Kaival Brands(KAVL) - 2025 Q2 - Quarterly Report

Financial Performance - Total revenues for the three months ended April 30, 2025, were $47,045, a decrease of 97.6% compared to $2,226,314 for the same period in 2024[19] - Net loss for the three months ended April 30, 2025, was $1,997,653, compared to a net loss of $1,527,178 for the same period in 2024, representing a 30.8% increase in losses[19] - Net loss for the six months ended April 30, 2025, was $6,058,733, compared to a net loss of $3,640,864 for the same period in 2024, representing an increase of 66.5%[28] - The company recognized revenue of zero during the six months ended April 30, 2025, compared to $3,700 for the same period in 2024 from a related party[113] Cash and Assets - Cash decreased from $3,902,300 as of October 31, 2024, to $1,805,702 as of April 30, 2025, a decline of 53.7%[17] - Total assets decreased from $16,004,276 as of October 31, 2024, to $12,229,901 as of April 30, 2025, a reduction of 23.4%[17] - Ending cash balance as of April 30, 2025, was $1,805,702, up from $488,083 at the end of the same period in 2024, reflecting a year-over-year increase of 269.5%[28] - As of April 30, 2025, the company had uninsured cash of $1,555,702, down from $3,652,300 as of October 31, 2024[49] Operating Expenses - Operating expenses for the three months ended April 30, 2025, were $2,083,809, an increase of 18.7% compared to $1,755,368 for the same period in 2024[19] - Stock-based compensation increased to $2,873,750 for the six months ended April 30, 2025, compared to $62,000 in the same period of 2024, indicating a substantial rise in compensation expenses[28] - The Company incurred operating lease expenses of $120,979 for the six months ended April 30, 2025, compared to $98,168 for the same period in 2024[117] Equity and Shares - Total stockholders' equity decreased from $13,815,672 as of October 31, 2024, to $10,641,936 as of April 30, 2025, a decline of 23.3%[17] - The number of common shares outstanding increased from 8,517,302 as of October 31, 2024, to 11,542,302 as of April 30, 2025, reflecting an increase of 35.4%[17] Revenue Sources and Future Outlook - The company does not expect significant revenue from the sale of Bidi Sticks in the foreseeable future due to ongoing legal challenges and regulatory issues[34] - The primary source of revenue is expected to come from royalties from PMI under the PMI License Agreement, following the recent rescission of the Marketing Denial Order for non-tobacco flavored BIDI® Sticks[40] - The Company plans to finance its cash needs through public or private equity offerings or debt financing due to the uncertainty in generating substantial product revenues[92] Legal and Regulatory Challenges - The FDA has prioritized enforcement against unauthorized ENDS products, which poses ongoing risks to the company's operations and market presence[42] Inventory and Reserves - The company recognized a full reserve for all remaining "Classic" products on hand amounting to $313,654 as of October 31, 2024, with zero inventory as of April 30, 2025[56] - The company determined that no reserve for credit losses is required as of April 30, 2025, and October 31, 2024[52] Agreements and Amendments - A merger and share exchange agreement was entered into with Delta Corp Holdings Limited on September 23, 2024, which will result in both companies becoming wholly owned subsidiaries of a new entity[43] - The company has executed a Deed of Amendment to the PMI License Agreement, effective June 30, 2023, modifying the royalty structure[72] Intangible Assets and Amortization - The Company's intangible assets amounted to $11,795,975 as of April 30, 2025, with accumulated amortization of $1,507,268[94] - Amortization expenses for the six months ended April 30, 2025, were $393,204, consistent with the previous year[95] - Future amortization expense of intangible assets is projected to total $10,288,707 over the remaining useful life[96] Credit and Lease Liabilities - The company performs periodic credit evaluations of its customers and has historically not experienced significant credit losses[54] - The company recognizes lease liabilities at the present value of future lease payments, with no financing leases reported[58]