Cover
Cover - shares | 6 Months Ended | |
Apr. 30, 2022 | Jun. 13, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Apr. 30, 2022 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --10-31 | |
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 | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32949 | |
City Area Code | (833) | |
Local Phone Number | 452-4825 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | KAVL | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 31,166,090 |
Consolidated Balance Sheets (U
Consolidated Balance Sheets (Unaudited) - USD ($) | Apr. 30, 2022 | Oct. 31, 2021 |
CURRENT ASSETS: | ||
Cash | $ 4,661,495 | $ 7,760,228 |
Restricted Cash | 65,542 | 65,007 |
Accounts receivable | 1,175,583 | 1,985,186 |
Inventory deposit – related party | 2,925,000 | |
Inventories | 9,214,320 | 15,326,370 |
Prepaid expenses | 375,891 | 319,531 |
Income tax receivable | 1,753,594 | 1,753,594 |
Total current assets | 17,246,425 | 30,134,916 |
Right of use asset- operating lease | 48,299 | 55,604 |
TOTAL ASSETS | 17,294,724 | 30,190,520 |
CURRENT LIABILITIES: | ||
Accounts payable | 224,774 | 242,829 |
Accounts payable- related party | 3,394,759 | 12,667,769 |
Accrued expenses | 467,079 | 579,604 |
Operating lease obligation – short term | 13,680 | 13,020 |
Customer refund due | 2,382 | 316,800 |
Total current liabilities | 4,102,674 | 13,820,022 |
LONG TERM LIABILITIES | ||
Operating lease obligation, net of current portion | 39,180 | 46,185 |
TOTAL LIABILITIES | 4,141,854 | 13,866,207 |
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 April 30, 2022 and October 31, 2021) | 3,000 | 3,000 |
Common stock ($0.001 par value, 1,000,000,000 shares authorized, 31,166,090 and 30,195,312 issued and outstanding as of April 30, 2022 and October 31, 2021, respectively) | 31,166 | 30,195 |
Additional paid-in capital | 26,173,669 | 21,551,959 |
Accumulated deficit | (13,054,965) | (5,260,841) |
Total Stockholders’ Equity | 13,152,870 | 16,324,313 |
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ 17,294,724 | $ 30,190,520 |
Consolidated Balance Sheets _2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Apr. 30, 2022 | Oct. 31, 2021 |
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 | 31,166,090 | 30,195,312 |
Common stock, shares outstanding | 31,166,090 | 30,195,312 |
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 | 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 | 6 Months Ended | ||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Revenues | ||||
Revenues, net | $ 3,099,751 | $ 18,752,086 | $ 5,965,506 | $ 56,122,053 |
Revenues - related parties | 11,245 | 61,545 | ||
Excise tax on products | (39,727) | (614,252) | (63,599) | (673,000) |
Total revenues | 3,060,024 | 18,149,079 | 5,901,907 | 55,510,598 |
Cost of revenue | ||||
Cost of revenue - related party | 2,627,430 | 11,792,353 | 6,112,050 | 44,271,453 |
Cost of revenue - other | 44,925 | 70,247 | 93,097 | 156,268 |
Total cost of revenue | 2,672,355 | 11,862,600 | 6,205,147 | 44,427,721 |
Gross profit | 387,669 | 6,286,479 | (303,240) | 11,082,877 |
Operating expenses | ||||
Advertising and Promotion | 761,069 | 800,685 | 1,353,570 | 1,761,187 |
General & Administrative expenses | 4,644,567 | 9,558,009 | 6,143,121 | 12,976,348 |
Total operating expenses | 5,405,636 | 10,358,694 | 7,496,691 | 14,737,535 |
Other Income | ||||
Interest income | 46 | 376 | ||
Total Other Income | 46 | |||
Income (loss) before income taxes provision | (5,017,967) | (4,072,169) | (7,799,931) | (3,654,282) |
Provision for income taxes | 5,807 | (186,758) | 5,807 | (293,144) |
Net income (loss) | $ (5,012,160) | $ (4,258,927) | $ (7,794,124) | $ (3,947,426) |
Net income (loss) per common share - basic and diluted | $ (0.16) | $ (0.18) | $ (0.25) | $ (0.17) |
Weighted average number of common shares outstanding - basic and diluted | 30,701,393 | 23,511,959 | 30,680,701 | 23,368,691 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Oct. 31, 2020 | $ 3,000 | $ 23,107 | $ 618,904 | $ 3,772,597 | $ 4,417,608 |
Balance at beginning (in shares) at Oct. 31, 2020 | 3,000,000 | 23,106,886 | |||
Issuance of common shares for employee compensation | $ 45 | 76,655 | 76,700 | ||
Issuance of common shares for employee compensation (in shares) | 44,583 | ||||
Common shares settled and cancelled | $ (18) | (30,493) | (30,511) | ||
Common shares settled and cancelled (in shares) | (17,625) | ||||
Issuance of common shares for compensation | $ 172 | 1,034,424 | 1,034,596 | ||
Common shares settled and cancelled (in shares) | 172,129 | ||||
Net income | 311,501 | 311,501 | |||
Ending balance, value at Jan. 31, 2021 | $ 3,000 | $ 23,306 | 1,699,490 | 4,084,098 | 5,809,894 |
Balance at end (in shares) at Jan. 31, 2021 | 3,000,000 | 23,305,973 | |||
Issuance of common shares for employee compensation (in shares) | 64,583 | ||||
Issuance of common shares for employee compensation | $ 65 | 647,396 | 647,461 | ||
Common shares settled and cancelled | $ (21) | (47,443) | (47,464) | ||
Common shares settled and cancelled (in shares) | (20,505) | ||||
Issuance of common shares for compensation | $ 217 | 6,494,338 | 6,494,555 | ||
Common shares settled and cancelled (in shares) | 216,924 | ||||
Stock Option Expenses | 579,699 | 579,699 | |||
Net income | (4,258,927) | (4,258,927) | |||
Ending balance, value at Apr. 30, 2021 | $ 3,000 | $ 23,567 | 9,373,480 | (174,829) | 9,225,218 |
Balance at end (in shares) at Apr. 30, 2021 | 3,000,000 | 23,566,975 | |||
Beginning balance, value at Oct. 31, 2021 | $ 3,000 | $ 30,195 | 21,551,959 | (5,260,841) | 16,324,313 |
Balance at beginning (in shares) at Oct. 31, 2021 | 3,000,000 | 30,195,312 | |||
Issuance of common shares for employee compensation | $ 61 | 110,189 | 110,250 | ||
Stock Issued for Services RSU, (in shares) | 61,250 | ||||
Common shares settled and cancelled | $ (20) | (35,739) | (35,759) | ||
Common shares settled and cancelled (in shares) | (19,866) | ||||
Stock Option Expenses | 309,700 | 309,700 | |||
Net income | (2,781,964) | (2,781,964) | |||
Ending balance, value at Jan. 31, 2022 | $ 3,000 | $ 30,236 | 21,936,109 | (8,042,805) | 13,926,540 |
Balance at end (in shares) at Jan. 31, 2022 | 3,000,000 | 30,236,696 | |||
Issuance of common shares for employee compensation | $ 80 | 80,086 | 80,166 | ||
Stock Issued for Services RSU, (in shares) | 80,166 | ||||
Common shares settled and cancelled | $ (24) | (24,034) | (24,058) | ||
Common shares settled and cancelled (in shares) | (24,058) | ||||
Exercise of common stock warrants | $ 874 | 1,565,316 | 1,566,190 | ||
Exercise of common stock warrants, shares | 873,286 | ||||
Stock Option Expenses | 2,616,192 | 2,616,192 | |||
Net income | (5,012,160) | (5,012,160) | |||
Ending balance, value at Apr. 30, 2022 | $ 3,000 | $ 31,166 | $ 26,173,669 | $ (13,054,965) | $ 13,152,870 |
Balance at end (in shares) at Apr. 30, 2022 | 3,000,000 | 31,166,090 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Apr. 30, 2022 | Apr. 30, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net (loss) income | $ (7,794,124) | $ (3,947,426) |
Adjustment to reconcile net (loss) income to net cash used in operating activities: | ||
Stock based compensation | 190,416 | 8,253,312 |
Stock option expense | 2,925,892 | 579,699 |
ROU operating lease expense | 7,305 | 7,905 |
Changes in current assets and liabilities: | ||
Accounts receivable | 809,603 | (16,734,585) |
Accounts receivable – related parties | 0 | 14,595 |
Prepaid expenses | (56,360) | (30,000) |
Inventory deposit – related party | 2,925,000 | |
Inventory | 6,112,050 | (28,787,767) |
Accounts payable | (18,055) | 272,509 |
Accounts payable – related party | (9,273,010) | 36,592,072 |
Accrued expenses | (112,525) | (37,854) |
Deferred revenue | (623,096) | |
Income tax accrual | (756,078) | |
Customer refund due | (314,418) | |
Right of use liabilities – operating lease | (6,345) | (6,345) |
Net cash used in operating activities | (4,604,571) | (5,203,059) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Stock warrant exercises | 1,566,190 | |
Settled RSUs with cash | (59,817) | (77,975) |
Cash flows provided by (used in) financing activities | 1,506,373 | (77,975) |
Net change in cash and restricted cash | (3,098,198) | (5,281,034) |
Beginning cash and restricted cash balance | 7,825,235 | 7,421,701 |
Ending cash and restricted cash balance | 4,727,037 | 2,140,667 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Interest paid | ||
Income taxes paid | $ 106,385 |
Organization and Description of
