Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Jan. 31, 2021 | Mar. 12, 2021 | |
Document And Entity Information | ||
Entity Registrant Name | Kaival Brands Innovations Group, Inc. | |
Entity Central Index Key | 0001762239 | |
Document Type | 10-Q | |
Document Period End Date | Jan. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --10-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Shell Company? | false | |
Is Entity Emerging Growth Company? | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 282,803,708 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 | |
Interactive Data Current | Yes | |
Incorporation State | DE | |
File Number | 000-56016 |
Consolidated Balance Sheet (Una
Consolidated Balance Sheet (Unaudited) - USD ($) | Jan. 31, 2021 | Oct. 31, 2020 |
CURRENT ASSETS: | ||
Cash | $ 1,963,854 | $ 7,421,701 |
Accounts receivable | 12,664,538 | 1,401,562 |
Accounts receivable - related parties | 18,575 | 15,360 |
Inventories | 8,105 | 6,383 |
Total Current Assets | 14,655,072 | 8,845,006 |
Right of use asset- operating lease | 66,511 | 70,133 |
TOTAL ASSETS | 14,721,583 | 8,915,139 |
CURRENT LIABILITIES: | ||
Accounts payable- related party | 6,247,882 | 1,409,561 |
Accrued expenses | 1,157,495 | 1,062,105 |
Income tax accrual | 1,438,241 | 1,331,856 |
Deferred revenue | 623,096 | |
Office lease liability - short term | 12,036 | 11,709 |
Total Current Liabilities | 8,855,654 | 4,438,327 |
LONG TERM LIABILITIES | ||
Operating lease obligation, net of current portion | 56,035 | 59,204 |
TOTAL LIABILITIES | 8,911,689 | 4,497,531 |
STOCKHOLDERS' EQUITY: | ||
Preferred stock 5,000,000 shares authorized; Series A Convertible Preferred stock ($.001 par value, 3,000,000 shares authorized, 3,000,000 issued and outstanding as of January 31, 2021 and October 31, 2020) | 3,000 | 3,000 |
Common stock ($.001 par value, 1,000,000,000 shares authorized, 279,671,677 and 277,282,630 issued and outstanding as of January 31, 2021 and October 31, 2020, respectively) | 279,672 | 277,283 |
Additional paid in capital | 1,443,124 | 364,728 |
Retained earnings | 4,084,098 | 3,772,597 |
Total Stockholders' Equity | 5,809,894 | 4,417,608 |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ 14,721,583 | $ 8,915,139 |
Consolidated Balance Sheet (U_2
Consolidated Balance Sheet (Unaudited) (Parenthetical) - $ / shares | Jan. 31, 2021 | Oct. 31, 2020 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
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 | 279,671,677 | 277,282,630 |
Common stock, shares outstanding | 279,671,677 | 277,282,630 |
Preferred Stock Series A | ||
Preferred stock, par value | $ .001 | $ .001 |
Preferred stock, shares authorized | 3,000,000 | 3,000,000 |
Preferred stock, shares issued | 3,000,000 | 3,000,000 |
Preferred stock, shares outsanding | 3,000,000 | 3,000,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Jan. 31, 2021 | Jan. 31, 2020 | |
Revenues | ||
Revenues | $ 37,369,967 | |
Revenues - related parties | 50,300 | |
Excise tax on products | (58,748) | |
Total revenues | 37,361,519 | |
Cost of revenue | ||
Cost of revenue - related party | 32,479,100 | |
Cost of revenue - other | 86,021 | |
Total cost of revenue | 32,565,121 | |
Gross profit | 4,796,398 | |
Operating expenses | ||
Advertising and Promotions | 960,502 | |
General & Administrative expenses | 3,418,339 | 12,933 |
Total operating expenses | 4,378,841 | 12,933 |
Other Income | ||
Interest Income | 330 | |
Total Other Income | 330 | |
Income (loss) before income taxes provision | 417,887 | (12,933) |
Provision for income taxes | (106,386) | |
Net income (loss) | $ 311,501 | $ (12,933) |
Net income (loss) per common share - basic and diluted | $ 0 | $ 0 |
Weighted average number of common shares outstanding - basic and diluted | 278,250,733 | 572,364,574 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) | Convertible Preferred Shares (Series A) | Common Stock | Additional Paid-In Capital | Retained Earnings | Total |
Balance at beginning at Oct. 31, 2019 | $ 572,364,574 | $ (544,026) | $ (73,225) | $ (44,886) | |
Balance at beginning (in shares) at Oct. 31, 2019 | 572,365 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Expenses paid on behalf of the Company and contributed to capital | 26,457 | 26,457 | |||
Net Income (loss) | (12,933) | (12,933) | |||
Balance at end at Jan. 31, 2020 | $ 572,364,574 | (517,569) | (86,158) | (31,362) | |
Balance at end (in shares) at Jan. 31, 2020 | 572,365 | ||||
Balance at beginning at Oct. 31, 2020 | $ 3,000,000 | $ 277,282,630 | 364,728 | 3,772,597 | 4,417,608 |
Balance at beginning (in shares) at Oct. 31, 2020 | 3,000 | 277,283 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common shares for employee compensation | $ 535,000 | 76,165 | 76,700 | ||
