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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 January 31, 2026

☐ 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.)

1317 Edgewater Dr #730

Orlando FL 32804

(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

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 ☒

As of March 13, 2026, there were 13,535,402 shares of common stock, $0.001 par value, outstanding.

KAIVAL BRANDS INNOVATIONS GROUP, INC.

FORM 10-Q

TABLE OF CONTENTS

Item		Page

Cautionary Note Concerning Forward-Looking Statements		ii

PART I	Financial Information	F-1

Item 1.	Financial Statements	F-1
	Unaudited Consolidated Balance Sheets	F-1
	Unaudited Consolidated Statements of Operations	F-2
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity	F-3
	Unaudited Consolidated Statements of Cash Flows	F-5
	Notes to Unaudited Consolidated Financial Statements	F-6
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
	Liquidity and Capital Resources	4
	Results of Operations	4

Item 3	Quantitative and Qualitative Disclosures about Market Risk	5
Item 4	Controls and Procedures	5

PART II	Other Information	6

Item 1.	Legal Proceedings	6
Item 1A.	Risk Factors	6
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6
Item 3	Defaults Upon Senior Securities	6
Item 4	Mine Safety Disclosures	6
Item 5	Other Information	6
Item 6	Exhibits	7

Signatures		8

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements and information included in this Quarterly Report on Form 10-Q for the quarter ended January 31, 2026 (this “Report”) contain or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. We generally use the words “may,” “should,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “likely,” “estimate,” “potential,” “continue,” “will,” and similar expressions to identify forward-looking statements. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results, including, without limitation, statements related to:

	●	our substantial reliance on, and efforts to diversify our business from, the business of our affiliate Bidi Vapor, LLC (“Bidi”);

	●	our inability to import and sell the Bidi Stick due to a patent infringement claim filed by R.J. Reynolds Vapor Company, R.J. Reynolds Tobacco Company, and RAI Services Company with the; International Trade Commission (the “ITC”) against Bidi, us, and forty (40) other respondents (the “ITC Complaint”) and the ongoing investigation of the ITC in connection with the ITC Complaint;

	●	our ability to raise required funding in the form of debt or equity both in the near and longer term;

	●	whether we will realize any value or benefit from the intellectual property assets we acquired from GoFire, Inc. on May 30, 2023;

	●	the impact of the FDA’s marketing denial order (“MDO”) in January 2024 regarding the Classic BIDI® Stick tobacco-flavored ENDS product, and the November 2025 MDO for the non-tobacco flavored BIDI® Sticks, which has the potential to have a substantial adverse impact on our company;

	●	the denial of Bidi Vapor’s petition with the 11th Circuit Court of Appeals regarding the January 2024 MDO related to Classic BIDI® Stick;

	●	our substantial reliance on our relationship with, and the results of marketing and sales activity by, Phillip Morris International, to whom we have licensed international rights to distribute Bidi products and from whom we are entitled to receive royalty payments, which are currently our primary source of revenue;

●

the impact of government regulation, laws or consumer preferences generally, or changes thereto, that could affect our business; 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, including matters over which we have little or no control.

Forward-looking statements, including those concerning our expectations, involve significant risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance, or achievements, or industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. See the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section contained in this Report and the section “Risk Factors” in our Annual Report on Form 10-K for the year ended October 31, 2025, for a listing of some of the factors that could cause the results anticipated by our forward-looking statements to differ from actual future results. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Report.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. Such statements are presented only as a guide about future possibilities and do not represent assured events, and we anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q also contains estimates and other statistical data prepared by independent parties and by us relating to market size and growth and other data about our industry. These estimates and data involve a number of assumptions and limitations, and potential investors are cautioned not to give undue weight to these estimates and data. We have not independently verified the statistical and other industry data generated by independent parties and contained in this Quarterly Report on Form 10-Q. In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

iii

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Kaival Brands Innovations Group, Inc.

Consolidated Balance Sheets

(Unaudited)


	January 31, 2026			October 31, 2025
ASSETS
CURRENT ASSETS
Cash	$	797,500		$	534,406
Accounts receivable, net		120,000			120,000
Prepaid expenses		13,930			14,850
Total current assets		931,430			669,256
TOTAL ASSETS	$	931,430		$	669,256

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	339,362		$	349,289
Accounts payable - related party		50,000			50,000
Accrued expenses		45,000			170,000
Total current liabilities		434,362			569,289

TOTAL LIABILITIES		434,362			569,289

STOCKHOLDERS’ EQUITY

Preferred stock; 5,000,000 shares authorized
Series A Convertible Preferred stock ($0.001 par value, 3,000,000 shares authorized, none issued and outstanding as of January 31, 2026 and October 31, 2025)		—			—

Series B Convertible Preferred stock ($0.001 par value, 900,000 shares authorized, 900,000 issued and outstanding as of January 31, 2026 and October 31, 2025)		900			900

Common stock ($.001 par value, 1,000,000,000 shares authorized, 13,535,402 and 11,593,402 shares issued and outstanding as of January 31, 2026 and October 31, 2025, respectively)		13,535			11,593

Additional paid-in capital		55,196,535			54,180,589

Accumulated deficit		(54,713,902	)		(54,093,115	)
TOTAL STOCKHOLDERS’ EQUITY		497,068			99,967
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	931,430		$	669,256

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-1

Kaival Brands Innovations Group, Inc.

Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended January 31,
	2026			2025
Revenues
Revenues, net	$	—		$	42,682
Royalty revenue		92,938			159,921
Total revenues, net		92,938			202,603

Operating expenses
General and administrative expenses		713,725			4,278,533
Total operating expenses		713,725			4,278,533

Other expense
Interest expense, net		—			(4,092	)
Total other expense		—			(4,092	)

Loss before income taxes provision		(620,787	)		(4,080,022	)

Benefit from (provision for) income taxes		—			18,942

Net loss	$	(620,787	)	$	(4,061,080	)
Preferred stock dividend		—			(22,500	)
Net loss attributable to common shareholders	$	(620,787	)	$	(4,083,580	)

Net loss per common share - basic and diluted	$	(0.05	)	$	(0.43	)

Weighted average number of common shares outstanding - basic and diluted		13,110,582			9,503,715

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

Kaival Brands Innovations Group, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended January 31, 2026

(Unaudited)


	Convertible Preferred Shares (Series B)		Par Value Convertible Preferred Shares (Series B)		Common Shares			Par Value Common Shares			Additional Paid-in Capital		Accumulated Deficit			Total
Balances, October 31, 2025		900,000	$	900		11,593,402		$	11,593		$	54,180,589	$	(54,093,115	)	$	99,967
Common shares canceled		—		—		(2,950,000	)		(2,950	)		2,950		—			—
Issuance of common shares for cash		—		—		4,892,000			4,892			1,010,551		—			1,015,443
Stock option expense		—		—		—			—			2,445		—			2,445
Net loss		—		—		—			—			—		(620,787	)		(620,787	)
Balances, January 31, 2026		900,000	$	900		13,535,402		$	13,535		$	55,196,535	$	(54,713,902	)	$	497,068

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-3

Kaival Brands Innovations Group, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended January 31, 2025

(Unaudited)

	Convertible Preferred Shares (Series B)		Par Value Convertible Preferred Shares (Series B)		Common Shares		Par Value Common Shares		Additional Paid-in Capital			Accumulated Deficit			Total
Balances, October 31, 2024		900,000	$	900		8,517,302	$	8,517	$	51,269,485		$	(37,463,230	)	$	13,815,672
Common shares issued for services		—		—		3,025,000		3,025		2,870,725			—			2,873,750
Preferred stock dividend		—		—		—		—		(22,500	)		—			(22,500	)
Stock option expense		—		—		—		—		31,302			—			31,302
Net loss		—		—		—		—		—			(4,061,080	)		(4,061,080	)
Balances, January 31, 2025		900,000	$	900		11,542,302	$	11,542	$	54,149,012		$	(41,524,310	)	$	12,637,144

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

Kaival Brands Innovations Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended			For the Three Months Ended
	January 31, 2026			January 31, 2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(620,787	)	$	(4,061,080	)

Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		—			2,873,750
Depreciation and amortization		—			196,776
Make-whole provision		—			39,283
Stock options expense		2,445			31,302
ROU operating lease expense		—			50,928

Changes in current assets and liabilities:
Accounts receivable		—			56,714
Prepaid expenses		920			154,429
Accounts payable		(9,927	)		(51,861	)
Accounts payable - related party		—			(50,254	)
Accrued expenses		(125,000	)		(96,625	)
Operating lease obligations		—			(49,101	)
Net cash used in operating activities		(752,349	)		(905,739	)

CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities		—			—

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common shares		1,015,443			—
Payments on loans payable		—			(163,949	)
Payments on preferred dividend		—			(405,000	)
Net cash (used in) provided by financing activities		1,015,443			(568,949	)

Net change in cash		263,094			(1,474,688	)
Beginning cash balance		534,406			3,902,300
Ending cash balance	$	797,500		$	2,427,612

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	—		$	4,092
Income taxes paid	$	—		$	—

NON-CASH TRANSACTIONS
Common shares canceled	$	2,950		$	—
Preferred stock dividend	$	—		$	22,500

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-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

On March 11, 2022, the Company formed Kaival Brands International, LLC, a Delaware limited liability company (herein referred to as “KBI”), as a wholly owned subsidiary of the Company, for the purpose of entering into an international licensing agreement with Philip Morris Products S.A. (“PMPSA”), a wholly owned affiliate of Philip Morris International Inc. (“PMI”).

On June 13, 2022, the Company’s wholly owned subsidiary, KBI, entered into the PMI License Agreement with PMPSA, a wholly owned affiliate of PMI, for the development and distribution of ENDS products in certain markets outside of the United States, subject to market (or regulatory) assessment. The PMI License Agreement grants to PMPSA a license of certain intellectual property rights relating to Bidi’s ENDS device, known as the BIDI® Stick in the United States, as well as potentially newly developed devices, to permit PMPSA to manufacture, promote, sell, and distribute such ENDS device and newly developed devices, in international markets, outside of the United States. Our primary source of revenue is from KBI royalties from PMI under the PMI License Agreement.

