Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 20, 2023

Kaival Brands Innovations Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-56016	83-3492907
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

4460 Old Dixie Highway

Grant-Valkaria, Florida 32949

(Address of principal executive office, including zip code)

Telephone: (833) 452-4825

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	KAVL	The Nasdaq Stock Market, LLC

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 2.02 Results of Operations and Financial Condition.

On September 20, 2023, Kaival Brands Innovations Group, Inc. (the “Company”) issued a press release announcing its financial results for the third fiscal quarter ended July 31, 2023. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information contained in or incorporated into Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, are furnished under Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or be otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in any such filing.

Exhibit No.	Description
99.1	Press release of the Company, dated September 20, 2023, announcing the Company’s fiscal third quarter 2023 financial results
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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.

Dated: September 20, 2023	By:	/s/ Eric Mosser
		Eric Mosser
		Chief Executive Officer and President

EXHIBIT 99.1

(PRNewsfoto|Kaival Brands)

Kaival Brands Reports Fiscal 2023 Third Quarter Financial Results

Stable Revenues and Improving Gross and Net Profits

Expanding Distribution, Revised Licensing Agreement and More Favorable Regulatory Environment Expected to Serve as Strong Tailwinds for Improving Financial Performance

GRANT-VALKARIA, Fla., September 20, 2023 /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”), including the BIDI^® Stick, which are intended for adults 21 and over, today announced its financial results for the fiscal 2023 third quarter ended July 31, 2023.

Recent Business Highlights

Added more than 1,500 store locations to Circle K rollout bringing the total locations to more than 2,700 in the South Atlantic and Midwest regions

Shipped an initial order of BIDI^® Sticks to over 900 Kwik Trip and Mapco locations

Amended agreement with Phillip Morris International (PMI) for distribution of Bidi Vapor products internationally, simplifying payment structure thereby reducing costs and accelerating royalty payments. On September 8, 2023, the Company received both a net reconciliation payment from PMI of approximately $135,000 pursuant to this amendment, and also received a royalty payment earned from July 1, 2023 through July 31, 2023, in the amount of approximately $121,000

Appointed Thomas J. Metzler to the role of Chief Financial Officer

Promoted Eric Mosser to the role of Chief Executive Officer

Promoted Stephen Sheriff to role of Chief Operating Officer

Management Comments

Eric Mosser, Chief Executive Officer and President of Kaival Brands, stated, “We are increasingly encouraged by the renewed BIDI^® Stick interest and order flow from our distribution partners and increased enforcement of compliance regulations by the U.S. Food and Drug Administration (FDA). Over the past several months, we have increased placements with several large-scale C-store brands including Kwik Trip and Circle K, both of which are focused on ID-verification and youth-access prevention, and engaged a prominent national broker and one of the largest retail distributors in the U.S. We are pushing distribution into more channels and expect the impact will be evident in our financial results in the coming periods. Sales in September are on pace to double sales in August, a solid proof point of the momentum that is building.

“We recently renegotiated the licensing agreement with PMI in light of regulation changes in international markets and given the lessons learned during the first year of the agreement. Importantly, the revised agreement simplifies the payment terms, provides us with incremental cost savings and improves visibility into our future revenue and cash flows. We anticipate an acceleration of royalty payments, which will also serve as a catalyst for improving financial performance in the coming periods.”

Financial Results for Fiscal Third Quarter 2023

Revenues: Revenues for the third quarter of fiscal year 2023 were $3.6 million, compared to $3.8 million in the same period of the prior fiscal year. Revenues were flat in the third quarter of 2023, primarily due to credits/discounts/rebates issued to customers. The Company does not anticipate this trend to continue as renewed distribution ramps up and sales of non-tobacco flavored BIDI® Sticks increase, and even more so now that the PMTA denial order has been vacated by the 11^th Circuit Court of Appeals, which allows it to continue marketing and selling BIDI ® Sticks, subject to the FDA’s enforcement discretion.

Cost of Revenue, Net, and Gross Profit: Gross profit in the third quarter of fiscal year 2023 was $1.3 million, or 36.3% of revenues, net, compared to approximately $442,000 gross profit, or 11.5% of revenues, net, for the third quarter of fiscal year 2022. Total cost of revenue, net was $2.3 million, or 63.7% of revenue, net for the third quarter of fiscal year 2023, compared to $3.4 million, or 88.5% of revenue, net for the third quarter of fiscal year 2022. The increase in gross profit was primarily driven by improved cost per sticks during the third quarter of fiscal year 2023.