Organization and Description of Business | 6 Months Ended |
Apr. 30, 2022 | |
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 ENDS and related components (the “Products”) manufactured by Bidi, a related party company that is also owned by Nirajkumar Patel, the Chief Executive Officer of the Company. On March 9, 2020, the Company entered into an exclusive distribution agreement (the “Distribution Agreement”) with Bidi, which Distribution Agreement was amended and restated on May 21, 2020 and again on April 20, 2021 (collectively, the “A&R Distribution Agreement”). 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. Currently, the Products consist primarily of the “BIDI ® Subsequent Events 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. On March 11, 2022, the Company formed Kaival Brands International, LLC, a Delaware limited liability company (herein referred to as “KBI”), as a wholly owned subsidiary of the Company. On July 16, 2021, the Company filed a Certificate of Amendment to the Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the shares of the Company’s common stock, par value $ 0.001 Current Product Offerings Pursuant to the A&R Distribution Agreement, the Company sells and resells electronic nicotine delivery systems, which it may refer to herein as “ENDS Products”, or “e-cigarettes”, to non-retail level customers. The sole Product the Company resells is the “BIDI ® ® On July 14, 2021, the Company announced plans to launch its first Kaival-branded product, a Hemp CBD product. In addition to its branded formulation, the Company anticipates that it will also provide white label, wholesale solutions for other product manufacturers through its subsidiary, Kaival Labs. The Company has not yet launched any branded product, nor has it begun to provide white label wholesale solutions for other product manufacturers. COVID-19 Impact 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. The Company’s operations have not been directly impacted by COVID-19. However, we have encountered some logistical delays related to product launches and distribution in international markets. The Company was also indirectly impacted by supply chain issues and regulatory oversight. No impairments have been recorded and no triggering events or changes in circumstances had occurred. While the spread of COVID-19 has slowed and social restrictions have been largely lifted, the full impact of the COVID-19 pandemic continues to evolve and remains uncertain, particularly as new variants of the virus emerge. 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. Impact of the FDA PMTA Decision As of March 2022, the FDA announced that it has taken action on over 99% of applications and issued Marketing Denial Orders (“MDOs”) for more than 1,167,000 non-tobacco flavored ENDS products, while issuing zero marketing authorizations for such products. Bidi, along with nearly every other company in the ENDS industry, received a MDO for its non-tobacco flavored ENDS products. With respect to Bidi, the MDO covered all non-tobacco flavored BIDI ® ® ® ® On September 29, 2021, Bidi petitioned the U.S. Court of Appeals for the Eleventh Circuit to review the FDA’s denial of the PMTAs for its non-tobacco flavored BIDI ® ultra vires ® Finally, on October 14, 2021, Bidi requested that the FDA re-review the MDO and reconsider its position that Bidi did not include certain scientific data in its applications sufficient to allow the PMTAs to proceed to scientific review. In light of this request, on October 22, 2021, pursuant to 21 C.F.R. § 10.35(a), the FDA issued an administrative stay of Bidi’s MDO pending its re-review. Subsequently, the FDA lifted its administrative stay on December 17, 2021. Following the lifting of the FDA’s administrative stay, Bidi filed a renewed motion to stay the MDO with the U.S. Court of Appeals for the Eleventh Circuit, which was granted on February 1, 2022. On February 1, 2022, the U.S. Court of Appeals for the Eleventh Circuit granted Bidi’s motion to stay ( i.e., In the event that the U.S. Court of Appeals for the Eleventh Circuit issues a ruling adverse to Bidi, or if the FDA otherwise chooses to enforce the MDO against Bidi, Bidi will be forced to cease the continued sale of its non-tobacco flavored BIDI ® |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 6 Months Ended |
Apr. 30, 2022 | |
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 subsidiaries, Kaival Labs, Inc. and Kaival Brands International, LLC. Intercompany transactions are eliminated. Basis of Presentation The accompanying unaudited interim consolidated 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 16, 2022 (the “2021 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 consolidated financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the 2021 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. Cash and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at April 30, 2022 and October 31, 2021. Cash and restricted cash at April 30, 2022 and October 31, 2021 were $ 4,727,037 7,825,235 Restricted cash consists of cash held in short-term escrow as required. As of April 30, 2022, and October 31, 2021, the Company had $ 65,542 65,007 The following table sets forth a reconciliation of cash, and restricted cash reported in the consolidated balance sheet and the consolidated statements of cash flows that agrees to the total of those amounts presented in the consolidated statements of cash flows. Restrictions on Cash and Cash Equivalents April 30, 2022 October 31, 2021 Cash $ 4,661,495 $ 7,760,228 Restricted cash 65,542 65,007 Total cash and restricted cash shown in statement of cash flows $ 4,727,037 $ 7,825,235 Advertising and Promotion All advertising, promotion and marketing expenses, including commissions, are expensed when incurred. Accounts Receivable and Allowance for Doubtful Accounts Receivables are stated at cost, net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of accounts receivables. A considerable amount of judgment is required in assessing the amount of the allowance and the Company considers the historical level of credit losses and collection history and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of debtors based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the debtors were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. As of April 30, 2022, based upon management’s assessment of the accounts receivable aging and the customers’ payment history, the Company has determined that no allowance for doubtful accounts was required. As of October 31, 2021, the Company also determined that no Inventories Inventories are stated at the lower of cost and net realizable value. Cost includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The Company determines cost based on the FIFO method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. All inventories (i) were purchased from Bidi, a related party, as of October 31, 2021 and April 30, 2022, (ii) only consisted of finished goods, (iii) were significant, and (iv) were located in three storage warehouses: (1) the primary leased warehouse, which is owned by a related party, Just Pick, LLC (“Just Pick”), (2) a customer/sub distributor warehouse, which is owned by Favs Business LLC (“Favs Business”), and (3) a third-party logistics services warehouse, which is owned by Ranger Enterprises, LLC (“Ranger”). Based upon fiscal year 2021 inventory management procedures and their results, that have continued through the quarter ended April 30, 2022, the Company has determined that no allowance for the inventory valuation was required at April 30, 2022, nor October 31, 2021. Inventory deposit related party In the fourth quarter of fiscal 2021, the Company placed an order for BIDI ® ® ® 2,925,000 Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers 2,556,930 1,433,730 Deferred Revenue The Company accepts partial payments for orders from wholesale customers, which it holds as deposits or deferred revenue, until the Company has received full payment and orders are shipped to the customer. Revenue for these orders is recognized at time of shipment to the customer. As of April 30, 2022, the Company had received $ 2,382 Customer Refunds The Company infrequently has a need to adjust the size of an order after it has been shipped, received, and paid for, due to the customer oversizing the order for more product that it can realistically sell at that time. If and when this occurs, the Company will ask the customer to return the over allotted Products. Once received and inspected, the Company will issue a refund for the Product return. As of April 30, 2022 and October 31, 2021, the Company had customer refunds due in the amounts equal to approximately $ 0 316,800 Products Revenue The Company generates revenue from the sale of the Products (as defined above) to non-retail customers. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the Products has been transferred to the customer. In most situations, transfer of control is considered complete when the Products have been shipped to the customer. The Company determines that a customer obtains control of the Product upon shipment when title of such product and risk of loss transfer to the customer. The Company’s shipping and handling costs are fulfillment costs and such amounts are classified as part of cost of sales. The Company’s sales arrangements for retail sales usually require full prepayment before delivery of the Products. The advance payment is not considered a significant financing component because the period between when the Company transfers a promised good to a customer and when the customer pays for that good is short. The Company offers credit sales arrangements to non-retail (or wholesale) customers and monitors the collectability of each credit sale routinely. Revenue is measured by the transaction price, which is defined as the amount of consideration expected to be received in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes refunds and returns as well as incentive offers and promotional discounts on current orders. Estimates for sales returns are based on, among other things, an assessment of historical trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the period of sale and reduce revenue in the period of the sale. Variable consideration related to incentive offers and promotional programs are recorded as a reduction to revenue based on amounts the Company expects to collect. Estimates are regularly updated and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established at the time an order is placed and incentives have very short-term durations. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time related to credit terms is required before payments are due. The Company does not grant payment financing terms greater than one year. Payments received in advance of revenue recognition are recorded as deferred revenue. Concentration of Revenues and Accounts Receivable For the six months ended April 30, 2022, approximately 40%, or $ 2,366,200 , of the revenue from the sale of Products was generated from Favs Business, and approximately 15%, or $ 877,264 , of the revenue from the sale of Products was generated from The H.T. Hackney Company. Favs Business had an outstanding balance of approximately $ 305,430 297,629 163,163 116,444 For the six months ended April 30, 2021, approximately 33%, or $ 18,129,136 9,069,455 6,820,132 Favs Business, with an outstanding balance of approximately $ 8,590,200 2,482,553 Share-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments (share-based payments, or SBP) based on the grant-date fair value of the award. That cost is recognized over the period during which a recipient is required to provide service in exchange for the SBP award—the requisite service period (vesting period). For SBP awards subject to conditions, compensation is not recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated using the Black-Scholes-Merton option-pricing model. Compensation expense for SBP awards granted to nonemployees is remeasured each period as the underlying options vest. The fair value of each option granted during the fiscal six-month period ended April 30, 2022 and at October 31, 2021 was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the weighted average assumptions in the following table: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions As of April 30, 2022 As of October 31, 2021 Expected dividend yield 0 % 0 % Expected option term (years) 10 10 Expected volatility 294.55 301.53 % 294.55 301.53 Risk-free interest rate 1.19 1.62 % 1.19 1.62 % The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected volatility was based on the volatility in the trading of the Common Stock. The assumed discount rate was the default risk-free ten-year interest rate for U.S. Treasury bills. The Company’s stock option expense for the fiscal three and six months ended April 30, 2022 was $ 2,616,193 and $ 2,925,892 , respectively. The Company’s stock-based compensation for the fiscal three and six months ended April 30, 2022 was $ 110,189 and $ 190,416 , respectively. Income Tax Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. The Company has Federal net operating loss (“NOL”) carryforwards of approximately $ 4,000,000 1,800,000 1,256,059 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes The Company has completed its federal and state tax returns for the 2020 tax year and intends on filing them shortly. Given the federal and state NOLs, the Company anticipates that its 2020 tax returns will report that it is eligible to apply those NOLs against the federal and state taxes it paid in 2019. The Company anticipates federal and state tax refunds of approximately $ 1,600,000 146,000 During the six months ended April 30, 2022, the Company generated no taxable income and, thus, no federal or state income taxes are accrued for fiscal year 2022. Fair Value of Financial Instruments The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. ASC 820, Fair Value Measurements and Disclosures ● Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 - Inputs that are both significant to the fair value measurement and unobservable. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of April 30, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, restricted cash, accounts receivable, inventory, accounts payable and accrued expenses. Recent Accounting Pronouncements The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements. |
Going Concern
Going Concern | 6 Months Ended |
Apr. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 3 – Going Concern In February 2022, the U.S. Court of Appeals for the Eleventh Circuit granted Bidi a judicial stay of the MDO previously issued by the FDA. The ruling means that the MDO is not legally in force pending the outcome of litigation on the merits of Bidi’s challenge to the MDO. Accordingly, we anticipate being able to continue marketing and selling the Products, subject to the FDA’s enforcement discretion, while Bidi continues with its merits case challenging the legality of the MDO. The FDA has indicated that it is prioritizing enforcement against companies that have not submitted PMTAs, whose PMTAs have been refused acceptance or filing by the FDA, or whose PMTAs remain subject to MDOs. Oral arguments in the merits case were held on May 17, 2022. If the U.S. Court of Appeals for the Eleventh Circuit rules in Bidi’s favor in the merits case, the Company anticipates that the FDA will be compelled to place the non-tobacco flavored ENDS back into the PMTA scientific review process. If this is the outcome of the merits case, the Company anticipates being able to continue marketing and selling the Products, subject to the FDA’s enforcement discretion, until the scientific review process is complete on each of Bidi’s PMTA for non-tobacco flavored ENDS and the FDA issues its decision on each. If the U.S. Court of Appeals for the Eleventh Circuit does not rule in Bidi’s favor on the merits case, if the FDA re-issues the MDO after completing its scientific review process for each of Bidi’s PMTAs for its non-tobacco flavored ENDS, or if the FDA otherwise chooses to enforce the MDO against Bidi, the Company will be forced to cease sales of the non-tobacco flavored BIDI ® ® Management plans to continue similar operations with increased marketing, which the Company believes will result in increased revenue and net income. Further, after the end of the three and six months ended April 30, 2022, the Company’s wholly owned subsidiary, KBI, entered into an international licensing agreement with PMPSA, which the Company expects will generate additional revenues. However, there is no assurance that management’s plan will be successful due to the current economic climate in the United States and globally. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that we cannot continue as a going concern. |
Leases
Leases | 6 Months Ended |
Apr. 30, 2022 | |
Leases | |