Historically, the Company’s business focused on the sale, marketing and distribution of ENDS products, primarily the BIDI® Stick disposable e-cigarette product manufactured by Bidi. Under an exclusive distribution agreement with Bidi, the Company distributed BIDI® Stick products to wholesalers and retailers within the United States and generated revenue primarily from the resale of these products. Beginning in 2024, the Company significantly reduced and ultimately ceased its ENDS distribution activities due to regulatory developments affecting ENDS products in the United States, including FDA marketing denial orders and patent litigation involving Bidi products. As a result, the Company no longer generates revenue from the distribution of ENDS products and has transitioned its focus toward royalty revenue generated under its international licensing agreement with Philip Morris Products S.A. and the development and monetization of intellectual property assets.

F-6

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 subsidiaries, Kaival Labs and Kaival Brands International. Intercompany transactions are eliminated.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent audited financial statements contained within the Company’s Annual Report on Form 10-K, filed with the SEC on January 28, 2026 (the “2025 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 expected for the full fiscal 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 2025 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.

F-7

Cash

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of January 31, 2026, and October 31, 2025.

The Federal Deposit Insurance Corporation (“FDIC”) insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash of $547,500 and $284,406 as of January 31, 2026, and October 31, 2025, respectively.

Advertising and Promotion

All advertising, promotion and marketing expenses, including commissions, are expensed when incurred.

Accounts Receivable and Reserve for Credit Loss

Accounts receivable pertain to contracts with customers who are granted credit by the Company in the ordinary course of business and are recorded at the invoiced amount. Accounts receivable does not bear interest. Accounts receivable presented on the consolidated balance sheet are adjusted for any write-offs and net of allowance for credit losses. The Company’s reserve for credit losses is developed by using relevant available information including historical collection and loss experience, current economic conditions, prevailing economic conditions, supportable forecasted economic conditions and evaluations of customer balances. Once a receivable is deemed uncollectible after collection efforts have been exhausted, it is written off against the reserve for credit losses. The Company closely monitors the credit quality of its customers and does not generally require collateral or other security on receivables. The reserve for credit losses is measured on a collective basis when similar risk characteristics exist.

Based upon management’s assessment of the accounts receivable aging and the customers’ payment history, the Company has determined that no reserve for credit losses is required as of January 31, 2026 and October 31, 2025.

Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue. The Company performs periodic credit evaluations of its customers and generally does not require collateral on trade receivables. Historically, the Company has not experienced significant credit losses.

Leases

The Company determines if a contract contains a lease at commencement of the arrangement based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset and whether it has the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which the Company does not own. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company recognizes lease liabilities at the present value of the future lease payments and a corresponding ROU asset at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the rate implicit in the lease unless that rate cannot be readily determined. When the interest rate implicit in the lease is not readily determinable,

F-8

the interest rate used to determine the present value of the future lease payments is the Company’s Incremental Borrowing Rate (“IBR”). The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be to borrow and resulting interest the Company would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Periods covered by the Company’s option to extend or terminate the lease are included in the lease term when it is reasonably certain that the Company will exercise its option to extend or not exercise its option to terminate, as applicable.

Lease payments may be fixed or variable; however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments may include costs such as common area maintenance, utilities, real estate taxes or other costs. Variable lease payments are recognized in operating expenses in the period in which the obligations for those payments are incurred. The Company records rent expense for its operating lease, which has escalating rent payments, on a straight-line basis over the lease term. The Company does not have any financing leases.

The Company made a policy election not to separate non-lease components from lease components for all its leases; therefore, it accounts for lease and non-lease components as a single lease component. The Company also elected the short-term lease recognition exemption for all leases that qualify, such that leases with a term of 12 months or less are not recognized on the balance sheet.

During the fiscal year ended October 31, 2025, the Company determined that it would no longer be using the leased office space in its business operations and wrote off the related right-of use assets and liability accounts.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, which includes definite-lived intangibles, long-lived fixed assets and lease right-of-use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Factors that could trigger an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business or significant negative industry or economic trends. If this evaluation indicates that the value of the long-lived asset may be impaired, the Company makes an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the long-lived asset is not recoverable, based on the estimated undiscounted future cash flows of the technology over the remaining useful life, the Company reduces the net carrying value of the related asset to fair value and may adjust the remaining useful life. An impairment analysis is subjective and assumptions regarding future growth rates and operating expense levels can have a significant impact on the expected future cash flows and impairment analysis.

The Company evaluated its intangible assets for impairment and recognized an impairment loss of $9,895,503 for the year ended October 31, 2025.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“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. Under ASC 606, disaggregated revenue from contracts with customers depicts the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

F-9

Royalty Revenue

On June 13, 2022, KBI entered into the PMI License Agreement with PMPSA, effective as of May 13, 2022 (the “PMI Commencement Date”). Pursuant to the PMI License Agreement, KBI granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property to make, distribute, and sell disposable nicotine e-cigarettes Products based on the intellectual property in certain international markets set forth in the PMI License Agreement (the “PMI Markets”). The Company has the exclusive international distribution rights to the Products and, in order to allow KBI to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution rights for the PMI Markets to KBI as set forth in a Capital Contribution Agreement, dated June 10, 2022. The sublicense granted to PMPSA is exclusive in the PMI Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products in the PMI Markets for the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement). PMSPA will be responsible for any regulatory filings necessary to sell the Products in the PMI Markets. Both KBI and PMPSA agree to work together in the registration and maintenance of the Intellectual Property, but KBI will bear all cost and expense to implement the registration strategy. Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted certain rights with respect to potential future products.

