31,
2021, <span id="xdx_904_eus-gaap--StockIssuedDuringPeriodSharesIssuedForServices_c20201101__20210731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenNonEmployeesMember_pdd" title="Stock Issued During Period, Shares, Issued for Services"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesIssuedForServices" contextRef="From2020-11-012021-07-31_custom_SevenNonEmployeesMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">389,053</ix:nonFraction></span> shares of Common Stock were issued to 7 non-employee vendors as compensation for professional services rendered to
the Company and two officers as additional compensation. These shares were expensed to the Company using the closing share price
on the share issuance dates to compute an aggregate fair market value total of $<span id="xdx_906_eus-gaap--StockIssuedDuringPeriodValueIssuedForServices_c20201101__20210731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--SevenNonEmployeesMember_pp0p0" title="Stock Issued During Period, Value, Issued for Services"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodValueIssuedForServices" contextRef="From2020-11-012021-07-31_custom_SevenNonEmployeesMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">7,529,151</ix:nonFraction></span>.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stock Options</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months July 31, 2021,
the Company granted options exercisable for up to <span id="xdx_90D_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableNumber_c20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_pdd" title="Options exercisable"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisableNumber" contextRef="AsOf2021-07-31_us-gaap_StockOptionMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">150,000</ix:nonFraction> </span>shares of <span id="xdx_903_ecustom--CommonStockVestedDescription_c20201101__20210731_z9nDSaYUUvT9" title="Common stock vested description"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="kavl:CommonStockVestedDescription">Common Stock of which 41,667 fully vested on December 1, 2021,
15,000 fully vested on March 17, 2021, 7,500 fully vested on June 30, 2021, 68,333 vest over the next 2 years on March 17, 2022,
and 2023, and 17,500 vest over the next 2 years on June 30, 2022 and 2023.</ix:nonNumeric></span> The options have exercise prices ranging from $<span id="xdx_907_eus-gaap--StockOptionExercisePriceDecrease_c20201101__20210731__srt--RangeAxis__srt--MinimumMember_z8zCDUv96Hc4" title="Options exercises price"><ix:nonFraction name="us-gaap:StockOptionExercisePriceDecrease" contextRef="From2020-11-012021-07-31_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">9.12</ix:nonFraction></span>
to $<span id="xdx_908_eus-gaap--StockOptionExercisePriceDecrease_c20201101__20210731__srt--RangeAxis__srt--MaximumMember_zteR97gms2Ph" title="Options exercises price"><ix:nonFraction name="us-gaap:StockOptionExercisePriceDecrease" contextRef="From2020-11-012021-07-31_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">28.68</ix:nonFraction></span> per share. These options have a weighted average remaining life of <span id="xdx_90B_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2_dtY_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_z2Yqc6URzkU8" title="Weighted average remaining life of options"><ix:nonNumeric contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember" format="ixt-sec:duryear" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTerm2">9.62</ix:nonNumeric></span> years as of July 31, 2021 and expire in the year
2031. On July 19, 2021, two of the stock option agreements, exercisable for an aggregate of&#160; <span id="xdx_90A_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares_c20210701__20210719_zRZzWLh3Rs12" title="Options Vested"><ix:nonFraction name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares" contextRef="From2021-07-012021-07-19" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">50,000</ix:nonFraction></span> shares of Common Stock, were modified to accelerate the full vesting
period from 3 years to 2 years. The aggregate intrinsic value of these outstanding options as of July 31, 2021 was $<span id="xdx_907_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingIntrinsicValue_c20210731_pp0p0" title="Intrinsic value of outstanding options"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingIntrinsicValue" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">0</ix:nonFraction></span>.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company fair valued the options on
the grant date at $<span id="xdx_90E_ecustom--FairValueOfOptionsGrant_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_pp0p0"><ix:nonFraction name="kavl:FairValueOfOptionsGrant" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">3,088,002</ix:nonFraction> </span>using
a Black-Scholes option pricing model with the following assumptions: stock price range of $<span id="xdx_902_eus-gaap--SharePrice_iI_c20210731__srt--RangeAxis__srt--MinimumMember_zyMovajDocch"><ix:nonFraction name="us-gaap:SharePrice" contextRef="AsOf2021-07-31_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">9.12</ix:nonFraction></span>&#160;to
$<span id="xdx_909_eus-gaap--SharePrice_c20210731__srt--RangeAxis__srt--MaximumMember_pdd"><ix:nonFraction name="us-gaap:SharePrice" contextRef="AsOf2021-07-31_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" unitRef="USDPShares">27.36</ix:nonFraction> </span>per
share (based on the quoted trading price on the date of grant), volatility range of <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate_dp_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember__srt--RangeAxis__srt--MinimumMember_zqwEweERaxs4"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">294.57</ix:nonFraction></span>%&#160;to <span id="xdx_902_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate_dp_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember__srt--RangeAxis__srt--MaximumMember_z9iXVWwp1MN3"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">301.53</ix:nonFraction></span>%,
expected term of <span id="xdx_90B_eus-gaap--SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1_dtY_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_z1Ncv15PmLCk"><ix:nonNumeric contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember" format="ixt-sec:duryear" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1">10</ix:nonNumeric> </span>years,
and a risk-free interest rate range of <span id="xdx_900_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate_dp_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember__srt--RangeAxis__srt--MinimumMember_zUP9hBGQR8p"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember_srt_MinimumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">1.19</ix:nonFraction></span>%
to <span id="xdx_905_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate_dp_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember__srt--RangeAxis__srt--MaximumMember_zXrM7GrzLZP5"><ix:nonFraction name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember_srt_MaximumMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">1.63</ix:nonFraction></span>%.
The Company is amortizing the expense over the vesting terms of each. The total stock option expense for the nine months ended July
31, 2021 was $<span id="xdx_90F_eus-gaap--StockOptionPlanExpense_c20201101__20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_pp0p0"><ix:nonFraction name="us-gaap:StockOptionPlanExpense" contextRef="From2020-11-012021-07-31_us-gaap_StockOptionMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,268,210</ix:nonFraction></span>.
The total unamortized stock option expense at July 31, 2021 was $<span id="xdx_906_eus-gaap--EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized_c20210731__us-gaap--AwardTypeAxis__us-gaap--StockOptionMember_pp0p0"><ix:nonFraction name="us-gaap:EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognized" contextRef="AsOf2021-07-31_us-gaap_StockOptionMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">1,819,792</ix:nonFraction></span>.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p id="xdx_804_eus-gaap--RelatedPartyTransactionsDisclosureTextBlock_z9BG7ZbD4Tne" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 5 &#8211; <span id="xdx_829_zhwspZLgc2Ma">Related-Party Transactions</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Revenue and Accounts Receivable</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31,
2021, the Company recognized revenue of $<span id="xdx_904_eus-gaap--RevenueFromRelatedParties_c20201101__20210731_pp0p0" title="Revenue from related parties"><ix:nonFraction name="us-gaap:RevenueFromRelatedParties" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">132,145</ix:nonFraction></span> from three companies owned by Nirajkumar Patel, the Chief Executive Officer of
the Company, and/or his wife.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31, 2021, Lakshmi
Distributors Inc., doing business as C Store Master (&#8220;C Store Master&#8221;), a large customer of the Company, elected to return
the inventory associated with the consignment order placed on April 1, 2021, which was located at the staging warehouse in California,
to the Company at no cost. The Company then returned this same inventory to Bidi&#8217;s warehouse in Florida at no cost. This reduced
the Company&#8217;s inventory and reduced the related-party amount due to Bidi Vapor by $13,846,950.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="color: black"></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i>Purchases and Accounts Payable</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i>&#160;</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31,
2021, the Company purchased Products equal to $<span id="xdx_90E_ecustom--PurchasesOfProducts_c20201101__20210731_pp0p0" title="Purchases of products"><ix:nonFraction name="kavl:PurchasesOfProducts" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">62,394,093</ix:nonFraction></span> from Bidi, a related party company that is also owned by Nirajkumar Patel,
the Company&#8217;s Chief Executive Officer. As of July 31, 2021, the Company had accounts payable to Bidi of $<span id="xdx_90D_eus-gaap--AccountsPayableRelatedPartiesCurrent_c20210731_pp0p0" title="Accounts payable to related paties"><ix:nonFraction name="us-gaap:AccountsPayableRelatedPartiesCurrent" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">16,813,962</ix:nonFraction></span> and products
valued at $<span id="xdx_908_eus-gaap--InventoryNet_c20210731_pp0p0" title="Inventory"><ix:nonFraction name="us-gaap:InventoryNet" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">14,947,200</ix:nonFraction></span> were held in inventory at July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_23B_zlMS7zi3gQpi" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

<ix:exclude><!-- Field: Page; Sequence: 14; Value: 1 -->
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<ix:exclude><p id="xdx_231_zggfFw3aZn71" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Office Space</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 1, 2020, the Company began
leasing office space for its main corporate office in Grant, Florida. The five-year lease agreement is with a related party, Just
Pick, LLC (&#8220;Just Pick&#8221;). The Company&#8217;s Chief Executive Officer is an officer of Just Pick.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to this, the Company utilized
the home office space and warehouse of its management at no cost through July 31, 2020.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:ConcentrationRiskDisclosureTextBlock"><p id="xdx_80C_eus-gaap--ConcentrationRiskDisclosureTextBlock_zAuqsZecmY3k" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 6 - <span id="xdx_82D_zLpRYFEpZ0y1">Concentrations</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts
receivable, and revenue.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Concentration of Purchases and
Accounts Payable- Related Party</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended July 31, 2021,
<span id="xdx_90C_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--InventoriesOfProductsMember_zGhYjVMaBi16" title="Concentration percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_custom_InventoriesOfProductsMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the inventories of Products, primarily consisting of the &#8220;BIDI<sup>&#174;</sup> Stick,&#8221; were purchased from
Bidi, a related party company that is also owned by Nirajkumar Patel, the Company&#8217;s Chief Executive Officer, in the amount
of $<span id="xdx_90D_ecustom--PurchasesOfProducts_c20201101__20210731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--BidiStickMember_pp0p0" title="Purchases of products"><ix:nonFraction name="kavl:PurchasesOfProducts" contextRef="From2020-11-012021-07-31_custom_BidiStickMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">62,394,093</ix:nonFraction></span>. It also accounted for <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__custom--AccountsPayableRelatedPartyMember_zel9w19eM308" title="Concentration percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_custom_AccountsPayableRelatedPartyMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">100</ix:nonFraction></span>% of the total accounts payable-related party and <span id="xdx_90F_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsPayableMember_zjdh4osHW7el" title="Concentration percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_AccountsPayableMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">99.3</ix:nonFraction></span>% of the total accounts payable
of the Company as of July 31, 2021. Products valued at $<span id="xdx_909_eus-gaap--InventoryNet_iI_pp0p0_c20210731_zR9GZb3E4Uw6" title="Inventory"><ix:nonFraction name="us-gaap:InventoryNet" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">14,947,200</ix:nonFraction></span> were held in inventory at July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Concentration of Revenues and
Accounts Receivable</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">For the nine months ended July 31, 2021, approximately
<span id="xdx_90F_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--FavsBusinessMember_ziDsp33Pop1b"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_FavsBusinessMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">30</ix:nonFraction></span>%,
or $<span id="xdx_900_eus-gaap--RevenueFromRelatedParties_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--FavsBusinessMember_pp0p0"><ix:nonFraction name="us-gaap:RevenueFromRelatedParties" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_FavsBusinessMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">18,435,648</ix:nonFraction></span>,
of the revenue from the sale of Products, primarily consisting of the &#8220;BIDI<sup>&#174;</sup> Stick,&#8221; was generated from Favs
Business LLC (&#8220;Favs Business&#8221;), approximately <span id="xdx_900_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--MMSDistroMember_zSAZUyD06lo6"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_MMSDistroMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">16</ix:nonFraction></span>%,
or $<span id="xdx_900_eus-gaap--RevenueFromRelatedParties_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--MMSDistroMember_pp0p0"><ix:nonFraction name="us-gaap:RevenueFromRelatedParties" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_MMSDistroMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">9,598,426</ix:nonFraction></span>,
of the revenue from the sale of Products was generated from MMS Distributing, LLC (&#8220;MMS Distro&#8221;), approximately <span id="xdx_909_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--CStoreMasterMember_z0sPXjsFpknc"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_CStoreMasterMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">13</ix:nonFraction></span>%,
or $<span id="xdx_906_eus-gaap--RevenueFromRelatedParties_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--CStoreMasterMember_pp0p0"><ix:nonFraction name="us-gaap:RevenueFromRelatedParties" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_CStoreMasterMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">7,663,490</ix:nonFraction></span>,
of the revenue from the sale of Products was generated from C Store Master, and approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--GPMInvestmentMember_zWhtv3YKbDcg" title="Concentration percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_GPMInvestmentMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">8</ix:nonFraction></span>%,
or $<span id="xdx_906_eus-gaap--RevenueFromRelatedParties_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--GPMInvestmentMember_pp0p0"><ix:nonFraction name="us-gaap:RevenueFromRelatedParties" contextRef="From2020-11-012021-07-31_us-gaap_SalesRevenueNetMember_custom_GPMInvestmentMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">4,648,659</ix:nonFraction></span>,
of the revenue from the sale of Products was generated by GPM Investment, LLC (&#8220;GPM Investment&#8221;).</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Favs Business, C Store Master, MMS Distro
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$<span id="xdx_900_eus-gaap--AccountsReceivableRelatedPartiesCurrent_c20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--CStoreMasterMember_pp0p0"><ix:nonFraction name="us-gaap:AccountsReceivableRelatedPartiesCurrent" contextRef="AsOf2021-07-31_us-gaap_AccountsReceivableMember_custom_CStoreMasterMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">545,879</ix:nonFraction></span>,
$<span id="xdx_900_eus-gaap--AccountsReceivableRelatedPartiesCurrent_c20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--MMSDistroMember_pp0p0" title="Accounts Receivable"><ix:nonFraction name="us-gaap:AccountsReceivableRelatedPartiesCurrent" contextRef="AsOf2021-07-31_us-gaap_AccountsReceivableMember_custom_MMSDistroMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">255,620</ix:nonFraction></span>
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and <span id="xdx_909_eus-gaap--ConcentrationRiskPercentage1_dp_c20201101__20210731__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--AccountsReceivableMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--GPMInvestmentMember_zCMALwXcVgE" title="Concentration percentage"><ix:nonFraction name="us-gaap:ConcentrationRiskPercentage1" contextRef="From2020-11-012021-07-31_us-gaap_AccountsReceivableMember_custom_GPMInvestmentMember" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">2</ix:nonFraction></span>%,
respectively, of the total accounts receivable from customers as of July 31, 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><p id="xdx_809_eus-gaap--CommitmentsAndContingenciesDisclosureTextBlock_zieI6vOSdXdb" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Note 7 &#8211; <span><span id="xdx_82E_zx3NNhwwmB92">Commitments and Contingencies</span></span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows ASC 450-20,&#160;<i>Los</i>s<i>&#160;Contingencies,&#160;</i>to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and
penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated. There were no commitments or contingencies as of July 31, 2021 and July 31, 2020 other than the below:</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Patent Contribution Agreement</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 4, 2021, Next Generation Labs,
LLC (&#8220;Next Generation&#8221;) notified the Company that a &#8220;reversion event&#8221; had occurred under that certain Patent
Contribution Agreement, dated September 28, 2020 (the &#8220;Patent Contribution Agreement&#8221;). Pursuant to the Patent Contribution
Agreement, Next Generation agreed to contribute certain patents, patent applications, and patent data, described on Exhibit &#8220;A&#8221;
of the Patent Contribution Agreement (the &#8220;Patents&#8221;),  to the Company and the Company would subsequently transfer
the Patents to Kaival Labs.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_239_zGOnAOCp3qOe" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

