Recently Signed Agreement with Affiliate of
Philip Morris International Could Dramatically Drive Global
Distribution; Accelerate Delivery of a Smoke-Free Future
GRANT,
Fla., June 21, 2022 /PRNewswire/ -- Kaival
Brands Innovations Group, Inc. (NASDAQ: KAVL) ("Kaival Brands," the
"Company," or "we"), the exclusive U.S. distributor of all products
manufactured by Bidi Vapor, LLC ("Bidi Vapor"), which are intended
for adults 21 and over, today announced its financial results for
the fiscal 2022 second quarter ended April
30, 2022.
Recently Signed Agreement with Affiliate of
Philip Morris International Could Drive Global Distribution
Corporate Updates Subsequent to the Fiscal Second Quarter
2022
- The Company's recently formed, wholly owned subsidiary, Kaival
Brands International, LLC ("KBI"), entered into an international
licensing agreement with Philip Morris Products S.A. ("PMPSA"), a
wholly owned affiliate of Philip Morris International Inc. ("PMI")
(NYSE: PM), for the development and distribution of electronic
nicotine delivery system ("ENDS") products in markets outside of
the U.S., 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 U.S., 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 U.S.
- PMI's international distribution network will potentially
create substantial new "capital-light" revenue stream.
Management Comments
Niraj Patel, Chief Executive
Officer and Founder of Kaival Brands stated, "Our results
demonstrate strong execution and resiliency in our business, as
revenues in the second quarter of fiscal year 2022 rose 11% as
compared to revenues in the first quarter of fiscal year 2022. The
recently announced international licensing agreement with PMPSA, a
wholly owned affiliate of PMI, is a major milestone in the
Company's efforts to expand the global sales and distribution of
the BIDI® Stick. From a balance sheet perspective,
the international licensing agreement has the potential to generate
substantial returns on capital for the Company, given the low cash
investment needed to reach a significant number of potential new
consumers."
Financial Results for Fiscal Second Quarter 2022
Revenues: Revenues decreased by approximately
$15.7 million in the second quarter
of fiscal year 2022, compared to the same period of fiscal year
2021. In February 2022, Bidi Vapor
was granted a judicial stay on the marketing denial order ("MDO")
previously issued by the U.S. Food and Drug Administration (the
"FDA") prohibiting the marketing and sale of non-tobacco flavored
BIDI® Sticks, which had significantly impacted our revenues in
previous quarters. As a result of the grant of the judicial
stay of the MDO, our revenues increased in the second quarter of
fiscal 2022, as compared to first quarter of fiscal 2022. We expect
this trend to continue as renewed distribution ramps up and sales
of non-tobacco flavored BIDI® Sticks increase, subject to the court
ruling in Bidi Vapor's favor in the pending merits-based case, and
subject to the FDA's enforcement discretion.
Cost of Revenue, Net, and Gross Profit (Loss): Gross
profit in the second quarter of fiscal year 2022 was approximately
$387,700, or approximately 12.7% of
revenues, net, compared to approximately $6.3 million gross profit, or approximately 34.6%
of revenues, net, for the second quarter of fiscal year 2021. Total
cost of revenue, net was approximately $2.7
million, or approximately 87.3% of revenue, net for the
second quarter of fiscal year 2022, compared to approximately
$11.9 million, or approximately 65.4%
of revenue, net for the second quarter of fiscal year 2021. The
decrease in gross profit is primarily driven by the decrease in
overall sales and the recognition of accumulated year-to-date
credits/discounts/rebates given to customers, totaling
approximately $499,000, resulting in
an offset to revenue, net, during the second quarter of fiscal year
2022.
Operating Expenses: Total operating expenses were
approximately $5.4 million for the
second quarter of fiscal year 2022, compared to approximately
$10.4 million for the second quarter
of fiscal year 2021. For the second quarter of fiscal year 2022,
operating expenses consisted primarily of advertising and promotion
fees of approximately $761,000,
stock-based compensation expense of approximately $2.5 million, professional fees of approximately
$163,000 and general and
administrative expenses of approximately $2.0 million. General and administrative expenses
in the second quarter of fiscal year 2022 consisted primarily of
salaries and wages, stock option expense, insurance, lease expense,
project expenses, banking fees, business fees and state and
franchise taxes. For the second quarter of fiscal year 2021,
operating expenses were approximately $10.4
million, consisting primarily of advertising and promotion
fees of approximately $801,000,
professional fees totaling approximately $7.3 million, and general and administrative
expenses of approximately $2.3
million. General and administrative expenses in the second
quarter of fiscal year 2021 consisted primarily of salaries and
wages, insurance, banking fees, business fees, and other service
fees. We expect future operating expenses to increase while we
increase the footprint of our business and generate increased sales
growth.