Issuance of common shares for employee compensation (in shares) | 535 | ||||
Common shares settled and cancelled | $ (211,500) | (30,299) | (30,511) | ||
Common shares settled and cancelled (in shares) | (212) | ||||
Issuance of common shares for compensation | $ 2,065,547 | 1,032,530 | 1,034,596 | ||
Issuance of common shares for compensation (in shares) | 2,066 | ||||
Net Income (loss) | 311,501 | 311,501 | |||
Balance at end at Jan. 31, 2021 | $ 3,000,000 | $ 279,671,677 | $ 1,443,124 | $ 4,084,098 | $ 5,809,894 |
Balance at end (in shares) at Jan. 31, 2021 | 3,000 | 3,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Jan. 31, 2021 | Jan. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ 311,501 | $ (12,933) |
Adjustment to reconcile net income (loss) to net cash provided by operating activities: | ||
Stock based compensation | 1,111,296 | |
ROU operating lease expense | 3,949 | |
Expenses contributed to capital | 26,457 | |
Changes in current assets and liabilities: | ||
Accounts receivable | (11,262,976) | |
Accounts receivable - related parties | (3,215) | |
Inventories | (1,722) | |
Deferred revenue | (623,096) | |
Payments on operating lease liability | (3,169) | |
Accounts payable - related party | 4,838,321 | |
Accrued taxes | 106,385 | |
Accrued expenses | 95,390 | (13,239) |
Net cash (used in) provided by operating activities | (5,427,336) | 285 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Settled RSU shares with cash | (30,511) | |
Cash flows used in financing activities | (30,511) | |
Net change in cash | (5,457,847) | 285 |
Beginning cash balance | 7,421,701 | |
Ending cash balance | 1,963,854 | 285 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest paid | ||
Income taxes paid |
Note 1 - Organization and Descr
Note 1 - Organization and Description of Business | 3 Months Ended |
Jan. 31, 2021 | |
Accounting Policies [Abstract] | |
Organization and Description of Business | Note 1 – Organization and Description of Business Kaival Brands Innovations Group, Inc. (the “Company,” the “Registrant,” “we,” “us,” or “our”), formerly known as Quick Start Holdings, Inc., was incorporated on September 4, 2018 in the State of Delaware. Description of Business The Company is focused on growing and incubating innovative and profitable products into mature, dominant brands. In March 2020, the Company commenced business operations as a result of becoming the exclusive distributor of certain electronic nicotine delivery systems and related components (the “Products”) manufactured by Bidi Vapor, LLC, a Florida limited liability company (“Bidi”), a related party company that is also owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer of the Company. On March 9, 2020, the Company entered into an exclusive distribution agreement (the “Distribution Agreement”) with Bidi, a related party company, which Distribution Agreement was amended and restated on May 21, 2020 (the “A&R Distribution Agreement”) in order to clarify some of the provisions. Pursuant to the A&R Distribution Agreement, Bidi granted the Company an exclusive worldwide right to distribute the Products for sale and resale to both retail level customers and non-retail level customers. In connection with the A&R Distribution Agreement, the Company entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and restated by the parties in order to clarify certain provisions (all such agreements, as amended and restated, are collectively referred to as the “A&R Sub-Distribution Agreements”), whereby the Company appointed the counterparties as non-exclusive sub-distributors. Pursuant to the A&R Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale the Products in such quantities as they should need to properly service non-retail customers within the continental United States (the “Territory”). On August 31, 2020, the Company formed Kaival Labs, Inc., a Delaware corporation (herein referred to as “Kaival Labs”), as a wholly owned subsidiary of the Company. Recent Developments In January 2020, the World Health Organization (the “WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure. Our operations have not been significantly impacted. No impairments have been recorded and no triggering events or changes in circumstances had occurred. However, the full impact of the COVID-19 pandemic continues to evolve subsequent to the fiscal year ended October 31, 2020 and as of the date these consolidated financial statements are issued. As such, the full magnitude of the COVID-19 pandemic, and the resulting impact, if any, on the Company’s financial condition, liquidity, and future results of operations is uncertain. Management is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry, and customers. Reduced demand for products or impaired ability to meet customer demand (including as a result of disruptions at the Company’s suppliers) could have a material adverse effect on its business operations and financial performance. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not presently able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for the current fiscal year. As of the date of this filing, the Company’s recently commenced business operations have not been impacted. |