The initial term of the PMI License Agreement is five (5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon minimum key performance indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically terminate at the end of the initial license term.

In consideration for the grant of the licensed rights, PMPSA agreed to pay to KBI a royalty equal to a percentage of the base price of the first sale of each unit of Product manufactured. In addition, before the launch of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed minimum royalty based on the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following the first launch or each successive anniversary of the first launch,

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subject to an aggregate maximum guaranteed royalty payment for all markets for each applicable twelve (12)-month period. PMPSA may require modification of certain products to be sold under the PMI Licensing Agreement to be modified for a PMI Market. Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over sales, marketing, product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific PMI Markets in which to launch commercialization and determine what product types are to be promoted in each market, subject to sales and marketing plans and annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI. Royalty revenue earned from the PMI License Agreement is recognized in the period the sales of the Product manufactured occurs.

The PMI License Agreement contains customary representations, warranties, covenants, and indemnification provisions; however, KBI’s liability under the PMI License Agreement is capped at the greater of: (i) Ten Million Dollars ($10,000,000); or (ii) an amount equal to the total of the royalties due to KBI (but not yet paid) plus the royalties (including the guaranteed royalty payment) paid to KBI pursuant to the PMI License Agreement during the immediately preceding twelve (12) consecutive months, provided that such amount shall not exceed Thirty Million Dollars ($30,000,000).

On June 10, 2022, Bidi entered into a License Agreement (the “KBI License Agreement”) with KBI, pursuant to which KBI has the exclusive irrevocable license to use Bidi’s licensed intellectual property to the extent necessary for KBI to fulfill its obligations set forth in the PMI Licensing Agreement. Such irrevocable license includes: (i) the right of KBI to grant sub-licenses to PMPSA under the PMI License Agreement for the express purposes set forth in the PMI License Agreement, but for no other purpose; (ii) the right of KBI to grant to PMPSA the right to grant sub-sub-licenses in the manner set forth in the PMI License Agreement, but for no other purpose; and (iii) certain branding rights to the extent (but only to the extent) necessary to permit KBI to perform its obligations to PMPSA as set forth in the PMI License Agreement.

On August 12, 2023, the Company executed and entered into a Deed of Amendment No. 1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI. Pursuant to the PMI License Amendment (which has an effective date of June 30, 2023), the following material changes have been made to the PMI License Agreement:

1. Royalty Rate. The royalty paid by PMPSA to KBI will no longer be based on sales price of the Product being sold, but rather on the volume of liquid contained within Product being sold. The royalty will be on a sliding scale of between $0.08 to $0.16 per sale based on the volume of liquid contained in the Product, increasing to between $0.10 to $0.20 per sale upon meeting certain sales milestones. For purposes of determining aggregate sales threshold, all sales undertaken since commencement of the PMI Licensing Agreement will be counted.

2. Elimination of Certain Potential Royalty Adjustments. Certain potential adjustments to the royalties receivable by KBI as provided for in the PMI License Agreement have been eliminated.

3. Guaranteed Royalty. The guaranteed royalty payment owed to KBI under the PMI License Agreement has been eliminated. Instead, royalties will be paid on a quarterly basis going-forward based on actual sales. Any unpaid guaranteed royalty has been cancelled.

4. Insurance Tail Requirements. KBI’s requirement to keep certain tail insurance after the expiration or termination of the PMI Licensing Agreement was reduced from 6 years to 2 years.

5. Markets. The identification of the PMI Markets that PMI may enter has been expanded to cover certain additional territories.

6. Net Reconciliation Payment to KBI. As a result of the changes to the PMI License Agreement described in paragraphs 1 thought 3 above, the value of such changes was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023.

The KBI License Agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development costs incurred for entry to specific international markets. During the three months ended January 31, 2026, the Company paid license fees of $37,500 to Bidi. As of January 31, 2026 and October 31, 2025, $50,000 and $50,000, respectively, of license fees are owed to Bidi.

F-11

As of January 31, 2026 and 2025, amounts receivable from PMPSA in connection with the PMI License Agreement totaled $120,000 and $120,000, respectively.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, without consideration of potential common stock equivalents.

Diluted net loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common stock outstanding plus common share equivalents from conversion of dilutive stock options and warrants using the treasury method and preferred stock using the if-converted method, except when antidilutive. In the event of a net loss, the effects of all potentially dilutive shares are excluded from the diluted net loss per share calculation as their inclusion would be antidilutive.

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments (share-based payments, referred to herein as “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 performance 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.

Fair Value of Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

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●	Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

●

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

●	Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of January 31, 2026 and October 31, 2025. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable and accounts payable. As of January 31, 2026 and October 31, 2025, the Company did not have any financial assets or liabilities measured and recorded at fair value on a recurring basis.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires additional disclosures reconciling the rates of different categories of income tax (i.e. federal, state, foreign, etc.) and a disaggregation of taxes paid and refunded. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and for interim periods in fiscal years beginning after December 15, 2025, although early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its income tax disclosures.

Note 3 – Going Concern

Our accompanying consolidated financial statements are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are issued.

In accordance with Financial Accounting Standards Board (or FASB), Accounting Standards Update (or ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying financial statements are issued.

