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<!-- Field: Rule-Page --><DIV STYLE="margin-top: 12pt; margin-bottom: 3pt; width: 100%"><DIV STYLE="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 14pt"><B>UNITED
STATES</B>&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 14pt"><B>SECURITIES
AND EXCHANGE COMMISSION</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt"><B>Washington,
D.C. 20549</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 18pt"><B>FORM
10-Q</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Mark One)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">&#9746;
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the quarterly period ended&nbsp;<U>April 30, 2021</U></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">OR</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">&#9744;
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">For the transition period from ___________ to ____________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Commission file number 000-56016</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 20pt"><B>KAIVAL
BRANDS INNOVATIONS GROUP, INC.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Exact name of registrant as specified in its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</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: 51%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>DELAWARE</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 48%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>83-3492907</B></FONT></TD></TR>
  <TR>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(I.R.S. Employer<BR>
Identification No.)</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>4460 Old Dixie Highway</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Grant, Florida 32949</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Address of principal executive offices, including
zip code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(833) 452-4825</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Registrant&rsquo;s telephone number, including area
code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>N/A</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; width: 30%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title of each class</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 36%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Trading Symbol(s)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 32%; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name of each exchange on which registered</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>None</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>None</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>None</B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT 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. YES &#9746; NO &#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT 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 (&sect;232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was
required to submit such files). YES &#9746; NO &#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT 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 &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer,&rdquo;
&ldquo;smaller reporting company,&rdquo; and &ldquo;emerging growth company&rdquo; in Rule 12b-2 of the Exchange Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR>
    <TD STYLE="width: 27%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large Accelerated filer</FONT></TD>
    <TD STYLE="width: 24%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD>
    <TD STYLE="width: 25%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer</FONT></TD>
    <TD STYLE="width: 24%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</FONT></TD></TR>
  <TR>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-accelerated filer</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Smaller reporting company</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</FONT></TD></TR>
  <TR>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT 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 &#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT 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; NO &#9746;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">APPLICABLE
ONLY TO CORPORATE ISSUERS:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Indicate
the number of shares outstanding of each of the issuer&rsquo;s classes of common stock, as of the latest practicable date:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">283,206,612&nbsp;shares
of common stock, $0.001 par value, outstanding as of June 16, 2021</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>KAIVAL BRANDS INNOVATIONS GROUP, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FORM 10-Q</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</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: 83px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 83px; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Page</B></FONT></TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD COLSPAN="2"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_001">Cautionary Note Concerning Forward-Looking Statements</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD COLSPAN="2">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PART I</B></FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Financial Information</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 1.</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial Statements</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_002">Unaudited Consolidated Balance Sheets</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_003">Unaudited Consolidated Statements of Operations</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_004">Unaudited Consolidated Statements of Changes in Stockholders&rsquo; Equity</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_005">Unaudited Consolidated Statements of Cash Flows</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_006">Notes to Unaudited Consolidated Financial Statements</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">6</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 2</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_007">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations Corporate History</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">13</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_008">Liquidity and Capital Resources</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">16</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_009">Results of Operations</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">16</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_010">Off-Balance Sheet Arrangements</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">18</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_011">Emerging Growth Company</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">18</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 3</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_012">Quantitative and Qualitative Disclosures about Market Risk</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">18</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 4</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_013">Controls and Procedures</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">18</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PART II</B></FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A HREF="#a_014">Other Information</A></B></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">19</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 1.</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_015">Legal Proceedings</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">19</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 1A.</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_016">Risk Factors</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">19</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 2.</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_017">Unregistered Sales of Equity Securities and Use of Proceeds</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">19</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 3</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_018">Defaults Upon Senior Securities</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">21</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 4</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_019">Mine Safety Disclosures</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">21</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 5</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_020">Other Information</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">21</FONT></TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item 6</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_021">Exhibits</A></FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">21</FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A HREF="#a_022">Signatures</A></B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">24</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_001"></A>CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain statements and information in this Quarterly
Report on Form 10-Q for the quarter ended April 30, 2021 (the &ldquo;Quarterly Report&rdquo;) may constitute &ldquo;forward-looking statements&rdquo;
within the meaning of Section 27A of the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;), Section 21E of the Securities
Exchange Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;), 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 (&ldquo;COVID-19&rdquo;) pandemic, and other similar matters
are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as &ldquo;may,&rdquo;
&ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;expect,&rdquo; &ldquo;plan,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo;
&ldquo;estimate,&rdquo; &ldquo;predict,&rdquo; &ldquo;potential,&rdquo; or &ldquo;continue,&rdquo; 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 mandatory business
closures and 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Kaival Brands Innovations Group, Inc.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_002"></A>Consolidated Balance Sheets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">April&nbsp;30,<BR> 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">October&nbsp;31,<BR> 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; width: 56%; text-indent: -10pt">Cash</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,140,667</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">7,421,701</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,136,147</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,401,562</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Accounts receivable &ndash; related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">765</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,360</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-indent: -10pt">Inventories</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">28,794,150</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,383</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49,101,729</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,845,006</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Right of use asset- operating lease</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">62,882</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,133</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,164,611</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,915,139</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">LIABILITIES AND STOCKHOLDERS&rsquo; EQUITY</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable- related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">38,001,633</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,409,561</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable- trade</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">272,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,600,029</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,062,105</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Income tax accrual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,331,856</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">623,096</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Operating lease obligation &ndash; short term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,363</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,709</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39,886,534</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,438,327</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">LONG TERM LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Operating lease obligation, net of current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">52,859</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">59,204</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">TOTAL LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39,939,393</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,497,531</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">STOCKHOLDERS&rsquo; EQUITY:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Preferred stock 5,000,000 shares authorized; Series A Convertible Preferred stock ($.001 par value, 3,000,000 shares authorized, 3,000,000 issued and outstanding as of April 30, 2021 and October 31, 2020)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-indent: -10pt">Common stock ($.001 par value, 1,000,000,000 shares authorized, 282,803,708 and 277,282,630 issued and outstanding as of April 30, 2021 and October 31, 2020, respectively)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">282,804</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">277,283</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,114,243</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">364,728</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Retained
    (deficit) earnings</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(174,829</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,772,597</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Total Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,225,218</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,417,608</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">TOTAL LIABILITIES &amp; STOCKHOLDERS&rsquo; EQUITY</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">49,164,611</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,915,139</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Kaival Brands Innovations Group, Inc.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_003"></A>Consolidated Statements of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>For the Three Months </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Ended April 30,</B></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Six Months<BR> Ended April 30,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>&nbsp;&nbsp;</B></FONT><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>2020</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold">Revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; padding-left: 10pt">Revenues</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">18,752,086</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">22,473,674</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">56,122,053</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">22,473,674</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 10pt">Revenues - related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,245</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,480</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61,545</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,480</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Excise tax on products</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(614,252</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(673,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Total revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,149,079</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,506,154</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55,510,598</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,506,154</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold">Cost of revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Cost of revenue - related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,792,353</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,301,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,271,453</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,301,800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Cost of revenue - other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">70,247</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">156,268</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 8pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 8pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; font-size: 8pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Total cost of revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,862,600</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,301,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,427,721</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,301,800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Gross profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,286,479</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,204,354</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,082,877</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,204,354</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-left: 9pt">&nbsp;Advertising and Promotion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">800,685</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">259,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,761,187</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">259,998</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">General &amp; Administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,558,009</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">198,092</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,976,348</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">211,025</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Total operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,358,694</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">458,090</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,737,535</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">471,023</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><B>Other Income</B></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Interest income</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">46</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">376</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Total Other Income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">376</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Income (loss) before income taxes provision</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,072,169</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,746,264</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,654,282</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,733,331</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Provision for income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(186,758</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(950,431</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(293,144</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(950,431</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,258,927</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,795,833</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,947,426</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,782,900</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per common share - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.02</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.01</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Weighted average number of common shares outstanding - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">282,143,504</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">572,364,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">280,424,288</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">572,364,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="background-color: white">The accompanying
notes are an integral part of these unaudited consolidated financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Kaival Brands Innovations Group, Inc.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_004"></A>Consolidated Statements of Changes in Stockholders&rsquo;
Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>For the Six Months Ended April 30, 2021 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Convertible Preferred Shares (Series A)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Par Value Convertible Preferred Shares (Series A)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Common Shares</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Par Value Common Shares</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Additional Paid-in Capital</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Retained Earnings</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 37%; font-weight: bold; text-indent: -10pt">Balances, October 31, 2020</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">3,000,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">3,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">277,282,630</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">277,283</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">364,728</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">3,772,597</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">4,417,608</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Issuance of common shares for employee compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">535,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">535</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76,165</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Common shares settled and cancelled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(211,500</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(212</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,299</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,511</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Issuance of common shares for compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,065,547</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,066</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,032,530</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,034,596</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Net income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">311,501</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">311,501</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balances, January 31, 2021</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">279,671,677</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">279,672</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,443,124</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,084,098</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,809,894</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Issuance of common shares for employee compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">775,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">775</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">646,686</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">647,461</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Common shares settled and cancelled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(246,055</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(246</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(47,218</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(47,464</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Issuance of common shares for compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,603,086</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,603</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,491,952</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,494,555</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Stock option expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">579,699</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">579,699</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Net income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,258,927</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,258,927</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balances,&nbsp;April 30, 2021</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,000,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">282,803,708</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">282,804</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,114,243</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(174,829</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,225,218</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><B>Kaival Brands Innovations Group, Inc.</B>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Consolidated Statements</B>&nbsp;<B>of Changes in Stockholders&rsquo; Deficit</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>For the Six Months Ended April 30, 2020 </B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;<B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B>&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Convertible Preferred Shares</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Series A)&nbsp;</B></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Par Value Convertible Preferred Shares (Series A)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Common Shares</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Par Value Common Shares</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Additional Paid-in Capital</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Accumulated Deficit</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 37%; font-weight: bold; text-indent: -10pt">Balances, October 31, 2019</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">572,364,574</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">572,365</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">(544,026</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">(73,225</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; text-align: right">(44,886</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Expenses paid on behalf of the Company and contributed to capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,457</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,457</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,933</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,933</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balances, January 31, 2020</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">572,364,574</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">572,365</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(517,569</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(86,158</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(31,362</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Expenses paid on behalf of the Company and contributed to capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Net profit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,795,833</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,795,833</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balances, April 30, 2020</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">572,364,574</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">572,365</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(516,869</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,709,675</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,765,171</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="background-color: white">The accompanying
notes are an integral part of these unaudited consolidated financial statements.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;<B>Kaival Brands Innovations Group, Inc.</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_005"></A>Consolidated Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 60pt; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Six Months Ended April 30, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Six Months Ended April 30, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: left; text-indent: -10pt; padding-left: 10pt">CASH FLOWS FROM OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; text-align: left; text-indent: -10pt; padding-left: 20pt">Net (loss) income</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(3,947,426</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">2,782,900</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Adjustment to reconcile net (loss) income to net cash provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,253,312</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Stock option expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">579,699</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">ROU operating lease expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,905</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Expenses contributed to capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,157</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Changes in current assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,734,585</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,213,920</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Accounts receivable &ndash; related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,595</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,070</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 30pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(28,787,767</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,419</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Deferred revenue</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(623,096</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Payments on operating lease liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,345</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Accounts payable &ndash; related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,592,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,259,145</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">272,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,493</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt">Accrued taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(756,078</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 30pt">Accrued expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(37,854</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,117,396</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Net cash (used in) provided by operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,203,059</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,970,682</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: left; text-indent: -10pt; padding-left: 10pt">CASH FLOWS FROM FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Settled RSU shares with cash</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(77,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Cash flows used in financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(77,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Net change in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(5,281,034</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,970,682</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Beginning cash balance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,421,701</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Ending cash balance</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,140,667</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,970,682</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: left; text-indent: -10pt; padding-left: 10pt">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Income taxes paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 60pt; text-align: center">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>KAIVAL BRANDS INNOVATIONS GROUP, INC.&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_006"></A>Notes to Unaudited Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Note 1 &ndash; Organization and Description of Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Description of Business</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 and related components (the &ldquo;Products&rdquo;) manufactured
by Bidi Vapor, LLC, a Florida limited liability company (&ldquo;Bidi&rdquo;), a related party company that is also owned by Nirajkumar
Patel, the Chief Executive Officer and Chief Financial Officer of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">On March 9,
2020, the Company entered into an exclusive distribution agreement (the &ldquo;Distribution Agreement&rdquo;) 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 &ldquo;A&amp;R
Distribution Agreement&rdquo;) 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.</FONT>&nbsp;Currently, the Products consist primarily of the &ldquo;Bidi Stick&rdquo; and, once launched, the &ldquo;Bidi
Pouch&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">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 &ldquo;A&amp;R Sub-Distribution Agreements&rdquo;), 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 &ldquo;Territory</FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">&rdquo;).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Recent Developments</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">In
January 2020, the World Health Organization (the &ldquo;WHO&rdquo;) announced a global health emergency because of a new strain of coronavirus
(&ldquo;COVID-19&rdquo;) 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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">Our 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&rsquo;s
financial condition, liquidity, and future results of operations is uncertain. Management is actively monitoring the global situation
on our 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&rsquo;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&rsquo;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.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 2 &ndash; Basis of Presentation and Significant
Accounting Policies</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Principles of Consolidation</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Basis of Presentation</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt 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
(&ldquo;GAAP&rdquo;) and the rules of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) and should be read in conjunction with
the audited financial statements and notes thereto contained in the Company&rsquo;s most recent Annual Financial Statements filed with
the SEC on Annual Report on Form 10-K on February 12, 2021 (the &ldquo;2020 Annual Report&rdquo;). 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Use of Estimates</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt 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</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white">been included. Actual results could differ from
those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white"><B><U>Share-Based Compensation</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt 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&mdash;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 Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">The fair value of each option
granted during the period ended April&nbsp;30, 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 Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2021</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2020</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; text-align: left">Expected dividend yield</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected option term (years)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">301.53</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Risk-free interest rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.62</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt 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 Company&rsquo;s common stock. The assumed discount rate was the default risk-free five-year interest rate for US
Treasury bills.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Revenue Recognition</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted ASC 606,&nbsp;<I>Revenue from
Contracts with Customers</I>&nbsp;(Topic 606) (&ldquo;ASC 606&rdquo;), 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Products Revenue</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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&rsquo;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&rsquo;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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 3 &ndash; Leases</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company capitalizes all leased assets pursuant
to ASU 2016-02, &ldquo;Leases (Topic 842),&rdquo; 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 April
30, 2021, the right-to-use (&ldquo;ROU&rdquo;) lease asset, net of accumulated amortization, was $62,882. 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 six months ended April
30, 2021 was $7,905 and two payments on the ROU liability were $6,345. At April 30, 2021, short-term ROU lease liability was $12,363 and
long-term liability was $52,859, totaling $65,222. Operating lease expense totaling $9,000 for November 1, 2020 until April 2021 was accrued
at April 30, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2022</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2023</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2024</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 40%; text-align: left; text-indent: -10pt">Lease payments</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">12,300</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">13,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">15,300</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">18,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">13,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 6%; text-align: right">72,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Less discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,378</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">Present value of future payments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,222</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Less current obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,363</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Long term lease obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">52,859</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 4 &ndash; Stockholder Equity</B> &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Preferred Shares Issued</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">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 &ldquo;Series A Preferred Stock&rdquo;). Each share of the Series A Preferred Stock are initially convertible
into 100 shares of common stock. All 3,000,000 shares of Series A Preferred Stock were issued and outstanding as of April 30, 2021.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Common Shares Issued</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">The authorized
common stock of the Company consists of 1,000,000,000 shares with a par value of $0.001. There were 282,803,708 shares of common stock
issued and outstanding as of April 30, 2021.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Restricted Stock Unit Awards</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">During the six months
ended April 30, 2021, 1,310,000 shares of common stock were issued to eight employees of the Company pursuant to restricted stock unit
(&ldquo;RSU&rdquo;) agreements, resulting in $724,161</FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">of
share-based compensation. Of the shares issued to employees, 457,555 shares were withheld by the Company to satisfy tax withholding obligations
equal to $77,975.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; margin: 0; font: 10pt Times New Roman, Times, Serif">During the six months ended April 30, 2021, 4,668,633 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 issue dates to compute an aggregate
fair market value total of $7,529,151.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Stock Options</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I></I>During the six months April 30, 2021,
the Company granted 1,100,000 options of which 500,000 fully vest on December 1, 2021,180,000 fully vest on March 15, 2021 and 140,000
vest over the next 3 years on March 15, 2022, 2023 and 2024. The options have exercise prices ranging from $2.165 to $2.39 per share.
These options have a weighted average remaining life of 9.88 years as of April 30, 2021 and expire in the year 2031. The aggregate intrinsic
value of these outstanding options as of April 30, 2021 was $0.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="background-color: white">The Company
fair valued the options on the grant date at $2,438,996 using a Black-Scholes option pricing model with the following assumptions: stock
price range of $2.165-2.28 per share (based on the quoted trading price on the date of grant), volatility of 301.53%, expected term of
10 years, and a risk-free interest rate of 1.62%. The Company is amortizing the expense over the vesting terms of each. The total stock
option expense for the six months April 30, 2021 was $579,699. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 5 &ndash; Related-Party Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Revenue and Accounts Receivable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended April 30, 2021, the Company
recognized revenue of $61,545 from three companies owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer
of the Company, and/or his wife. As of April 30, 2021, the Company has accounts receivable from this related party in the amount of $765.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Purchases and Accounts Payable</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended April 30, 2021, the Company
purchased Products equal to $75,065,602 from Bidi, a related party company that is also owned by Nirajkumar Patel, the Company&rsquo;s
Chief Executive Officer and Chief Financial Officer. As of April 30, 2021, the Company had accounts payable to Bidi of $38,001,633 and
products valued at $28,791,150 were held in inventory at April 30, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Office Space</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 (&ldquo;Just
Pick&rdquo;). The Company&rsquo;s Chief Executive Officer is an officer of Just Pick.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 6 - Concentrations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the six months ended April 30, 2021, 100% of
the inventories of Products, primarily consisting of the &ldquo;Bidi Stick,&rdquo; were purchased from Bidi, a related party company
that is also owned by Nirajkumar Patel, the Company&rsquo;s Chief Executive Officer and Chief Financial Officer, in the amount of $75,065,602.