Note 2 - Basis of Presentation
Note 2 - Basis of Presentation and Significant Accounting Policies | 3 Months Ended |
Jan. 31, 2021 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies | Note 2 – Basis of Presentation and Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the financial statements of the Company’s wholly-owned subsidiary, Kaival Labs. Intercompany transactions are eliminated. Basis of Presentation The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Annual Report on Form 10-K on February 12, 2021 (the “2020 Annual Report”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the 2020 Annual Report, have been omitted. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. |
Note 3 - Leases
Note 3 - Leases | 3 Months Ended |
Jan. 31, 2021 | |
Notes to Financial Statements | |
Leases | Note 3 – Leases The Company capitalizes all leased assets pursuant to ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize right-of-use assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12 months and classified as either financing or operating leases. The Company does not have financing leases and only one operating lease for office space. The operating lease is for a term of five years, beginning August 1, 2020, with rent of $1,000 payable monthly. As the operating lease does not provide for an implicit interest rate, we estimated a current borrowing rate of 4.5% in determining the present value of the lease. As of January 31, 2021, the right-to-use (“ROU”) lease asset, net of accumulated amortization, was $66,511. The initial recognition of the ROU operating lease was $73,749 for both the ROU asset and ROU liability. The amortization expense for ROU asset for the twelve months ended October 31, 2020 was $3,616 and one payment on the ROU liability was $2,836. The amortization expense for the three months ended January 31, 2021 was $3,949 and one payment on the ROU liability was $3,169. At January 31, 2021, short-term ROU lease liability was $12,036 and long-term liability was $56,035, totaling $68,071. Operating lease expense totaling $6,000 for August 2020 until January 2021 was accrued at January 31, 2021. 2020 2021 2022 2023 2024 Total Lease payments $ 12,300 $ 13,500 $ 15,300 $ 18,000 $ 13,500 $ 72,600 Less discount (4,529 ) Present value of future payments 68,071 Less current obligations (12,036 ) Long term lease obligations $ 56,035 |
Note 4 - Stockholder Equity
Note 4 - Stockholder Equity | 3 Months Ended |
Jan. 31, 2021 | |
Equity [Abstract] | |
Stockholder Equity | Note 4 – Stockholder Equity Preferred Shares Issued The authorized preferred stock of the Company consists of 5,000,000 shares with a par value of $0.001 per share, of which 3,000,000 shares were designated as Series A Preferred Stock (the “Series A Preferred Stock”). Each share of the Series A Preferred Stock are initially convertible into 100 shares of common stock. All 3,000,000 shares of Series A Preferred Stock were issued and outstanding as of January 31, 2021. Common Shares Issued The authorized common stock of the Company consists of 1,000,000,000 shares with a par value of $0.001. There were 279,671,677 shares of common stock issued and outstanding as of January 31, 2021. Restricted Stock Unit Awards During the three months ended January 31, 2021, 535,000 shares of common stock were issued to seven employees of the Company under restricted stock unit (“RSU”) agreements, resulting in $76,700 of share-based compensation. Of the shares issued to employees, 211,500 shares were withheld by the Company to satisfy tax withholding obligations equal to $30,511. During the three months ended January 31, 2021, 2,065,547 shares of common stock were issued to 6 non-employee vendors as compensation for professional services rendered to the Company. These shares were expensed to the Company using the closing share price on the share issue dates to compute a total of $1,034,596. |
Note 5 - Related-Party Transact
Note 5 - Related-Party Transactions | 3 Months Ended |