As shown in the accompanying consolidated financial statements, we have incurred recurring losses and negative cash flows from operations for the three months ended January 31, 2026. We will need significant additional funds to satisfy our outstanding payables, fund our working capital, and fully implement our business plan. In addition, our ability to continue as a going concern is adversely affected by the FDA’s denial of Bidi’s PMTA process for its non-tobacco flavored Bidi® Stick as well as our ability to continue to sell the Bidi Stick given the patent infringements claim filed by RJ Reynolds. Likewise, in April 2025, the 11th Circuit upheld FDA’s MDO for the Classic BIDI® Stick. Finally, on November 4, 2025, FDA issued a MDO for the PMTA for the non-tobacco flavored Bidi Sticks. All of these factors raise substantial doubt regarding our ability to continue as a going concern.

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There can be no assurance that we will be able to obtain additional capital or generate revenues sufficient to sustain operations. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these or other risks or uncertainties.

Note 4 – Leases

During fiscal year 2025, the Company had an operating lease for office and inventory storage space with Just Pick, LLC.

Cash flow information related to the above-mentioned lease was as follows:


	January 31, 2026		January 31, 2025
Other Lease Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	—	$	(49,101	)

On April 23, 2025, the Company received a letter of demand from Just Pick, LLC, noting that the Company was in breach of the lease as base rent and operating expenses have not been paid since January 8, 2025. On April 30, 2025, the Company responded and provided Just Pick, LLC with a termination notice. As of April 30, 2025, the Company determined that it would no longer be using the leased office space in its business and recorded a loss on the ROU assets of $707,626, accordingly. In May 2025, the Company paid the total unpaid lease payments through May 2025 amounting to $78,217.

On January 7, 2026, the Company executed a settlement agreement with Just Pick where both parties agreed to no further payments remaining for the office lease liability. The lease liability was written off as of October 31, 2025 and the Company recognized a net gain of approximately $59,000 from the termination of the lease.

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Note 5 – Stockholders’ Equity

Series B Convertible Preferred Stock

On May 30, 2023, the Company issued 900,000 shares of the Series B Preferred Stock as consideration for the GoFire asset purchase. The Series B Preferred Stock carries no voting rights except: (i) with respect to the ability of the holders of a majority of the then outstanding Series B Preferred Stock (the “Majority Holders”), to nominate a director to the Company’s board of directors, and (ii) that the vote of the Majority Holders is necessary for effecting any amendment to the Company’s Certificate of Incorporation or Certificate of Designation that affects the Series B Preferred Stock. The Series B Preferred Stock is redeemable at the option of the Company at a redemption price of $15 per share, subject to potential downward adjustments based on the trading price of the Common Stock. Subject to additional limitations in the GoFire APA, the Series B Preferred Stock holds seniority over the Common Stock and each other class of series of securities now existing or hereafter authorized with respect to dividend rights, the distribution of assets upon liquidation, and dissolution and redemption rights. Upon a liquidation and winding up of the Company, the holders of Series B Preferred Stock are entitled to a liquidation preference of $15 per share (the “Liquidation Preference”), though the redemption may be adjusted downward based on the trading price of the Common Stock at the time of liquidation. The holders of Series B Preferred Stock are entitled to receive a dividend equal to 2% of the Liquidation Preference, accruing from the Closing Date and payable on the eighteen-month anniversary of the Closing Date. Amounts payable in respect of the Series B Dividend shall begin to accrue on a daily basis, be cumulative from and including the Original Issue Date, whether or not the Corporation has funds legally available for such dividends or such dividends are declared, shall compound on each six month anniversary of the Original Issue Date and shall be payable in arrears on the 18-month anniversary of the Original Issue Date. No preemptive rights are granted to the holders of Series B Preferred Stock. The Majority Holders have the ability to cause a voluntary conversion of the Series B Preferred Stock into Common Stock at a conversion rate of 0.3968 shares of Common Stock per share of Series B Preferred Stock which may only occur on or after the following dates 18-month, 24 month, 36 month, 48 month, and 60 month anniversary of the original issuance date; and only up to 180,000 shares of Series B Preferred Stock on each of these dates. All shares of Series B Preferred Stock will automatically convert to Common Stock upon the occurrence of a Change of Control (as defined in the GoFire APA). On December 3, 2024, the Company paid accrued dividends of $405,000 to Series B shareholders. As of January 31, 2026, the Company had zero accrued dividend payable to Series B shareholders and no further dividends will be accrued or paid.

Pursuant to the GoFire APA, the Company is required to use commercially reasonable efforts to register the APA Shares and Warrant Shares with the SEC for distribution to GoFire’s stockholders and/or public resale by such stockholders within 180 days of the Closing Date. In addition, if any Series B Preferred Stock remains outstanding nineteen (19) months after the Closing Date, the Company shall use commercially reasonable efforts to file with the SEC a subsequent registration statement registering the distribution to GoFire’s stockholders and/or public resale Series B Conversion Shares by such stockholders. If such subsequent registration statement is required, the Company will use its commercially reasonable efforts to obtain effectiveness of such subsequent registration statement within nineteen (19) months of the Closing Date, and if the Company does not so register the Series B Conversion Shares within nineteen (19) months of the Closing Date, the Company will issue to GoFire or its designee an additional ten percent (10%) of all of the Series B Conversion Shares underlying the then outstanding shares of Series B Preferred Stock. All of the securities issued as consideration for the Purchased Assets are subject to a lock-up agreement that terminates one hundred eighty (180) days from the Closing Date. As of January 31, 2026,

the Company has accrued the additional ten percent (10%) of all of the Series B Conversion Shares of $39,283.