It also accounted for 99.3% of the total accounts payable as of April 30, 2021. Products valued at $28,791,150 were held in inventory at April 30,
2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the six months ended April 30, 2021, approximately
33%, or $18,129,136, of the revenue from the sale of Products, primarily consisting of the &ldquo;Bidi Stick,&rdquo; was generated from
Favs Business LLC (&ldquo;Favs Business&rdquo;), approximately 16%, or $9,069,455, of the revenue from the sale of Products was generated
from MMS Distributing, LLC (&ldquo;MMS Distro&rdquo;), approximately 12%, or $6,820,132, of the revenue from the sale of Products was
generated from Lakshmi Distributing Inc., doing business as C Store Master (&ldquo;C Store Master&rdquo;) and approximately 11%, or $5,868,000,
of the revenue from the sale of Products was generated by GPM Investment, LLC (&ldquo;GPM Investment&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 12pt/106% Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">Favs Business,
and GPM Investment had </FONT><FONT STYLE="font-family: Calibri, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">outstanding
balances of $8,590,200 and $2,482,553, respectively, accounted for approximately 47% and 14%, respectively, of the total accounts receivable
from customers as of April 30, 2021.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>Note 7 &ndash; Commitments and Contingencies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company follows ASC 450-20,&nbsp;<I>Los</I>s<I>&nbsp;Contingencies,&nbsp;</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 April 30, 2021 and April 30, 2020 other than the below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 28, 2020, the Board of Directors approved cash
bonus awards to each of the Company&rsquo;s Chief Executive Officer and its Chief Operating Officer. With respect to the Chief Executive
Officer, the Board of Directors 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 of Directors 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 of Directors approved an award
of 90,000 restricted shares of the Company&rsquo;s 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 75,000 restricted shares of the Company&rsquo;s common stock
for every $50 million in accumulated gross revenues generated by the Company. The Company&rsquo;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 165,000 shares, or $70,785, and the cash bonuses totaling $100,000 should be accrued at January 31, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; margin: 0; font: 10pt Times New Roman, Times, Serif">During the three and six months ended April 30, 2021 additional revenue
targets were not achieved and no related bonuses were accrued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 31, 2020, the Company entered into a service
agreement (the &ldquo;Service Agreement&rdquo;) with QuikfillRx LLC, a Florida limited liability company (&ldquo;QuikfillRx&rdquo;), 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 &ldquo;Services&rdquo;).
The Services are provided by QuikfillRx as requested from time to time by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 &ldquo;First Amendment&rdquo; and, collectively with the Service Agreement, the &ldquo;Amended
Service Agreement&rdquo;) with QuikfillRx. Effective as of March 16, 2021, the Company entered into the Second Amendment to Service Agreement
(the &ldquo;Second Amendment&rdquo; and, collectively with the Amended Service Agreement, the &ldquo;Further Amended Service Agreement&rdquo;)
with QuikfillRx. Pursuant to the terms of the Further Amended Service Agreement, the parties agreed to the following &ldquo;General Compensation&rdquo;
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.&nbsp; In addition, the Company will
pay the following quarterly bonuses:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 3%">&#9679;</TD>
    <TD STYLE="text-align: justify; width: 94%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&rsquo;s
    option be paid in (a) cash or (b) shares of the Company&rsquo;s common stock, or (c) a combination of cash and Common Stock.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify; width: 94%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">An amount equal to 0.27%
    of the Applicable Gross Quarterly Sales, which amount must be paid in cash.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has accrued $212,345 for a quarterly bonus
payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended April 30, 2021.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On March 17, 2021
the Company entered into a consulting agreement with Russell Quick which granted stock options to purchase 500,000 shares of the Company&rsquo;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 $2.39. The Company recognized $190,000 in expense to account for the stock options.</FONT><FONT STYLE="font-family: Calibri, Helvetica, Sans-Serif; font-size: 8pt">&nbsp;&nbsp;
</FONT><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Russell Quick is the manager of QuikfillRx.</FONT></P>

<P STYLE="margin: 0; text-align: justify"><FONT STYLE="font: 10pt/107% Times New Roman, Times, Serif">&nbsp;</FONT></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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 8 &ndash; Income Tax</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Tax Cuts and Jobs Act (the &ldquo;Tax Act&rdquo;)
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%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the six months ended April 30, 2021, the Company
generated no taxable income and, thus no federal or state income taxes are accrued for tax year 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Significant components of the Company&rsquo;s deferred
tax assets and liabilities as of April 30, 2021 and October 31, 2020 after applying enacted corporate income tax rate, is net operating
loss carryforward of $0 and $15,377, and a valuation allowance of $0 and $15,377, respectively, which is a total deferred tax asset of
$0. The Company&rsquo;s tax returns for 2018 and 2019 remain open to examination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note 9 &ndash; Subsequent Events</B>&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Patent Contribution Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

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

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 &ldquo;Purchase Price&rdquo;), 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 &ldquo;Offering Payment&rdquo;). 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: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 &ldquo;Filing Date&rdquo;). 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: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is in 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&rsquo;s business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Share-based Compensation</I></P>

<P STYLE="margin: 0; font-family: Times New Roman, Times, Serif"><FONT STYLE="font-size: 10pt">On May 5, 2021, 775,000 shares of </FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">common
stock were issued to eight employees of the Company pursuant to RSU agreements, resulting in the recognition of $487,514 of share-based
compensation. Of the shares issued to employees, 372,096 shares were withheld by the Company to satisfy tax withholding obligations equal
to $123,536</FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">.</FONT></P>


<P STYLE="margin: 0; font-family: Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><A NAME="a_007"></A>Item 2. Management&rsquo;s Discussion and Analysis of Financial Condition
and Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0">Management&rsquo;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 six months ended
April 30, 2021 included under Item 1 &ndash; Financial Statements in this Quarterly Report and our audited Financial Statements and notes
thereto for the year ended October 31, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 &ldquo;gross profit.&rdquo; 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Potential Impact of COVID-19</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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 and, to date, we have not seen any
significant direct negative impact of COVID-19 to our newly commenced business. H<FONT STYLE="background-color: white">owever, we have
encountered some logistical delays related to product launches and distribution in international markets due to COVID-19 </FONT>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. The COVID-19 pandemic continues to impact economic conditions, which could impact the short-term and
long-term demand from our customers and, therefore, has the potential to negatively impact our results of operations, cash flows, and
financial position in the future. Management is actively monitoring this situation and any impact on our financial condition, liquidity,
and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we
are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial condition, or
liquidity for the remainder of fiscal year 2021 and, possibly, beyond.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U>Corporate History</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</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. We are focused on growing and incubating innovative and profitable products into mature, dominant brands.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>USSE Corp. and USSE Delaware Merger</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">USSE Corp., a Nevada corporation (&ldquo;USSE Nevada&rdquo;)
was incorporated with the Nevada Secretary of State on July 8, 1998 under the original name C&amp;A Restaurants, Inc. (&ldquo;C&amp;A
Restaurants&rdquo;). On June 15, 2009, C&amp;A Restaurants changed its name to USSE Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Effective September 19, 2018, USSE Nevada re-domiciled
from Nevada to Delaware pursuant to a merger of USSE Nevada with and into USSE Delaware, Inc. (&ldquo;USSE Delaware&rdquo;), with USSE
Delaware as the surviving entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Holding Company Reorganization</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 4, 2018, USSE Delaware acquired 1,000
shares of our common stock, which represented 100% of our then-outstanding shares of common stock, for no consideration, resulting in
us becoming a wholly-owned subsidiary of USSE Delaware. Also, immediately prior to the Holding Company Reorganization (as defined below),
USSE Merger Sub, Inc., a Delaware corporation (&ldquo;USSE Merger Sub&rdquo;), was our wholly-owned subsidiary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On September 19, 2018, and in accordance with the
provisions set forth in Section 251(g) of the Delaware General Corporation Law, USSE Merger Sub, an indirect wholly-owned subsidiary of
USSE Delaware and our direct wholly-owned subsidiary, merged with and into USSE Delaware, our then-parent. USSE Delaware was the surviving
corporation and our wholly-owned subsidiary. USSE Delaware also changed its name to USSE Corp. following this holding company reorganization.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</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 &ldquo;Share Purchase Agreement&rdquo;), by and among us, GMRZ Holdings LLC, a Nevada limited liability company (&ldquo;GMRZ&rdquo;),
our then-controlling stockholder, and Kaival Holdings, LLC, a Delaware limited liability company (&ldquo;KH&rdquo;), 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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Name Change</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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">&nbsp;</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">&nbsp;</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">&nbsp;</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 &ldquo;Exchange Agreement&rdquo;) 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 &ldquo;Cancellation Shares&rdquo;), which were cancelled and retired by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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 &ldquo;Series A Certificate of Designation&rdquo;) 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">&nbsp;</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 &ldquo;Preferred Shares&rdquo;) 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 of 1933, as amended (the
&ldquo;Act&rdquo;), in that the issuance is exempt from the registration requirements of the 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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Our Business</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Currently, we market and place the Products into
national distribution channels through long-standing industry relationships in accordance with the A&amp;R Distribution Agreement entered
into with Bidi, a related party, in March 2020 (and subsequently amended and restated in May 2020&nbsp; and again in April 2021). Pursuant
to the A&amp;R Distribution Agreement, we sell and resell the Products to both retail level customers and non-retail level customers.