Jan. 31, 2021 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Note 5 – Related-Party Transactions Revenue and Accounts Receivable During the three months ended January 31, 2021, the Company recognized revenue of $50,300 from three companies owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer of the Company, and/or his wife. As of January 31, 2021, the Company has accounts receivable from this related party in the amount of $18,575. Purchases and Accounts Payable During the three months ended January 31, 2021, the Company purchased Products of $32,479,100 from Bidi, a related party company that is also owned by Nirajkumar Patel, our Chief Executive Officer and Chief Financial Officer. As of January 31, 2021, the Company had accounts payable to Bidi of $6,247,882. Office Space On August 1, 2020, the Company began leasing office space for its main corporate office in Grant, Florida. The five-year lease agreement is with a related party, Just Pick, LLC (“Just Pick”). The Company’s Chief Executive Officer is an officer of Just Pick. Prior to this, the Company utilized the home office space and warehouse of its management at no cost through July 31, 2020. |
Note 6 - Concentrations
Note 6 - Concentrations | 3 Months Ended |
Jan. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Note 6 - Concentrations Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue. Concentration of Purchases and Accounts Payable- Related Party For the three months ended January 31, 2021, 100% of the inventories of products, primarily consisting of the “Bidi Stick,” were purchased from Bidi, a related party company that is also owned by Nirajkumar Patel, the Company’s Chief Executive Officer and Chief Financial Officer, in the amount of $32,479,100. It also accounted for 100% of the total accounts payable as of January 31, 2021. Concentration of Revenues and Accounts Receivable For the three months ended January 31, 2021, approximately 37% of the revenue from the sale of Products, primarily consisting of the “Bidi Stick,” was generated from Favs Business, LLC in the amount of $13,888,376, approximately 18% of the revenue from the sale of Products was generated from MMS Distro, Inc. in the amount of $6,708,752 and approximately 13% of the revenue from the sale of Products was generated from Lakshmi Distributer Inc., doing business as C Store Master (“C Store Master”), in the amount of $4,879,427. Favs Business, LLC, with an outstanding balance of $8,601,200 and GPM Investment, LLC, with an outstanding balance of $1,262,985, accounted for approximately 68% and 10% of the total accounts receivable from customers, respectively, as of January 31, 2021. |
Note 7 - Commitments and Contin
Note 7 - Commitments and Contingencies | 3 Months Ended |
Jan. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7 – Commitments and Contingencies The Company follows ASC 450-20, Los Contingencies, On May 28, 2020, the Board of Directors approved cash bonus awards to each of the Company’s Chief Executive Officer and its Chief Operating Officer. With respect to the Chief Executive Officer, the Board of Directors approved a cash bonus award equal to $30,000 for every $25 million in gross revenues generated by the Company. With respect to the Chief Operating Officer, the Board approved a cash bonus award equal to $20,000 for every $25 million in gross revenues generated by the Company. On May 28, 2020, the Board of Directors also approved an equity bonus award for each of the Chief Executive Officer and the Chief Operating Officer. With respect to the Chief Executive Officer, the Board of Directors approved an award of 90,000 restricted shares of the Company’s common stock for every $50 million in accumulated gross revenues generated by the Company. With respect to the Chief Operating Officer, the Board approved an award of 75,000 restricted shares of the Company’s common stock for every $50 million in accumulated gross revenues generated by the Company. The Company’s accumulated gross revenues will be evaluated on a quarterly basis, beginning with the second quarter of fiscal year 2020. At October 31, 2020, the Company determined that the fair value of the equity bonus shares, or $165,000, should be accrued as it was deemed likely that the $50 million revenue target would be met. The Company issued these shares to the Chief Executive Officer and Chief Operating Office on January 1, 2021. During the three months ended January 31, 2021, the $75 million and $100 million revenue targets were both achieved and the Company determined that the fair market value of the 165,000 shares, or $495,000, and the cash bonuses totaling $100,000 should be accrued at January 31, 2021. On March 31, 2020, the Company entered into a service agreement (the “Service Agreement”) with QuikfillRx LLC, a Florida limited liability company (“QuikfillRx”), whereby QuikfillRx provides the Company with certain services and support relating to sales management, website development and design, graphics, content, public