Operating Expenses: Total operating expenses were $3.0 million for the third quarter of fiscal year 2023, compared to $4.3 million for the third quarter of fiscal year 2022. For the third quarter of fiscal year 2023, operating expenses consisted of advertising and promotion fees of $578,000 compared to $658,000 in the prior year quarter, and general and administrative expenses of $2.4 million compared to $3.6 million in the prior year quarter. The reduction in general and administrative expenses was primarily the result of lower stock option expenses and professional fees, which was partially offset by an increase in other general and administrative expenses. The Company expects future operating expenses to increase while it increases the footprint of its business and generates increased sales growth.

Net Loss: Net loss for the third quarter of fiscal year 2023 was $1.8 million, or $0.03 basic and diluted net loss per share, compared to a net loss of $3.9 million, or $0.09 basic and diluted net loss per share, for the third quarter of fiscal year 2022. The decrease in the net loss for the third quarter of fiscal year 2023, as compared to the third quarter of fiscal year 2022, is primarily attributable to increased gross margins on sold products and a reduction in general & administrative expenses.

Cash Position: As of July 31, 2023, the Company had working capital of $2.4 million and total cash of $1.0 million.

Additional information regarding the Company’s results of operations for the third quarter ended July 31, 2023 is available in the Company’s Quarterly Report on Form 10-Q for such reporting period, which has been filed with the Securities and Exchange Commission.

ABOUT KAIVAL BRANDS

Based in Grant-Valkaria, Florida, Kaival Brands is a company focused on incubating innovative and profitable adult-focused products into mature and dominant brands, with a current focus on the distribution of electronic nicotine delivery systems (ENDS) also known as “e-cigarettes” for adult smokers and tobacco users 21 and over. Our business plan is to seek to diversify into distributing other nicotine and non-nicotine delivery system products (including those related to hemp-derived cannabidiol (known as CBD) products). Kaival Brands and Philip Morris Products S.A. (via sublicense from Kaival Brands) are the exclusive global distributors of all products manufactured by Bidi Vapor.

Learn more about Kaival Brands at https://ir.kaivalbrands.com/overview/default.aspx.

ABOUT KAIVAL LABS

Based in Grant-Valkaria, Florida, Kaival Labs is a 100% wholly-owned subsidiary of Kaival Brands focused on developing new branded and white-label products and services in the vaporizer and inhalation technology sectors. Kaival Labs’ current patent portfolio consists of 12 existing and 46 pending with novel technologies across extrusion dose control, product preservation, tracking and tracing usage, multiple modalities and child safety. The patents and patent applications cover territories including the United States, Australia, Canada, China, the European Patent Organisation, Israel, Japan, Mexico, New Zealand and South Korea. The portfolio also includes a fully-functional proprietary mobile device software application that is used in conjunction with certain patents in the portfolio.

Learn more about Kaival Labs at https://kaivallabs.com.

ABOUT BIDI VAPOR

Based in Melbourne, Florida, Bidi Vapor maintains a commitment to responsible, adult-focused marketing, supporting age-verification standards and sustainability through its BIDI ® Cares recycling program. Bidi Vapor’s premier 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.

Nirajkumar Patel, the Company’s Chief Science and Regulatory Officer and director, owns and controls Bidi Vapor. As a result, Bidi Vapor is considered a related party of the Company.

For more information, visit www.bidivapor.com.

Contact:

Brett Maas, Managing Partner

Hayden IR

(646) 536-7331

brett@haydenir.com

Kaival Brands Media & Press Relations:

Stephen Sheriff, COO and Investor Relations Officer

Kaival Brands

(646) 572-7086

investors@kaivalbrands.com

-- Tables Follow –


	July 31, 2023			October 31, 2022
ASSETS
CURRENT ASSETS:
Cash	$	1,003,212		$	3,685,893
Accounts receivable, net		710,608			574,606
Other receivable - related party - current portion		1,136,452			1,539,486
Inventories		3,591,991			1,239,725
Prepaid expenses		172,601			426,407
Income tax receivable		—			1,607,302
Total current assets		6,614,864			9,073,419
Fixed assets, net		3,016			—
Intangible assets, net		11,664,909			—
Other receivable - related party - net of current portion		1,840,475			2,164,646
Right of use asset - operating lease		1,056,767			1,198,969
TOTAL ASSETS	$	21,180,031		$	12,437,034