Bidi&rsquo;s primary product is the &ldquo;Bidi Stick&rdquo; and, once launched, the &ldquo;Bidi Pouch.&rdquo; Bidi is considered a related
party to us because our Chief Executive Officer, Chief Financial Officer, and director, Mr. Nirajkumar Patel, owns and controls Bidi.
Mr. Patel is also a beneficial owner of KH, the entity that is our largest controlling stockholder. Thus, Bidi and we are under common
control.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We process all sales made to retail customers and
non-retail customers, with all sales to retail customers historically made through the website, www.bidivapor.com; however, we recently
engaged goPuff who will handle sales to retail customers going forward. We provide all customer service and support at our own expense.
Bidi sets the minimum prices for all sales made by us. With respect to sales to non-retail customers, we submit purchase orders to Bidi,
Bidi delivers the Products to us, and we ship the Products directly to these non-retail customers. In the case of retail customers, we
maintain adequate inventory levels of the Products in order to meet these customers&rsquo; demand, and deliver the Products sold to these
retail customers. 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 the Products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the A&amp;R Distribution Agreement,
we entered into the A&amp;R Sub-Distribution Agreements with certain counterparties, pursuant to which we appointed such counterparties
as non-exclusive sub-distributors of the Products to non-retail customers within the Territory. Each of the A&amp;R Sub-Distribution Agreements
set forth certain minimum purchase obligations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We believe that over the course of the next twelve
months, our business operations will generate the capital needed to achieve our business objectives; however, there can be no assurance
that our business operations will continue to generate the cash flows required for us to achieve our business objectives. If we require
additional capital, there can be no assurance that we will be able to raise any required capital or that capital will be available to
us at acceptable terms, or at all. We believe that our cash provided by operations will be sufficient for the next twelve months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the commencement of business operations,
in March 2020, we began hiring employees and intend to hire additional independent contractors and/or employees in the future. We cannot
provide any assurance as to the timing of the hiring of any additional independent contractors or employees, the number of independent
contractors or employees that we may hire, and whether acceptable independent contractors or employees will be available to us at that
time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U><A NAME="a_008"></A>Liquidity and Capital Resources</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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 April 30, 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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At April 30, 2021, we had working capital of approximately
$9.2 million and total cash of approximately $2.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</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">Cash flow used in operations was approximately $5.2
million for the first six months of fiscal year 2021, compared to $1.9 million provided by operations for the first six months of fiscal
year 2020. The decrease in cash flow from operations for the first six months of fiscal year 2021 was mainly due to the net loss during
the first six months of fiscal year 2021 as compared to the net profit during the comparable period for fiscal 2020. We anticipate improvement
in our cash flows provided by operations in future years based on the minimum purchase obligations set forth in the A&amp;R Sub-Distribution
Agreements, partially offset by increases in costs as we ramp up our sales and marketing efforts. Cash flow used in financing activities
was approximately $77,975 for the first six months of fiscal year 2021, compared to $0 for the first six months of fiscal year 2020.
The cash used in financing activities for the first two quarters of fiscal year of 2021 consisted of the settlement of RSUs for cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U><A NAME="a_009"></A>Results of Operations</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Three months ended April 30, 2021, compared to
three months ended April 30, 2020</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</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">Revenues for the second quarter of fiscal year 2021
were approximately $18.1 million, compared to $22.5 million in the same period of the prior fiscal year. During the second quarter of
fiscal year 2020, we entered into the A&amp;R Distribution Agreement, pursuant to which we were granted the exclusive, worldwide right
to distribute the Products. In connection therewith, we entered into the A&amp;R Sub-Distribution Agreements and other agreements with
counterparties and granted such sub-distributors the right to distribute the Products to non-retail customers within the Territory. We
have continued to enter into additional A&amp;R Sub-Distribution Agreements, thereby increasing our distribution of the Products and,
ultimately, we expect our revenues to increase during the remainder of the current fiscal year. We recognize revenue when a customer
obtains control of promised goods. In some cases, we provide customers with 120-day payment terms, with the ability for a full refund
for products not sold during that 120-day period. During such periods the risk of loss on the products delivered remains with the Company.
In such case, the customer typically obtains control on the products when the customer purchases and ships the product to their customer
or pays the Company for the product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</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">Gross profit in the second quarter of fiscal year
2021 was approximately $6.3 million, compared to $4.2 million for the second quarter of fiscal year 2020. Total cost of revenue was approximately
$11.9 million for the second quarter of fiscal year 2021, compared to $18.3 million for the second quarter of fiscal year 2020. The increase
in gross profit is entirely driven by the decrease in the cost of the Products sold in fiscal year 2021 as compared to the previous year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">Total operating expenses were approximately $10.4
&nbsp;million for the second quarter of fiscal year 2021, compared to approximately $458,000 for the second quarter of fiscal year 2020.
For the second quarter of fiscal year 2021, operating expenses consisted of commissions paid pursuant to the Further Amended Service Agreement
of approximately $801,000 &nbsp;and general and administrative expenses of approximately $9.6 &nbsp;million&nbsp;. General and administrative
expenses in the second quarter of fiscal year 2021 consisted primarily of legal fees, salaries, other professional fees, merchant fees,
and other service fees. The increase in general and administrative expenses is mostly attributable to the expense related to the issuance
of 2,000,000 shares of common stock as compensation for investor relations consulting services. Total operating expenses for the second
quarter of fiscal 2020 were approximately $458,000, which included approximately $260,000 in commissions paid pursuant to the Further
Amended Service Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</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">During the second quarter of fiscal year 2021, we
expensed approximately $186,800 for prior year income taxes, compared to the accrual of income taxed of approximately $950,400 for the
second quarter of fiscal year 2020. The decrease in the accrual for income taxes is as a result of having no taxable income during fiscal
year 2021, as compared to the previous fiscal year. 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">&nbsp;</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">Net loss for the second quarter of fiscal year 2021
was approximately $4.3&nbsp; million, or $(0.02) &nbsp;basic and diluted earnings per share, compared to net income of approximately $2.8
million, or $0.00 basic and diluted earnings per share, for the second quarter of fiscal year 2020. The decrease in net income for the
second quarter of fiscal year 2021, as compared to the second quarter of fiscal year 2020, is attributable to the increase in operating
expenses and commissions and the decrease in revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Weighted-average common stock shares outstanding were
282,143,504 in the second quarter of fiscal year 2021 and 572,364,574 for the second quarter of fiscal year 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Six months ended April 30, 2021, compared to six
months ended April 30, 2020</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">Revenues for the second quarter of fiscal year 2021
were approximately $18.1 million, compared to $22.5 million in the same period of the prior fiscal year. During the second quarter of
fiscal year 2020, we entered into the A&amp;R Distribution Agreement, pursuant to which we were granted the exclusive, worldwide right
to distribute the Products. In connection therewith, we entered into the A&amp;R Sub-Distribution Agreements and other agreements with
counterparties and granted such sub-distributors the right to distribute the Products to non-retail customers within the Territory. We
have continued to enter into additional A&amp;R Sub-Distribution Agreements, thereby increasing our distribution of the Products and,
ultimately, we expect our revenues to increase during the remainder of the current fiscal year. We recognize revenue when a customer obtains
control of promised goods. In some cases, we provide customers with 120-day payment terms, with the ability for a full refund for products
not sold during that 120-day period. During such periods the risk of loss on the products delivered remains with the Company. In such
case, the customer typically obtains control on the products when the customer purchases and ships the product to their customer or pays
the Company for the product.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">Gross profit in the first six months of fiscal year
2021 was approximately $11.1 million, compared to approximately $4.2 million for the first six months of fiscal year 2020. Total cost
of revenue was approximately $44.4 million for the first six months of fiscal year 2021, compared to $18.3 million for the first six
months of fiscal year 2020 and the decrease in cost of products sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Operating Expenses:</I></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">Total operating
expenses were approximately $14.7 </FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">million for the
first six months of fiscal year 2021, compared to approximately $471,000 for the first six months of fiscal year 2020. For the first
six months of fiscal year 2021, operating expenses consisted of commissions paid pursuant to the Further Amended Service Agreement
of approximately $1.8 million and general and administrative expenses of approximately $13.0 </FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">million.