communication, social media, management and analytics, and market and other research (collectively, the “Services”). The Services are provided by QuikfillRx as requested from time to time by the Company. On June 2, 2020, the Company entered into the First Amendment to the Service Agreement (the “First Amendment” and, collectively with the Service Agreement, the “Amended Service Agreement”) with QuikfillRx. Pursuant to the terms of the First Amendment, the parties modified the amount of General Compensation (as defined below) to be paid to QuikfillRx. “General Compensation” consists of the following: (i) for the Services provided in March 2020, the Company paid QuikfillRx an amount equal to $86,000; (ii) for the Services provided in April 2020, the Company paid QuikfillRx an amount equal to $100,000; (iii) each calendar month commencing May 2020 through October 2020, the Company paid QuikfillRx an amount equal to $125,000 per month for the Services to be performed during such calendar month; (iv) if the parties agree to extend the term of the Amended Service Agreement beyond the original expiration date of October 31, 2020, then for the period between November 1, 2020 and October 31, 2021, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar month; and (iv) if the parties agree to extend the term of the Amended Service Agreement beyond October 31, 2021, then for the period between November 1, 2021 and October 31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month. In October 2020, the parties agreed to extend the term of the Amended Service Agreement. In addition, the Company will pay the following quarterly bonuses: · An amount equal to 0.9% of the Applicable Gross Quarterly Sales (as defined in the Amended Service Agreement), which amount shall, at the Company’s option be paid in (a) cash or (b) shares of the Company’s common stock, or (c) a combination of cash and Common Stock. · An amount equal to 0.27% of the Applicable Gross Quarterly Sales, which amount must be paid in cash. The Company has accrued $437,817 for a quarterly bonus payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended January 31, 2021. On September 28, 2020, the Company, entered into a patent contribution agreement (the “Patent Contribution Agreement”) with Kaival Labs, the Company’s wholly-owned subsidiary, and Next Generation Labs, LLC, a California limited liability company (“Next Generation”), whereby Next Generation will contribute certain patents, patent applications, and patent data (collectively, the “Patents”) to the Company. Pursuant to the Patent Contribution Agreement, the Company has agreed to pay Next Generation a purchase price of $3 million for the Patents (the “Purchase Price”), which is expected to be paid over-time upon two events. First, the Company expects to pay part of the Purchase Price from proceeds generated from a future securities offering (the “Offering Payment”). Additionally, on the first date that Kaival Labs sells a product that was developed using any portion of the Patents or based on the Patents, the Company will pay Next Generation the difference between the Purchase Price and the Offering Payment. Kaival Labs has also agreed to pay Next Generation a quarterly royalty equal to fifteen percent (15%) of the profits from sales of a product that was developed using any portion of the Patents or based on the Patents, on an accrued basis. Finally, the Company has agreed to pay all of the applicable costs associated with obtaining product approval(s) from the United States Food and Drug Administration. As of the date of issuance of these consolidated financial statements, none of the Patents have been transferred, no payments have been made to Next Generation, and none of the triggering events listed in the Patent Contribution Agreement have occurred. |
Note 8 - Income Tax
Note 8 - Income Tax | 3 Months Ended |
Jan. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Note 8 – Income Tax The Company is subject to federal income taxes and state income tax in the United States. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and reduced the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain companies. The Company fulfilled and shipped all of the Products from Florida and, thus, it is subject to the state corporate income tax of Florida with a tax rate of 4.458%. During the three months ended January 31, 2021, the Company generated taxable income of $417,887 and, thus, accrued $87,756 of federal income tax and $18,629 of state income tax. Significant components of the Company’s deferred tax assets and liabilities as of January 31, 2021 and October 31, 2020 after applying enacted corporate income tax rate, is net operating loss carryforward of $0 and $15,377, and a valuation allowance of $0 and $15,377, respectively, which is a total deferred tax asset of $0. The Company’s tax returns for 2018 and 2019 remain open to examination. |