Income Taxes: During the second quarter of fiscal
year 2022, we did not accrue a tax provision for income taxes, due
to the pre-tax loss of approximately ($5.1)
million, compared to a tax provision of approximately
$187,000 for the second quarter of
fiscal year 2021, due to the amount of pre-tax income for that
three-month period. However, we did report a tax benefit of
approximately $5,800. The reduction
from the second quarter of fiscal year 2021 was due to the pre-tax
operating loss recognized during the second quarter of fiscal year
2022.
Net Loss: As a result of decreased revenue, the net
loss for the second quarter of fiscal year 2022 was approximately
($5.0) million, or ($0.16) basic and diluted loss per share,
compared to a net loss of approximately ($4.3) million, or ($0.18) basic and diluted earnings per share, for
the second quarter of fiscal year 2021. The increase in the net
loss for the second quarter of fiscal year 2022, as compared to the
second quarter of fiscal year 2021, is primarily attributable to
the decreased revenues and increase in customer
credits/discounts/rebates, as noted above.
Six months ended April 30,
2022, compared to six months ended April 30, 2021
Revenues: Revenues for the first six months of fiscal
year 2022 were approximately $6.0
million, compared to $55.5
million in the same period of the prior fiscal year.
Revenues decreased in the first six months of fiscal year 2022
compared to fiscal year 2021, generally due to (i) Bidi Vapor's
receipt of the MDO, which limited our ability during the first six
months of fiscal year 2022 to sell flavored BIDI® Sticks in
the United States and (ii)
increased competition. In February
2022, Bidi Vapor was granted a judicial stay on the MDO
previously issued by the FDA banning the marketing and sale of
non-tobacco flavored BIDI® Sticks, amongst banning these
non-tobacco flavored sticks with other industry competitors. As a
result of the judicial stay of Bidi Vapor's MDO, we have begun to
experience an upward trajectory in our revenue as renewed
distribution ramps up and sales of non-tobacco flavored
BIDI® Sticks products increase, which sales remain
subject to FDA's enforcement discretion (and assuming that Bidi
Vapor is successful in its currently pending merits-based case). We
also anticipate that if the FDA begins enforcement against
illegally-marketed or synthetic-nicotine vaping products, there may
be an increased demand for compliant and legal vaping products,
such as the BIDI® Stick.
Cost of Revenue and Gross Profit: Gross loss in the first
six months of fiscal year 2022 was approximately ($303,000), compared to gross profit of
approximately $11.1 million profit
for the first six months of fiscal year 2021. Total cost of revenue
was approximately $6.2 million for
the first six months of fiscal year 2022, compared to $44.4 million for the first six months of fiscal
year 2021. The decrease in gross profit is primarily driven by the
decrease in overall sales and the recognition of accumulated
year-to-date credits/discounts/rebates given to customers, totaling
approximately $1.4 million, resulting
in an offset to revenue, net, during the six months ended
April 30, 2022.
Operating Expenses: Total operating expenses were
approximately $7.5 million for the
first six months of fiscal year 2022, compared to approximately
$14.7 million for the first six
months of fiscal year 2021. For the first six months of fiscal year
2022, operating expenses consisted of commissions paid pursuant to
a service agreement of approximately $1.4
million and general and administrative expenses consisting
of amortized stock option expense of approximately $2.8 million, professional fees of approximately
$1.4 million, salaries and wages of
approximately $939,000, and all other
general and administrative expenses of approximately $1.0 million. General and administrative expenses
in the first six months of fiscal year 2022 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 year 2021 were approximately $14.7 million. These operating expenses consisted
primarily of advertising and promotion fees of approximately
$1.8 million; professional fees of
approximately $9.7 million;
salary, wages, commissions, and bonuses of approximately
$1.8 million; stock-based
compensation expense of approximately $580,000; professional fees of approximately
$163,000; and general and
administrative expenses of approximately $820,000, which consisted primarily of insurance,
banking fees, merchant fees, business fess and other service
fees.
Cash Position: As of April
30, 2022, the Company had working capital of approximately
$13.4 million and total cash of
$4.7 million.
