Kaival Brands Innovations Group, Inc.

Results of Operations

Three months ended April 30, 2026, compared to three months ended April 30, 2025

Revenues*:*

Revenues for the second quarter of fiscal year 2026 were approximately $38 thousand, compared to approximately $47 thousand in the same period of the prior fiscal year. Revenues decreased in the second quarter of 2026, primarily due to a decrease in royalty revenue.

Cost of Revenue, Net and Gross Profit:

Gross profit in the second quarter of fiscal year 2026 was approximately $38 thousand, or approximately 100.0% of revenues, net, compared to approximately $47 thousand or approximately 100%, of revenues, net, for the second quarter of fiscal year 2025. Total cost of revenue, net was zero for the second quarter of fiscal year 2026 and 2025.

Operating Expenses:

Total operating expenses were approximately $0.6 million for the second quarter of fiscal year 2026, compared to approximately $2.0 million for the second quarter of fiscal year 2025. The decrease is primarily from amortization expense, legal fees and the loss on the ROU asset in 2025. For the second 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 $0.3 million. General and administrative expenses in the second quarter of fiscal year 2026 consisted primarily of salaries and wages, insurance, banking fees, business fees and state and franchise taxes.

For the second quarter of fiscal year 2025, operating expenses consisted primarily of a loss on ROU asset of $0.7 million, professional fees of approximately $0.7 million, and all other general and administrative expenses of approximately $0.6 million. General and administrative expenses in the second 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 second 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 $2.0 million for the second quarter of fiscal year 2025.

Net Loss:

As a result of the items noted above, the net loss for the second quarter of fiscal year 2026 was approximately $0.6 million, or $0.04 basic and diluted net loss per share, compared to a net loss of approximately $2.0 million, or $0.17 basic and diluted net loss per share, for the second quarter of fiscal year 2025. The decrease in the net loss for the second quarter of fiscal year 2026, as compared to the second quarter of fiscal year 2025, is primarily attributable to the decrease of loss on ROU asset and decrease in general and administrative expenses.

Six months ended April 30, 2026, compared to six months ended April 30, 2025

Revenues:

Revenues for the six months ended April 30, 2026, were approximately $0.1 million, compared to $0.2 million for the six months ended April 30, 2025. Revenues decreased during the six months ended April 30, 2026, compared to the six months ended April 30, 2025, primarily due to a decrease in royalty sales.

Operating Expenses:

Total operating expenses were approximately $1.3 million for the six months ended April 30, 2026, compared to approximately $6.3 million for the six months ended April 30, 2025. The decrease in operating expenses primarily related to consulting fees and legal fees. For the six months ended April 30, 2026, operating expenses consisted primarily of stock option expense of $13 thousand, professional fees totaling approximately $0.1 million, and all other general and administrative expenses of approximately $1.2 million. General and administrative expenses during the six months ended April 30, 2026, consisted primarily of salaries and wages, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes.

For the six months ended April 30, 2025, operating expenses consisted primarily of stock option expense of $34 thousand, professional fees totaling approximately $4.1 million, loss on ROU asset of $0.7 million, and all other general and administrative expenses of approximately $1.5 million. General and administrative expenses during the six months ended April 30, 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 six months ended April 30, 2026, we did not accrue a tax provision for income taxes, due to the pre-tax loss of approximately $1.2 million for the six months ended April 30, 2026. Similarly, we did not accrue a tax provision for income taxes during the six months ended April 30, 2025, due to the pre-tax loss of approximately $6.1 million for the six months ended April 30, 2025.

Net Loss:

The net loss for the first six months ended April 30, 2026, was approximately $1.2 million, or $0.08 basic and diluted net loss per share, compared to net loss for the six months ended April 30, 2025, which was approximately $6.1 million, or $0.58 basic and diluted net loss per share. The decrease in the net loss for the six months ended April 30, 2026, as compared to the six months ended April 30, 2025, is primarily attributable to the decrease in the loss on ROU asset and lower sales revenue.

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 six months ended April 30, 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.