Note 9 - Subsequent Events
Note 9 - Subsequent Events | 3 Months Ended |
Jan. 31, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 9 – Subsequent Events On February 5, 2021, 528,945 shares of common stock were issued to eight employees of the Company under RSU agreements, resulting in $708,786 of share-based compensation. Of the shares issued to employees, 246,055 shares were withheld by the Company to satisfy tax withholding obligations equal to $329,714. On February 5, 2021, 597,136 shares of common stock were issued to 4 non-employee vendors as compensation for professional services rendered to the Company. These shares were expensed to the Company using the closing share price on the share issue dates to compute a total of $1,074,845. On February 28, 2021, 2,010,000 shares of common stock were issued to 2 non-employee vendors as compensation for professional services rendered to the Company. These shares were expensed to the Company using the closing share price on the previous business day to the issue dates to compute a total of $5,427,000. |
Note 2 - Basis of Presentatio_2
Note 2 - Basis of Presentation and Significant Accounting Policies (Policies) | 3 Months Ended |
Jan. 31, 2021 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the financial statements of the Company’s wholly-owned subsidiary, Kaival Labs. Intercompany transactions are eliminated. |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Annual Report on Form 10-K on February 12, 2021 (the “2020 Annual Report”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the 2020 Annual Report , have been omitted. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. |
Note 3 - Leases (Tables)
Note 3 - Leases (Tables) | 3 Months Ended |
Jan. 31, 2021 | |
Notes to Financial Statements | |
Schedule of Future Minimum Rental Payments for Operating Leases | 2020 2021 2022 2023 2024 Total Lease payments $ 12,300 $ 13,500 $ 15,300 $ 18,000 $ 13,500 $ 72,600 Less discount (4,529 ) Present value of future payments 68,071 Less current obligations (12,036 ) Long term lease obligations $ 56,035 |
Note 3 - Leases (Details)
Note 3 - Leases (Details) - USD ($) | Jan. 31, 2021 | Oct. 31, 2020 |
Notes to Financial Statements | ||
2020 | $ 12,300 | |
2021 | 13,500 | |
2022 | 15,300 | |
2023 | 18,000 | |
2024 | 13,500 | |
Total | 72,600 | |
Less discount | (4,529) | |
Present value of future payments | 68,071 | |
Less current obligations | (12,036) | $ (11,709) |
Long term lease obligations | $ 56,035 | $ 59,204 |
Note 3 - Leases (Details Narrat
Note 3 - Leases (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Jan. 31, 2021 | Oct. 30, 2020 | Oct. 31, 2020 | |
Notes to Financial Statements | |||
Rent per month | $ 1,000 | ||
Lease term | 5 years | ||
Current borrowing rate | 4.50% | ||
Right to use lease asset | $ 66,511 | $ 70,133 | |
Recognition of ROU operating lease | 73,749 | ||
Recognition of ROU liability | 73,749 | ||
Amortization expense for right to use asset | 3,949 | $ 3,616 | |
Payment of ROU liability | 3,169 | $ 2,836 | |
Short-term ROU lease liability | 12,036 | 11,709 | |
Long term lease liability | 56,035 | $ 59,204 | |
Lease liability | 68,071 | ||
Operating lease expense | $ 6,000 |
Note 4 - Stockholder Equity (De
Note 4 - Stockholder Equity (Details Narrative) - USD ($) | 3 Months Ended | |
Jan. 31, 2021 | Oct. 31, 2020 | |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Common stock shares, authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock shares, issued | 279,671,677 | 277,282,630 |
Common stock shares, outstanding | 279,671,677 | 277,282,630 |
Series A Preferred Stock [Member] | ||
Preferred stock, shares authorized | 3,000,000 | |
Preferred stock, shares issued | 3,000,000 | |
Preferred stock shares, outstanding | 3,000,000 | |
Seven Employees [Member] | Restricted Stock Units (RSUs) [Member] | ||
Share based compensation | $ 76,700 | |
Restricted common stock issued | 535,000 | |
Shares Withheld for Tax Withholding Obligation | 211,500 | |
Restricted Stock, Value, Shares Issued Net of Tax Withholdings | $ 30,511 | |
6 non-employees [Member] | ||
Stock Issued During Period, Value, Issued for Services | $ 1,034,596 | |
Stock Issued During Period, Shares, Issued for Services | 2,065,547 |
Note 5 - Related-Party Transa_2
Note 5 - Related-Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Oct. 31, 2020 | |
Related Party Transactions [Abstract] | |||
Revenue from related parties | $ 50,300 | ||
Accounts receivable from related parties | 18,575 | $ 15,360 | |
Purchases of products | 32,479,100 | ||