Leases | Note 4 – Leases The Company capitalizes all leased assets pursuant to ASU 2016-02, Leases (Topic 842) T 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. 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. The operating lease is for a term of five 5 1,000 4.5 As of April 30, 2022 and October 31, 2021, the ROU lease asset, net of accumulated amortization, was approximately $ 48,299 55,604 73,749 14,529 7,305 13,020 46,185 59,205 13,680 39,180 52,860 Schedule of Future Minimum Rental Payments for Operating Leases 2022 2023 2024 2025 Total Lease payments $ 13,400 $ 15,000 $ 18,000 $ 15,000 $ 61,400 Less discount imputed interest (8,540 ) Present value of future payments 52,860 Less current obligations (13,680 ) Long term lease obligations $ 39,180 Storage Space On November 1, 2021, the Company entered into a month-to-month lease agreement with Ranger Enterprises, LLC, located in Seymour, Indiana, to store product inventory at this satellite location. The Company made seven payments on this lease, totaling approximately $ 15,451 19,108 For additional information regarding leases as of the date these unaudited consolidated financial statements were issued, please see Note 8, Subsequent Events |
Stockholder Equity
Stockholder Equity | 6 Months Ended |
Apr. 30, 2022 | |
Equity [Abstract] | |
Stockholder Equity | Note 5 – Stockholder Equity Additional Paid-In Capital During the six months ended April 30, 2022, approximately $ 2,925,892 130,502 1,565,316 4,621,710 Preferred Shares Issued The authorized preferred stock of the Company consists of 5,000,000 0.001 3,000,000 as a result of the Reverse Stock Split, the conversion rate was adjusted such that each share of the Series A Preferred Stock is convertible into approximately 8.33 shares of Common Stock 3,000,000 Common Shares Issued The Company implemented the Reverse Stock Split, effective prior to the opening of the market on July 20, 2021. The Reverse Stock Split was implemented by the Company in support of its application to list on the Nasdaq Capital Market (“Nasdaq”). As a result of the Reverse Stock Split at a ratio of 1-for-12 , every 12 shares of the Common Stock were exchanged for one share of the Common Stock. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split. During the three months ended April 30, 2022, stockholders of the Company exercised warrants to purchase approximately 873,286 The authorized Common Stock of the Company consists of 1,000,000,000 0.001 Warrants Shares Issued As part of the Company’s underwritten public offering during fiscal 2021, the Company issued warrants to purchase a total of 4,053,750 1.90 873,326 1,566,190 0 4.50 The following is a summary of the stock warrant activity during the fiscal six months ended April 30, 2022 and the year ended October 31, 2021. Share-based Payment Arrangement, Option, Activity Six Months Ended April 30, 2022 Year Ended October 31, 2021 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Warrants Outstanding at Beginning of the Period 3,173,922 $ 1.90 — $ 1.90 Granted — — 4,053,750 1.90 Exercised (873,286 ) 1.90 (879,828 ) 1.90 Canceled, forfeited, expired — — — 1.90 Warrants Outstanding and Exercisable at End of Period 2,300,636 $ 1.90 3,173,922 $ 1.90 Restricted Stock Unit Awards On November 5, 2021, the Company issued 61,250 shares of Common Stock to 7 employees in accordance with the vesting schedules set forth in RSU agreements previously entered into with such employees, resulting in the recognition of approximately $110,250 of share-based compensation. Of the shares issued to employees, 19,866 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy cash settlement options to employees, equaling approximately $35,759. On February 5, 2022, the Company issued 61,250 shares of Common Stock to 7 employees in accordance with the vesting schedules set forth in RSU agreements previously entered into with such employees, resulting in the recognition of approximately $65,538 of share-based compensation. Of the shares issued to employees, 24,058 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy cash settlement options to employees, equaling approximately $24,058. On March 4, 2022, the Company’s Board approved the termination of the RSU agreements with the consent of the employees. At the time these agreements were terminated, there remained 1,230,833 unvested RSUs with approximately $4,457,875 of related unvested compensation. See Common Stock Compensation Transition Plan below for additional details. Additionally, during the three months ended April 30, 2022, the Company issued 18,160 . Stock Options During fiscal year 2021, the Company granted options exercisable for up to 150,000 shares of Common Stock of which 15,000 fully vested on March 17, 2021, 7,500 fully vested on June 30, 2021, 41,667 fully vested on December 1, 2021, 68,333 vested on March 17, 2022, 68,333 vest on March 17, 2023, and 17,500 vest over the next 2 years on June 30, 2022 and 2023. The options have exercise prices ranging from $9.12 to $28.68 per share. These options have a weighted average remaining life of 9.43 years as of October 31, 2021 and of 8.92 years as of April 30, 2022. The options expire in the year 2031. On July 19, 2021, two of the stock option agreements, exercisable for an aggregate of 50,000 shares of Common Stock, were modified to accelerate the full vesting period from 3 years to 2 years 1,044,517 1,065,217 The Company granted new options during the three months ended April 30, 2022. On February 27, 2022, non-qualified stock options exercisable for up to 100,000 These stock options have a ten-year term from the grant date, with one-half of the shares vesting on the grant date and the remaining one-half of the shares vesting on the first anniversary of the grant date. The stock options exercisable for an aggregate of up to 200,000 2.45 285,832 and $ 204,167 The aggregate intrinsic value of these outstanding options as of October 31, 2021 and April 30, 2022 was $ 0 Common Stock Compensation Transition Plan During the second quarter of fiscal year 2021 the Board and executive management began cost reduction discussions, including the reduction of non-cash items such as equity compensation awards. Those discussions stalled primarily due to the focus on other corporate events of significant value. In the first and second fiscal quarters of 2022, the Board resumed serious discussions, assessments, and evaluations regarding the equity compensation awarded to its officers and employees. The Board ultimately approved a stock option program for equity awards granted to its officers and employees. The Compensation Committee spent considerable time, effort, and resources designing this program, which was finalized in February 2022 and approved in March 2022. While evaluating and designing this program, the Compensation Committee did not utilize any aspects of value to the employees or other features. Therefore, the termination of the RSU program and the newly adopted stock option program were developed completely independent of each other and terminated and implemented, respectively, distinctly and simultaneously. Management concluded under ASC 718 these transactions are a cancelation and replacement whereby total compensation cost measured at the date of a cancellation and replacement is the portion of the grant-date fair value of the original award for which the service is expected to be rendered at that date plus the incremental cost resulting from the cancellation and replacement. Incremental cost is measured as the excess of the fair value of the replacement award over the fair value of the cancelled award at the cancellation date in which there was none since the fair value of the replacement award was less than the fair value of the canceled award. The outcomes of this decision and the transition on March 4, 2022 resulting in: (i) the termination of the RSU program for all executive officers and employees, consisting of 1,230,833 unvested RSUs and (ii) the implementation a new stock option program for executive officers and employees. The stock options granted pursuant to the program will have ten-year terms from the grant date, with one-half of the shares vesting on the grant date and the remaining one-half of the shares vesting on the first anniversary of the grant date. Stock options exercisable for up to an aggregate of 1,385,600 shares of Common Stock were granted to the executive officers and employees with a fair market value of $2.85 per share, which was calculated using the Black Scholes method. The amortization expense and unamortized expense for these stock options for the three months ended April 30, 2022 was $ 2,303,533 1,645,395 0 The fair values of the options on the grant dates, as noted above, were approximately $3,948,948 using a Black-Scholes option pricing model with the following assumptions: stock price $2.85 per share (based on the quoted trading price on the date of grant), volatility range of 294.55%, expected term of 10 years, and a risk-free interest rate range of 1.62%. The Company is amortizing the expense over the vesting terms of each option. The total stock option expense for the three and six months ended April 30, 2022 was approximately $2,303,533. The fiscal year 2022 unamortized stock option expense at April 30, 2022 was approximately $1,645,395. |