<ix:exclude><!-- Field: Page; Sequence: 15; Value: 1 -->
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<ix:exclude><p id="xdx_232_zpvDbe6GMhLc" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the Patent Contribution
Agreement, the Company agreed to pay Next Generation a purchase price of $3 million for the Patents (the &#8220;Purchase Price&#8221;),
which was expected to be paid over-time upon two events. First, the Company expected to pay part of the Purchase Price from proceeds
generated from a future securities offering (the &#8220;Offering Payment&#8221;). Additionally, on the first date that Kaival Labs
sold a product that was developed using any portion of the Patents or based on the Patents, the Company agreed to pay Next Generation
the difference between the Purchase Price and the Offering Payment.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the terms of the Patent
Contribution Agreement, the parties agreed that the Company would file a Form 1-A offering statement no later than January 31,
2021, unless extended in writing by the Company in good faith to no later than March 15, 2021 (the &#8220;Filing Date&#8221;).
The Patent Contribution Agreement further provided that in the event the Company or Kaival Labs materially breached the terms of
the Patent Contribution Agreement and the material breach is not cured within fifteen (15) business days after Next Generation
provides written notice of such material breach, then a reversion event would occur, and the Patents would revert from Kaival Labs
to Next Generation.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company did not undertake a securities
offering by filing a Form 1-A offering statement by the Filing Date. The Company attempted to negotiate an amendment to the Patent
Contribution Agreement, which would allow the Company additional time to undertake a securities offering. However, on April 8,
2021, Next Generation notified the Company that it was in material breach of the Patent Contribution Agreement and that the Company
would have fifteen (15) business days, or April 30, 2021, to cure such breach. Ultimately, the Company decided not to cure such
breach within the requisite time and, on May 4, 2021, Next Generation notified the Company that a reversion event occurred.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has completed the process
of completing the necessary documentation to transfer the Patents from Kaival Labs to Next Generation. Neither the Company, nor
Kaival Labs, has developed or otherwise relied on the Patents to date and does not expect the reversion of the Patents to materially
affect the Company&#8217;s business.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 28, 2020, the Board approved
<span id="xdx_902_ecustom--BonusDescription_c20201101__20210731" title="Bonus description"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="kavl:BonusDescription">cash bonus awards to each of the Company&#8217;s Chief Executive Officer and its Chief Operating Officer. With respect to the Chief
Executive Officer, the Board approved a cash bonus award equal to $30,000 for every $25 million in gross revenues generated by
the Company.</ix:nonNumeric> </span>With respect to the Chief Operating Officer, the Board approved a cash bonus award equal to $20,000 for every $25
million in gross revenues generated by the Company. On May 28, 2020, the Board also approved an equity bonus award for each of the Chief Executive
Officer and the Chief Operating Officer. With respect to the Chief Executive Officer, the Board approved an award of 7,500 restricted
shares of the Common Stock for every $50 million in accumulated gross revenues generated by the Company. With respect to the Chief Operating
Officer, the Board approved an award of 6,250 restricted shares of the Common Stock for every $50 million in accumulated gross revenues
generated by the Company. The Company&#8217;s accumulated gross revenues will be evaluated on a quarterly basis, beginning with the second
quarter of fiscal year 2020. At October 31, 2020, the Company determined that the fair value of the equity bonus shares, or $165,000,
should be accrued as it was deemed likely that the $50 million revenue target would be met. The Company issued these shares to the Chief
Executive Officer and Chief Operating Office on January 1, 2021. <span id="xdx_90F_ecustom--RevenueDescription_c20201101__20210731" title="Revenue description"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="kavl:RevenueDescription">During the quarter ended January 31, 2021, the $75 million and $100 million accumulated revenue targets
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three and nine months ended
July 31, 2021 additional revenue targets were not achieved and no related bonuses were accrued.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_23E_zRRRqzQa5iLa" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

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<ix:exclude><p id="xdx_23E_zEo2xdQRqwOd" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 31, 2020, the Company entered
into a service agreement (the &#8220;Service Agreement&#8221;) with QuikfillRx LLC, a Florida limited liability company (&#8220;QuikfillRx&#8221;),
whereby QuikfillRx provides the Company with certain services and support relating to sales management, website development and
design, graphics, content, public communication, social media, management and analytics, and market and other research (collectively,
the &#8220;Services&#8221;). The Services are provided by QuikfillRx as requested from time to time by the Company.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 2, 2020, the Company entered
into the First Amendment to the Service Agreement (the &#8220;First Amendment&#8221; and, collectively with the Service Agreement,
the &#8220;Amended Service Agreement&#8221;) with QuikfillRx. Effective as of March 16, 2021, the Company entered into the Second
Amendment to Service Agreement (the &#8220;Second Amendment&#8221; and, collectively with the Amended Service Agreement, the &#8220;Further
Amended Service Agreement&#8221;) with QuikfillRx. Pursuant to the terms of the Further Amended Service Agreement, the parties
agreed to the following <span id="xdx_90B_ecustom--GeneralCompensationDescription_c20201101__20210731" title="General Compensation"><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" name="kavl:GeneralCompensationDescription">&#8220;General Compensation&#8221; payments: (i) for the Services provided in March 2020, the Company paid
QuikfillRx an amount equal to $86,000; (ii) for the Services provided in April 2020, the Company paid QuikfillRx an amount equal
to $100,000; (iii) each calendar month commencing May 2020 through October 2020, the Company paid QuikfillRx an amount equal to
$125,000 per month for the Services to be performed during such calendar month; (iv) for each calendar month between November 1,
2020 and October 31, 2021, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar
month; (iv) if the parties agree to extend the term of the Further Amended Service Agreement beyond October 31, 2021, then for
the period between November 1, 2021 and October 31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to
be performed during such calendar month; and (v) if the parties agree to extend the term of the Further Amended Service Agreement
beyond October 31, 2022, then for the period between November 1, 2022 and October 31, 2021, the Company will pay QuikfillRx $150,000
per month for the Services to be performed during such calendar month.</ix:nonNumeric> </span>In addition, the Company will pay the following quarterly
bonuses:</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0 0 0 32.4pt; text-align: justify; text-indent: 0.5in">&#160;</p>

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</table>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has accrued $<span id="xdx_903_eus-gaap--AccruedBonusesCurrent_c20210731__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--QuickfillrxMember_pp0p0" title="Accrued Bonus payable"><ix:nonFraction name="us-gaap:AccruedBonusesCurrent" contextRef="AsOf2021-07-31_custom_QuickfillrxMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">40,283</ix:nonFraction></span> for
a quarterly bonus payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended July 31,
2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 17, 2021 the Company entered
into a consulting agreement with Russell Quick which granted stock options to purchase 41,667 shares of the Company&#8217;s common
stock in exchange for consulting services. Mr. Quick may exercise the option right on December 1, 2021 when the shares are fully
vested. The exercise price per share is $28.68. The Company recognized $190,000 in expense to account for the stock options. Russell
Quick is the Chief Executive Officer of QuikfillRx.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<ix:exclude><p id="xdx_230_zTFKStfsTcDc" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p></ix:exclude>

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<ix:exclude><p id="xdx_239_zcgGlVMjUkbk" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p></ix:exclude>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><p id="xdx_804_eus-gaap--IncomeTaxDisclosureTextBlock_zbkfUEuBh3N2" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 8 &#8211; <span id="xdx_826_zWXvHwgVQxR7">Income Tax</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is subject to federal income
taxes and state income tax in the United States. Significant judgment is required in determining the provision for income taxes
and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex
tax laws.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Tax Cuts and Jobs Act (the &#8220;Tax
Act&#8221;) was enacted on December 22, 2017, and reduced the U.S. federal corporate tax rate from <span id="xdx_905_eus-gaap--EffectiveIncomeTaxRateReconciliationStateAndLocalIncomeTaxes_dp_c20191101__20200731_zmXckh4CSJ15" title="U.S. federal and state income tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationStateAndLocalIncomeTaxes" contextRef="From2019-11-012020-07-31" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">35</ix:nonFraction></span>% to <span id="xdx_90A_eus-gaap--EffectiveIncomeTaxRateReconciliationStateAndLocalIncomeTaxes_dp_c20201101__20210731_zUfJbfS9nsHh" title="U.S. federal and state income tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateReconciliationStateAndLocalIncomeTaxes" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">21</ix:nonFraction></span>%, eliminated corporate
Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain
companies. The Company fulfilled and shipped all of the Products from Florida and, thus, it is subject to the state corporate income
tax of Florida with a tax rate of <span id="xdx_900_eus-gaap--EffectiveIncomeTaxRateContinuingOperations_dp_c20201101__20210731_zBYaQ8HhLYr8" title="Statutory corporate income tax rate"><ix:nonFraction name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" contextRef="From2020-11-01to2021-07-31" format="ixt:numdotdecimal" decimals="INF" scale="-2" unitRef="Pure">4.458</ix:nonFraction></span>%.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended July 31,
2021, the Company generated no taxable income and, thus <span id="xdx_90C_eus-gaap--CurrentFederalTaxExpenseBenefit_pp0p0_do_c20201101__20210731_zlK7tLf8vOcc" title="Accrued of federal income tax"><span id="xdx_90C_eus-gaap--CurrentStateAndLocalTaxExpenseBenefit_pp0p0_do_c20201101__20210731_zn3qXnrl3UOl" title="Accrued of state income tax"><ix:nonFraction name="us-gaap:CurrentFederalTaxExpenseBenefit" contextRef="From2020-11-01to2021-07-31" format="ixt-sec:numwordsen" decimals="0" scale="0" unitRef="USD"><ix:nonFraction name="us-gaap:CurrentStateAndLocalTaxExpenseBenefit" contextRef="From2020-11-01to2021-07-31" format="ixt-sec:numwordsen" decimals="0" scale="0" unitRef="USD">no</ix:nonFraction></ix:nonFraction></span></span> federal or state income taxes are accrued for tax year 2021.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Significant components of the
Company&#8217;s deferred tax assets and liabilities as of July 31, 2021 and October 31, 2020 after applying enacted corporate income
tax rate, is net operating loss carryforward of $<span id="xdx_909_eus-gaap--OperatingLossCarryforwards_c20210731_pp0p0" title="Net operating loss carryforward"><ix:nonFraction name="us-gaap:OperatingLossCarryforwards" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">721,771</ix:nonFraction></span>
and $<span id="xdx_900_eus-gaap--OperatingLossCarryforwards_c20201031_pp0p0" title="Net operating loss carryforward"><ix:nonFraction name="us-gaap:OperatingLossCarryforwards" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">15,377</ix:nonFraction></span>,
respectively, and a valuation allowance of $<span id="xdx_905_eus-gaap--DeferredTaxAssetsValuationAllowance_c20210731_pp0p0" title="Valuation allowance"><ix:nonFraction name="us-gaap:DeferredTaxAssetsValuationAllowance" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">721,771</ix:nonFraction></span>
and $<span id="xdx_90F_eus-gaap--DeferredTaxAssetsValuationAllowance_c20201031_pp0p0" title="Valuation allowance"><ix:nonFraction name="us-gaap:DeferredTaxAssetsValuationAllowance" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">15,377</ix:nonFraction></span>,
respectively, which is a total deferred tax asset of $<span id="xdx_906_eus-gaap--DeferredTaxAssetsNet_c20210731_pp0p0" title="Deferred tax asset"><span id="xdx_901_eus-gaap--DeferredTaxAssetsNet_c20201031_pp0p0" title="Deferred tax asset"><ix:nonFraction name="us-gaap:DeferredTaxAssetsNet" contextRef="AsOf2021-07-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD"><ix:nonFraction name="us-gaap:DeferredTaxAssetsNet" contextRef="AsOf2020-10-31" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">737,148</ix:nonFraction></ix:nonFraction></span></span>.
The Company&#8217;s tax returns for 2018 and 2019 remain open to examination.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

</ix:nonNumeric><ix:nonNumeric contextRef="From2020-11-01to2021-07-31" escape="true" name="us-gaap:SubsequentEventsTextBlock"><p id="xdx_80E_eus-gaap--SubsequentEventsTextBlock_z7I28VUc1wL" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Note 9 &#8211; <span id="xdx_82F_zIrtH2LNivKk">Subsequent Events</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; text-indent: 0"><span style="color: #222222"><i>Share-based
Compensation</i></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">On
August 8, 2021, the Company issued <span id="xdx_90C_eus-gaap--StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures_c20210801__20210808__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--RSUAgreementMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--EightEmployeesMember_pdd" title="Restricted stock issued"><ix:nonFraction name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardNetOfForfeitures" contextRef="From2021-08-012021-08-08_us-gaap_SubsequentEventMember_custom_RSUAgreementMember_custom_EightEmployeesMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">56,250</ix:nonFraction></span> shares of Common Stock to eight employees in accordance with the vesting schedules set
forth in RSU agreements previously entered into with such employees, resulting in the recognition of $<span id="xdx_90D_eus-gaap--ShareBasedCompensation_c20210801__20210808__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--RSUAgreementMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--EightEmployeesMember_pp0p0" title="Share based compensation"><ix:nonFraction name="us-gaap:ShareBasedCompensation" contextRef="From2021-08-012021-08-08_us-gaap_SubsequentEventMember_custom_RSUAgreementMember_custom_EightEmployeesMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">352,137</ix:nonFraction></span> of share-based compensation.
Of the shares issued to employees, <span id="xdx_90A_eus-gaap--SharesPaidForTaxWithholdingForShareBasedCompensation_c20210801__20210808__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--RSUAgreementMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--EightEmployeesMember_pdd" title="Shares Withheld for Tax Withholding Obligation"><ix:nonFraction name="us-gaap:SharesPaidForTaxWithholdingForShareBasedCompensation" contextRef="From2021-08-012021-08-08_us-gaap_SubsequentEventMember_custom_RSUAgreementMember_custom_EightEmployeesMember" format="ixt:numdotdecimal" decimals="INF" unitRef="Shares">28,660</ix:nonFraction></span> shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy
cash settlement options to employees, equaling $<span id="xdx_90D_eus-gaap--RestrictedStockValueSharesIssuedNetOfTaxWithholdings_c20210801__20210808__us-gaap--SubsequentEventTypeAxis__us-gaap--SubsequentEventMember__us-gaap--TypeOfArrangementAxis__custom--RSUAgreementMember__us-gaap--RelatedPartyTransactionsByRelatedPartyAxis__custom--EightEmployeesMember_pp0p0" title="Restricted Stock, Value, Shares Issued Net of Tax Withholdings"><ix:nonFraction name="us-gaap:RestrictedStockValueSharesIssuedNetOfTaxWithholdings" contextRef="From2021-08-012021-08-08_us-gaap_SubsequentEventMember_custom_RSUAgreementMember_custom_EightEmployeesMember" format="ixt:numdotdecimal" decimals="0" scale="0" unitRef="USD">179,412</ix:nonFraction></span>.</p>