LIABILITIES AND STOCKHOLDER EQUITY
CURRENT LIABILITIES:
Accounts payable	$	125,011		$	40,023
Accounts payable - related party		2,308,373			—
Accrued expenses		540,516			1,099,157
Customer deposits		—			44,973
Customer refund due		618,403			—
Deferred revenue		—			235,274
Loans payable, net		483,078			—
Operating lease obligation - short term		179,861			166,051
Total current liabilities		4,255,242			1,585,478

LONG TERM LIABILITIES:

Operating lease obligation, net of current portion		914,761			1,050,776

TOTAL LIABILITIES		5,170,003			2,636,254

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 July 31, 2023, and October 31, 2022, respectively)		—			—
Series B Convertible Preferred stock ($0.001 par value, 900,000 shares authorized, 900,000 and none issued and outstanding as of July 31, 2023, and October 31, 2022, respectively)		900			—

Common stock
($.001 par value, 1,000,000,000 shares authorized, 58,261,090 and 56,169,090 shares issued and outstanding as of July 31, 2023, and October 31, 2022, respectively)		58,261			56,169

Additional paid-in capital		44,339,243			29,375,787

Accumulated deficit		(28,388,376	)		(19,631,176	)
Total Stockholders’ Equity		16,010,028			9,800,780
TOTAL LIABILITIES & EQUITY	$	21,180,031		$	12,437,034


	For the Three Months Ended July 31,						For the Nine Months Ended July 31,
	2023			2022			2023			2022
Revenues
Revenues, net	$	3,228,099		$	3,854,012		$	8,710,591		$	9,788,368
Revenues - related party		1,165			29,319			7,878			60,469
Royalty revenue		385,685			—			491,257			—
Excise tax on products		(31,356	)		(36,070	)		(79,913	)		(99,669	)
Total revenues, net		3,583,593			3,847,261			9,129,813			9,749,168

Cost of revenues
Cost of revenue - related party		2,282,601			3,365,010			7,414,053			9,477,060
Cost of revenue - other		—			40,186			—			133,283
Total cost of revenue		2,282,601			3,405,196			7,414,053			9,610,343

Gross profit		1,300,992			442,065			1,715,760			138,825

Operating expenses
Advertising and promotion		577,991			657,561			1,827,033			2,011,131
General and administrative expenses		2,376,057			3,641,495			8,510,792			9,784,616
Total operating expenses		2,954,048			4,299,056			10,337,825			11,795,747

Other income (expense)
Interest expense, net		(147,087	)		—			(135,135	)		—
Total other expense		(147,087	)		—			(135,135	)		—

Loss before income taxes provision		(1,800,143	)		(3,856,991	)		(8,757,200	)		(11,656,922	)

Provision for income taxes		—			—			—			5,807

Net loss		(1,800,143	)		(3,856,991	)		(8,757,200	)		(11,651,115	)
Preferred stock dividends		(45,000	)		—			(45,000	)		—
Net loss attributable to common shareholders	$	(1,845,143	)	$	(3,856,991	)	$	(8,802,200	)	$	(11,651,115	)

Net loss per common share - basic and diluted	$	(0.03	)	$	(0.09	)	$	(0.16	)	$	(0.34	)

Weighted average number of common shares outstanding - basic and diluted		57,578,916			41,493,644			56,645,943			34,259,009

Cover	Sep. 20, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 20, 2023
Entity File Number	000-56016
Entity Registrant Name	Kaival Brands Innovations Group, Inc.
Entity Central Index Key	0001762239
Entity Tax Identification Number	83-3492907
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	4460 Old Dixie Highway
Entity Address, City or Town	Grant-Valkaria
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	32949
City Area Code	(833)
Local Phone Number	452-4825
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	KAVL
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false