Related-Party Transactions
Related-Party Transactions | 6 Months Ended |
Apr. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Note 6 – Related-Party Transactions Revenue and Accounts Receivable During the six months ended April 30, 2022, the Company recognized revenue of approximately $ 31,150 During the six months ended April 30, 2021, the Company recognized revenue of approximately $ 61,545 765 Concentration Purchases and Accounts Payable During the six months ended April 30, 2022, the Company did not purchase Products from Bidi, a related party. Sales of Products during the first six months of fiscal year 2022 were drawn from the inventory purchase made on September 6, 2021. As of April 30, 2022, the Company had accounts payable to Bidi of approximately $ 3,394,759 9,214,320 During the six months ended April 30, 2021, the Company purchased Products of approximately $ 75,065,602 38,001,633 Leased Office Space and Storage 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. The Company’s Chief Executive Officer is an officer of Just Pick. The liability for rent not paid from the beginning of the lease through April 30, 2022 is $ 21,900 For additional information regarding leases as of the date these unaudited consolidated financial statements were issued, please see Note 8, Subsequent Events |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Apr. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7 – Commitments and Contingencies The Company follows ASC 450-20, Los Contingencies, Cash and Equity Bonus Awards On May 28, 2020, the Board 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 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 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 approved an award of 7,500 restricted shares of the 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 6,250 restricted shares of the 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 quarter ended April 30, 2021, the $75 million and $100 million accumulated revenue targets were both achieved and the Company determined that the fair market value of the 13,750 shares, or approximately $70,785, and the cash bonuses totaling $100,000 should be accrued at April 30, 2021. During the quarter ended April 30, 2022, the $ 125 50,000 On March 4, 2022, the Board terminated all future cash and equity bonus awards for the Company’s Chief Executive Officer and its Chief Operating Officer. Service Agreement 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) with QuikfillRx. Effective as of March 16, 2021, the Company entered into the Second Amendment to Service Agreement (the “Second Amendment”) with QuikfillRx. Effective as of September 17, 2021, the Company entered into the Third Amendment to the Service Agreement (the “Third Agreement” and, collectively with the First Amendment, Second Amendment, and the Service Agreement, the “Amended Service Agreement”) with QuikfillRx. Pursuant to the terms of the Amended Service Agreement, the parties agreed to the following “General Compensation” payments: (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) for each calendar month between November 1, 2020 and October 31, 2021, the Company paid QuikfillRx $125,000 per month for the Services to be performed during such calendar month; (iv) 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; and (v) if the parties agree to extend the term of the Amended Service Agreement beyond October 31, 2022, then for the period between November 1, 2022 and October 31, 2021, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month. On November 1, 2021, the parties agreed to extend the term for an additional one-year period. 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. On March 17, 2021, the Company entered into a consulting agreement with Russell Quick, pursuant to which the Company granted stock options exercisable for up to 41,667 shares of the Company’s Common Stock in exchange for consulting services. The shares underlying the stock option fully vested on December 1, 2021. The exercise price per share is $28.68. The Company recognized approximately $190,000 in expense to account for the stock options. Russell Quick is the Chief Executive Officer of QuikfillRx. The Company accrued approximately $ 35,803 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Apr. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 8 – Subsequent Events Third Amended and Restated Distribution Agreement On June 10, 2022, the Company entered into the Third A&R Distribution Agreement with Bidi, which amended and restated the A&R Distribution Agreement (collectively, the “Distribution Agreement”). The Third A&R Distribution Agreement modifies various terms and provisions to reflect the terms of the PMI Licensing Agreement (as defined below) and also modify the terms between the Company and Bidi. Pursuant to the Third A&R Distribution Agreement, Bidi granted the Company, and its designees, an exclusive right to distribute electronic and non-electronic nicotine delivery systems and related components (other than certain excluded products) for sale and resale to both retail level customers and non-retail level customers worldwide, subject to a carve-out for, and exclusion, of the PMI Markets (as defined below). The Third A&R Distribution Agreement has a term of ten years and automatically renews for a successive ten-year term, unless earlier terminated pursuant its terms. Exercise of Stock Warrants As part of the Company’s underwritten public offering during fiscal 2021, the Company issued warrants to purchase a total of 4,053,750 1.90 3,000 5,700 0 4.50 Lease Agreement On June 10, 2022, the Company entered into a Lease Agreement (the “2022 Lease”) with Just Pick for approximately 21,332 The anticipated commencement date of the 2022 Lease is June 10, 2022 (the “Commencement Date”). The term of the Lease is one ( 1 5 The Company must pay Just Pick base rent equal to $ 17,776 18,665 19,554 20,443 22,220 23,998 Any changes, alterations, additions, or improvements to the Premises made by the Company becomes the property of Just Pick unless prior to the 2022 Lease expiration, the Company removes such improvements and restores the Premises to the same condition as existed on the Commencement Date. The 2022 Lease contains customary representations, warranties, covenants, indemnification provisions, default provisions, and termination provisions. License Agreement On June 10, 2022, Bidi entered into a License Agreement (the “License Agreement”) with KBI, pursuant to which KBI has the exclusive irrevocable license to use Bidi’s licensed intellectual property to the extent necessary for KBI to fulfill its obligations set forth in the Deed of Licensing Agreement (the “PMI License Agreement”), by and between KBI and PMPSA. Such irrevocable license includes: (i) the right of KBI to grant sub-licenses to PMPSA under the PMI License Agreement for the express purposes set forth in the PMI License Agreement, but for no other purpose; (ii) the right of KBI to grant to PMPSA the right to grant sub-sub-licenses in the manner set forth in the PMI License Agreement, but for no other purpose; and (iii) certain branding rights to the extent (but only to the extent) necessary to permit KBI to perform its obligations to PMPSA as set forth in the PMI License Agreement. Pursuant to the License Agreement, if at any time, KBI receives any license of PMPSA intellectual property from PMPSA or any of its affiliates in the manner contemplated by the PMI License Agreement, KBI will grant Bidi an irrevocable sub-license of all right, title, and interest of KBI in and to that PMPSA intellectual property. In addition, Bidi and KBI agree that any amount payable and all net royalties payable to KBI under the PMI License Agreement will be apportioned equally among Bidi and KBI in a manner such that each will