General and administrative expenses in the first six months of fiscal year 2021 consisted primarily of legal fees, salaries, other
professional fees, merchant fees, and other service fees. Total operating expenses for the first six months of fiscal 2020 were
approximately $471,000 and consisted of general and administrative expenses</FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">,
which were primarily from professional fees, and approximately $260,000 in commissions paid pursuant to the Further Amended Service
Agreement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</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">During the first six months of fiscal year 2021,
we expensed approximately $293,100 for prior year income taxes, compared to the approximately $950,400 accrual for the first six
months of fiscal year 2020. 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">&nbsp;</P>

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

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-size: 10pt">Net loss for the first
six months of fiscal year 2021 was approximately $3.9 </FONT><FONT STYLE="font-size: 8pt">&nbsp;</FONT><FONT STYLE="font-size: 10pt">million,
or $(0.01) basic and diluted earnings per share, compared to net income of approximately $2.8 million, or $0.00 basic and diluted earnings
per share, for the first six months of fiscal year 2020. The decrease in net income for the first six months of fiscal year 2021, as compared
to the first six months of fiscal year 2020, is attributable to the increase in operating expenses and commissions and the decrease in
revenues.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; margin: 0; font: 10pt Times New Roman, Times, Serif">Weighted-average common stock shares outstanding were 280,242,288 in the
first six months of fiscal year 2021 and 572,364,574 for the first six months of fiscal year 2020.&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><U><A NAME="a_010"></A>Off-Balance Sheet Arrangements</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Critical Accounting Policies and Estimates</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other than the policy changes disclosed in Note 2,&nbsp;<I>Basis
of Presentation and Significant Accounting Policies,&nbsp;</I>to the unaudited 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 six months ended April 30,
2021 from those disclosed in Item 7, Management&rsquo;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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Recently Adopted Accounting Pronouncements</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 2,&nbsp;<I>Basis of Presentation and Significant
Accounting Policies</I>, to the unaudited 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U><A NAME="a_011"></A>Emerging Growth Company</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are an &ldquo;emerging growth company,&rdquo; 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 &ldquo;JOBS Act&rdquo;). 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&rsquo;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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_012"></A>Item 3. Quantitative and Qualitative Disclosures
About Market Risk</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a &ldquo;smaller reporting company&rdquo; 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_013"></A>Item 4. Controls and Procedures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Evaluation of Disclosure Controls and Procedures</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the supervision and with the participation of
our management, including our Chief Executive Officer and 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 April 30, 2021, the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer and 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 April 30, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt 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&rsquo;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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Changes in Internal Control over Financial Reporting</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the quarter ended April 30, 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U><A NAME="a_014"></A>PART II OTHER INFORMATION</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_015"></A>Item 1. Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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&rsquo;s business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_016"></A>Item 1A. Risk Factors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a &ldquo;smaller reporting company&rdquo; 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 Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_017"></A>Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="margin: 0">On&nbsp;May 5, 2021, we issued an aggregate of 575,000 shares of our common stock to six employees as equity
compensation pursuant to certain RSU agreements entered into with each employee. These shares had a fair market value at the date of grant
of $0.14, which was closing price on the grant date as reported by the OTC <FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Markets
Group, Inc. (&ldquo;OTCM&rdquo;). On the vesting and issuance date, the shares were valued at $1.21 per share, which was the highest closing
price of our common stock during the three days prior to the issuance date as reported by the OTCM. We issued the shares in reliance on
the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;)(in
that the issuance of shares of our common stock issued did not involve any public offering).</FONT></P>



<P STYLE="text-indent: 20pt; font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</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">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 5, 2021, we issued 60,000 shares of our common
stock to an employee as equity compensation pursuant to a RSU agreement. These shares had a fair market value at the date of grant of
$0.17, which was closing price on the grant date as reported by the OTCM. On the vesting and issuance date, the shares were valued at
$1.21 per share, which was the highest closing price of our common stock during the three days prior to the issuance date as reported
by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in
that the issuance of shares of our common stock issued did not involve any public offering).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 5, 2021, we issued 140,000 shares of our common
stock to an employee as equity compensation pursuant to a RSU agreement. These shares had a fair market value at the date of grant of
$0.43, which was closing price on the grant date as reported by the OTCM. On the vesting and issuance date, the shares were valued at
$1.21 per share, which was the highest closing price of our common stock during the three days prior to the issuance date as reported
by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in
that the issuance of shares of our common stock issued did not involve any public offering).&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_018"></A>Item 3. Defaults Upon Senior Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_019"></A>Item 4. Mine Safety Disclosures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_020"></A>Item 5. Other Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_021"></A>Item 6. Exhibits</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt 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 Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom; width: 8%; border-bottom: black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Exhibit Number</B></FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 90%; border-bottom: black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Description</B></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991619000052/articlesofinc.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991619000028/bylaws.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><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></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><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></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991620000101/designation31_82120.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991620000036/ex10_1.htm">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)</A></FONT></TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

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<P STYLE="margin: 0"></P>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; width: 8%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.2</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: justify; width: 90%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991620000047/serviceagreement.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_8k.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000344/e1848_10-1.htm">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)</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000374/e1864_10-1.htm">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)</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000584/e1956_ex10-5.htm">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)</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000584/e1956_ex10-6.htm">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)</A></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; width: 8%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.8</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 90%; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000584/e1956_ex10-7.htm">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)</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000159991620000101/shareagreement101_82120.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_10-2.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_10-3.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_10-4.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_10-5.htm">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.</A></FONT></TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">10.14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000618/e1968_10-6.htm">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.</A></FONT></TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top; width: 8%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.15</FONT></TD>
<TD STYLE="width: 2%">&nbsp;</TD>
<TD STYLE="text-align: justify; width: 90%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220000946/e2108_10-14.htm">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.</A></FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.16</FONT></TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112220001000/e2134_10-1.htm">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.</A></FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top">10.17</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify"><A HREF="http://www.sec.gov/Archives/edgar/data/1762239/000173112221000625/e2658_10-1.htm">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)</A></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top">10.18</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify"><A HREF="e2861_ex10-18.htm">Consulting Agreement, by and between Kaival Brands Innovations Group, Inc. and Russell Quick, dated March 16, 2021.*</A></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top">10.19</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="e2861_ex10-19.htm">Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021.*</A></FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">31.1</FONT></TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2861_ex31-1.htm">Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*</A></FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">32.1</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2861_ex32-1.htm">Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*</A></FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.INS</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Instance Document*</FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.SCH</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Taxonomy Extension Schema Document*</FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.CAL</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Taxonomy Extension Calculation Linkbase Document*</FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.DEF</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Taxonomy Extension Definition Linkbase Document*</FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.LAB</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Taxonomy Extension Label Linkbase Document*</FONT></TD></TR>
<TR STYLE="background-color: White">
<TD STYLE="vertical-align: top">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
<TD STYLE="vertical-align: top"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">101.PRE</FONT></TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">XBRL Taxonomy Presentation Linkbase Document*</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; width: 5%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify; width: 95%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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;&nbsp;<I>provided, however,</I>&nbsp;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.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_022"></A>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
<TD>&nbsp;</TD>
<TD COLSPAN="2"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>KAIVAL BRANDS INNOVATIONS GROUP, INC.</B></FONT></TD></TR>
<TR>
<TD STYLE="width: 50%">&nbsp;</TD>
<TD STYLE="width: 5%">&nbsp;</TD>
<TD STYLE="width: 45%">&nbsp;</TD></TR>
<TR>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Date: June 21, 2021</FONT></TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">By:</FONT></TD>
<TD STYLE="border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>/s/ Nirajkumar Patel</I></FONT></TD></TR>
<TR>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Nirajkumar Patel</FONT></TD></TR>
<TR>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>President, Chief Executive Officer, and<BR>
Chief Financial Officer</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0">24</P>

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

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>























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[{"type": "10-Q", "sequence": "1", "filename": "e2861_10-q.htm", "description": "FORM 10-Q", "secsgml_size_bytes": 281516}]
{"company-data": {"conformed-name": "Kaival Brands Innovations Group, Inc.", "cik": "0001762239", "assigned-sic": "6770", "irs-number": "833492907", "fiscal-year-end": "1031"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-56016", "film-number": "211031835"}, "business-address": {"street1": "4460 OLD DIXIE HIGHWAY", "city": "GRANT", "state": "FL", "zip": "32949", "phone": "(833) 452-4825"}, "mail-address": {"street1": "4460 OLD DIXIE HIGHWAY", "city": "GRANT", "state": "FL", "zip": "32949"}, "former-company": {"former-conformed-name": "Quick Start Holdings, Inc.", "date-changed": "20181218"}}
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark One)
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
April 30, 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
None
None
None
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 CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
283,206,612 shares
of common stock, $0.001 par value, outstanding as of June 16, 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
13
Liquidity and Capital Resources
16
Results of Operations
16
Off-Balance Sheet Arrangements
18
Emerging Growth Company
18
Item 3
Quantitative and Qualitative Disclosures about Market Risk
18
Item 4
Controls and Procedures
18
PART II
Other Information
19
Item 1.