</ix:nonNumeric><p id="xdx_811_z5rifezCUyc5" style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><span id="a_008"></span>Item 2. Management&#8217;s Discussion and Analysis of
Financial Condition and Results of Operations</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="color: black">Management&#8217;s
Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements
with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be
read in conjunction with the unaudited Financial Statements and notes thereto for the three and nine months ended July 31, 2021
included under Item 1 &#8211; Financial Statements in this Quarterly Report and our audited Financial Statements and notes thereto
for the year ended October 30, 2020 contained in our Annual Report on Form 10-K. The following discussion contains forward-looking
statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our
actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language
at the beginning of this Quarterly Report regarding forward-looking statements.</span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>The discussions of our results as
presented in this Quarterly Report include use of the non-GAAP term &#8220;gross profit.&#8221; Gross profit is determined by deducting
the cost of goods sold from operating revenue. Cost of goods sold includes direct and indirect labor, materials, services, fixed
costs, and variable overhead. Gross profit should not be considered an alternative to operating income or net income, which are
determined in accordance with GAAP. We believe that gross profit, although a non-GAAP financial measure, is useful and meaningful
to investors as a basis for making investment decisions. It provides investors with information that demonstrates our cost structure
and provides funds for our total costs and expenses. We use gross profit in measuring the performance of our business. Other companies
may calculate gross profit in a different manner.</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="color: black"><b><span style="text-decoration: underline">
Impact of COVID-19</span></b></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In March 2020, the WHO declared the outbreak of COVID-19
as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world, including the United
States. Our business operations, which commenced during this pandemic, continue to be operational; however, we were indirectly negatively
impacted by COVID-19.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We were indirectly impacted by supply chain issues
and regulatory oversight. First, COVID-19 impacted Bidi&#8217;s ability to quality test and develop its new product, the BIDI<sup>&#174;</sup>
Pouch, in line with its targeted release date, which negatively impacted our ability to begin distribution of the BIDI<sup>&#174;</sup>
Pouch. Throughout the year and during the Premarket Tobacco Product Application (&#8220;PMTA&#8221;) process, the Food and Drug Administration
(&#8220;FDA&#8221;) reiterated their enhanced scrutiny over ENDS products and raised the bar. Together with Bidi, we have not only invested
significant financial resources into developing state of the art procedures, policies and technology around compliance but had also refused
to relax our own internal standards when we observed some distributers and retailers relaxing their standards. We believe that retailers
and distributers relaxed their standards for two reasons: (i) due to COVID-19, government enforcement of regulations were very limited
due to imposed social restrictions, resulting in less in-person monitor enforcement by government officials and (ii) retail stores experienced
light foot traffic from customers due to COVID-19 restrictions and fears, which resulted in relaxed compliance in an effort to generate
revenue. The relaxation of standards by certain retailers significantly impacted our revenues.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Impact of FDA PMTA Decision</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Prior to the September 9, 2021 court-order deadline
for the FDA to make PMTA determinations for pending applications, we believe that many retailers and distributors were reluctant to take
on new inventory. We believe these retailers, were concerned with the potential for sitting on inventory that after September 9, 2021
could be ruled adulterated or misbranded by the FDA and, thus, illegal to sell.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Separately, we believe there were other retailers
willing to purchase counterfeit or sub-optimal products from manufacturers who were selling these products at significantly reduced prices.
These manufacturers were willing, we believe, to significantly reduce sales prices because they realized they would likely not receive
the FDA&#8217;s PMTA authorization on September 9, 2021 and were attempting to recognize any revenues associated with what they believe
will likely be unsellable product following the deadline. Both of these unanticipated consequences resulted in the third quarter of fiscal
2021 being an extremely challenging quarter for us.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0">Due to increased pressure from,
among others, tobacco control and public health groups, members of Congress, academic institutions, family advocacy organizations and
attorneys general, we believe that the FDA has used the September 9, 2021 PMTA deadline to effectively &#8220;ban&#8221; flavored ENDS
by denying nearly all pending PMTAs for such products. As of September 10, 2021, the FDA announced that it has taken action on over 93%
of applications and issued Marketing Denial Orders (&#8220;MDOs&#8221;) for more than 992,000 flavored ENDS products, while issuing zero
marketing authorizations. Unfortunately, despite submitting a comprehensive PMTA and continuing to develop robust and reliable product-specific
scientific evidence demonstrating the public health benefit of its flavored ENDS products, Bidi, along with nearly every other company
in the ENDS industry, received a MDO for its non-tobacco flavored BIDI<sup>&#174;</sup> Sticks, including its Arctic (menthol) BIDI<sup>&#174;</sup>
Stick, which the FDA mischaracterized as &#8220;flavored&#8221;. However, because its Arctic BIDI<sup>&#174;</sup> Stick is menthol, Bidi
believes its menthol BIDI<sup>&#174;</sup> Stick is not subject to the MDO. This position is aligned with the FDA&#8217;s public statements
and press releases stating that tobacco and menthol ENDS are not deemed flavored products subject to the MDOs. Accordingly, along with
the Classic (tobacco) BIDI<sup>&#174;</sup> Stick, Bidi intends to continue to manufacture and market its Arctic (menthol) BIDI<sup>&#174;</sup>
Stick for distribution by us.</p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0">Historically, substantially
all of our revenues were derived from sales of flavored BIDI<sup>&#174;</sup> Sticks, including the Arctic (menthol) BIDI<sup>&#174; </sup>Stick,
sales of which constituted approximately 15.2% and 18.5%, respectively, of our total sales of BIDI&#174; Sticks for the three and nine
months ended July 31, 2021. Generally, substantially all of the ENDS industry revenue is derived from the sales of flavored products.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Following the issuance of the MDOs, nearly all manufacturers,
not only BIDI, will be limited to manufacturing and selling only tobacco and menthol ENDS products. Accordingly, we believe that consumers
are likely to modify their purchases to shift to products that are available and, thus, that a substantial amount of our revenue that
had previously been generated from sales of flavored BIDI<sup>&#174;</sup> Sticks (other than Arctic) may be replaced through sales of
the Classic (tobacco) and Arctic (menthol) BIDI<sup>&#174;</sup> Sticks, given that consumers will only be able to purchase, on a legal
basis, non-flavored ENDS products. Accordingly, we believe revenues for tobacco and menthol ENDS products will restore some or all of
the revenue we derived from the sale of flavored products. Moreover, based on sales and consumer data, we believe that our consumers are
loyal to the Bidi brand and BIDI<sup>&#174;</sup> Sticks and that they thus are likely to continue to purchase our Classic (tobacco) and
Arctic (menthol) BIDI<sup>&#174;</sup> Sticks in lieu of the flavored BIDI&#174; Sticks they may have bought in the past.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If the FDA disagrees with Bidi&#8217;s position, issues a warning letter,
or takes other action against Bidi resulting in us not being able to distribute the menthol (Arctic) BIDI<sup>&#174;</sup> Stick in the
United States, or consumers do not purchase the tobacco (Classic) or menthol (Arctic) BIDI<sup>&#174;</sup> Sticks, our revenues and,
thereby our financial results and condition, would be materially adversely affected. Our financial results and condition will also be
significantly impacted by our ability to continue to sell the Arctic (menthol) BIDI<sup>&#174;</sup> Stick and the degree to which sales
of the Classic (tobacco) and Arctic (menthol) BIDI&#174; Sticks replace sales of flavored products that are now prohibited.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, Bidi informed us that it is not wavering in its commitment
to demonstrating that all its BIDI<sup>&#174;</sup> Stick products are appropriate for the protection of the public health and proving
to the FDA that these products should remain on the market as an alternative for adult cigarette smokers. In this regard, Bidi is appealing
the MDO and plans on continuing to complete multiple ongoing studies, including a clinical pharmacokinetic, or PK, study, and several
actual use and perception and intention studies to support its PMTA. Preliminary results from these studies indicate that, compared to
tobacco-flavored ENDS, the flavored BIDI<sup>&#174;</sup> Sticks do indeed provide an added benefit for adult cigarette smokers while
outweighing any risks to youth posed by flavored ENDS, particularly when considering Bidi&#8217;s stringent youth access prevention measures.
In addition, as FDA is currently focusing on non-tobacco and non-menthol ENDS, Bidi will continue to market its Classic (tobacco) and
Arctic (menthol) BIDI<sup>&#174;</sup> Sticks, respectively.</p>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As has become clear, the PMTA decision process will
result in the elimination of the vast majority of all ENDS products from the marketplace, as these applications did not include the product
specific scientific evidence needed to justify marketing authorization, which Bidi is developing.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Despite this MDO, we continue to believe that Bidi
has the potential to be one of only a handful of companies that will not only survive but rise above the demanding scrutiny of the new
regulatory world while continuing to deliver a premium and preferred vape experience, as reflected by the BIDI<sup>&#174;</sup> Stick
leading the market share in the disposable ENDS category confirmed by Nielsen reports dated June 29, 2021.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Future Strategic Opportunities</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0">With the FDA&#8217;s effective
ban of flavored ENDS products through its denial of nearly all pending PMTAs for such products, we expect that only tobacco and menthol
ENDS products will be available for marketing and distribution in the United States. While this will clearly change the traditional and
future industry landscape, for manufacturers whose tobacco and/or menthol ENDS products remain on the market as their pending PMTAs undergo
FDA scientific review, it represents a much larger market opportunity per-formulation due to the elimination of flavors.</p>