ultimately receive fifty percent (50%) thereof. The License Agreement contains customary representations, warranties, covenants, and indemnification provisions. Deed of Licensing Agreement On June 13, 2022 KBI entered into the PMI License Agreement with PMPSA, effective as of May 13, 2022 (the “PMI Commencement Date”). Pursuant to the PMI License Agreement, KBI granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property to make, distribute, and sell disposable nicotine e-cigarettes Products based on the intellectual property in certain international markets set forth in the PMI License Agreement (the “PMI Markets”). The Company has the exclusive international distribution rights to the Products and, in order to allow KBI to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution rights for the PMI Markets to KBI as set forth in a Capital Contribution Agreement dated June 10, 2022. The sublicense granted to PMPSA is exclusive in the PMI Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products in the PMI Markets for the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement). PMSPA will be responsible for any regulatory filings necessary to sell the Products in the PMI Markets. Both KBI and PMPSA agree to work together in the registration and maintenance of the Intellectual Property, but KBI will bear all cost and expense to implement the registration strategy. Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted certain rights with respect to potential future products. The initial term of the PMI License Agreement is five (5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon minimum key performance indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically terminate at the end of the initial license term. In consideration for the grant of the licensed rights, PMPSA agreed to pay to KBI a royalty equal to 2.00% to 3.50% of the base price of the first sale of each unit of Product manufactured. In addition, before the launch of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed minimum royalty equal to twenty percent (20%) of the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty payment of One Million Dollars ($ 1,000,000 The PMI License Agreement contains customary representations, warranties, covenants, and indemnification provisions; however, KBI’s liability under the PMI License Agreement is capped at the greater of: (i) Ten Million Dollars ($10,000,000); or (ii) an amount equal to the total of the royalties due to KBI (but not yet paid) plus the royalties (including the guaranteed royalty payment) paid to KBI pursuant to the PMI License Agreement during the immediately preceding twelve (12) consecutive months, provided that such amount shall not exceed Thirty Million Dollars ($30,000,000). In connection with the PMI License Agreement, the Company, Bidi, and PMPSA also entered into a deed of letter (“Deed of Letter”) to require specific performance of the duties and obligations set forth in the PMI License Agreement if KBI is unable or fails to sublicense the intellectual property to PMPSA pursuant to the PMI License Agreement and/or is unable or fails to perform certain of its obligations or grant the rights pursuant to the PMI License Agreement. In addition, the Company, Bidi, and PMPSA entered into a guarantee (“Guarantee”), whereby each of the Company and Bidi guarantees to PMPSA up to 50% of all of KBI’s monetary obligations set forth in the PMI License Agreement if KBI fails to perform or discharge certain of its obligations in the PMI License Agreement. |
Basis of Presentation and Sig_2
Basis of Presentation and Significant Accounting Policies (Policies) | 6 Months Ended |
Apr. 30, 2022 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the financial statements of the Company’s wholly-owned subsidiaries, Kaival Labs, Inc. and Kaival Brands International, LLC. Intercompany transactions are eliminated. |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim consolidated 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 16, 2022 (the “2021 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 consolidated financial statements, which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the 2021 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. |
Cash and Restricted Cash | Cash and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at April 30, 2022 and October 31, 2021. Cash and restricted cash at April 30, 2022 and October 31, 2021 were $ 4,727,037 7,825,235 Restricted cash consists of cash held in short-term escrow as required. As of April 30, 2022, and October 31, 2021, the Company had $ 65,542 65,007 The following table sets forth a reconciliation of cash, and restricted cash reported in the consolidated balance sheet and the consolidated statements of cash flows that agrees to the total of those amounts presented in the consolidated statements of cash flows. Restrictions on Cash and Cash Equivalents April 30, 2022 October 31, 2021 Cash $ 4,661,495 $ 7,760,228 Restricted cash 65,542 65,007 Total cash and restricted cash shown in statement of cash flows $ 4,727,037 $ 7,825,235 |
Advertising and Promotion | Advertising and Promotion All advertising, promotion and marketing expenses, including commissions, are expensed when incurred. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Receivables are stated at cost, net of an allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of accounts receivables. A considerable amount of judgment is required in assessing the amount of the allowance and the Company considers the historical level of credit losses and collection history and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of debtors based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the debtors were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. As of April 30, 2022, based upon management’s assessment of the accounts receivable aging and the customers’ payment history, the Company has determined that no allowance for doubtful accounts was required. As of October 31, 2021, the Company also determined that no |
Inventories | Inventories Inventories are stated at the lower of cost and net realizable value. Cost includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The Company determines cost based on the FIFO method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. All inventories (i) were purchased from Bidi, a related party, as of October 31, 2021 and April 30, 2022, (ii) only consisted of finished goods, (iii) were significant, and (iv) were located in three storage warehouses: (1) the primary leased warehouse, which is owned by a related party, Just Pick, LLC (“Just Pick”), (2) a customer/sub distributor warehouse, which is owned by Favs Business LLC (“Favs Business”), and (3) a third-party logistics services warehouse, which is owned by Ranger Enterprises, LLC (“Ranger”). Based upon fiscal year 2021 inventory management procedures and their results, that have continued through the quarter ended April 30, 2022, the Company has determined that no allowance for the inventory valuation was required at April 30, 2022, nor October 31, 2021. |
Inventory deposit related party | Inventory deposit related party In the fourth quarter of fiscal 2021, the Company placed an order for BIDI ® ® ® 2,925,000 |
Revenue Recognition | Revenue Recognition The Company adopted ASC 606, Revenue from Contracts with Customers 2,556,930 1,433,730 |
Deferred Revenue | Deferred Revenue The Company accepts partial payments for orders from wholesale customers, which it holds as deposits or deferred revenue, until the Company has received full payment and orders are shipped to the customer. Revenue for these orders is recognized at time of shipment to the customer. As of April 30, 2022, the Company had received $ 2,382 |
Customer Refunds | Customer Refunds The Company infrequently has a need to adjust the size of an order after it has been shipped, received, and paid for, due to the customer oversizing the order for more product that it can realistically sell at that time. If and when this occurs, the Company will ask the customer to return the over allotted Products. Once received and inspected, the Company will issue a refund for the Product return. As of April 30, 2022 and October 31, 2021, the Company had customer refunds due in the amounts equal to approximately $ 0 316,800 |