Legal Proceedings
19
Item 1A.
Risk Factors
19
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
19
Item 3
Defaults Upon Senior Securities
21
Item 4
Mine Safety Disclosures
21
Item 5
Other Information
21
Item 6
Exhibits
21
Signatures
24
i
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly
Report on Form 10-Q for the quarter ended April 30, 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 mandatory business
closures and 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)
April 30,
2021
October 31,
2020
ASSETS
CURRENT ASSETS:
Cash
$
2,140,667
$
7,421,701
Accounts receivable
18,136,147
1,401,562
Accounts receivable – related parties
765
15,360
Prepaid expenses
30,000
—
Inventories
28,794,150
6,383
Total current assets
49,101,729
8,845,006
Right of use asset- operating lease
62,882
70,133
TOTAL ASSETS
$
49,164,611
$
8,915,139
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable- related party
$
38,001,633
$
1,409,561
Accounts payable- trade
272,509
—
Accrued expenses
1,600,029
1,062,105
Income tax accrual
—
1,331,856
Deferred revenue
—
623,096
Operating lease obligation – short term
12,363
11,709
Total current liabilities
39,886,534
4,438,327
LONG TERM LIABILITIES
Operating lease obligation, net of current portion
52,859
59,204
TOTAL LIABILITIES
$
39,939,393
$
4,497,531
STOCKHOLDERS' EQUITY:
Preferred stock 5,000,000 shares authorized; Series A Convertible Preferred stock ($.001 par value, 3,000,000 shares authorized, 3,000,000 issued and outstanding as of April 30, 2021 and October 31, 2020)
3,000
3,000
Common stock ($.001 par value, 1,000,000,000 shares authorized, 282,803,708 and 277,282,630 issued and outstanding as of April 30, 2021 and October 31, 2020, respectively)
282,804
277,283
Additional paid-in capital
9,114,243
364,728
Retained
    (deficit) earnings
(174,829
)
3,772,597
Total Stockholders' Equity
9,225,218
4,417,608
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
$
49,164,611
$
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 April 30,
For the Six Months
Ended April 30,
2021
2020
2021
2020
Revenues
Revenues
$
18,752,086
$
22,473,674
$
56,122,053
$
22,473,674
Revenues - related parties
11,245
32,480
61,545
32,480
Excise tax on products
(614,252
)
—
(673,000
)
—
Total revenues
18,149,079
22,506,154
55,510,598
22,506,154
Cost of revenue
Cost of revenue - related party
11,792,353
18,301,800
44,271,453
18,301,800
Cost of revenue - other
70,247
—
156,268
—
Total cost of revenue
11,862,600
18,301,800
44,427,721
18,301,800
Gross profit
6,286,479
4,204,354
11,082,877
4,204,354
Operating expenses
Advertising and Promotion
800,685
259,998
1,761,187
259,998
General & Administrative expenses
9,558,009
198,092
12,976,348
211,025
Total operating expenses
10,358,694
458,090
14,737,535
471,023
Other Income
Interest income
46
—
376
—
Total Other Income
46
—
376
—
Income (loss) before income taxes provision
(4,072,169
)
3,746,264
(3,654,282
)
3,733,331
Provision for income taxes
(186,758
)
(950,431
)
(293,144
)
(950,431
)
Net income (loss)
$
(4,258,927
)
$
2,795,833
$
(3,947,426
)
$
2,782,900
Net income (loss) per common share - basic and diluted
$
(0.02
)
$
(0.00
)
$
(0.01
)
$
(0.00
)
Weighted average number of common shares outstanding - basic and diluted
282,143,504
572,364,574
280,424,288
572,364,574
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 Six Months Ended April 30, 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
Total
Balances, October 31, 2020
3,000,000
$
3,000
277,282,630
$
277,283
$
364,728
$
3,772,597
$
4,417,608
Issuance of common shares for employee compensation
—
—
535,000
535
76,165
—
76,700
Common shares settled and cancelled
—
—
(211,500
)
(212
)
(30,299
)
—
(30,511
)
Issuance of common shares for compensation
—
—
2,065,547
2,066
1,032,530
—
1,034,596
Net income
—
—
—
—
—
311,501
311,501
Balances, January 31, 2021
3,000,000
$
3,000
279,671,677
$
279,672
$
1,443,124
$
4,084,098
$
5,809,894
Issuance of common shares for employee compensation
—
—
775,000
775
646,686
—
647,461
Common shares settled and cancelled
—
—
(246,055
)
(246
)
(47,218
)
—
(47,464
)
Issuance of common shares for compensation
—
—
2,603,086
2,603
6,491,952
—
6,494,555
Stock option expense
—
—
—
—
579,699
—
579,699
Net income
—
—
—
—
—
(4,258,927
)
(4,258,927
)
Balances, April 30, 2021
3,000,000
$
3,000
282,803,708
$
282,804
$
9,114,243
$
(174,829
)
$
9,225,218
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 Six Months Ended April 30, 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 Deficit
Total
Balances, October 31, 2019
—
$
—
572,364,574
$
572,365
$
(544,026
)
$
(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
—
—
572,364,574
572,365
(517,569
)
(86,158
)
(31,362
)
Expenses paid on behalf of the Company and contributed to capital
—
—
—
—
700
—
700
Net profit
—
—
—
—
—
2,795,833
2,795,833
Balances, April 30, 2020
—
$
—
572,364,574
$
572,365
$
(516,869
)
$
2,709,675
$
2,765,171
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 Six Months Ended April 30, 2021
For the Six Months Ended April 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
$
(3,947,426
)
$
2,782,900
Adjustment to reconcile net (loss) income to net cash provided by operating activities:
Stock based compensation
8,253,312
—
Stock option expense
579,699
ROU operating lease expense
7,905
—
Expenses contributed to capital
—
27,157
Changes in current assets and liabilities:
Accounts receivable
(16,734,585
)
(3,213,920
)
Accounts receivable – related parties
14,595
(5,070
)
Inventories
(28,787,767
)
(16,419
)
Prepaid expenses
(30,000
)
Deferred revenue
(623,096
)
—
Payments on operating lease liability
(6,345
)
—
Accounts payable – related party
36,592,072
1,259,145
Accounts payable
272,509
19,493
Accrued taxes
(756,078
)
—
Accrued expenses
(37,854
)
1,117,396
Net cash (used in) provided by operating activities
(5,203,059
)
1,970,682
CASH FLOWS FROM FINANCING ACTIVITIES:
Settled RSU shares with cash
$
(77,975
)
$
—
Cash flows used in financing activities
(77,975
)
—
Net change in cash
$
(5,281,034
)
$
1,970,682
Beginning cash balance
7,421,701
—
Ending cash balance
$
2,140,667
$
1,970,682
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 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 and Chief Financial 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.
6
Recent Developments
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.
Our 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 our 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.
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.
7
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.
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 April 30, 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
301.53
%
—
Risk-free interest rate
1.62
%
—
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 Company's common stock. The assumed discount rate was the default risk-free five-year interest rate for US
Treasury bills.
8
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.
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 April
30, 2021, the right-to-use ("ROU") lease asset, net of accumulated amortization, was $62,882. 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 six months ended April
30, 2021 was $7,905 and two payments on the ROU liability were $6,345. At April 30, 2021, short-term ROU lease liability was $12,363 and
long-term liability was $52,859, totaling $65,222. Operating lease expense totaling $9,000 for November 1, 2020 until April 2021 was accrued
at April 30, 2021.
2020
2021
2022
2023
2024
Total
Lease payments
$
12,300
$
13,500
$
15,300
$
18,000
$
13,500
$
72,600
Less discount
(7,378
)
Present value of future payments
65,222
Less current obligations
(12,363
)
Long term lease obligations
$
52,859
9
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. All 3,000,000 shares of Series A Preferred Stock were issued and outstanding as of April 30, 2021.
Common Shares Issued
The authorized
common stock of the Company consists of 1,000,000,000 shares with a par value of $0.001. There were 282,803,708 shares of common stock
issued and outstanding as of April 30, 2021.
Restricted Stock Unit Awards
During the six months
ended April 30, 2021, 1,310,000 shares of common stock were issued to eight employees of the Company pursuant to restricted stock unit
("RSU") agreements, resulting in $724,161
of
share-based compensation. Of the shares issued to employees, 457,555 shares were withheld by the Company to satisfy tax withholding obligations
equal to $77,975.
During the six months ended April 30, 2021, 4,668,633 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 issue dates to compute an aggregate
fair market value total of $7,529,151.
Stock Options
During the six months April 30, 2021,
the Company granted 1,100,000 options of which 500,000 fully vest on December 1, 2021,180,000 fully vest on March 15, 2021 and 140,000
vest over the next 3 years on March 15, 2022, 2023 and 2024. The options have exercise prices ranging from $2.165 to $2.39 per share.