<p style="font: 12pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0"><span style="font-size: 10pt">As
the FDA continues to issue MDOs, we believe Bidi will be one of the only remaining players in the disposable ENDS market, since many of
Bidi&#8217;s competitors in this space only marketed flavored disposable ENDS. Based upon information released by the FDA, we believe
that only 7% of the domestic players in this industry remain. Prior to these recent PMTA determinations, we captured an approximately
37% market share within the ENDS market. That market share was captured from a market containing more than one hundred other brands. </span><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 12pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0"><span style="font-size: 10pt">In
addition to the continued domestic opportunity, we believe that international markets provide an exciting growth opportunity for us. The
estimated total addressable global market for ENDS products is approximately $36.7 billion. </span><span style="font-size: 8pt">&#160;</span><span style="font-size: 10pt">As
previously announced, Bidi has received approval to market and distribute products within 11 international markets, including the United
Kingdom, France, Russia, and the Czech Republic. Bidi has also secured significant intellectual property protections similar to those
received in the United States from the European Union, China, and several other regions and countries. It is also important to note that
the nicotine formulation in the Bidi<sup>&#174;</sup> Stick has been modified and approved at the 2% level to meet the criteria for distribution
in the United Kingdom and Europe. </span></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-right: 0; margin-left: 0">These international market
approvals Bidi has previously secured are for the full formulation lineup, including all flavors. Because the FDA&#8217;s PMTA restrictions
and guidelines do not pertain to international markets, Bidi intends to continue manufacturing its full product lineup, for distribution
by us in these international markets.&#160;&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><span style="text-decoration: underline">Corporate History</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We were incorporated on September 4, 2018 in
the State of Delaware. Effective July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc. to Kaival Brands
Innovations Group, Inc. The name change was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations
Group, Inc., our wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into us. We were the
surviving entity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Change of Control</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On February 6, 2019, we entered into a Share
Purchase Agreement (the &#8220;Share Purchase Agreement&#8221;), by and among us, GMRZ Holdings LLC, a Nevada limited liability
company (&#8220;GMRZ&#8221;), our then-controlling stockholder, and Kaival Holdings, LLC, a Delaware limited liability company
(&#8220;KH&#8221;), pursuant to which, on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted common stock, representing
approximately 88.06 percent of our then issued and outstanding shares of common stock, to KH, and KH paid GMRZ consideration in
the amount set forth in the Share Purchase Agreement. The consummation of the transactions contemplated by the Share Purchase Agreement
resulted in a change in control, with KH becoming our largest controlling stockholder. Nirajkumar Patel and Eric Mosser are the
sole voting members of KH.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Share Cancellation and Exchange Agreement</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 19, 2020, we entered into a Share
Cancellation and Exchange Agreement (the &#8220;Exchange Agreement&#8221;) with our controlling stockholder, KH. Nirajkumar Patel
and Eric Mosser, our current officers and directors, are the only voting members of KH. Pursuant to the Exchange Agreement, KH
returned to us 300,000,000 shares of our common stock (the &#8220;Cancellation Shares&#8221;), which were cancelled and retired
by us.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On August 19, 2020, we filed a Certificate
of Designation of Preferences, Rights, and Limitations of the Series A Preferred Stock (the &#8220;Series A Certificate of Designation&#8221;)
with the Secretary of State of the State of Delaware, which authorized a total of 3,000,000 shares of Series A Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In exchange for the Cancellation Shares, we
issued 3,000,000 shares (the &#8220;Preferred Shares&#8221;) of our newly designated Series A Preferred Stock to KH. The exchange
of the Cancellation Shares and the issuance of the Preferred Shares is intended to comply with Section 3(a)(9) of the Securities
Act, in that the issuance is exempt from the registration requirements of the Securities Act because the exchange of the Cancellation
Shares for the Preferred Shares was an exchange between us, as issuer, with an existing stockholder, and no commission or other
remuneration was paid or given directly for the exchange.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Our Business</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">We are focused on growing and incubating
innovative and profitable products into mature, category-dominant brands. In March 2020, we commenced business operations after
becoming the exclusive distributor of the Products manufactured by Bidi, and a related party company that is also owned by Nirajkumar
Patel, our Chief Executive Officer.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the A&amp;R Distribution
Agreement, Bidi granted to us an exclusive worldwide right to distribute the Products for sale and resale to both retail level
customers and non-retail level customers. The newly amended and restated distribution agreement extends the previous one-year,
annual renewable term to an initial term of ten years, which automatically renews for another five-year term; provided, that we
satisfy certain minimum purchase thresholds. The newly amended and restated distribution agreement also provides us with a right
of first refusal in the event Bidi receives an offer that would constitute a &#8220;change of control transaction,&#8221; as well
as a right of first refusal to act as the exclusive distributor of any and all future products of Bidi that arise out of or related
to ENDS and components related to ENDS, arise out of or relate to the synthetic nicotine industry, or arise out of or related to
the tobacco-derived nicotine industry.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Current Product Offerings</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the A&amp;R Distribution Agreement,
we sell and resell electronic nicotine delivery systems, which we may refer to herein as &#8220;ENDS Products&#8221;, or &#8220;e-cigarettes&#8221;,
to both retail level customers and non-retail level customers. Our primary Product we resell is the &#8220;BIDI<sup>&#174;</sup> Stick,&#8221;
a disposable, tamper-resistant ENDS product that comes in a variety of flavor options for adult cigarette smokers. In addition to the
BIDI<sup>&#174;</sup> Stick, we anticipated launching distribution of the &#8220;BIDI<sup>&#174;</sup> Pouch&#8221; in the fall of 2021.
The initial, planned February 2021 BIDI<sup>&#174;</sup> Pouch roll out had been delayed due to COVID-19 based manufacturing and supply
chain constraints. Due to these complications and in effort to prevent future bottlenecks, Bidi decided to move manufacturing in-house.
The BIDI<sup>&#174;</sup> Pouch provided a tobacco-free nicotine formulation, which contains natural fibers and a chew-base filler in
six different flavors. However, the BIDI<sup>&#174;</sup> Pouch product is now being placed on temporary hold domestically due to the
likelihood of the FDA enforcement of synthetic nicotine products as drugs, which will require a PMTA determination from the FDA. More
specifically, while the BIDI<sup>&#174; </sup>Pouch, which made with synthetic (tobacco-free) nicotine, would not fall within the meaning
of a tobacco product as set forth in the Food, Drug and Cosmetic Act (&#8220;FDCA&#8221;), the FDA could take the position that such
product is a drug. A drug is defined in Section 201(g) of the FDCA, in pertinent part, as &#8220;articles intended for use in the diagnosis,
cure, mitigation, treatment, or prevention of disease in man or other animals&#8221; (i.e., the &#8220;disease&#8221; or &#8220;therapeutic
benefit&#8221; prong) or &#8220;articles (other than food) intended to affect the structure or function of the body of man or other animals&#8221;
(i.e., the &#8220;structure/function&#8221; prong). Given nicotine&#8217;s well-known structure/function effect on the body there is
a chance the FDA will take the position that synthetic nicotine products, such as the BIDI<sup>&#174;</sup> Pouch, are subject to the
FDA&#8217;s drug authority and can only be marketed with an approved New Drug Application (even if no disease or therapeutic benefit
claims are made). Indeed, prior to the enactment of the Tobacco Control Act, the FDA historically took the position that any product
with added nicotine (other than traditional tobacco products) was a drug, even when marketed for recreational use and without specific
claims of smoking cessation or other therapeutic benefit.&#160; It is, of course, illegal to distribute a drug without the FDA&#8217;s
approval.&#160;Given these concerns, Bidi has decided not to launch the synthetic-nicotine BIDI<sup>&#174;</sup> Pouch at this time but
will instead seek a PMTA marketing authorization from the FDA for the BIDI<sup>&#174;</sup> Pouch made with tobacco-derived nicotine.
We do not manufacture any of the Products we resell. The BIDI<sup>&#174;</sup> Stick and BIDI<sup>&#174;</sup> Pouch are manufactured
by Bidi. Pursuant to the terms of the A&amp;R Distribution Agreement, Bidi provides us with all branding, logos, and marketing materials
to be utilized by us in connection with our marketing and promotion of our Products.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 14, 2021, we announced plans
to launch our first Kaival-branded product, a Hemp CBD product. In addition to our Kaival-branded formulation, we anticipate that
we will also provide white label, wholesale solutions for other product manufacturers through our subsidiary, Kaival Labs.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">All CBD products will be produced and distributed
strictly in compliance under the 2018 Farm Bill, which defines hemp as the plant Cannabis sativa and any part of the plant with a delta-9
THC concentration of not more than 0.3 percent by dry weight. According to the 2018 Farm Bill, hemp-derived products can be offered for
retail sale in the many forms: smoke, pouch, tinctures, topicals, capsules, vape oil and gummies/edibles. We plan to utilize Bidi&#8217;s
patented BIDI<sup>&#174;</sup> Stick delivery mechanism in order to provide a similar, premium experience in the initial CBD product
line. We expect our industrial-grade hemp CBD formula to provide greater bioavailability than many market peers, resulting in a better
consumer experience in less usage.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="a_009"></span>Liquidity and Capital Resources</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have no known demands or commitments and
are not aware of any events or uncertainties as of July 31, 2021 that will result in or that are reasonably likely to materially
increase or decrease our current liquidity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At July 31, 2021, we had working capital of
approximately $6.4 million and total cash of approximately $938,000.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Now that we have commenced business operations,
we intend to generally rely on cash from operations and equity and debt offerings, to the extent necessary and available, to satisfy
our liquidity needs. There are a number of factors that could result in the need to raise additional funds, including a decline
in revenue or a lack of anticipated sales growth and increased costs. Our efforts are directed toward generating positive cash
flow and profitability. If these efforts are not successful, we may need to raise additional capital. Should capital not be available
to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase
sales. These actions may include exploring strategic options for the sale of the Company, the creation of joint ventures or strategic
alliances under which we will pursue business opportunities, or other alternatives. We believe we have the financial resources
to weather any short-term impacts of COVID-19; however, we are unable to presently estimate any potential future impacts from COVID-19
and an extended impact could have a material and adverse effect on our sales, earnings, and liquidity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Cash Flows:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash flow used in operations was approximately
$6.3 million for the first nine months of fiscal year 2021, compared to $2.7 million provided by operations for the first nine
months of fiscal year 2020. The increase in cash flow used in operations for the first nine months of fiscal year 2021 compared
to the first nine months of fiscal 2020 was primarily due to decreased revenues and increased operating expenses, resulting in
a net loss.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash flow used in financing activities was
approximately $202,000 for the first nine months of fiscal year 2021, compared to $0 for the first nine months of fiscal year 2020.
The cash used in financing activities for the first nine months of fiscal year of 2021 consisted of cash used for the settlement
of RSUs issued to employees.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="a_010"></span>Results of Operations</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Three months ended July 31, 2021, compared
to three months ended July 31, 2020</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Revenues:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenues for the third quarter of fiscal year 2021
were approximately $3.4 million, compared to $32.4 million in the same period of the prior fiscal year. Revenues decreased in the third
quarter of fiscal year 2021 primarily due to increased competition resulting from the lack of enforcement by federal and state authorities
against sub-par and low-priced vaping products that continued to enter the market illegally without FDA authorization.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><i>Cost of Revenue and Gross Profit (Loss):</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i>&#160;</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Gross loss in the third quarter of fiscal year 2021 was approximately $84,000,
or approximately 2.5% of gross revenues, compared to $4.4 million gross profit, or approximately 13.6% of gross revenues, for the third
quarter of fiscal year 2020. Total cost of revenue was approximately $3.5 million, or approximately 102.5% of gross revenues, for the
third quarter of fiscal year 2021, compared to $28.0 million, or approximately 86.4% of gross revenues, for the third quarter of fiscal
year 2020. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date
credits/discounts taken by customers, resulting in an offset to gross revenues during the third quarter of fiscal year 2021.&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><i>Operating Expenses:</i></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b><i>&#160;</i></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Total operating
expenses were approximately $3.4 million for the third quarter of fiscal year 2021, compared to approximately $1.5 million for
the third quarter of fiscal year 2020. For the third quarter of fiscal year 2021, operating expenses consisted primarily of advertising
and promotion fees of approximately $711,000, professional fees totaling $945,000 and general and administrative expenses of approximately
$1.7 million. General and administrative expenses in the third quarter of fiscal year 2021 consisted primarily of salaries and
wages, stock option expense, insurance, banking fees, business fees, and other service fees. We expect future operating expenses
to continue to increase while we generate increased sales growth.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Income Taxes:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the third quarter of fiscal year 2021,
we accrued approximately $300 for state income taxes, compared to $320,000 for the third quarter of fiscal year 2020. The reduction
from the third quarter of fiscal year 2020 was due to the pre-tax operating loss recognized during the third quarter of fiscal
year 2021. Please refer to Note 8, Income Tax, in the Notes to the Consolidated Financial Statements in this Quarterly Report for
additional information related to our income taxes.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Net Income (Loss):</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the items noted above, the net
loss for the third quarter of fiscal year 2021 was approximately $3.4 million, or $(0.15) basic and diluted loss per share, compared
to net income of approximately $2.6 million, or $0.05 basic and diluted earnings per share, for the third quarter of fiscal year
2020. The decrease in net income for the third quarter of fiscal year 2021, as compared to the third quarter of fiscal year 2020,
is primarily attributable to the decreased revenues, customer credits/discounts used and increased expenses, as noted above.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>Nine months ended July 31, 2021, compared to nine months
ended July 31, 2020</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Revenues:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Revenues for the first nine months of fiscal
year 2021 was approximately $59.0 million, compared to $54.9 million in the same period of the prior fiscal year.&#160;This 7.5%
revenue increase year-over-year was achieved, despite the disruption in the industry, primarily due to the strong business partnerships
we have with our major customers.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Cost of Revenue and Gross Profit:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Gross profit in the first nine months of fiscal
year 2021 was approximately $11.0 million, or approximately 18.6% of gross revenues, compared to $6.9 million, or approximately
12.6% of gross revenues, for the first nine months of fiscal year 2020. Total cost of revenue was approximately $48.0 million,
or approximately 81.4% of gross revenues, for the first nine months of fiscal year 2021, compared to $48.0 million, or approximately
87.4% of gross revenues, for the first nine months of fiscal year 2020.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Operating Expenses:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Total operating expenses were approximately
$18.1 million for the first nine months of fiscal year 2021, compared to approximately $1.9 million for the first nine months of
fiscal year 2020. For the first nine months of fiscal year 2021, operating expenses consisted of advertising and promotion expenses
of approximately $2.5 million general and administrative expenses of approximately $4.9 million and $10.7 million of professional fees. General and administrative
expenses in the first nine months of fiscal year 2021 consisted primarily of legal fees, salaries, bonuses, professional fees,
merchant fees, and other service fees. Total operating expenses for the first nine months of fiscal year 2020 consisted of approximately
$1.0 million of general and administrative expenses, which were primarily from legal fees incurred and approximately $916,000 in
advertising and promotion expenses. We expect future operating expenses to continue to increase while we generate increased sales
growth.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Income Taxes:</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the first nine months of fiscal year
2021, we accrued approximately&#160;$292,844 for   income taxes, compared to $1.3 million for the first nine months of fiscal year 2020,
due to the overall decrease in taxable income between the two fiscal years. Please refer to Note 8, Income Tax, in the Notes to
the Consolidated Financial Statements in this Quarterly Report for additional information related to our income taxes.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Net Income (Loss):</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the items noted above, the net
loss for the first nine months of fiscal year 2021 was approximately $7.4 million, or $(0.32) basic and diluted loss per share,
compared to the net income for first nine months of fiscal year 2020 of approximately $3.7 million, or $0.08 basic and diluted
earnings per share. The decrease in net income for the first nine months of fiscal year 2021, as compared to the first nine months
of fiscal year 2020, is attributable to the decreased sales, customer credits/discounts used and increased overall operating expenses,
as noted above.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="a_011"></span>Off-Balance Sheet Arrangements</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material
to investors.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Critical Accounting Policies and
Estimates</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Other than the policy changes disclosed
in Note 2,&#160;<i>Basis of Presentation and Significant Accounting Policies,&#160;</i>to the unaudited Consolidated Financial
Statements in Item 1 of Part I of this Quarterly Report, there have been no material changes to our critical accounting policies
and estimates during the three and nine months ended July 31, 2021 from those disclosed in Item 7, Management&#8217;s Discussion
and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended October 31,
2020.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Recently Adopted Accounting Pronouncements</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 2,&#160;<i>Basis of Presentation
and Significant Accounting Policies</i>, to the unaudited Consolidated Financial Statements in Item 1 of Part I of this Quarterly
Report for a description of recent accounting pronouncements and accounting changes.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="a_012"></span>Emerging Growth Company</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">We are an &#8220;emerging growth company,&#8221;
that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our
Business Startups Act of 2012 (the &#8220;JOBS Act&#8221;). The JOBS Act eases restrictions on the sale of securities and increases
the number of stockholders a company must have before becoming subject to the SEC&#8217;s reporting and disclosure rules. We have
not elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2)
of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates
for public and private companies until those standards apply to private companies.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_013"></span>Item 3. Quantitative and Qualitative
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As a &#8220;smaller reporting company&#8221;
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_014"></span>Item 4. Controls and Procedures</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Evaluation of Disclosure Controls
and Procedures</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="color: black">Un</span>der
the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial
Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) as of July 31, 2021, the end of the period covered by this Quarterly Report. Based on that
evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that because of material weakness in our
internal control over financial reporting, our disclosure controls and procedures were not effective as of July 31, 2021. Management
will continue to work to improve its disclosure controls and procedures in fiscal 2021 and is committed to the improvement in the
effectiveness of its systems in its internal controls during the next 12 months. The Company intends to hire additional staff and to
take such other actions as may be necessary to address its material weaknesses.</p>
<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="color: black"></span></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC&#8217;s rules
and forms. Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including
our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline">Changes in Internal Control over
Financial Reporting</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">During the quarter ended July 31, 2021,
there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span style="text-decoration: underline"><span id="a_015"></span>PART II OTHER INFORMATION</span></b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_016"></span>Item 1. Legal Proceedings</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">There are no material pending legal
proceedings as defined by Item 103 of Regulation S-K, to which we are a party or of which any of our property is the subject, other
than ordinary routine litigation incidental to the Company&#8217;s business.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_017"></span>Item 1A. Risk Factors</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">As a &#8220;smaller reporting company&#8221;
as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_018"></span>Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">On
August 8, 2021, the Company issued 56,250 shares of Common Stock to eight employees in accordance with the vesting schedules set
forth in RSU agreements previously entered into with such employees, resulting in the recognition of $352,137 of share-based compensation.
Of the shares issued to employees, 28,660 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy
cash settlement options to employees, equaling $179,412.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white; color: #222222">&#160;&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_019"></span>Item 3. Defaults Upon Senior Securities</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_020"></span>Item 4. Mine Safety Disclosures</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_021"></span>Item 5. Other Information</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><span id="a_022"></span>Item 6. Exhibits</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">The following exhibits are filed herewith as a part of this
Quarterly Report.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="background-color: white">
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    <td style="border-bottom: black 1pt solid; vertical-align: bottom; width: 90%; padding-right: 0.8pt; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif"><b>Description</b></span></td></tr>
<tr style="background-color: white">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
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<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
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    <td style="padding-right: 0.8pt; text-align: justify; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="http://www.sec.gov/Archives/edgar/data/1762239/000173112219000386/e1427_3-1.htm">Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on June 20, 2019, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.</a></span></td></tr>
<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
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    <td style="padding-right: 0.8pt; text-align: justify; line-height: 107%"><span style="font: 10pt Times New Roman, Times, Serif; color: windowtext"><a href="http://www.sec.gov/Archives/edgar/data/1762239/000173112219000386/e1427_3-2.htm">Certificate of Correction, as filed with the Secretary of State of the State of Delaware on July 15, 2019, which was filed as Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.</a></span></td></tr>
<tr style="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
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    <td style="vertical-align: top; padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td></tr>
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<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
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<tr style="background-color: White">
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<p style="margin: 0">&#160;</p>

<p style="margin: 0"></p>

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<tr style="background-color: White">
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    <td style="padding-right: 0.8pt; line-height: 107%">&#160;</td>
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; line-height: 107%">&#160;</td>
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
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<tr style="background-color: rgb(204,238,255)">
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<tr style="background-color: White">
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<tr style="background-color: rgb(204,238,255)">
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<p style="margin: 0">&#160;</p>

<p style="margin: 0"></p>

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<p style="margin: 0">&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<td style="padding: 0pt; width: 1%; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; width: 92%; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
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<tr style="background-color: white">
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: #CCEEFF">
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
XBRL Taxonomy Extension Schema Document*</span></td></tr>
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: #CCEEFF">
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
XBRL Taxonomy Extension Calculation Linkbase Document*</span></td></tr>
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: #CCEEFF">
<td style="padding: 0pt; vertical-align: top; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">101.DEF</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding: 0pt; vertical-align: top; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">101.LAB</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
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<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding: 0pt; vertical-align: top; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">101.PRE</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">Inline
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<td style="padding: 0pt; vertical-align: top; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td></tr>
<tr style="background-color: rgb(204,238,255)">
<td style="padding: 0pt; vertical-align: top; line-height: 106%; text-indent: 0pt"><span style="font: 10pt/106% Times New Roman, Times, Serif">104</span></td>
<td style="padding: 0pt; line-height: 106%; text-indent: 0pt"><span style="font: 10pt Times New Roman, Times, Serif">&#160;</span></td>
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<p style="margin: 0">&#160;&#160;</p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">*filed herewith</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b><span id="a_023"></span>SIGNATURES</b></p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the requirements of the
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duly authorized.</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
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<tr>
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<tr>
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<tr>
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<tr>
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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&#160;</p>

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<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0">&#160;</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">27</p>