Accounts payable to related paties | $ 6,247,882 | $ 1,409,561 |
Note 6 - Concentrations (Detail
Note 6 - Concentrations (Details Narrative) - USD ($) | 3 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Oct. 31, 2020 | |
Purchases of products | $ 32,479,100 | ||
Revenue from related parties | 50,300 | ||
Accounts Receivable | $ 18,575 | $ 15,360 | |
Accounts Payable [Member] | |||
Concentration percentage | 100.00% | ||
Inventories Of Products [Member] | |||
Concentration percentage | 100.00% | ||
BidiStick [Member] | |||
Purchases of products | $ 32,479,100 | ||
Favs Business [Member] | Revenue Benchmark [Member] | |||
Concentration percentage | 37.00% | ||
Revenue from related parties | $ 13,888,376 | ||
Favs Business [Member] | Accounts Receivable [Member] | |||
Concentration percentage | 68.00% | ||
Accounts Receivable | $ 8,601,200 | ||
MMS Distro [Member] | Revenue Benchmark [Member] | |||
Concentration percentage | 18.00% | ||
Revenue from related parties | $ 6,708,752 | ||
MMS Distro [Member] | Accounts Receivable [Member] | |||
Concentration percentage | 10.00% | ||
Accounts Receivable | $ 1,262,985 | ||
C Store Master [Member] | Revenue Benchmark [Member] | |||
Concentration percentage | 13.00% | ||
Revenue from related parties | $ 4,879,427 |
Note 7 - Commitments and Cont_2
Note 7 - Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Jan. 31, 2021 | Oct. 30, 2020 | |
Bonus description | cash bonus award equal to $30,000 for every $25 million in gross revenues generated by the Company. With respect to the Chief Operating Officer, the Board approved a cash bonus award equal to $20,000 for every $25 million in gross revenues generated by the Company. On May 28, 2020, the Board of Directors also approved an equity bonus award for each of the Chief Executive Officer and the Chief Operating Officer. With respect to the Chief Executive Officer, the Board of Directors approved an award of 90,000 restricted shares of the Company’s common stock for every $50 million in accumulated gross revenues generated by the Company. With respect to the Chief Operating Officer, the Board approved an award of 75,000 restricted shares of the Company’s common stock for every $50 million in accumulated gross revenues generated by the Company. | |
Fair value of bonus shares | $ 165,000 | |
General Compensation | “General Compensation” consists of the following: (i) for the Services provided in March 2020, the Company paid QuikfillRx an amount equal to $86,000; (ii) for the Services provided in April 2020, the Company paid QuikfillRx an amount equal to $100,000; (iii) each calendar month commencing May 2020 through October 2020, the Company paid QuikfillRx an amount equal to $125,000 per month for the Services to be performed during such calendar month; (iv) if the parties agree to extend the term of the Amended Service Agreement beyond the original expiration date of October 31, 2020, then for the period between November 1, 2020 and October 31, 2021, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar month; and (iv) if the parties agree to extend the term of the Amended Service Agreement beyond October 31, 2021, then for the period between November 1, 2021 and October 31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month. | |
Purchase Price | $ 3,000,000 | |
Quickfillrx [Member] | ||
Accrued Bonus payable | $ 437,817 |
Note 8 - Income Tax (Details Na
Note 8 - Income Tax (Details Narrative) - USD ($) | 3 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Oct. 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
U.S. federal and state income tax rate | 21.00% | 35.00% | |
Statutory corporate income tax rate | 4.458% | ||
Income (loss) before income taxes provision | $ 417,887 | $ (12,933) | |
Accrued of federal income tax | 87,756 | ||
Accrued of state income tax | 18,629 | ||
Net operating loss carryforward | 0 | $ 15,377 | |
Valuation allowance | 0 | 15,377 | |
Deferred tax asset | $ 0 | $ 0 |
Note 9 - Subsequent Events (Det
Note 9 - Subsequent Events (Details Narrative) - Subsequent Event [Member] | Feb. 05, 2021USD ($)shares |
Eight Employees [Member] | RSU Agreement [Member] | |
Restricted stock issued | shares | 528,945 |
Share based compensation | $ | $ 708,786 |
Shares Withheld for Tax Withholding Obligation | shares | 246,055 |
Restricted Stock, Value, Shares Issued Net of Tax Withholdings | $ | $ 329,714 |
4 non-employees [Member] | |
Stock Issued During Period, Value, Issued for Services | $ | $ 1,074,845 |
Stock Issued During Period, Shares, Issued for Services | shares | 597,136 |
2 non-employees [Member] | |
Stock Issued During Period, Value, Issued for Services | $ | $ 5,427,000 |
Stock Issued During Period, Shares, Issued for Services | shares | 2,010,000 |