Products Revenue | Products Revenue The Company generates revenue from the sale of the Products (as defined above) to non-retail customers. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the Products has been transferred to the customer. In most situations, transfer of control is considered complete when the Products have been shipped to the customer. The Company determines that a customer obtains control of the Product upon shipment when title of such product and risk of loss transfer to the customer. The Company’s shipping and handling costs are fulfillment costs and such amounts are classified as part of cost of sales. The Company’s sales arrangements for retail sales usually require full prepayment before delivery of the Products. The advance payment is not considered a significant financing component because the period between when the Company transfers a promised good to a customer and when the customer pays for that good is short. The Company offers credit sales arrangements to non-retail (or wholesale) customers and monitors the collectability of each credit sale routinely. Revenue is measured by the transaction price, which is defined as the amount of consideration expected to be received in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes refunds and returns as well as incentive offers and promotional discounts on current orders. Estimates for sales returns are based on, among other things, an assessment of historical trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the period of sale and reduce revenue in the period of the sale. Variable consideration related to incentive offers and promotional programs are recorded as a reduction to revenue based on amounts the Company expects to collect. Estimates are regularly updated and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established at the time an order is placed and incentives have very short-term durations. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time related to credit terms is required before payments are due. The Company does not grant payment financing terms greater than one year. Payments received in advance of revenue recognition are recorded as deferred revenue. |
Concentration of Revenues and Accounts Receivable | Concentration of Revenues and Accounts Receivable For the six months ended April 30, 2022, approximately 40%, or $ 2,366,200 , of the revenue from the sale of Products was generated from Favs Business, and approximately 15%, or $ 877,264 , of the revenue from the sale of Products was generated from The H.T. Hackney Company. Favs Business had an outstanding balance of approximately $ 305,430 297,629 163,163 116,444 For the six months ended April 30, 2021, approximately 33%, or $ 18,129,136 9,069,455 6,820,132 Favs Business, with an outstanding balance of approximately $ 8,590,200 2,482,553 |
Share-Based Compensation | Share-Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments (share-based payments, or SBP) based on the grant-date fair value of the award. That cost is recognized over the period during which a recipient is required to provide service in exchange for the SBP award—the requisite service period (vesting period). For SBP awards subject to conditions, compensation is not recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated using the Black-Scholes-Merton option-pricing model. Compensation expense for SBP awards granted to nonemployees is remeasured each period as the underlying options vest. The fair value of each option granted during the fiscal six-month period ended April 30, 2022 and at October 31, 2021 was estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the weighted average assumptions in the following table: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions As of April 30, 2022 As of October 31, 2021 Expected dividend yield 0 % 0 % Expected option term (years) 10 10 Expected volatility 294.55 301.53 % 294.55 301.53 Risk-free interest rate 1.19 1.62 % 1.19 1.62 % The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected volatility was based on the volatility in the trading of the Common Stock. The assumed discount rate was the default risk-free ten-year interest rate for U.S. Treasury bills. The Company’s stock option expense for the fiscal three and six months ended April 30, 2022 was $ 2,616,193 and $ 2,925,892 , respectively. The Company’s stock-based compensation for the fiscal three and six months ended April 30, 2022 was $ 110,189 and $ 190,416 , respectively. |
Income Tax | Income Tax Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. The Company has Federal net operating loss (“NOL”) carryforwards of approximately $ 4,000,000 1,800,000 1,256,059 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes The Company has completed its federal and state tax returns for the 2020 tax year and intends on filing them shortly. Given the federal and state NOLs, the Company anticipates that its 2020 tax returns will report that it is eligible to apply those NOLs against the federal and state taxes it paid in 2019. The Company anticipates federal and state tax refunds of approximately $ 1,600,000 146,000 During the six months ended April 30, 2022, the Company generated no taxable income and, thus, no federal or state income taxes are accrued for fiscal year 2022. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. ASC 820, Fair Value Measurements and Disclosures ● Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 - Inputs that are both significant to the fair value measurement and unobservable. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of April 30, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, restricted cash, accounts receivable, inventory, accounts payable and accrued expenses. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements. |
Basis of Presentation and Sig_3
Basis of Presentation and Significant Accounting Policies (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Accounting Policies [Abstract] | |
Restrictions on Cash and Cash Equivalents | Restrictions on Cash and Cash Equivalents April 30, 2022 October 31, 2021 Cash $ 4,661,495 $ 7,760,228 Restricted cash 65,542 65,007 Total cash and restricted cash shown in statement of cash flows $ 4,727,037 $ 7,825,235 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions As of April 30, 2022 As of October 31, 2021 Expected dividend yield 0 % 0 % Expected option term (years) 10 10 Expected volatility 294.55 301.53 % 294.55 301.53 Risk-free interest rate 1.19 1.62 % 1.19 1.62 % |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Leases | |
Schedule of Future Minimum Rental Payments for Operating Leases | Schedule of Future Minimum Rental Payments for Operating Leases 2022 2023 2024 2025 Total Lease payments $ 13,400 $ 15,000 $ 18,000 $ 15,000 $ 61,400 Less discount imputed interest (8,540 ) Present value of future payments 52,860 Less current obligations (13,680 ) Long term lease obligations $ 39,180 |
Stockholder Equity (Tables)
Stockholder Equity (Tables) | 6 Months Ended |
Apr. 30, 2022 | |
Equity [Abstract] | |
Share-based Payment Arrangement, Option, Activity | Share-based Payment Arrangement, Option, Activity Six Months Ended April 30, 2022 Year Ended October 31, 2021 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Warrants Outstanding at Beginning of the Period 3,173,922 $ 1.90 — $ 1.90 Granted — — 4,053,750 1.90 Exercised (873,286 ) 1.90 (879,828 ) 1.90 Canceled, forfeited, expired — — — 1.90 Warrants Outstanding and Exercisable at End of Period 2,300,636 $ 1.90 3,173,922 $ 1.90 |
Organization and Description _2
Organization and Description of Business (Details Narrative) | Apr. 30, 2022 $ / shares |
Accounting Policies [Abstract] | |
Common stock, par value | $ 0.001 |
Basis of Presentation and Sig_4
Basis of Presentation and Significant Accounting Policies (Details - Restricted on Cash) - USD ($) | Apr. 30, 2022 | Oct. 31, 2021 |
Accounting Policies [Abstract] | ||
Cash | $ 4,661,495 | $ 7,760,228 |
Restricted cash | 65,542 | 65,007 |
Total cash and restricted cash shown in statement of cash flows | $ 4,727,037 | $ 7,825,235 |
Basis of Presentation and Sig_5
Basis of Presentation and Significant Accounting Policies (Details - Black-Scholes option) | 6 Months Ended | |
Apr. 30, 2022 | Apr. 30, 2021 | |
Property, Plant and Equipment [Line Items] | ||
Expected dividend yield | 0% | 0% |
Expected option term (years) | 10 years | 10 years |
Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Expected volatility | 294.55% | 294.55% |
Risk-free interest rate | 1.19% | 1.19% |
Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Expected volatility | 301.53% | 301.53% |
Risk-free interest rate | 1.62% | 1.62% |
Basis of Presentation and Sig_6