These options have a weighted average remaining life of 9.88 years as of April 30, 2021 and expire in the year 2031. The aggregate intrinsic
value of these outstanding options as of April 30, 2021 was $0.
The Company
fair valued the options on the grant date at $2,438,996 using a Black-Scholes option pricing model with the following assumptions: stock
price range of $2.165-2.28 per share (based on the quoted trading price on the date of grant), volatility of 301.53%, expected term of
10 years, and a risk-free interest rate of 1.62%. The Company is amortizing the expense over the vesting terms of each. The total stock
option expense for the six months April 30, 2021 was $579,699.
Note 5 – Related-Party Transactions
Revenue and Accounts Receivable
During the six months ended April 30, 2021, the Company
recognized revenue of $61,545 from three companies owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer
of the Company, and/or his wife. As of April 30, 2021, the Company has accounts receivable from this related party in the amount of $765.
Purchases and Accounts Payable
During the six months ended April 30, 2021, the Company
purchased Products equal to $75,065,602 from Bidi, a related party company that is also owned by Nirajkumar Patel, the Company's
Chief Executive Officer and Chief Financial Officer. As of April 30, 2021, the Company had accounts payable to Bidi of $38,001,633 and
products valued at $28,791,150 were held in inventory at April 30, 2021.
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.
10
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 six months ended April 30, 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 and Chief Financial Officer, in the amount of $75,065,602.
It also accounted for 99.3% of the total accounts payable as of April 30, 2021. Products valued at $28,791,150 were held in inventory at April 30,
2021.
Concentration of Revenues and Accounts Receivable
For the six months ended April 30, 2021, approximately
33%, or $18,129,136, 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 $9,069,455, of the revenue from the sale of Products was generated
from MMS Distributing, LLC ("MMS Distro"), approximately 12%, or $6,820,132, of the revenue from the sale of Products was
generated from Lakshmi Distributing Inc., doing business as C Store Master ("C Store Master") and approximately 11%, or $5,868,000,
of the revenue from the sale of Products was generated by GPM Investment, LLC ("GPM Investment").
Favs Business,
and GPM Investment had
outstanding
balances of $8,590,200 and $2,482,553, respectively, accounted for approximately 47% and 14%, respectively, of the total accounts receivable
from customers as of April 30, 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 April 30, 2021 and April 30, 2020 other than the below:
On May 28, 2020, the Board of Directors 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 of Directors 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 of Directors 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 of Directors approved an award
of 90,000 restricted shares of the Company's 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 75,000 restricted shares of the Company's 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 165,000 shares, or $70,785, and the cash bonuses totaling $100,000 should be accrued at January 31, 2021.
During the three and six months ended April 30, 2021 additional revenue
targets were not achieved and no related bonuses were accrued.
11
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 $212,345 for a quarterly bonus
payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended April 30, 2021.
On March 17, 2021
the Company entered into a consulting agreement with Russell Quick which granted stock options to purchase 500,000 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 $2.39. The Company recognized $190,000 in expense to account for the stock options.
Russell Quick is the manager of QuikfillRx.
12
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 six months ended April 30, 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 April 30, 2021 and October 31, 2020 after applying enacted corporate income tax rate, is net operating
loss carryforward of $0 and $15,377, and a valuation allowance of $0 and $15,377, respectively, which is a total deferred tax asset of
$0. The Company's tax returns for 2018 and 2019 remain open to examination.
Note 9 – Subsequent Events
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.
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 is in 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.
Share-based Compensation
On May 5, 2021, 775,000 shares of
common
stock were issued to eight employees of the Company pursuant to RSU agreements, resulting in the recognition of $487,514 of share-based
compensation. Of the shares issued to employees, 372,096 shares were withheld by the Company to satisfy tax withholding obligations equal
to $123,536
.
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 six months ended
April 30, 2021 included under Item 1 – Financial Statements in this Quarterly Report and our audited Financial Statements and notes
thereto for the year ended October 31, 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.
Potential 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 and, to date, we have not seen any
significant direct negative impact of COVID-19 to our newly commenced business. H
owever, we have
encountered some logistical delays related to product launches and distribution in international markets due to COVID-19
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. The COVID-19 pandemic continues to impact economic conditions, which could impact the short-term and
long-term demand from our customers and, therefore, has the potential to negatively impact our results of operations, cash flows, and
financial position in the future. Management is actively monitoring this situation and any impact on our financial condition, liquidity,
and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we
are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial condition, or
liquidity for the remainder of fiscal year 2021 and, possibly, beyond.
13
Corporate History
We were incorporated on September 4, 2018 in the State
of Delaware. We are focused on growing and incubating innovative and profitable products into mature, dominant brands.
USSE Corp. and USSE Delaware Merger
USSE Corp., a Nevada corporation ("USSE Nevada")
was incorporated with the Nevada Secretary of State on July 8, 1998 under the original name C&A Restaurants, Inc. ("C&A
Restaurants"). On June 15, 2009, C&A Restaurants changed its name to USSE Corp.
Effective September 19, 2018, USSE Nevada re-domiciled
from Nevada to Delaware pursuant to a merger of USSE Nevada with and into USSE Delaware, Inc. ("USSE Delaware"), with USSE
Delaware as the surviving entity.
Holding Company Reorganization
On September 4, 2018, USSE Delaware acquired 1,000
shares of our common stock, which represented 100% of our then-outstanding shares of common stock, for no consideration, resulting in
us becoming a wholly-owned subsidiary of USSE Delaware. Also, immediately prior to the Holding Company Reorganization (as defined below),
USSE Merger Sub, Inc., a Delaware corporation ("USSE Merger Sub"), was our wholly-owned subsidiary.
On September 19, 2018, and in accordance with the
provisions set forth in Section 251(g) of the Delaware General Corporation Law, USSE Merger Sub, an indirect wholly-owned subsidiary of
USSE Delaware and our direct wholly-owned subsidiary, merged with and into USSE Delaware, our then-parent. USSE Delaware was the surviving
corporation and our wholly-owned subsidiary. USSE Delaware also changed its name to USSE Corp. following this holding company reorganization.
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.
Name Change
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.
14
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.
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 of 1933, as amended (the
"Act"), in that the issuance is exempt from the registration requirements of the 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
Currently, we market and place the Products into
national distribution channels through long-standing industry relationships in accordance with the A&R Distribution Agreement entered
into with Bidi, a related party, in March 2020 (and subsequently amended and restated in May 2020  and again in April 2021). Pursuant
to the A&R Distribution Agreement, we sell and resell the Products to both retail level customers and non-retail level customers.
Bidi's primary product is the "Bidi Stick" and, once launched, the "Bidi Pouch." Bidi is considered a related
party to us because our Chief Executive Officer, Chief Financial Officer, and director, Mr. Nirajkumar Patel, owns and controls Bidi.
Mr. Patel is also a beneficial owner of KH, the entity that is our largest controlling stockholder. Thus, Bidi and we are under common
control.
We process all sales made to retail customers and
non-retail customers, with all sales to retail customers historically made through the website, www.bidivapor.com; however, we recently
engaged goPuff who will handle sales to retail customers going forward. We provide all customer service and support at our own expense.
Bidi sets the minimum prices for all sales made by us. With respect to sales to non-retail customers, we submit purchase orders to Bidi,
Bidi delivers the Products to us, and we ship the Products directly to these non-retail customers. In the case of retail customers, we
maintain adequate inventory levels of the Products in order to meet these customers' demand, and deliver the Products sold to these
retail customers. 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 the Products.
In connection with the A&R Distribution Agreement,
we entered into the A&R Sub-Distribution Agreements with certain counterparties, pursuant to which we appointed such counterparties
as non-exclusive sub-distributors of the Products to non-retail customers within the Territory. Each of the A&R Sub-Distribution Agreements
set forth certain minimum purchase obligations.
We believe that over the course of the next twelve
months, our business operations will generate the capital needed to achieve our business objectives; however, there can be no assurance
that our business operations will continue to generate the cash flows required for us to achieve our business objectives. If we require
additional capital, there can be no assurance that we will be able to raise any required capital or that capital will be available to
us at acceptable terms, or at all. We believe that our cash provided by operations will be sufficient for the next twelve months.
As a result of the commencement of business operations,
in March 2020, we began hiring employees and intend to hire additional independent contractors and/or employees in the future. We cannot
provide any assurance as to the timing of the hiring of any additional independent contractors or employees, the number of independent
contractors or employees that we may hire, and whether acceptable independent contractors or employees will be available to us at that
time.
15
Liquidity and Capital Resources
We have no known demands or commitments and are not
aware of any events or uncertainties as of April 30, 2021 that will result in or that are reasonably likely to materially increase or
decrease our current liquidity.
At April 30, 2021, we had working capital of approximately
$9.2 million and total cash of approximately $2.1 million.
