Kaival Brands Innovations Group, Inc.

Results of Operations

Three months ended July 31, 2026, compared to three months ended July 31, 2025

Revenues*:*

Revenues for the third quarter of fiscal year 2026 were approximately $55 thousand, compared to approximately $142 thousand in the same period of the prior fiscal year. Revenues decreased in the third quarter of 2026, primarily due to a decrease in royalty revenue.

Cost of Revenue, Net and Gross Profit:

Gross profit in the third quarter of fiscal year 2026 was approximately $55 thousand, or approximately 100.0% of revenues, net, compared to approximately $142 thousand or approximately 100%, of revenues, net, for the third quarter of fiscal year 2025. Total cost of revenue, net was zero for the third quarter of fiscal year 2026, compared to zero for the third quarter of fiscal year 2025.

Operating Expenses:

Total operating expenses were approximately $0.3 million for the third quarter of fiscal year 2026, compared to approximately $0.7 million for the third quarter of fiscal year 2025. The decrease is primarily from decrease in General and administrative expenses. For the third quarter of fiscal year 2026, operating expenses consisted primarily of professional fees of approximately $0.1 million, and all other general and administrative expenses of approximately $0.2 million. General and administrative expenses in the third quarter of fiscal year 2026 consisted primarily of salaries and wages, insurance, banking fees, and business fees.

For the third quarter of fiscal year 2025, operating expenses consisted primarily of professional fees of approximately $0.2 million, and all other general and administrative expenses of approximately $0.5 million. General and administrative expenses in the third 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 third quarter of fiscal year 2026, we did not accrue a provision for income taxes, due to the pre-tax loss of approximately $0.2 million. Similarly, we did not accrue a provision for income taxes, due to the pre-tax loss of approximately $0.6 million for the third quarter of fiscal year 2025.

Net Loss:

As a result of the items noted above, the net loss for the third quarter of fiscal year 2026 was approximately $0.2 million, or $0.02 basic and diluted net loss per share, compared to a net loss of approximately $0.6 million, or $0.05 basic and diluted net loss per share, for the third quarter of fiscal year 2025. The decrease in the net loss for the third quarter of fiscal year 2026, as compared to the third quarter of fiscal year 2025, is primarily attributable to the decrease in general and administrative expenses.

Nine months ended July 31, 2026, compared to nine months ended July 31, 2025

Revenues:

Revenues for the nine months ended July 31, 2026, were approximately $0.2 million, compared to $0.4 million for the nine months ended July 31, 2025. Revenues decreased during the nine months ended July 31, 2026, compared to the nine months ended July 31, 2025, primarily due to a decrease in royalty sales.

Cost of Revenue and Gross Profit:

Gross profit for the nine months ended July 31, 2026, was approximately $0.2 million, compared to gross profit of approximately $0.4 million for the nine months ended July 31, 2025. Total cost of revenue was zero million for the nine months ended July 31, 2026, compared to zero million for the nine months ended July 31, 2025. The decrease in gross profit for the nine months ended July 31, 2026 compared to the nine months ended July 31, 2025, is due to the decrease in royalty sales during the nine months ended July 31, 2026.

Operating Expenses:

Total operating expenses were approximately $1.6 million for the nine months ended July 31, 2026, compared to approximately $7.0 million for the nine months ended July 31, 2025. For the nine months ended July 31, 2026, operating expenses consisted primarily of stock option expense of $49 thousand, professional fees totaling approximately $0.7 million, and all other general and administrative expenses of approximately $0.8 million. General and administrative expenses during the nine months ended July 31, 2026, consisted primarily of salaries and wages, insurance, project expenses, banking fees, business fees and state and franchise taxes.

For the nine months ended July 31, 2025, operating expenses consisted primarily of stock option expense of $36 thousand, professional fees totaling approximately $4.3 million, loss on ROU asset of $0.7 million, and all other general and administrative expenses of approximately $2.0 million. General and administrative expenses during the nine months ended July 31, 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 nine months ended July 31, 2026, we did not accrue a tax provision for income taxes, due to the pre-tax loss of approximately $1.4 million for the nine months ended July 31, 2026. Similarly, we did not accrue a tax provision for income taxes during the nine months ended July 31, 2025, due to the pre-tax loss of approximately $6.6 million for the nine months ended July 31, 2025.

Net Loss:

The net loss for the nine months ended July 31, 2026, was approximately $1.4 million, or $0.10 basic and diluted net loss per share, compared to net loss for the nine months ended July 31, 2025, which was approximately $6.6 million, or $0.61 basic and diluted net loss per share. The decrease in the net loss for the nine months ended July 31, 2026, as compared to the nine months ended July 31, 2025, is primarily attributable to reduced expenses.

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 nine months ended July 31, 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.