Kaival Brands Innovations Group, Inc.

Previous wording

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.

Current wording

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 six months ended April 30, 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.

Previous wording

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.

Current wording

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. A decision from the ALJ is expected on July 21, 2025. The ALJ’s initial determination (ID) will be reviewed by the Commission and the Commission deadline is 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.

Previous wording

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.

Current wording

As a result of the ITC Complaint and other factors, we do not expect any significant 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.

Previous wording

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.

Current wording

In accordance with Financial Accounting Standards Board (or FASB), ASC 205 , 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.

Previous wording

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.

Current wording

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 April 30, 2026, we had a working capital deficit of $20,662 and total cash of $277,951. As discussed above, this condition and other factors raise substantial doubt regarding our ability to continue as a going concern.

Previous wording

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.

Current wording

Net cash flows used in operations was approximately $1.2 million for the first six months of fiscal year 2026, compared to $1.5 million cash flows used in operations for the first six months of fiscal year 2025. The decrease in cash flows used in operations for the first six months of fiscal year 2026 compared to the first six months of fiscal year 2025 was primarily due to the decrease of accrued expenses.

Previous wording

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.

Current wording

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