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 $5.2
million for the first six months of fiscal year 2021, compared to $1.9 million provided by operations for the first six months of fiscal
year 2020. The decrease in cash flow from operations for the first six months of fiscal year 2021 was mainly due to the net loss during
the first six months of fiscal year 2021 as compared to the net profit during the comparable period for fiscal 2020. We anticipate improvement
in our cash flows provided by operations in future years based on the minimum purchase obligations set forth in the A&R Sub-Distribution
Agreements, partially offset by increases in costs as we ramp up our sales and marketing efforts. Cash flow used in financing activities
was approximately $77,975 for the first six months of fiscal year 2021, compared to $0 for the first six months of fiscal year 2020.
The cash used in financing activities for the first two quarters of fiscal year of 2021 consisted of the settlement of RSUs for cash.
Results of Operations
Three months ended April 30, 2021, compared to
three months ended April 30, 2020
Revenues:
Revenues for the second quarter of fiscal year 2021
were approximately $18.1 million, compared to $22.5 million in the same period of the prior fiscal year. During the second quarter of
fiscal year 2020, we entered into the A&R Distribution Agreement, pursuant to which we were granted the exclusive, worldwide right
to distribute the Products. In connection therewith, we entered into the A&R Sub-Distribution Agreements and other agreements with
counterparties and granted such sub-distributors the right to distribute the Products to non-retail customers within the Territory. We
have continued to enter into additional A&R Sub-Distribution Agreements, thereby increasing our distribution of the Products and,
ultimately, we expect our revenues to increase during the remainder of the current fiscal year. We recognize revenue when a customer
obtains control of promised goods. In some cases, we provide customers with 120-day payment terms, with the ability for a full refund
for products not sold during that 120-day period. During such periods the risk of loss on the products delivered remains with the Company.
In such case, the customer typically obtains control on the products when the customer purchases and ships the product to their customer
or pays the Company for the product.
Cost of Revenue and Gross Profit:
Gross profit in the second quarter of fiscal year
2021 was approximately $6.3 million, compared to $4.2 million for the second quarter of fiscal year 2020. Total cost of revenue was approximately
$11.9 million for the second quarter of fiscal year 2021, compared to $18.3 million for the second quarter of fiscal year 2020. The increase
in gross profit is entirely driven by the decrease in the cost of the Products sold in fiscal year 2021 as compared to the previous year.
Operating Expenses:
Total operating expenses were approximately $10.4
 million for the second quarter of fiscal year 2021, compared to approximately $458,000 for the second quarter of fiscal year 2020.
For the second quarter of fiscal year 2021, operating expenses consisted of commissions paid pursuant to the Further Amended Service Agreement
of approximately $801,000  and general and administrative expenses of approximately $9.6  million . General and administrative
expenses in the second quarter of fiscal year 2021 consisted primarily of legal fees, salaries, other professional fees, merchant fees,
and other service fees. The increase in general and administrative expenses is mostly attributable to the expense related to the issuance
of 2,000,000 shares of common stock as compensation for investor relations consulting services. Total operating expenses for the second
quarter of fiscal 2020 were approximately $458,000, which included approximately $260,000 in commissions paid pursuant to the Further
Amended Service Agreement.
16
Income Taxes:
During the second quarter of fiscal year 2021, we
expensed approximately $186,800 for prior year income taxes, compared to the accrual of income taxed of approximately $950,400 for the
second quarter of fiscal year 2020. The decrease in the accrual for income taxes is as a result of having no taxable income during fiscal
year 2021, as compared to the previous fiscal year. 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):
Net loss for the second quarter of fiscal year 2021
was approximately $4.3  million, or $(0.02)  basic and diluted earnings per share, compared to net income of approximately $2.8
million, or $0.00 basic and diluted earnings per share, for the second quarter of fiscal year 2020. The decrease in net income for the
second quarter of fiscal year 2021, as compared to the second quarter of fiscal year 2020, is attributable to the increase in operating
expenses and commissions and the decrease in revenues.
Weighted-average common stock shares outstanding were
282,143,504 in the second quarter of fiscal year 2021 and 572,364,574 for the second quarter of fiscal year 2020.
Six months ended April 30, 2021, compared to six
months ended April 30, 2020
Revenues:
Revenues for the second quarter of fiscal year 2021
were approximately $18.1 million, compared to $22.5 million in the same period of the prior fiscal year. During the second quarter of
fiscal year 2020, we entered into the A&R Distribution Agreement, pursuant to which we were granted the exclusive, worldwide right
to distribute the Products. In connection therewith, we entered into the A&R Sub-Distribution Agreements and other agreements with
counterparties and granted such sub-distributors the right to distribute the Products to non-retail customers within the Territory. We
have continued to enter into additional A&R Sub-Distribution Agreements, thereby increasing our distribution of the Products and,
ultimately, we expect our revenues to increase during the remainder of the current fiscal year. We recognize revenue when a customer obtains
control of promised goods. In some cases, we provide customers with 120-day payment terms, with the ability for a full refund for products
not sold during that 120-day period. During such periods the risk of loss on the products delivered remains with the Company. In such
case, the customer typically obtains control on the products when the customer purchases and ships the product to their customer or pays
the Company for the product.
Cost of Revenue and Gross Profit:
Gross profit in the first six months of fiscal year
2021 was approximately $11.1 million, compared to approximately $4.2 million for the first six months of fiscal year 2020. Total cost
of revenue was approximately $44.4 million for the first six months of fiscal year 2021, compared to $18.3 million for the first six
months of fiscal year 2020 and the decrease in cost of products sold.
Operating Expenses:
Total operating
expenses were approximately $14.7
million for the
first six months of fiscal year 2021, compared to approximately $471,000 for the first six months of fiscal year 2020. For the first
six months of fiscal year 2021, operating expenses consisted of commissions paid pursuant to the Further Amended Service Agreement
of approximately $1.8 million and general and administrative expenses of approximately $13.0
million.
General and administrative expenses in the first six months of fiscal year 2021 consisted primarily of legal fees, salaries, other
professional fees, merchant fees, and other service fees. Total operating expenses for the first six months of fiscal 2020 were
approximately $471,000 and consisted of general and administrative expenses
,
which were primarily from professional fees, and approximately $260,000 in commissions paid pursuant to the Further Amended Service
Agreement.
Income Taxes:
During the first six months of fiscal year 2021,
we expensed approximately $293,100 for prior year income taxes, compared to the approximately $950,400 accrual for the first six
months of fiscal year 2020. 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):
Net loss for the first
six months of fiscal year 2021 was approximately $3.9
million,
or $(0.01) basic and diluted earnings per share, compared to net income of approximately $2.8 million, or $0.00 basic and diluted earnings
per share, for the first six months of fiscal year 2020. The decrease in net income for the first six months of fiscal year 2021, as compared
to the first six months of fiscal year 2020, is attributable to the increase in operating expenses and commissions and the decrease in
revenues.
Weighted-average common stock shares outstanding were 280,242,288 in the
first six months of fiscal year 2021 and 572,364,574 for the first six months of fiscal year 2020.
17
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 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 six months ended April 30,
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 Financial Statements in Item 1 of Part I of this Quarterly Report for a description of recent
accounting pronouncements and accounting changes.
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
Under the supervision and with the participation of
our management, including our Chief Executive Officer and 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 April 30, 2021, the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer and 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 April 30, 2021.
18
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 April 30, 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.
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 May 5, 2021, we issued an aggregate of 575,000 shares of our common stock to six employees as equity
compensation pursuant to certain RSU agreements entered into with each employee. These shares had a fair market value at the date of grant
of $0.14, which was closing price on the grant date as reported by the OTC
Markets
Group, Inc. ("OTCM"). On the vesting and issuance date, the shares were valued at $1.21 per share, which was the highest closing
price of our common stock during the three days prior to the issuance date as reported by the OTCM. We issued the shares in reliance on
the exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act")(in
that the issuance of shares of our common stock issued did not involve any public offering).
20
On May 5, 2021, we issued 60,000 shares of our common
stock to an employee as equity compensation pursuant to a RSU agreement. These shares had a fair market value at the date of grant of
$0.17, which was closing price on the grant date as reported by the OTCM. On the vesting and issuance date, the shares were valued at
$1.21 per share, which was the highest closing price of our common stock during the three days prior to the issuance date as reported
by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in
that the issuance of shares of our common stock issued did not involve any public offering).
On May 5, 2021, we issued 140,000 shares of our common
stock to an employee as equity compensation pursuant to a RSU agreement. These shares had a fair market value at the date of grant of
$0.43, which was closing price on the grant date as reported by the OTCM. On the vesting and issuance date, the shares were valued at
$1.21 per share, which was the highest closing price of our common stock during the three days prior to the issuance date as reported
by the OTCM. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in
that the issuance of shares of our common stock issued did not involve any public offering).
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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.
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)
21
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)
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.
22
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.
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.*
10.19
Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021.*
31.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1
Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema Document*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
XBRL Taxonomy Presentation Linkbase Document*
(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
23
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: June 21, 2021
By:
/s/ Nirajkumar Patel
Nirajkumar Patel
President, Chief Executive Officer, and
Chief Financial Officer
24