Common Stock

During the three months ended January 31, 2026, the Company canceled 2,950,000 fully vested shares of common stock previously issued to directors, and officers as a result of the termination of the merger and share exchange agreement with Delta.

During the three months ended January 31, 2025, the Company issued 3,025,000 fully vested shares of common stock to directors, officers and an employee pursuant to grants under the Company’s Amended and Restated 2020 Stock and Incentive Compensation Plan. During the three months ended January 31, 2025, the Company recognized stock compensation cost of $2,873,750.

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Stock Options

Summary of stock options information is as follows:

Schedule of stock options information
	Aggregate		Aggregate		Exercise Price		WA Exercise
	Number		Exercise Price		Range		Price
Outstanding, October 31, 2025		55,667	$	848,028	$	3.64-59.85	$	15.23
Granted		—		—		—		—
Exercised		—		—		—		—
Cancelled, forfeited, or expired		—		—		—		—
Outstanding, January 31, 2026		55,667	$	848,028	$	3.64-59.85	$	15.23
Exercisable, January 31, 2026		54,477	$	828,314	$	3.64-59.85	$	15.20

During the three months ended January 31, 2026, and 2025, the Company recognized $2,445 and $31,302, respectively of stock option expense related to outstanding stock options. No options were granted during the three months ended January 31, 2026.

As of January 31, 2026, the Company had $13,854 of unrecognized expenses related to options, which is expected to be recognized over a weighted-average period of approximately 1.43 years. The weighted average remaining contractual life is approximately 7.59 years for stock options outstanding as of January 31, 2026. The aggregate intrinsic value of these outstanding options as of January 31, 2026, was $0.

Warrants

Warrant information as of the periods indicated is as follows:

Schedule of warrant information
							Weighted
	Aggregate		Aggregate		Exercise Price		Average
	Number		Exercise Price		Range		Exercise Price
Outstanding, October 31, 2025		5,754,686	$	19,826,116	$	1.16-126.00	$	3.45
Granted		—		—		—		—
Exercised		—		—		—		—
Cancelled, forfeited, or expired		—		—		—		—
Outstanding, January 31, 2026		5,754,686	$	19,826,116	$	1.16-126.00	$	3.45
Exercisable, January 31, 2026		5,754,686	$	19,826,116	$	1.16-126.00	$	3.45

The weighted average remaining contractual life is approximately 3.31 years for common stock warrants outstanding as of January 31, 2026. As of January 31, 2026, the intrinsic value of outstanding stock warrants was $0.

Note 6 – Related-Party Transactions

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Purchases and Accounts Payable

The KBI License agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development costs incurred for entry to specific international markets. Bidi is considered a related party because it beneficially owns more than 10% of the Company’s outstanding common stock.

During the three months ended January 31, 2026, the Company paid license fees of approximately $37,500 to Bidi. As of January 31, 2026, the Company had a payable to Bidi of $50,000 related to the PMI License Agreement.

During the three months ended January 31, 2025, the Company paid license fees of approximately $108,215 to Bidi. As of January 31, 2025, the Company had a payable to Bidi of $81,429 related to the PMI License Agreement.

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

This 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 months ended January 31, 2026, included under Item 1 – Financial Statements in this Report and our audited financial statements and notes thereto for the year ended October 31, 2025, contained in the 2025 Annual Report. 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 Report regarding forward-looking statements.

Overview

We were previously engaged in the sale, marketing and distribution of electronic nicotine delivery system (“ENDS”) products, also known as “e-cigarettes”, in a variety of favors. Until October of 2024, our primary source of revenue has been the Bidi Stick as we sold our inventory on hand. However, on June 11, 2024, RAI Strategic Holdings, Inc., R.J. Reynolds Vapor Company, R.J. Reynolds Tobacco Company, and RAI Services Company (collectively, the “RJ Reynolds Entities”) filed a patent infringement complaint with the International Trade Commission (the “ITC”) against Bidi, us, and forty (40) other respondents (the “ITC Complaint”) pursuant to Section 337 of the Tariff Act of 1930, as amended. Specifically, the ITC Complaint alleges that one or more components or elements of the Bidi Stick infringe U.S. Patent No. 11,925,202, which is owned by one of the RJ Reynolds Entities. The ITC Complaint requests the ITC grant: (a) temporary and permanent limited exclusion orders pursuant to Section 337(e) of the Tariff Act of 1930, as amended, which would prohibit the importation of the Bidi Stick in the United States; and (b) issue temporary and permanent cease and desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit the sale and distribution of the Bidi Stick in the United States. No damages are recoverable in the proceedings before the ITC. Since the initiation of the ITC Complaint, we have not imported any Bidi Sticks and currently do not generate any revenue from the sale of Bidi Sticks. Our current primary source of revenue is through an international licensing agreement with Philip Morris Products S.A. (“PMPSA”), a wholly owned affiliate of Philip Morris International Inc. (“PMI”).

We have also entered into a Merger and Share Exchange Agreement (the “Merger Agreement”) with Delta Corp Holdings Limited, a company incorporated in England and Wales (together with its successors and assigns, “Delta”), Delta Corp Holdings Limited, a Cayman Islands exempted company (“Pubco”), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco (“Merger Sub”) and Delta Corp Cayman Limited (the “Sellers”).