Consolidated Balance Sheets (Unaudited) - USD ($)	Jul. 31, 2023	Oct. 31, 2022
CURRENT ASSETS:
Cash	$ 1,003,212	$ 3,685,893
Accounts receivable, net	710,608	574,606
Other receivable - related party - current portion	1,136,452	1,539,486
Inventories	3,591,991	1,239,725
Prepaid expenses	172,601	426,407
Income tax receivable	0	1,607,302
Total current assets	6,614,864	9,073,419
Fixed assets, net	3,016	0
Intangible assets, net	11,664,909	0
Other receivable - related party - net of current portion	1,840,475	2,164,646
Right of use asset - operating lease	1,056,767	1,198,969
TOTAL ASSETS	21,180,031	12,437,034
CURRENT LIABILITIES:
Accounts payable	125,011	40,023
Accounts payable - related party	2,308,373	0
Accrued expenses	540,516	1,099,157
Customer deposits	0	44,973
Customer refund due	618,403	0
Deferred revenue	0	235,274
Loans payable, net	483,078	0
Operating lease obligation - short term	179,861	166,051
Total current liabilities	4,255,242	1,585,478
LONG TERM LIABILITIES:
Operating lease obligation, net of current portion	914,761	1,050,776
TOTAL LIABILITIES	5,170,003	2,636,254
STOCKHOLDERS’ EQUITY:
Common stock ($.001 par value, 1,000,000,000 shares authorized, 58,261,090 and 56,169,090 shares issued and outstanding as of July 31, 2023, and October 31, 2022, respectively)	58,261	56,169
Additional paid-in capital	44,339,243	29,375,787
Accumulated deficit	(28,388,376)	(19,631,176)
Total Stockholders’ Equity	16,010,028	9,800,780
TOTAL LIABILITIES & EQUITY	21,180,031	12,437,034
Series A Preferred Stock [Member]
STOCKHOLDERS’ EQUITY:
Preferred Stock, Value, Issued	0	0
Series B Preferred Stock [Member]
STOCKHOLDERS’ EQUITY:
Preferred Stock, Value, Issued	$ 900	$ 0

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jul. 31, 2023	Oct. 31, 2022
Preferred stock, shares authorized	5,000,000	5,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	1,000,000,000	1,000,000,000
Common stock, shares issued	58,261,090	56,169,090
Common stock, shares outstanding	58,261,090	56,169,090
Series A Preferred Stock [Member]
Preferred stock, shares authorized	3,000,000	3,000,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, shares authorized	900,000	900,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares issued	900,000	0
Preferred stock, shares outstanding	900,000	0

Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2023	Jul. 31, 2022	Jul. 31, 2023	Jul. 31, 2022
Revenues
Revenues, net	$ 3,228,099	$ 3,854,012	$ 8,710,591	$ 9,788,368
Revenues - related party	1,165	29,319	7,878	60,469
Royalty revenue	385,685	0	491,257	0
Excise tax on products	(31,356)	(36,070)	(79,913)	(99,669)
Total revenues, net	3,583,593	3,847,261	9,129,813	9,749,168
Cost of revenues
Cost of revenue - related party	2,282,601	3,365,010	7,414,053	9,477,060
Cost of revenue - other	0	40,186	0	133,283
Total cost of revenue	2,282,601	3,405,196	7,414,053	9,610,343
Gross profit	1,300,992	442,065	1,715,760	138,825
Operating expenses
Advertising and promotion	577,991	657,561	1,827,033	2,011,131
General and administrative expenses	2,376,057	3,641,495	8,510,792	9,784,616
Total operating expenses	2,954,048	4,299,056	10,337,825	11,795,747
Other income (expense)
Interest expense, net	(147,087)	0	(135,135)	0
Total other expense	(147,087)	0	(135,135)	0
Loss before income taxes provision	(1,800,143)	(3,856,991)	(8,757,200)	(11,656,922)
Provision for income taxes	0	0	0	5,807
Net loss	(1,800,143)	(3,856,991)	(8,757,200)	(11,651,115)
Preferred stock dividends	(45,000)		(45,000)
Net loss attributable to common shareholders	$ (1,845,143)	$ (3,856,991)	$ (8,802,200)	$ (11,651,115)

Consolidated Statements of Operations (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Jul. 31, 2023	Jul. 31, 2022	Jul. 31, 2023	Jul. 31, 2022
Income Statement [Abstract]
Earnings Per Share, Basic	$ (0.03)	$ (0.09)	$ (0.16)	$ (0.34)
Net loss per common share diluted	$ (0.03)	$ (0.09)	$ (0.16)	$ (0.34)
Weighted Average Number of Shares Outstanding, Basic	57,578,916	41,493,644	56,645,943	34,259,009
Weighted Average Number of Shares Outstanding, Diluted	57,578,916	41,493,644	56,645,943	34,259,009