<p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>

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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark O
ne)
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
July 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________ to ____________
Commission
file number
000-56016
KAIVAL BRANDS INNOVATIONS GROUP, INC.
(Exact
name of registrant as specified in its charter)
delaware
83-3492907
(State
    or other jurisdiction of
incorporation or organization)
(I.R.S.
    Employer
Identification No.)
4460 Old Dixie Highway
Grant
,
Florida
32949
(Address
of principal executive offices, including zip code)
(833)
452-4825
(Registrant's
telephone number, including area code)
N/A
(Former
name, former address, and former fiscal year, if changed since last report)
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, par value $0.001 per share
KAVL
The
Nasdaq
Stock Market, 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 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
☒
APPLICABLE
ONLY TO CO
RPORATE ISSUERS:
Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable date:
23,628,187
shares
of common stock, $0.001 par value, outstanding as of September 9, 2021
KAIVAL BRANDS INNOVATIONS GROUP, INC.
FORM 10-Q
TABLE OF CONTENTS
Item
Page
Cautionary Note Concerning Forward-Looking Statements
ii
PART I
Financial Information
Item 1.
Financial Statements
Unaudited Consolidated Balance Sheets
1
Unaudited Consolidated Statements of Operations
2
Unaudited Consolidated Statements of Changes in Stockholders' Equity
3
Unaudited Consolidated Statements of Cash Flows
5
Notes to Unaudited Consolidated Financial Statements
6
Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations Corporate History
15
Liquidity and Capital Resources
18
Results of Operations
18
Off-Balance Sheet Arrangements
20
Emerging Growth Company
21
Item 3
Quantitative and Qualitative Disclosures about Market Risk
21
Item 4
Controls and Procedures
21
PART II
Other Information
22
Item 1.
Legal Proceedings
22
Item 1A.
Risk Factors
22
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
22
Item 3
Defaults Upon Senior Securities
22
Item 4
Mine Safety Disclosures
22
Item 5
Other Information
22
Item 6
Exhibits
23
Signatures
27
i
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING
STATEMENTS
Certain statements and information in
this Quarterly Report on Form 10-Q for the three and nine months ended July 31, 2021 (the "Quarterly Report") may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities
Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or
developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures,
commencement of business operations, business strategy, statements related to the expected effects on our business from the novel
coronavirus ("COVID-19") pandemic, and other similar matters are forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "may" "will," "should," "expect,"
"plan," "anticipate," "believe," "estimate," "predict," "potential,"
or "continue," or other comparable terminology. These forward-looking statements are based largely on our current expectations
and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements
are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially
from those expressed in the forward-looking statements including, but not limited to, the duration and scope of the COVID-19 pandemic
and impact on the demand for the products we distribute; our ability to obtain the products from the manufacturer; actions governments,
businesses, and individuals take in response to the pandemic, including restrictions on onsite commercial interactions; the impact
of the COVID-19 pandemic and action taken in response to the pandemic on global and regional economies and economic activity; the
pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global
economic conditions or low levels of economic growth; our inability to sustain profitable sales growth; changes in government regulations
or laws that affect our business; significant changes in our relationships with our distributor or sub-distributors; and circumstances
or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our
current and planned business initiatives. In light of these risks and uncertainties, all of the forward-looking statements made
herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated
by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.
ii
Kaival Brands Innovations Group, Inc.
Consolidated Balance Sheets
(Unaudited)
July 31,
2021
October 31,
2020
ASSETS
CURRENT ASSETS:
Cash
$
938,435
$
7,421,701
Accounts receivable
7,724,414
1,401,562
Accounts receivable – related parties
—
15,360
Prepaid expenses
229,167
—
Inventories
14,947,200
6,383
Total current assets
23,839,216
8,845,006
Right of use asset- operating lease
59,246
70,133
TOTAL ASSETS
$
23,898,462
$
8,915,139
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable- related party
$
16,813,962
$
1,409,561
Accounts payable- trade
284,303
—
Accrued expenses
368,287
1,062,105
Income tax accrual
—
1,331,856
Deferred revenue
—
623,096
Operating lease obligation – short term
12,691
11,709
Total current liabilities
17,479,243
4,438,327
LONG TERM LIABILITIES
Operating lease obligation, net of current portion
49,675
59,204
TOTAL LIABILITIES
$
17,528,918
$
4,497,531
STOCKHOLDERS' EQUITY:
Preferred stock
5,000,000
shares authorized; Series A Convertible Preferred stock ($
.001
par value,
3,000,000
shares authorized,
3,000,000
issued
and outstanding as of July 31, 2021 and October 31, 2020)
3,000
3,000
Common stock ($
.001
par value,
1,000,000,000
shares authorized,
23,600,597
and
23,106,886
issued and outstanding as of July 31, 2021 and October 31, 2020, respectively)
23,600
23,107
Additional paid-in capital
9,954,779
618,904
Retained (deficit) earnings
(
3,611,835
)
3,772,597
Total Stockholders' Equity
6,369,544
4,417,608
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$
23,898,462
$
8,915,139
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
1
Kaival Brands Innovations Group, Inc.
Consolidated Statements of
Operations
(Unaudited)
For the Three Months Ended July 31,
For the Nine Months
Ended July 31,
2021
2020
2021
2020
Revenues
Revenues
$
3,368,065
$
32,422,993
$
59,490,118
$
54,923,896
Revenues - related parties
70,600
54,040
132,145
86,520
Excise tax on products
4,313
(
101,724
)
(
668,687
)
(
128,953
)
Total revenues
3,442,978
32,375,309
58,953,576
54,881,463
Cost of revenue
Cost of revenue - related party
3,426,998
27,860,145
47,698,451
47,771,211
Cost of revenue - other
100,270
115,868
256,538
173,448
Total cost of revenue
3,527,268
27,976,013
47,954,989
47,944,659
Gross (loss) profit
(
84,290
)
4,399,296
10,998,587
6,936,804
Operating expenses
Advertising and Promotion
710,832
769,134
2,472,019
1,029,132
General & Administrative expenses
2,642,200
704,737
15,618,548
915,762
Total operating expenses
3,353,032
1,473,871
18,090,567
1,944,894
Other Income
Interest income
16
—
392
—
Total Other Income
16
—
392
—
Income (loss) before income taxes provision
(
3,437,306
)
2,925,425
(
7,091,588
)
4,991,910
Provision for income taxes
300
(
320,410
)
(
292,844
)
(
1,270,841
)
Net income (loss)
$
(
3,437,006
)
$
2,605,015
$
(
7,384,432
)
$
3,721,069
Net income (loss) per common share - basic and diluted
$
(
0.15
)
$
0.05
$
(
0.32
)
$
0.08
Weighted average number of common shares outstanding - basic and diluted
23,603,306
47,978,837
23,380,268
47,791,663
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
2
Kaival Brands Innovations Group, Inc.
Consolidated Statements of Changes
in Stockholders' Equity
For the Nine Months Ended July 31,
2021
(Unaudited)
Convertible Preferred Shares (Series A)
Par Value Convertible Preferred Shares (Series A)
Common Shares
Par Value Common Shares
Additional Paid-in Capital
Retained Earnings(Deficit)
Total
Balances, October 31, 2020
3,000,000
$
3,000
23,106,886
$
23,107
$
618,904
$
3,772,597
$
4,417,608
Issuance of common shares for employee compensation
—
—
44,583
45
76,655
—
76,700
Common shares settled and cancelled
—
—
(
17,625
)
(
18
)
(
30,493
)
—
(
30,511
)
Issuance of common shares for compensation
—
—
172,129
172
1,034,424
—
1,034,596
Net income
—
—
—
—
—
311,501
311,501
Balances, January 31, 2021
3,000,000
$
3,000
23,305,973
$
23,306
$
1,699,490
$
4,084,098
$
5,809,894
Issuance of common shares for employee compensation
—
—
64,583
65
647,396
—
647,461
Common shares settled and cancelled
—
—
(
20,505
)
(
21
)
(
47,443
)
—
(
47,464
)
Issuance of common shares for compensation
—
—
216,924
217
6,494,338
—
6,494,555
Stock option expense
—
—
—
—
579,699
—
579,699
Net loss
—
—
—
—
—
(
4,258,927
)
(
4,258,927
)
Balances, April 30, 2021
3,000,000
$
3,000
23,566,975
$
23,567
$
9,373,480
$
(
174,829
)
$
9,225,218
Issuance of common shares for employee compensation
—
—
56,250
56
16,478
—
16,534
Common shares settled and cancelled
—
—
(
22,628
)
(
23
)
(
123,690
)
—
(
123,713
)
Stock option expense
—
—
—
—
688,511
—
688,511
Net loss
—
—
—
—
—
(
3,437,006
)
(
3,437,006
)
Balances, July 31, 2021
3,000,000
$
3,000
23,600,597
$
23,600
$
9,954,779
$
(
3,611,835
)
$
6,369,544
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
3
Kaival Brands Innovations Group, Inc.
Consolidated Statements
of Changes in Stockholders' Deficit
For the Nine Months Ended July 31, 2020
(Unaudited)
Convertible Preferred Shares (Series A)
Par Value Convertible Preferred Shares (Series A)
Common Shares
Par Value Common Shares
Additional Paid-in Capital
Accumulated Retained Earnings(Deficit)
Total
Balances, October 31, 2019
—
$
—
47,697,048
$
47,697
$
(
19,358
)
$
(
73,225
)
$
(
44,886
)
Expenses paid on behalf of the Company and contributed to capital
—
—
—
—
26,457
—
26,457
Net loss
—
—
—
—
—
(
12,933
)
(
12,933
)
Balances, January 31, 2020
—
—
47,697,048
47,697
7,099
(
86,158
)
(
31,362
)
Expenses paid on behalf of the Company and contributed to capital
—
—
—
—
700
—
700
Net income
—
—
—
—
—
1,128,987
1,128,987
Balance, April 30, 2020
—
$
—
47,697,048
$
47,697
$
7,799
$
1,042,829
$
1,098,325
Issuance of common shares for compensation
—
—
344,215
344
319,812
—
320,156
Net income
—
—
—
—
—
2,605,015
2,605,015
Balance, July 31, 2020
—
$
—
48,041,263
$
48,041
$
327,611
$
3,647,844
$
4,023,496
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
4
Kaival Brands
Innovations Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended July 31, 2021
For the Nine Months Ended July 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
$
(
7,384,432
)
$
3,721,069
Adjustment to reconcile net (loss) income to net cash provided by operating activities:
Stock based compensation
8,269,846
320,156
Stock option expense
1,268,210
—
ROU operating lease expense
10,887
—
Expenses contributed to capital
—
27,157
Changes in current assets and liabilities:
Accounts receivable
(
6,322,852
)
(
7,033,361
)
Accounts receivable – related parties
15,360
(
19,910
)
Inventories
(
14,940,817
)
(
9,357
)
Prepaid expenses
(
229,167
)
—
Customer Deposits
(
623,096
)
—
Payments on operating lease liability
(
8,547
)
—
Accounts payable – related party
15,404,401
4,283,852
Accounts payable
284,303
—
Accrued taxes
(
1,331,856
)
1,396,919
Accrued expenses
(
693,818
)
(
17,075
)
Net cash (used in) provided by operating activities
(
6,281,578
)
2,669,450
CASH FLOWS FROM FINANCING ACTIVITIES:
Settled RSU shares with cash
$
(
201,688
)
$
—
Cash flows used in financing activities
(
201,688
)
—
Net change in cash
$
(
6,483,266
)
$
2,669,450
Beginning cash balance
7,421,701
0
Ending cash balance
$
938,435
$
2,669,450
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
$
—
$
—
Income taxes paid
$
—
$
—
The accompanying notes are an integral
part of these unaudited consolidated financial statements.
5
KAIVAL BRANDS INNOVATIONS GROUP,
INC.
Notes to Unaudited Consolidated Financial
Statements
Note 1 –
Organization and Description of Business
Kaival Brands Innovations Group, Inc.
(the "Company," the "Registrant," "we," "us," or "our"), formerly known
as Quick Start Holdings, Inc., was incorporated on September 4, 2018 in the State of Delaware.
Description of Business
The Company is focused on growing and
incubating innovative and profitable products into mature, dominant brands. In March 2020, the Company commenced business operations
as a result of becoming the exclusive distributor of certain electronic nicotine delivery systems ("ENDS") and related
components (the "Products") manufactured by Bidi Vapor, LLC, a Florida limited liability company ("Bidi"),
a related party company that is also owned by Nirajkumar Patel, the Chief Executive Officer of the Company.
On March 9, 2020, the Company entered
into an exclusive distribution agreement (the "Distribution Agreement") with Bidi, a related party company, which Distribution
Agreement was amended and restated on May 21, 2020 and again on April 20, 2021 (collectively the "A&R Distribution Agreement")
in order to clarify some of the provisions. Pursuant to the A&R Distribution Agreement, Bidi granted the Company an exclusive
worldwide right to distribute the Products for sale and resale to both retail level customers and non-retail level customers. Currently,
the Products consist primarily of the "BIDI
®
Stick" and, once launched, the "BIDI
®
Pouch".
In connection with the A&R Distribution
Agreement, the Company entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and restated
by the parties in order to clarify certain provisions (all such agreements, as amended and restated, are collectively referred
to as the "A&R Sub-Distribution Agreements"), whereby the Company appointed the counterparties as non-exclusive
sub-distributors. Pursuant to the A&R Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale the Products
in such quantities as they should need to properly service non-retail customers within the continental United States (the "Territory").
On August 31, 2020, the Company formed Kaival Labs, Inc.,
a Delaware corporation (herein referred to as "Kaival Labs"), as a wholly owned subsidiary of the Company.
On July 16, 2021, the Company filed
a Certificate of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of
Delaware to effect a
1-for-12
reverse stock split (the "Reverse Stock Split") of the shares of the Company's
common stock, par value $
0.001
per share (the "Common Stock"). The Reverse Stock Split was effective as of 12:01 a.m.
Eastern time on July 20, 2021. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares
of Common Stock that would have otherwise resulted from the Reverse Stock Split will be rounded up to the nearest whole number.
In connection with the Reverse Stock Split, the Board of Directors (the "Board") approved appropriate and proportional
adjustments to all outstanding securities or other rights convertible or exercisable into shares of Common Stock, including, without
limitation, all preferred stock, warrants, options, and other equity compensation rights. All historical share and per-share amounts
reflected throughout our consolidated financial statements and other financial information in this Quarterly Report have been adjusted
to reflect the Reverse Stock Split as if the split occurred as of the earliest period presented. The par value per share of the
Common Stock was not affected by the Reverse Stock Split.
6
COVID-19 Impact
In January 2020, the World
Health Organization (the "WHO") announced a global health emergency because of a new strain of coronavirus ("COVID-19")
originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure.
The Company's operations have not been significantly
impacted. No impairments have been recorded and no triggering events or changes in circumstances had occurred. While the spread of COVID-19
has begun to slow and social restrictions have begun to ease, the full impact of the COVID-19 pandemic continues to evolve and remains
uncertain. As such, the full magnitude of the COVID-19 pandemic, and the resulting impact, if any, on the Company's financial condition,
liquidity, and future results of operations is uncertain. Management is actively monitoring the global situation on the Company's
financial condition, liquidity, operations, suppliers, industry, and customers. Reduced demand for products or impaired ability to meet
customer demand (including as a result of disruptions at the Company's suppliers) could have a material adverse effect on its business
operations and financial performance. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread,
the Company is not presently able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition,
or liquidity for the current fiscal year. As of the date of this filing, the Company's recently commenced business operations have
not been materially impacted, however, we have encountered some logistical delays related to product launches and distribution in international
markets. The Company was also indirectly impacted by supply chain issues and regulatory oversight.
Note 2 –
Basis of Presentation
and Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements
include the financial statements of the Company's wholly-owned subsidiary, Kaival Labs. Intercompany transactions are eliminated.
Basis of Presentation
The accompanying unaudited interim consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America ("GAAP") and the rules of the Securities and Exchange Commission ("SEC") and should be
read in conjunction with the audited financial statements and notes thereto contained in the Company's most recent Annual
Financial Statements filed with the SEC on Annual Report on Form 10-K on February 12, 2021 (the "2020 Annual Report").
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim period presented have been reflected herein. The results of operations
for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated
financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the
most recent fiscal period, as reported in the 2020 Annual Report have been omitted.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial
statements not misleading have been included. Actual results could differ from those estimates.
7
Share-Based Compensation
The Company
measures the cost of services received in exchange for an award of equity instruments (share-based payments, or SBP) based on the
grant-date fair value of the award. That cost is recognized over the period during which a recipient is required to provide service
in exchange for the SBP award—the requisite service period (vesting period). For SBP awards subject to conditions, compensation
is not recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated
using the Black-Scholes-Merton option-pricing model. Compensation expense for SBP awards granted to nonemployees is remeasured
each period as the underlying options vest.
The fair value
of each option granted during the period ended July 31, 2021 and 2020 was estimated on the date of grant using the Black-Scholes-Merton
option-pricing model with the weighted average assumptions in the following table:
2021
2020
Expected dividend yield
0
%
—
Expected option term (years)
10
—
Expected volatility
294.57
%-
301.53
%
—
Risk-free interest rate
1.19
%-
1.63
%
—
The expected
term of options granted represents the period of time that options granted are expected to be outstanding. The expected volatility
was based on the volatility in the trading of the Common Stock. The assumed discount rate was the default risk-free five-year interest
rate for US Treasury bills.
Revenue Recognition
The Company adopted ASC 606,
Revenue