On September 11, 2025, Kaival Brands Innovations Group, Inc., (the “Company”) and Delta Corp Holdings Limited, a company incorporated in England and Wales (together with its successors and assigns, “Delta”) entered into a Business Combination Termination and Release Agreement (the “Termination Agreement”) pursuant to Section 10.1(a) of the Merger Agreement (the “Merger Agreement’) among the Company, Delta, Delta Corp Holdings Limited, a Cayman Islands exempted company, KAVL Merger Sub Inc. and Delta Corp Cayman Limited.

Pursuant to the Termination Agreement, the Company and Delta mutually terminated the Merger Agreement and all agreements between the parties that are ancillary thereto and Delta waived any and all claims against the other party that in any way directly and/or indirectly arise out of, are based upon, or are in connection with the Merger Agreement any agreements ancillary thereto.

Material Items, Trends and Risks Impacting Our Business

We believe that the following items and trends may be useful in better understanding our results of operations.

On June 11, 2024, the RJ Reynolds Entities filed the ITC Complaint. The ITC Complaint requests the ITC grant: (a) temporary and permanent limited exclusion orders pursuant to Section 337(e) of the Tariff Act of 1930, as amended, which would prohibit the importation of the Bidi Stick in the United States; and (b) issue temporary and permanent cease and desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit the sale and distribution of the Bidi Stick in the United States. No damages are recoverable in the proceedings before the ITC. If the Company or Bidi is prohibited from importing the Bidi Stick, then our business, operations, financial results, and reputation would be significantly adversely impacted. Although Bidi disputes the patent infringement claims set forth in the ITC Complaint by the RJ Reynolds Entities, in December 2024 Bidi entered into a consent order agreeing to cease all importation and distribution of the Bidi Stick until the RJ Reynolds Entities’ patent expires in October 2026. In November 2024, the ITC Administrative Law Judge (ALJ) denied temporary relief to the Reynolds Entities and the case proceeded on the merits. A trial was held in April 2025. The initial determination (ID) from the ALJ was issued on August 29, 2025. The ALJ found that violation of §337 based on infringement of U.S. Patent No. 11,925,202 by the respondents, and that both the technical and economic prongs of domestic industry were satisfied. The ID will now be reviewed by the Commission for final approval, with respondents and complainants expected to file additional briefs. The Commission target deadline was November 24, 2025, subject to potential extensions. The asserted patent expires in October 2026 as would any exclusion order that the ITC enters as a result of the ITC Complaint, as well as the Bidi consent order.

As a result of the ITC Complaint and other factors, we do not expect to generate any revenue from the sale of Bidi Sticks in the foreseeable future. Our primary source of revenue is from KBI from royalties from PMI under the PMI License Agreement.

PMI Licensing Agreement and International Distribution

On June 13, 2022, we, through our wholly owned subsidiary, KBI, entered into the PMI License Agreement with PMPSA, a wholly owned affiliate of PMI, for the development and distribution of ENDS products in certain markets outside of the United States, subject to market (or regulatory assessment). The PMI License Agreement grants to PMPSA a license of certain intellectual property rights relating to Bidi’s ENDS device, known as the BIDI® Stick in the United States, as well as potentially newly developed devices, to permit PMPSA to manufacture, promote, sell, and distribute such ENDS device and newly developed devices, in international markets, outside of the United States.

On July 25, 2022, we announced the launch of PMPSA’s custom-branded self-contained e-vapor product, pursuant to the licensing agreement. The product, a self-contained e-vapor device initially called VEEBA and more recently rebranded as VEEV NOW, has been custom developed and was initially distributed in Canada. VEEV NOW was then commercially launched by PMPSA in Europe in February 2023, with additional market launches planned this year. On August 12, 2023, we executed and entered into a Deed of Amendment No. 1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI. Pursuant to the PMI License Amendment (which was effective on June 30, 2023), resulting in a Net Reconciliation Payment to KBI and ongoing quarterly royalty payments.

The ability of PMPSA to generate sales of its licensed products is important to our results of operations since we derive royalty revenue from PMPSA sales. Should our relationship with PMPSA deteriorate or terminate, or if PMPSA is unable to generate meaningful sales of its licensed products, our business and results of operations would be materially harmed.

Ability to Develop and Monetize the GoFire Intellectual Property

In May 2023, the Company acquired certain vaporizer and inhalation-related technology from GoFire, Inc. through its wholly-owned subsidiary, Kaival Labs, Inc. These assets remain part of the Company’s intellectual property holdings.

The Company can give no assurance that it will derive any revenue or other benefit from these assets in the future or that they will create any value for the Company. These assets are subject to numerous risks and uncertainties, including market conditions, regulatory developments, and other factors beyond the Company’s control. As of October 31, 2025, we have fully impaired the intangible asset related to the GoFire intellectual property.

Inflation

Consumer purchases of tobacco products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic conditions. The U.S. has been experiencing an environment of material inflation in recent quarters, and this condition may impact discretionary consumer purchases, such as the BIDI® Stick. Demand for our Products may also decline during recessionary periods or at other times when disposable income is lower, and taxes may be higher.

Corporate History

We were incorporated on September 4, 2018, in the State of Delaware. Effective July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc. to Kaival Brands Innovations Group, Inc. The name change was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations Group, Inc., our wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity.