Liquidity and Capital Resources: Cash flow used in
operations was approximately $(4.6)
million for the first six months of fiscal year 2022,
compared to $(5.2) million used in
operations for the first six months of fiscal year 2021. The
decrease in cash flow used in operations for the first six months
of fiscal year 2022 compared to the first six months of fiscal 2021
was primarily due to the decrease in stock-based compensation,
accounts receivable, and accounts payable, offset by an increase in
stock option expense, which is a non-cash item.
Cash flow used in financing activities was approximately
$1.5 million for the first six months
of fiscal year 2022, compared to $78,000 for the first six months of fiscal year
2021. Cash provided by financing activities during the first six
months of fiscal year 2022 resulted from the exercise of warrants
by various stockholders. The cash used in financing activities for
the first six months of fiscal year 2022 and fiscal year 2021
consisted of cash used for the settlement of restricted stock units
issued to employees.
ABOUT BIDI VAPOR
Based in Melbourne, Florida,
Bidi Vapor maintains a commitment to responsible adult-focused
marketing, strict youth access prevention measures and
age-verification standards, as well as sustainability through its
BIDI® Cares recycling program. Bidi Vapor's device, the
BIDI® Stick, is a premium product made with high-quality
components, a UL-certified battery and technology designed to
deliver a consistent vaping experience for adult smokers 21 and
over. Bidi Vapor is also adamant about strict compliance with all
federal, state, and local guidelines and regulations. At Bidi
Vapor, innovation is key to its mission, with the BIDI®
Stick promoting environmental sustainability, while providing a
unique vaping experience to adult smokers.
Mr. Patel, the Company's Chief Executive Officer, owns and
controls Bidi Vapor. As a result, Bidi Vapor and the Company
are considered under common control and Bidi Vapor is considered a
related party.
For more information, visit www.bidivapor.com
ABOUT KAIVAL BRANDS
Based in Grant, Florida, Kaival
Brands Innovations Group, Inc., is a company focused on growing and
incubating innovative and profitable products into mature and
dominant brands in their respective markets. Our vision is to
develop internally, acquire, own, or exclusively distribute these
innovative products and grow each into dominant market-share brands
with superior quality and recognizable innovation. Kaival Brands
and Philip Morris International Inc. are the exclusive global
distributors of products manufactured by Bidi Vapor.
Learn more about Kaival Brands at www.ir.kaivalbrands.com
Forward-Looking Statements
This press release includes statements that constitute
"forward-looking statements" within the meaning of federal
securities laws, which are statements other than historical facts
that frequently use words such as "anticipate," "believe,"
"continue," "could," "estimate," "expect," "forecast," "intend,"
"may," "plan," "position," "should," "strategy," "target," "will,"
and similar words. All forward-looking statements speak only as of
the date of this press release. Although we believe that the plans,
intentions, and expectations reflected in or suggested by the
forward-looking statements are reasonable, there is no assurance
that these plans, intentions, or expectations will be achieved.
Therefore, actual outcomes and results could materially differ from
what is expressed, implied, or forecasted in such statements. Our
business may be influenced by many factors that are difficult to
predict, involve uncertainties that may materially affect results,
and are often beyond our control. Factors that could cause or
contribute to such differences include, but are not limited to, the
success of our agreement with PMPSA, how quickly international
markets adopt our product, the timing and results of Bidi Vapor's
appeal of the FDA's PMTA denials for its non-tobacco flavored ENDS
products; the scope of future FDA enforcement of regulations in the
ENDS industry; the FDA's approach to the regulation of synthetic
nicotine and its impact on our business; potential federal and
state flavor bans and other restrictions on ENDS products; the
duration and scope of the COVID-19 pandemic and impact on the
demand for the products we distribute; the 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 pandemic and actions
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; the effects of steps that we could take to
reduce operating costs; our inability to generate and sustain
profitable sales growth, including sales growth in the
international markets; circumstances or developments that may make
us unable to implement or realize anticipated benefits, or that may
increase the costs, of our current and planned business
initiatives; changes in government regulation or laws that affect
our business; significant changes in our relationships with our
distributors or sub-distributors; and those factors detailed by us
in our public filings with the Securities and Exchange Commission.
All forward-looking statements included in this press release are
expressly qualified in their entirety by such cautionary
statements. Except as required under the federal securities laws
and the Securities and Exchange Commission's rules and regulations,
we do not have any intention or obligation to update any
forward-looking statements publicly, whether as a result of new
information, future events, or otherwise.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/kaival-brands-reports-fiscal-2022-second-quarter-financial-results-301571794.html
SOURCE Kaival Brands