from Contracts with Customers
(Topic 606) ("ASC 606"), in the second quarter of fiscal year 2020, as this
was the first quarter that the Company generated revenues. Under ASC 606, the Company recognizes revenue when a customer obtains
control of promised goods, in an amount that reflects the consideration that the Company expects to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:
(1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction
price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as
the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that
the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer. In addition,
the Company accounts for rebates and volume discounts that customers will be using to purchase products in the future.
Products Revenue
The Company generates products revenue
from the sale of the Products (as defined above) to non-retail customers. The Company recognizes revenue at a point in time based
on management's evaluation of when performance obligations under the terms of a contract with the customer are satisfied
and control of the Products has been transferred to the customer. In most situations, transfer of control is considered complete
when the products have been shipped to the customer. The Company determined that a customer obtains control of the Product upon
shipment when title of such product and risk of loss transfer to the customer. The Company's shipping and handling costs
are fulfillment costs and such amounts are classified as part of cost of sales. The Company offers credit sales arrangements to
non-retail (or wholesale) customers and monitors the collectability of each credit sales periodically.
8
Note 3 –
Leases
The Company capitalizes all leased assets
pursuant to ASU 2016-02, "Leases (Topic 842)," which requires lessees to recognize right-of-use assets and lease
liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12
months and classified as either financing or operating leases. The Company does not have financing leases and only one operating
lease for office space. The operating lease is for a term of five
years, beginning August 1, 2020, with rent of $
1,000
payable monthly. As the operating lease does not provide for an implicit interest rate, we estimated a current borrowing rate of
4.5
%
in determining the present value of the lease. As of July 31, 2021, the right-to-use ("ROU") lease asset, net of
accumulated amortization, was $
59,246
.
The initial recognition of the ROU operating lease was $
73,749
for both the ROU asset and ROU liability. The amortization expense for ROU asset for the twelve months ended October 31, 2020 was
$
3,616
and one payment on the ROU liability was $
2,836
.
The amortization expense for the nine months ended July 31, 2021 was $
10,887
and three payments on the ROU liability were $
8,547
.
At July 31, 2021, short-term ROU lease liability was $
12,691
and long-term liability was $
49,675
,
totaling $
62,366
. Operating
lease expense totaling $
11,000
for November 1, 2020 until July 2021 was accrued at July 31, 2021.
2020
2021
2022
2023
2024
Total
Lease payments
$
12,300
$
13,500
$
15,300
$
18,000
$
13,500
$
72,600
Less discount
(
10,887
)
Present value of future payments
62,336
Less current obligations
(
12,691
)
Long term lease obligations
$
49,675
Note 4 –
Stockholder Equity
Preferred Shares Issued
The authorized preferred stock of the
Company consists of
5,000,000
shares with a par value of $0
.001
per share, of which
3,000,000
shares were designated as Series
A Preferred Stock (the "Series A Preferred Stock"). Each share of the Series A Preferred Stock are initially convertible
into 100 shares of Common Stock.
As a result of the Reverse Stock Split, the conversion rate was adjusted such that each share
of the Series A Preferred Stock are convertible into approximately 8.33 shares of Common Stock.
All
3,000,000
shares of Series
A Preferred Stock were issued and outstanding as of July 31, 2021.
Common Shares Issued
The Company implemented the Reverse
Stock Split, effective prior to the opening of the market on Tuesday, July 20, 2021. The Reverse Stock Split was implemented by
the Company in support of its application to list on the Nasdaq Capital Market ("Nasdaq"). As a result of the Reverse
Stock Split at the
1-for-12
ratio, every 12 shares of the Common Stock was exchanged for one share of the Common Stock. The Company has retroactively adjusted all share amounts and per share
data herein to give effect to the Reverse Stock Split.
The authorized Common Stock of the Company
consists of
1,000,000,000
shares with a par value of $0
.001
. As a result of the Reverse Stock Split, effective July 20, 2021, and
the issuance of RSUs (as defined below) during May 2021 there were
23,600,597
shares of Common Stock issued and outstanding as
of July 31, 2021.
9
Restricted Stock Unit Awards
During the nine months ended July 31,
2021,
165,416
shares of Common Stock were issued to eight employees of the Company pursuant to restricted stock unit ("RSU")
agreements, resulting in $
740,695
of share-based compensation. Of the shares issued to employees,
60,758
shares were withheld by
the Company to satisfy tax withholding obligations equal to $
201,688
.
During the nine months ended July 31,
2021,
389,053
shares of Common Stock were issued to 7 non-employee vendors as compensation for professional services rendered to
the Company and two officers as additional compensation. These shares were expensed to the Company using the closing share price
on the share issuance dates to compute an aggregate fair market value total of $
7,529,151
.
Stock Options
During the nine months July 31, 2021,
the Company granted options exercisable for up to
150,000
shares of
Common Stock of which 41,667 fully vested on December 1, 2021,
15,000 fully vested on March 17, 2021, 7,500 fully vested on June 30, 2021, 68,333 vest over the next 2 years on March 17, 2022,
and 2023, and 17,500 vest over the next 2 years on June 30, 2022 and 2023.
The options have exercise prices ranging from $
9.12
to $
28.68
per share. These options have a weighted average remaining life of
9.62
years as of July 31, 2021 and expire in the year
2031. On July 19, 2021, two of the stock option agreements, exercisable for an aggregate of
50,000
shares of Common Stock, were modified to accelerate the full vesting
period from 3 years to 2 years. The aggregate intrinsic value of these outstanding options as of July 31, 2021 was $
0
.
The Company fair valued the options on
the grant date at $
3,088,002
using
a Black-Scholes option pricing model with the following assumptions: stock price range of $
9.12
to
$
27.36
per
share (based on the quoted trading price on the date of grant), volatility range of
294.57
% to
301.53
%,
expected term of
10
years,
and a risk-free interest rate range of
1.19
%
to
1.63
%.
The Company is amortizing the expense over the vesting terms of each. The total stock option expense for the nine months ended July
31, 2021 was $
1,268,210
.
The total unamortized stock option expense at July 31, 2021 was $
1,819,792
.
Note 5 –
Related-Party Transactions
Revenue and Accounts Receivable
During the nine months ended July 31,
2021, the Company recognized revenue of $
132,145
from three companies owned by Nirajkumar Patel, the Chief Executive Officer of
the Company, and/or his wife.
During the nine months ended July 31, 2021, Lakshmi
Distributors Inc., doing business as C Store Master ("C Store Master"), a large customer of the Company, elected to return
the inventory associated with the consignment order placed on April 1, 2021, which was located at the staging warehouse in California,
to the Company at no cost. The Company then returned this same inventory to Bidi's warehouse in Florida at no cost. This reduced
the Company's inventory and reduced the related-party amount due to Bidi Vapor by $13,846,950.
Purchases and Accounts Payable
During the nine months ended July 31,
2021, the Company purchased Products equal to $
62,394,093
from Bidi, a related party company that is also owned by Nirajkumar Patel,
the Company's Chief Executive Officer. As of July 31, 2021, the Company had accounts payable to Bidi of $
16,813,962
and products
valued at $
14,947,200
were held in inventory at July 31, 2021.
10
Office Space
On August 1, 2020, the Company began
leasing office space for its main corporate office in Grant, Florida. The five-year lease agreement is with a related party, Just
Pick, LLC ("Just Pick"). The Company's Chief Executive Officer is an officer of Just Pick.
Prior to this, the Company utilized
the home office space and warehouse of its management at no cost through July 31, 2020.
Note 6 -
Concentrations
Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts
receivable, and revenue.
Concentration of Purchases and
Accounts Payable- Related Party
For the nine months ended July 31, 2021,
100
% of the inventories of Products, primarily consisting of the "BIDI
®
Stick," were purchased from
Bidi, a related party company that is also owned by Nirajkumar Patel, the Company's Chief Executive Officer, in the amount
of $
62,394,093
. It also accounted for
100
% of the total accounts payable-related party and
99.3
% of the total accounts payable
of the Company as of July 31, 2021. Products valued at $
14,947,200
were held in inventory at July 31, 2021.
Concentration of Revenues and
Accounts Receivable
For the nine months ended July 31, 2021, approximately
30
%,
or $
18,435,648
,
of the revenue from the sale of Products, primarily consisting of the "BIDI
®
Stick," was generated from Favs
Business LLC ("Favs Business"), approximately
16
%,
or $
9,598,426
,
of the revenue from the sale of Products was generated from MMS Distributing, LLC ("MMS Distro"), approximately
13
%,
or $
7,663,490
,
of the revenue from the sale of Products was generated from C Store Master, and approximately
8
%,
or $
4,648,659
,
of the revenue from the sale of Products was generated by GPM Investment, LLC ("GPM Investment").
Favs Business, C Store Master, MMS Distro
and GPM Investment  had outstanding balances of $
6,641,912
,
$
545,879
,
$
255,620
and $
178,756
,
respectively, accounted for approximately
85
%,
7
%,
3
%
and
2
%,
respectively, of the total accounts receivable from customers as of July 31, 2021.
Note 7 –
Commitments and Contingencies
The Company follows ASC 450-20,
Los
s
Contingencies,
to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and
penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated. There were no commitments or contingencies as of July 31, 2021 and July 31, 2020 other than the below:
Patent Contribution Agreement
On May 4, 2021, Next Generation Labs,
LLC ("Next Generation") notified the Company that a "reversion event" had occurred under that certain Patent
Contribution Agreement, dated September 28, 2020 (the "Patent Contribution Agreement"). Pursuant to the Patent Contribution
Agreement, Next Generation agreed to contribute certain patents, patent applications, and patent data, described on Exhibit "A"
of the Patent Contribution Agreement (the "Patents"),  to the Company and the Company would subsequently transfer
the Patents to Kaival Labs.
11
Pursuant to the Patent Contribution
Agreement, the Company agreed to pay Next Generation a purchase price of $3 million for the Patents (the "Purchase Price"),
which was expected to be paid over-time upon two events. First, the Company expected to pay part of the Purchase Price from proceeds
generated from a future securities offering (the "Offering Payment"). Additionally, on the first date that Kaival Labs
sold a product that was developed using any portion of the Patents or based on the Patents, the Company agreed to pay Next Generation
the difference between the Purchase Price and the Offering Payment.
Pursuant to the terms of the Patent
Contribution Agreement, the parties agreed that the Company would file a Form 1-A offering statement no later than January 31,
2021, unless extended in writing by the Company in good faith to no later than March 15, 2021 (the "Filing Date").
The Patent Contribution Agreement further provided that in the event the Company or Kaival Labs materially breached the terms of
the Patent Contribution Agreement and the material breach is not cured within fifteen (15) business days after Next Generation
provides written notice of such material breach, then a reversion event would occur, and the Patents would revert from Kaival Labs
to Next Generation.
The Company did not undertake a securities
offering by filing a Form 1-A offering statement by the Filing Date. The Company attempted to negotiate an amendment to the Patent
Contribution Agreement, which would allow the Company additional time to undertake a securities offering. However, on April 8,
2021, Next Generation notified the Company that it was in material breach of the Patent Contribution Agreement and that the Company
would have fifteen (15) business days, or April 30, 2021, to cure such breach. Ultimately, the Company decided not to cure such
breach within the requisite time and, on May 4, 2021, Next Generation notified the Company that a reversion event occurred.
The Company has completed the process
of completing the necessary documentation to transfer the Patents from Kaival Labs to Next Generation. Neither the Company, nor
Kaival Labs, has developed or otherwise relied on the Patents to date and does not expect the reversion of the Patents to materially
affect the Company's business.
On May 28, 2020, the Board approved
cash bonus awards to each of the Company's Chief Executive Officer and its Chief Operating Officer. With respect to the Chief
Executive Officer, the Board approved a cash bonus award equal to $30,000 for every $25 million in gross revenues generated by
the Company.
With respect to the Chief Operating Officer, the Board approved a cash bonus award equal to $20,000 for every $25
million in gross revenues generated by the Company. On May 28, 2020, the Board also approved an equity bonus award for each of the Chief Executive
Officer and the Chief Operating Officer. With respect to the Chief Executive Officer, the Board approved an award of 7,500 restricted
shares of the Common Stock for every $50 million in accumulated gross revenues generated by the Company. With respect to the Chief Operating
Officer, the Board approved an award of 6,250 restricted shares of the Common Stock for every $50 million in accumulated gross revenues
generated by the Company. The Company's accumulated gross revenues will be evaluated on a quarterly basis, beginning with the second
quarter of fiscal year 2020. At October 31, 2020, the Company determined that the fair value of the equity bonus shares, or $165,000,
should be accrued as it was deemed likely that the $50 million revenue target would be met. The Company issued these shares to the Chief
Executive Officer and Chief Operating Office on January 1, 2021.
During the quarter ended January 31, 2021, the $75 million and $100 million accumulated revenue targets
were both achieved and the Company determined that the fair market value of the
13,750
shares, or $70,785, and the cash bonuses
totaling $100,000 should be accrued at January 31, 2021.
During the three and nine months ended
July 31, 2021 additional revenue targets were not achieved and no related bonuses were accrued.
12
On March 31, 2020, the Company entered
into a service agreement (the "Service Agreement") with QuikfillRx LLC, a Florida limited liability company ("QuikfillRx"),
whereby QuikfillRx provides the Company with certain services and support relating to sales management, website development and
design, graphics, content, public communication, social media, management and analytics, and market and other research (collectively,
the "Services"). The Services are provided by QuikfillRx as requested from time to time by the Company.
On June 2, 2020, the Company entered
into the First Amendment to the Service Agreement (the "First Amendment" and, collectively with the Service Agreement,
the "Amended Service Agreement") with QuikfillRx. Effective as of March 16, 2021, the Company entered into the Second
Amendment to Service Agreement (the "Second Amendment" and, collectively with the Amended Service Agreement, the "Further
Amended Service Agreement") with QuikfillRx. Pursuant to the terms of the Further Amended Service Agreement, the parties
agreed to the following
"General Compensation" payments: (i) for the Services provided in March 2020, the Company paid
QuikfillRx an amount equal to $86,000; (ii) for the Services provided in April 2020, the Company paid QuikfillRx an amount equal
to $100,000; (iii) each calendar month commencing May 2020 through October 2020, the Company paid QuikfillRx an amount equal to
$125,000 per month for the Services to be performed during such calendar month; (iv) for each calendar month between November 1,
2020 and October 31, 2021, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar
month; (iv) if the parties agree to extend the term of the Further Amended Service Agreement beyond October 31, 2021, then for
the period between November 1, 2021 and October 31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to
be performed during such calendar month; and (v) if the parties agree to extend the term of the Further Amended Service Agreement
beyond October 31, 2022, then for the period between November 1, 2022 and October 31, 2021, the Company will pay QuikfillRx $150,000
per month for the Services to be performed during such calendar month.
In addition, the Company will pay the following quarterly
bonuses:
●
An amount equal to 0.9% of the Applicable Gross Quarterly Sales (as defined in the Amended Service Agreement), which amount shall, at the Company's option be paid in (a) cash or (b) shares of the Company's common stock, or (c) a combination of cash and Common Stock.
●
An amount equal to 0.27% of the Applicable Gross Quarterly Sales, which amount must be paid in cash.
The Company has accrued $
40,283
for
a quarterly bonus payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended July 31,
2021.
On March 17, 2021 the Company entered
into a consulting agreement with Russell Quick which granted stock options to purchase 41,667 shares of the Company's common
stock in exchange for consulting services. Mr. Quick may exercise the option right on December 1, 2021 when the shares are fully
vested. The exercise price per share is $28.68. The Company recognized $190,000 in expense to account for the stock options. Russell
Quick is the Chief Executive Officer of QuikfillRx.
13
Note 8 –
Income Tax
The Company is subject to federal income
taxes and state income tax in the United States. Significant judgment is required in determining the provision for income taxes
and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex
tax laws.
The Tax Cuts and Jobs Act (the "Tax
Act") was enacted on December 22, 2017, and reduced the U.S. federal corporate tax rate from
35
% to
21
%, eliminated corporate
Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain
companies. The Company fulfilled and shipped all of the Products from Florida and, thus, it is subject to the state corporate income
tax of Florida with a tax rate of
4.458
%.
During the nine months ended July 31,
2021, the Company generated no taxable income and, thus
no
federal or state income taxes are accrued for tax year 2021.
Significant components of the
Company's deferred tax assets and liabilities as of July 31, 2021 and October 31, 2020 after applying enacted corporate income