Going Concern

We will need significant additional funds to satisfy our outstanding payables, fund our working capital, and sustain operations. As discussed in Note 3, conditions and other factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

Liquidity and Capital Resources

We believe we will not have sufficient cash on hand to support our operations for the next twelve months from the date of filing this report. As of January 31, 2026, we had working capital of $497,068 and total cash of $797,500. As discussed above, this condition and other factors raise substantial doubt regarding our ability to continue as a going concern.

We will need to raise additional capital to fund our operations. There can be no assurance that capital will be available to us on reasonable terms, if at all. Should capital not be available on acceptable terms, we may be required to take other actions to preserve liquidity. These matters are subject to numerous risks and uncertainties, including market conditions, regulatory considerations, and other factors beyond the Company’s control.

Cash Flows:

Net cash flows used in operations was approximately $0.8 million for the first three months of fiscal year 2026, compared to $0.9 million cash flows used in operations for the first three months of fiscal year 2025. The decrease in cash flows used in operations for the first three months of fiscal year 2026 compared to the first three months of fiscal year 2025 was primarily due to changes in accounts receivable, accounts payable – RP, and operating lease.

Net cash flows provided by financing activities was approximately $1.0 million for the first three months of fiscal year 2026, compared to cash flows used in financing activities of approximately $0.6 million for the first three months of fiscal year 2025. The cash provided by financing activities for the first three months of fiscal year 2026 consisted primarily of issuance of Common Shares for cash.

Results of Operations

Three months ended January 31, 2026, compared to three months ended January 31, 2025

Revenues:

Revenues for the first quarter of fiscal year 2026 were approximately $0.1 million, compared to approximately $0.2 million in the same period of the prior fiscal year. Revenues decreased in the first quarter of 2025, primarily due to a decrease in royalty revenue.

Operating Expenses:

Total operating expenses were approximately $0.7 million for the first quarter of fiscal year 2026, compared to approximately $4.3 million for the first quarter of fiscal year 2025. The decrease is primarily from stock compensation expense of $2.9 million for share-based awards to management and members of the board of directors. For the first quarter of fiscal year 2026, operating expenses consisted primarily of professional fees of approximately $0.3 million, and all other general and administrative expenses of approximately $0.4 million. General and administrative expenses in the first quarter of fiscal year 2026 consisted primarily of salaries and wages, insurance, banking fees, business fees and state and franchise taxes. For the first quarter of fiscal year 2025, operating expenses consisted primarily of professional fees of approximately $3.4 million, and all other general and administrative expenses of approximately $0.9 million. General and administrative expenses in the first quarter of fiscal year 2025 consisted primarily of salaries and wages, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes.

Income Taxes:

During the first quarter of fiscal year 2026, we did not accrue a provision for income taxes, due to the pre-tax loss of approximately ($0.6) million. Similarly, we did not accrue a provision for income taxes, due to the pre-tax loss of approximately ($4.0) million for the first quarter of fiscal year 2025.

Net Loss:

As a result of the items noted above, the net loss for the first quarter of fiscal year 2026 was approximately $0.6 million, or $0.05 basic and diluted net loss per share, compared to a net loss of approximately $4.0 million, or $0.43 basic and diluted net loss per share, for the first quarter of fiscal year 2025. The decrease in the net loss for the first quarter of fiscal year 2026, as compared to the first quarter of fiscal year 2025, is primarily attributable to the decrease in revenues and decrease in operating expenses as noted above.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available as of the date of the financial statements; therefore actual results could differ from those estimates. There have been no material changes to our critical accounting policies and estimates during the three months ended January 31, 2026 from those disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our 2025 Annual Report for the year ended October 31, 2025.

Recent Accounting Pronouncements

Refer to Item 1, Financial Statements, Note 2, Basis of Presentation and Significant Accounting Policies.

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

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15e and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer to allow for timely decisions regarding required disclosure.

As of January 31, 2026, the end of the period covered by this Report, we carried out an evaluation under the supervision and with the participation of members of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and the operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Our management has concluded, based on their evaluation, that the disclosure controls and procedures were not effective as of the end of the period covered by this Report due to material weaknesses in our internal control over financial reporting as disclosed in our Annual Report on Form 10K for the year ended October 31, 2025.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) that have occurred during the first quarter ended January 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition, or results of operations. To the best of our knowledge, no adverse legal activity is anticipated or threatened.

While we are not a party to the legal or regulatory proceedings involving Bidi, the outcome of those or related proceedings could have a material adverse or positive impact on our ability to operate our business given our reliance on Bidi.

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this item.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

The following exhibits are filed herewith as a part of this Quarterly Report.

Exhibit Number		Description

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

32.1		Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

101.INS		Inline XBRL Instance Document*

101.SCH		Inline XBRL Taxonomy Extension Schema Document*

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		Inline XBRL Taxonomy Presentation Linkbase Document*

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

(1)

Schedules and Exhibits omitted pursuant to Item 601(b) (10) (iv) 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

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: March 13, 2026	A	/s/ Eric Mosser
		Eric Mosser
		Chief Executive Officer

Date: March 13, 2026	By:	/s/ Eric Morris
		Eric Morris
		Chief Financial Officer

Kaival Brands Innovations Group, Inc. 10-Q