tax rate, is net operating loss carryforward of $
721,771
and $
15,377
,
respectively, and a valuation allowance of $
721,771
and $
15,377
,
respectively, which is a total deferred tax asset of $
737,148
.
The Company's tax returns for 2018 and 2019 remain open to examination.
Note 9 –
Subsequent Events
Share-based
Compensation
On
August 8, 2021, the Company issued
56,250
shares of Common Stock to eight employees in accordance with the vesting schedules set
forth in RSU agreements previously entered into with such employees, resulting in the recognition of $
352,137
of share-based compensation.
Of the shares issued to employees,
28,660
shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy
cash settlement options to employees, equaling $
179,412
.
14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Management's
Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements
with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be
read in conjunction with the unaudited Financial Statements and notes thereto for the three and nine months ended July 31, 2021
included under Item 1 – Financial Statements in this Quarterly Report and our audited Financial Statements and notes thereto
for the year ended October 30, 2020 contained in our Annual Report on Form 10-K. The following discussion contains forward-looking
statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our
actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language
at the beginning of this Quarterly Report regarding forward-looking statements.
The discussions of our results as
presented in this Quarterly Report include use of the non-GAAP term "gross profit." Gross profit is determined by deducting
the cost of goods sold from operating revenue. Cost of goods sold includes direct and indirect labor, materials, services, fixed
costs, and variable overhead. Gross profit should not be considered an alternative to operating income or net income, which are
determined in accordance with GAAP. We believe that gross profit, although a non-GAAP financial measure, is useful and meaningful
to investors as a basis for making investment decisions. It provides investors with information that demonstrates our cost structure
and provides funds for our total costs and expenses. We use gross profit in measuring the performance of our business. Other companies
may calculate gross profit in a different manner.
Impact of COVID-19
In March 2020, the WHO declared the outbreak of COVID-19
as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world, including the United
States. Our business operations, which commenced during this pandemic, continue to be operational; however, we were indirectly negatively
impacted by COVID-19.
We were indirectly impacted by supply chain issues
and regulatory oversight. First, COVID-19 impacted Bidi's ability to quality test and develop its new product, the BIDI
®
Pouch, in line with its targeted release date, which negatively impacted our ability to begin distribution of the BIDI
®
Pouch. Throughout the year and during the Premarket Tobacco Product Application ("PMTA") process, the Food and Drug Administration
("FDA") reiterated their enhanced scrutiny over ENDS products and raised the bar. Together with Bidi, we have not only invested
significant financial resources into developing state of the art procedures, policies and technology around compliance but had also refused
to relax our own internal standards when we observed some distributers and retailers relaxing their standards. We believe that retailers
and distributers relaxed their standards for two reasons: (i) due to COVID-19, government enforcement of regulations were very limited
due to imposed social restrictions, resulting in less in-person monitor enforcement by government officials and (ii) retail stores experienced
light foot traffic from customers due to COVID-19 restrictions and fears, which resulted in relaxed compliance in an effort to generate
revenue. The relaxation of standards by certain retailers significantly impacted our revenues.
15
Impact of FDA PMTA Decision
Prior to the September 9, 2021 court-order deadline
for the FDA to make PMTA determinations for pending applications, we believe that many retailers and distributors were reluctant to take
on new inventory. We believe these retailers, were concerned with the potential for sitting on inventory that after September 9, 2021
could be ruled adulterated or misbranded by the FDA and, thus, illegal to sell.
Separately, we believe there were other retailers
willing to purchase counterfeit or sub-optimal products from manufacturers who were selling these products at significantly reduced prices.
These manufacturers were willing, we believe, to significantly reduce sales prices because they realized they would likely not receive
the FDA's PMTA authorization on September 9, 2021 and were attempting to recognize any revenues associated with what they believe
will likely be unsellable product following the deadline. Both of these unanticipated consequences resulted in the third quarter of fiscal
2021 being an extremely challenging quarter for us.
Due to increased pressure from,
among others, tobacco control and public health groups, members of Congress, academic institutions, family advocacy organizations and
attorneys general, we believe that the FDA has used the September 9, 2021 PMTA deadline to effectively "ban" flavored ENDS
by denying nearly all pending PMTAs for such products. As of September 10, 2021, the FDA announced that it has taken action on over 93%
of applications and issued Marketing Denial Orders ("MDOs") for more than 992,000 flavored ENDS products, while issuing zero
marketing authorizations. Unfortunately, despite submitting a comprehensive PMTA and continuing to develop robust and reliable product-specific
scientific evidence demonstrating the public health benefit of its flavored ENDS products, Bidi, along with nearly every other company
in the ENDS industry, received a MDO for its non-tobacco flavored BIDI
®
Sticks, including its Arctic (menthol) BIDI
®
Stick, which the FDA mischaracterized as "flavored". However, because its Arctic BIDI
®
Stick is menthol, Bidi
believes its menthol BIDI
®
Stick is not subject to the MDO. This position is aligned with the FDA's public statements
and press releases stating that tobacco and menthol ENDS are not deemed flavored products subject to the MDOs. Accordingly, along with
the Classic (tobacco) BIDI
®
Stick, Bidi intends to continue to manufacture and market its Arctic (menthol) BIDI
®
Stick for distribution by us.
Historically, substantially
all of our revenues were derived from sales of flavored BIDI
®
Sticks, including the Arctic (menthol) BIDI
®
Stick,
sales of which constituted approximately 15.2% and 18.5%, respectively, of our total sales of BIDI® Sticks for the three and nine
months ended July 31, 2021. Generally, substantially all of the ENDS industry revenue is derived from the sales of flavored products.
Following the issuance of the MDOs, nearly all manufacturers,
not only BIDI, will be limited to manufacturing and selling only tobacco and menthol ENDS products. Accordingly, we believe that consumers
are likely to modify their purchases to shift to products that are available and, thus, that a substantial amount of our revenue that
had previously been generated from sales of flavored BIDI
®
Sticks (other than Arctic) may be replaced through sales of
the Classic (tobacco) and Arctic (menthol) BIDI
®
Sticks, given that consumers will only be able to purchase, on a legal
basis, non-flavored ENDS products. Accordingly, we believe revenues for tobacco and menthol ENDS products will restore some or all of
the revenue we derived from the sale of flavored products. Moreover, based on sales and consumer data, we believe that our consumers are
loyal to the Bidi brand and BIDI
®
Sticks and that they thus are likely to continue to purchase our Classic (tobacco) and
Arctic (menthol) BIDI
®
Sticks in lieu of the flavored BIDI® Sticks they may have bought in the past.
If the FDA disagrees with Bidi's position, issues a warning letter,
or takes other action against Bidi resulting in us not being able to distribute the menthol (Arctic) BIDI
®
Stick in the
United States, or consumers do not purchase the tobacco (Classic) or menthol (Arctic) BIDI
®
Sticks, our revenues and,
thereby our financial results and condition, would be materially adversely affected. Our financial results and condition will also be
significantly impacted by our ability to continue to sell the Arctic (menthol) BIDI
®
Stick and the degree to which sales
of the Classic (tobacco) and Arctic (menthol) BIDI® Sticks replace sales of flavored products that are now prohibited.
In addition, Bidi informed us that it is not wavering in its commitment
to demonstrating that all its BIDI
®
Stick products are appropriate for the protection of the public health and proving
to the FDA that these products should remain on the market as an alternative for adult cigarette smokers. In this regard, Bidi is appealing
the MDO and plans on continuing to complete multiple ongoing studies, including a clinical pharmacokinetic, or PK, study, and several
actual use and perception and intention studies to support its PMTA. Preliminary results from these studies indicate that, compared to
tobacco-flavored ENDS, the flavored BIDI
®
Sticks do indeed provide an added benefit for adult cigarette smokers while
outweighing any risks to youth posed by flavored ENDS, particularly when considering Bidi's stringent youth access prevention measures.
In addition, as FDA is currently focusing on non-tobacco and non-menthol ENDS, Bidi will continue to market its Classic (tobacco) and
Arctic (menthol) BIDI
®
Sticks, respectively.
As has become clear, the PMTA decision process will
result in the elimination of the vast majority of all ENDS products from the marketplace, as these applications did not include the product
specific scientific evidence needed to justify marketing authorization, which Bidi is developing.
Despite this MDO, we continue to believe that Bidi
has the potential to be one of only a handful of companies that will not only survive but rise above the demanding scrutiny of the new
regulatory world while continuing to deliver a premium and preferred vape experience, as reflected by the BIDI
®
Stick
leading the market share in the disposable ENDS category confirmed by Nielsen reports dated June 29, 2021.
Future Strategic Opportunities
With the FDA's effective
ban of flavored ENDS products through its denial of nearly all pending PMTAs for such products, we expect that only tobacco and menthol
ENDS products will be available for marketing and distribution in the United States. While this will clearly change the traditional and
future industry landscape, for manufacturers whose tobacco and/or menthol ENDS products remain on the market as their pending PMTAs undergo
FDA scientific review, it represents a much larger market opportunity per-formulation due to the elimination of flavors.
As
the FDA continues to issue MDOs, we believe Bidi will be one of the only remaining players in the disposable ENDS market, since many of
Bidi's competitors in this space only marketed flavored disposable ENDS. Based upon information released by the FDA, we believe
that only 7% of the domestic players in this industry remain. Prior to these recent PMTA determinations, we captured an approximately
37% market share within the ENDS market. That market share was captured from a market containing more than one hundred other brands.
In
addition to the continued domestic opportunity, we believe that international markets provide an exciting growth opportunity for us. The
estimated total addressable global market for ENDS products is approximately $36.7 billion.
As
previously announced, Bidi has received approval to market and distribute products within 11 international markets, including the United
Kingdom, France, Russia, and the Czech Republic. Bidi has also secured significant intellectual property protections similar to those
received in the United States from the European Union, China, and several other regions and countries. It is also important to note that
the nicotine formulation in the Bidi
®
Stick has been modified and approved at the 2% level to meet the criteria for distribution
in the United Kingdom and Europe.
These international market
approvals Bidi has previously secured are for the full formulation lineup, including all flavors. Because the FDA's PMTA restrictions
and guidelines do not pertain to international markets, Bidi intends to continue manufacturing its full product lineup, for distribution
by us in these international markets.
Corporate History
We were incorporated on September 4, 2018 in
the State of Delaware. Effective July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc. to Kaival Brands
Innovations Group, Inc. The name change was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations
Group, Inc., our wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into us. We were the
surviving entity.
Change of Control
On February 6, 2019, we entered into a Share
Purchase Agreement (the "Share Purchase Agreement"), by and among us, GMRZ Holdings LLC, a Nevada limited liability
company ("GMRZ"), our then-controlling stockholder, and Kaival Holdings, LLC, a Delaware limited liability company
("KH"), pursuant to which, on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted common stock, representing
approximately 88.06 percent of our then issued and outstanding shares of common stock, to KH, and KH paid GMRZ consideration in
the amount set forth in the Share Purchase Agreement. The consummation of the transactions contemplated by the Share Purchase Agreement
resulted in a change in control, with KH becoming our largest controlling stockholder. Nirajkumar Patel and Eric Mosser are the
sole voting members of KH.
Share Cancellation and Exchange Agreement
On August 19, 2020, we entered into a Share
Cancellation and Exchange Agreement (the "Exchange Agreement") with our controlling stockholder, KH. Nirajkumar Patel
and Eric Mosser, our current officers and directors, are the only voting members of KH. Pursuant to the Exchange Agreement, KH
returned to us 300,000,000 shares of our common stock (the "Cancellation Shares"), which were cancelled and retired
by us.
16
On August 19, 2020, we filed a Certificate
of Designation of Preferences, Rights, and Limitations of the Series A Preferred Stock (the "Series A Certificate of Designation")
with the Secretary of State of the State of Delaware, which authorized a total of 3,000,000 shares of Series A Preferred Stock.
In exchange for the Cancellation Shares, we
issued 3,000,000 shares (the "Preferred Shares") of our newly designated Series A Preferred Stock to KH. The exchange
of the Cancellation Shares and the issuance of the Preferred Shares is intended to comply with Section 3(a)(9) of the Securities
Act, in that the issuance is exempt from the registration requirements of the Securities Act because the exchange of the Cancellation
Shares for the Preferred Shares was an exchange between us, as issuer, with an existing stockholder, and no commission or other
remuneration was paid or given directly for the exchange.
Our Business
We are focused on growing and incubating
innovative and profitable products into mature, category-dominant brands. In March 2020, we commenced business operations after
becoming the exclusive distributor of the Products manufactured by Bidi, and a related party company that is also owned by Nirajkumar
Patel, our Chief Executive Officer.
Pursuant to the A&R Distribution
Agreement, Bidi granted to us an exclusive worldwide right to distribute the Products for sale and resale to both retail level
customers and non-retail level customers. The newly amended and restated distribution agreement extends the previous one-year,
annual renewable term to an initial term of ten years, which automatically renews for another five-year term; provided, that we
satisfy certain minimum purchase thresholds. The newly amended and restated distribution agreement also provides us with a right
of first refusal in the event Bidi receives an offer that would constitute a "change of control transaction," as well
as a right of first refusal to act as the exclusive distributor of any and all future products of Bidi that arise out of or related
to ENDS and components related to ENDS, arise out of or relate to the synthetic nicotine industry, or arise out of or related to
the tobacco-derived nicotine industry.
Current Product Offerings
Pursuant to the A&R Distribution Agreement,
we sell and resell electronic nicotine delivery systems, which we may refer to herein as "ENDS Products", or "e-cigarettes",
to both retail level customers and non-retail level customers. Our primary Product we resell is the "BIDI
®
Stick,"
a disposable, tamper-resistant ENDS product that comes in a variety of flavor options for adult cigarette smokers. In addition to the
BIDI
®
Stick, we anticipated launching distribution of the "BIDI
®
Pouch" in the fall of 2021.
The initial, planned February 2021 BIDI
®
Pouch roll out had been delayed due to COVID-19 based manufacturing and supply
chain constraints. Due to these complications and in effort to prevent future bottlenecks, Bidi decided to move manufacturing in-house.
The BIDI
®
Pouch provided a tobacco-free nicotine formulation, which contains natural fibers and a chew-base filler in
six different flavors. However, the BIDI
®
Pouch product is now being placed on temporary hold domestically due to the
likelihood of the FDA enforcement of synthetic nicotine products as drugs, which will require a PMTA determination from the FDA. More
specifically, while the BIDI
®
Pouch, which made with synthetic (tobacco-free) nicotine, would not fall within the meaning
of a tobacco product as set forth in the Food, Drug and Cosmetic Act ("FDCA"), the FDA could take the position that such
product is a drug. A drug is defined in Section 201(g) of the FDCA, in pertinent part, as "articles intended for use in the diagnosis,
cure, mitigation, treatment, or prevention of disease in man or other animals" (i.e., the "disease" or "therapeutic
benefit" prong) or "articles (other than food) intended to affect the structure or function of the body of man or other animals"
(i.e., the "structure/function" prong). Given nicotine's well-known structure/function effect on the body there is
a chance the FDA will take the position that synthetic nicotine products, such as the BIDI
®
Pouch, are subject to the
FDA's drug authority and can only be marketed with an approved New Drug Application (even if no disease or therapeutic benefit
claims are made). Indeed, prior to the enactment of the Tobacco Control Act, the FDA historically took the position that any product
with added nicotine (other than traditional tobacco products) was a drug, even when marketed for recreational use and without specific
claims of smoking cessation or other therapeutic benefit.  It is, of course, illegal to distribute a drug without the FDA's
approval. Given these concerns, Bidi has decided not to launch the synthetic-nicotine BIDI
®
Pouch at this time but
will instead seek a PMTA marketing authorization from the FDA for the BIDI
®
Pouch made with tobacco-derived nicotine.
We do not manufacture any of the Products we resell. The BIDI
®
Stick and BIDI
®
Pouch are manufactured
by Bidi. Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos, and marketing materials
to be utilized by us in connection with our marketing and promotion of our Products.
On July 14, 2021, we announced plans
to launch our first Kaival-branded product, a Hemp CBD product. In addition to our Kaival-branded formulation, we anticipate that
we will also provide white label, wholesale solutions for other product manufacturers through our subsidiary, Kaival Labs.
17
All CBD products will be produced and distributed
strictly in compliance under the 2018 Farm Bill, which defines hemp as the plant Cannabis sativa and any part of the plant with a delta-9
THC concentration of not more than 0.3 percent by dry weight. According to the 2018 Farm Bill, hemp-derived products can be offered for
retail sale in the many forms: smoke, pouch, tinctures, topicals, capsules, vape oil and gummies/edibles. We plan to utilize Bidi's
patented BIDI
®
Stick delivery mechanism in order to provide a similar, premium experience in the initial CBD product
line. We expect our industrial-grade hemp CBD formula to provide greater bioavailability than many market peers, resulting in a better
consumer experience in less usage.
Liquidity and Capital Resources
We have no known demands or commitments and
are not aware of any events or uncertainties as of July 31, 2021 that will result in or that are reasonably likely to materially
increase or decrease our current liquidity.
At July 31, 2021, we had working capital of
approximately $6.4 million and total cash of approximately $938,000.
Now that we have commenced business operations,
we intend to generally rely on cash from operations and equity and debt offerings, to the extent necessary and available, to satisfy
our liquidity needs. There are a number of factors that could result in the need to raise additional funds, including a decline
in revenue or a lack of anticipated sales growth and increased costs. Our efforts are directed toward generating positive cash
flow and profitability. If these efforts are not successful, we may need to raise additional capital. Should capital not be available
to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase
sales. These actions may include exploring strategic options for the sale of the Company, the creation of joint ventures or strategic
alliances under which we will pursue business opportunities, or other alternatives. We believe we have the financial resources
to weather any short-term impacts of COVID-19; however, we are unable to presently estimate any potential future impacts from COVID-19
and an extended impact could have a material and adverse effect on our sales, earnings, and liquidity.
Cash Flows:
Cash flow used in operations was approximately
$6.3 million for the first nine months of fiscal year 2021, compared to $2.7 million provided by operations for the first nine
months of fiscal year 2020. The increase in cash flow used in operations for the first nine months of fiscal year 2021 compared
to the first nine months of fiscal 2020 was primarily due to decreased revenues and increased operating expenses, resulting in
a net loss.
Cash flow used in financing activities was
approximately $202,000 for the first nine months of fiscal year 2021, compared to $0 for the first nine months of fiscal year 2020.
The cash used in financing activities for the first nine months of fiscal year of 2021 consisted of cash used for the settlement
of RSUs issued to employees.
Results of Operations
Three months ended July 31, 2021, compared
to three months ended July 31, 2020
Revenues:
Revenues for the third quarter of fiscal year 2021
were approximately $3.4 million, compared to $32.4 million in the same period of the prior fiscal year. Revenues decreased in the third
quarter of fiscal year 2021 primarily due to increased competition resulting from the lack of enforcement by federal and state authorities
against sub-par and low-priced vaping products that continued to enter the market illegally without FDA authorization.
18
Cost of Revenue and Gross Profit (Loss):
Gross loss in the third quarter of fiscal year 2021 was approximately $84,000,
or approximately 2.5% of gross revenues, compared to $4.4 million gross profit, or approximately 13.6% of gross revenues, for the third
quarter of fiscal year 2020. Total cost of revenue was approximately $3.5 million, or approximately 102.5% of gross revenues, for the
third quarter of fiscal year 2021, compared to $28.0 million, or approximately 86.4% of gross revenues, for the third quarter of fiscal
year 2020. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date
credits/discounts taken by customers, resulting in an offset to gross revenues during the third quarter of fiscal year 2021.
Operating Expenses:
Total operating
expenses were approximately $3.4 million for the third quarter of fiscal year 2021, compared to approximately $1.5 million for
the third quarter of fiscal year 2020. For the third quarter of fiscal year 2021, operating expenses consisted primarily of advertising
and promotion fees of approximately $711,000, professional fees totaling $945,000 and general and administrative expenses of approximately
$1.7 million. General and administrative expenses in the third quarter of fiscal year 2021 consisted primarily of salaries and
wages, stock option expense, insurance, banking fees, business fees, and other service fees. We expect future operating expenses
to continue to increase while we generate increased sales growth.
Income Taxes:
During the third quarter of fiscal year 2021,
we accrued approximately $300 for state income taxes, compared to $320,000 for the third quarter of fiscal year 2020. The reduction
from the third quarter of fiscal year 2020 was due to the pre-tax operating loss recognized during the third quarter of fiscal
year 2021. Please refer to Note 8, Income Tax, in the Notes to the Consolidated Financial Statements in this Quarterly Report for
additional information related to our income taxes.
Net Income (Loss):
As a result of the items noted above, the net
loss for the third quarter of fiscal year 2021 was approximately $3.4 million, or $(0.15) basic and diluted loss per share, compared
to net income of approximately $2.6 million, or $0.05 basic and diluted earnings per share, for the third quarter of fiscal year
2020. The decrease in net income for the third quarter of fiscal year 2021, as compared to the third quarter of fiscal year 2020,
is primarily attributable to the decreased revenues, customer credits/discounts used and increased expenses, as noted above.
Nine months ended July 31, 2021, compared to nine months
ended July 31, 2020
Revenues:
Revenues for the first nine months of fiscal
year 2021 was approximately $59.0 million, compared to $54.9 million in the same period of the prior fiscal year. This 7.5%
revenue increase year-over-year was achieved, despite the disruption in the industry, primarily due to the strong business partnerships
we have with our major customers.
Cost of Revenue and Gross Profit:
Gross profit in the first nine months of fiscal
year 2021 was approximately $11.0 million, or approximately 18.6% of gross revenues, compared to $6.9 million, or approximately
12.6% of gross revenues, for the first nine months of fiscal year 2020. Total cost of revenue was approximately $48.0 million,
or approximately 81.4% of gross revenues, for the first nine months of fiscal year 2021, compared to $48.0 million, or approximately
87.4% of gross revenues, for the first nine months of fiscal year 2020.
19
Operating Expenses:
Total operating expenses were approximately
$18.1 million for the first nine months of fiscal year 2021, compared to approximately $1.9 million for the first nine months of
fiscal year 2020. For the first nine months of fiscal year 2021, operating expenses consisted of advertising and promotion expenses
of approximately $2.5 million general and administrative expenses of approximately $4.9 million and $10.7 million of professional fees. General and administrative
expenses in the first nine months of fiscal year 2021 consisted primarily of legal fees, salaries, bonuses, professional fees,
merchant fees, and other service fees. Total operating expenses for the first nine months of fiscal year 2020 consisted of approximately
$1.0 million of general and administrative expenses, which were primarily from legal fees incurred and approximately $916,000 in
advertising and promotion expenses. We expect future operating expenses to continue to increase while we generate increased sales
growth.
Income Taxes:
During the first nine months of fiscal year
2021, we accrued approximately $292,844 for   income taxes, compared to $1.3 million for the first nine months of fiscal year 2020,
due to the overall decrease in taxable income between the two fiscal years. Please refer to Note 8, Income Tax, in the Notes to
the Consolidated Financial Statements in this Quarterly Report for additional information related to our income taxes.
Net Income (Loss):
As a result of the items noted above, the net
loss for the first nine months of fiscal year 2021 was approximately $7.4 million, or $(0.32) basic and diluted loss per share,
compared to the net income for first nine months of fiscal year 2020 of approximately $3.7 million, or $0.08 basic and diluted
earnings per share. The decrease in net income for the first nine months of fiscal year 2021, as compared to the first nine months
of fiscal year 2020, is attributable to the decreased sales, customer credits/discounts used and increased overall operating expenses,
as noted above.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material
to investors.
Critical Accounting Policies and
Estimates
Other than the policy changes disclosed
in Note 2,
Basis of Presentation and Significant Accounting Policies,
to the unaudited Consolidated Financial
Statements in Item 1 of Part I of this Quarterly Report, there have been no material changes to our critical accounting policies
and estimates during the three and nine months ended July 31, 2021 from those disclosed in Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended October 31,
2020.
Recently Adopted Accounting Pronouncements
See Note 2,
Basis of Presentation
and Significant Accounting Policies
, to the unaudited Consolidated Financial Statements in Item 1 of Part I of this Quarterly
Report for a description of recent accounting pronouncements and accounting changes.
20
Emerging Growth Company
We are an "emerging growth company,"
that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our
Business Startups Act of 2012 (the "JOBS Act"). The JOBS Act eases restrictions on the sale of securities and increases
the number of stockholders a company must have before becoming subject to the SEC's reporting and disclosure rules. We have
not elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2)
of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates
for public and private companies until those standards apply to private companies.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
As a "smaller reporting company"
as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls
and Procedures
Un
der
the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial
Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) as of July 31, 2021, the end of the period covered by this Quarterly Report. Based on that
evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that because of material weakness in our
internal control over financial reporting, our disclosure controls and procedures were not effective as of July 31, 2021. Management
will continue to work to improve its disclosure controls and procedures in fiscal 2021 and is committed to the improvement in the
effectiveness of its systems in its internal controls during the next 12 months. The Company intends to hire additional staff and to
take such other actions as may be necessary to address its material weaknesses.
Disclosure controls and procedures are
controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including
our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over
Financial Reporting
During the quarter ended July 31, 2021,
there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
21
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal
proceedings as defined by Item 103 of Regulation S-K, to which we are a party or of which any of our property is the subject, other
than ordinary routine litigation incidental to the Company's business.
Item 1A. Risk Factors
As a "smaller reporting company"
as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds
On
August 8, 2021, the Company issued 56,250 shares of Common Stock to eight employees in accordance with the vesting schedules set
forth in RSU agreements previously entered into with such employees, resulting in the recognition of $352,137 of share-based compensation.
Of the shares issued to employees, 28,660 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy
cash settlement options to employees, equaling $179,412.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
22
Item 6. Exhibits
The following exhibits are filed herewith as a part of this
Quarterly Report.
Exhibit Number
Description
3.1
Restated Certificate of Incorporation, which was filed as Exhibit 3.1 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on March 25, 2019, and is incorporated herein by reference thereto.
3.2
Bylaws, which were filed as Exhibit 3.2 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on February 19, 2019, and is incorporated herein by reference thereto.
3.3
Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on June 20, 2019, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.
3.4
Certificate of Correction, as filed with the Secretary of State of the State of Delaware on July 15, 2019, which was filed as Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.
3.5
Certificate of Designation of the Preferences, Rights, and Limitations of the Series A Preferred Stock, as filed with the Secretary of State of the State of Delaware on August 19, 2020, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto.
3.6
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective July 20, 2021, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2021, and is incorporated herein by reference thereto.
10.1
Exclusive Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Bidi Vapor LLC, dated March 9, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2020, and is incorporated herein by reference thereto. (1)
10.2
Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated March 31, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2020, and is incorporated herein by reference thereto.
10.3
First Amendment to Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated June 2, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.4
Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated April 3, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2020, and is incorporated herein by reference thereto. (1)
23
10.5
Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated April 11, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 13, 2020, and is incorporated herein by reference thereto. (1)
10.6
Amended and Restated Exclusive Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Bidi Vapor LLC, dated May 21, 2020, which was filed as Exhibit 10.5 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)
10.7
Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated May 21, 2020, which was filed as Exhibit 10.6 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)
10.8
Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated May 25, 2020, which was filed as Exhibit 10.7 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)
10.9
Share Cancellation and Exchange Agreement, by and between the Company and Kaival Holdings, LLC, dated August 19, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto.
10.10
2020 Stock and Incentive Compensation Plan, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.11
Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.12
Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.13
Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.14
Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.15
Lease Agreement by and between Kaival Brands Innovations Group, Inc., and Just Pick, LLC, dated July 15, 2020, filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 14, 2020, and is incorporated herein by reference thereto.
24
10.16
Patent Contribution Agreement, by and between Kaival Brands Innovations Group, Inc., and Next Generation Labs, LLC dated September 28, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 28, 2020, and is incorporated herein by reference thereto.
10.17
Second Amended and Restated Exclusive Distribution Agreement, by and between Kaival Brands Innovations Group, Inc. and Bidi Vapor, LLC, dated April 20, 2021, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 21, 2021, and is incorporated herein by reference thereto. (1)
10.18
Consulting Agreement, by and between Kaival Brands Innovations Group, Inc. and Russell Quick, dated March 16, 2021, which was filed as Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021, and is incorporated herein by reference thereto.
10.19
Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021, which was filed as Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021, and is incorporated herein by reference thereto.
10.20
Independent Director Agreement, dated June 30, 2021, by and between the Company and George Chuang, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto.
10.21
Consulting Agreement, dated June 14, 2021, by and between the Company and Mark Thoenes, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto.
10.22
Amended and Restated Independent Director Agreement, dated March 29, 2021, by and between the Company and Roger Brooks, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto.
10.23
Amended and Restated Independent Direct Agreement, dated March 29, 2021, by and between the Company and Paul Reuter, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto.
10.24
Amendment to Amended and Restated Independent Director Agreement, dated July 19, 2021, by and between the Company and Roger Brooks, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto.
10.25
Amendment to Amended and Restated Independent Director Agreement, dated July 19, 2021, by and between the Company and Paul Reuter, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto.
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1
Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
25
101.INS
Inline
XBRL Instance Document*
101.SCH
Inline
XBRL Taxonomy Extension Schema Document*
101.CAL
Inline
XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
Inline
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
Inline
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
Inline
XBRL Taxonomy Presentation Linkbase Document*
104
Cover
Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*
(1)
Schedules and Exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request;
provided, however,
that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any Schedule or Exhibit so furnished.
*filed herewith
26
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
KAIVAL BRANDS INNOVATIONS GROUP, INC.
Date: September  14, 2021
By:
/s/ Nirajkumar Patel
Nirajkumar Patel
President and Chief Executive Officer
Date: September 14, 2021
By:
/s/ Mark Thoenes
Mark Thoenes
Interim Chief Financial Officer
27