Basis of Presentation and Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | Apr. 29, 2022 | Oct. 31, 2021 | |
Product Information [Line Items] | ||||||
Cash and cash equivalents | $ 4,727,037 | $ 4,727,037 | $ 7,825,235 | |||
Restricted cash | 65,542 | 65,542 | 65,007 | |||
Allowance for doubtful accounts | 0 | |||||
Accounts payable | $ 2,925,000 | |||||
Consignment agreement amount | 1,433,730 | 1,433,730 | 2,556,930 | |||
Deposits | 2,382 | 2,382 | ||||
Refunds due amounts | 0 | 0 | $ 316,800 | |||
Revenue Not from Contract with Customer, Other | 2,366,200 | $ 18,129,136 | ||||
[custom:RevenueFromSale] | 877,264 | 9,069,455 | ||||
[custom:StockIssuedDuringPeriodValueStockOptionsExercisedNetOfTaxBenefitExpenses] | 2,616,193 | $ 2,925,892 | ||||
Share-Based Payment Arrangement, Noncash Expense | $ 110,189 | $ 190,416 | ||||
Net operating loss | 4,000,000 | 1,800,000 | ||||
Valuation allowance | 1,256,059 | |||||
Current Federal Tax Expense (Benefit) | 1,600,000 | |||||
Current State and Local Tax Expense (Benefit) | 146,000 | |||||
M M S Distribution [Member] | ||||||
Product Information [Line Items] | ||||||
[custom:RevenueFromSale] | 6,820,132 | |||||
G P M Investment L L C [Member] | ||||||
Product Information [Line Items] | ||||||
Revenue Not from Contract with Customer, Other | 8,590,200 | |||||
[custom:RevenueFromSale] | $ 2,482,553 | |||||
Accounts Receivable [Member] | Favs [Member] | ||||||
Product Information [Line Items] | ||||||
Outstanding balance | 305,430 | |||||
Accounts Receivable [Member] | H.T. Hackney [Member] | ||||||
Product Information [Line Items] | ||||||
Outstanding balance | 297,629 | |||||
Accounts Receivable [Member] | Warehouse [Member] | ||||||
Product Information [Line Items] | ||||||
Outstanding balance | 163,163 | |||||
Accounts Receivable [Member] | MMS Distro [Member] | ||||||
Product Information [Line Items] | ||||||
Outstanding balance | $ 116,444 |
Leases (Details)
Leases (Details) | Apr. 30, 2022 USD ($) |
Leases | |
2022 | $ 13,400 |
2023 | 15,000 |
2024 | 18,000 |
2025 | 15,000 |
Total | 61,400 |
Less discount imputed interest | (8,540) |
Present value of future payments | 52,860 |
Less current obligations | (13,680) |
Long term lease obligations | $ 39,180 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | |
Apr. 30, 2022 | Oct. 31, 2021 | Dec. 15, 2021 | |
Leases | |||
Lease term | 5 years | ||
Rent per month | $ 1,000 | ||
Current borrowing rate | 4.50% | ||
Right to use lease asset | $ 48,299 | $ 55,604 | |
Recognition of ROU operating lease | 73,749 | ||
Recognition of ROU liability | 14,529 | ||
Amortization expense for right to use asset | 7,305 | ||
Short-term ROU lease liability | 13,680 | 13,020 | |
Long term lease liability | 39,180 | 46,185 | |
Lease liability | $ 59,205 | ||
Lease liability | 52,860 | ||
Operating lease expense | $ 15,451 | ||
Lease amount | $ 19,108 |
Stockholder Equity (Details)
Stockholder Equity (Details) - Warrants [Member] - $ / shares | 6 Months Ended | 12 Months Ended | |
Apr. 30, 2022 | Apr. 30, 2021 | Oct. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Warrants Outstanding at Beginning | 3,173,922 | ||
Weighted Average Exercise Price at Beginning | $ 1.90 | $ 1.90 | $ 1.90 |
Number of warrants, Granted | 4,053,750 | ||
Weighted Average Exercise Price, Granted | $ 1.90 | ||
Number of warrants, Exercised | (873,286) | (879,828) | |
Weighted Average Exercise Price, Exercised | 1.90 | $ 1.90 | |
Number of warrants, Cancelled, forfeited, expired | |||
Weighted Average Exercise Price, Cancelled, forfeited, expired | $ 1.90 | ||
Warrants Outstanding at Ending | 2,300,636 | 3,173,922 | |
Weighted Average Exercise Price at Ending | $ 1.90 | $ 1.90 |
Stockholder Equity (Details Nar
Stockholder Equity (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 15 Months Ended | |||
Feb. 05, 2022 | Feb. 27, 2022 | Jul. 16, 2021 | Apr. 30, 2022 | Apr. 30, 2022 | Oct. 31, 2021 | Apr. 30, 2022 | Jul. 31, 2021 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Stock option expense | $ 2,925,892 | |||||||
Additional paid-in capital | $ 4,621,710 | $ 4,621,710 | $ 4,621,710 | |||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 | ||||
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | |||||||
Reverse stock split description | as a result of the Reverse Stock Split, the conversion rate was adjusted such that each share of the Series A Preferred Stock is convertible into approximately 8.33 shares of Common Stock | |||||||
Stockholders' Equity, Reverse Stock Split | 1-for-12 | |||||||
Exercise of common stock warrants | $ 873,286 | |||||||
Common Stock, Shares Authorized | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 | 1,000,000,000 | ||||
Common Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||
Issuance of warrants | 4,053,750 | |||||||
Exercise price | $ 1.90 | |||||||
Warrants exercised | $ 1,566,190 | $ 1,566,190 | $ 1,566,190 | |||||
Aggregate intrinsic value | 0 | $ 0 | $ 0 | 0 | ||||
Weighted average remaining term | 4 years 6 months | |||||||
Restricted stock unit awards description | the Company issued 61,250 shares of Common Stock to 7 employees in accordance with the vesting schedules set forth in RSU agreements previously entered into with such employees, resulting in the recognition of approximately $65,538 of share-based compensation. Of the shares issued to employees, 24,058 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy cash settlement options to employees, equaling approximately $24,058. On March 4, 2022, the Company’s Board approved the termination of the RSU agreements with the consent of the employees. At the time these agreements were terminated, there remained 1,230,833 unvested RSUs with approximately $4,457,875 of related unvested compensation. | the Company issued 61,250 shares of Common Stock to 7 employees in accordance with the vesting schedules set forth in RSU agreements previously entered into with such employees, resulting in the recognition of approximately $110,250 of share-based compensation. Of the shares issued to employees, 19,866 shares were withheld by the Company to satisfy tax withholding obligations and/or satisfy cash settlement options to employees, equaling approximately $35,759. | ||||||
Restricted Common Stock | 18,160 | |||||||
Stock option awards, description | the Company granted options exercisable for up to 150,000 shares of Common Stock of which 15,000 fully vested on March 17, 2021, 7,500 fully vested on June 30, 2021, 41,667 fully vested on December 1, 2021, 68,333 vested on March 17, 2022, 68,333 vest on March 17, 2023, and 17,500 vest over the next 2 years on June 30, 2022 and 2023. The options have exercise prices ranging from $9.12 to $28.68 per share. These options have a weighted average remaining life of 9.43 years as of October 31, 2021 and of 8.92 years as of April 30, 2022. The options expire in the year 2031. On July 19, 2021, two of the stock option agreements, exercisable for an aggregate of 50,000 shares of Common Stock, were modified to accelerate the full vesting period from 3 years to 2 years | |||||||
Amortized expense | $ 1,044,517 | |||||||
Unamortized expense | 1,065,217 | 1,065,217 | 1,065,217 | |||||
Stock options exercised | 200,000 | |||||||
Fair market value | $ 2.45 | |||||||
Amortization expense for these stock options | 285,832 | |||||||
[custom:UnamortizedStockOptionExpense] | 1,645,395 | 204,167 | ||||||
Aggregate intrinsic value | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Warrant [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Issuance of warrants | 873,326 | 873,326 | 873,326 | |||||
Common Stock Warrants [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Weighted average remaining term | 4 years 6 months | |||||||
Restricted Stock Units (RSUs) [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Additional paid-in capital | $ 130,502 | $ 130,502 | $ 130,502 | |||||
Warrants [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Additional paid-in capital | $ 1,565,316 | $ 1,565,316 | $ 1,565,316 | |||||
Series A Preferred Stock [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Preferred stock, shares authorized | 3,000,000 | |||||||
Preferred stock, shares issued | 3,000,000 | 3,000,000 | 3,000,000 | |||||
Preferred Stock, Shares Outstanding | 3,000,000 | |||||||
Common Stock [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Stock options exercised | 100,000 | |||||||
Equity Option [Member] | ||||||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||||||
Amortization expense for these stock options | $ 2,303,533 | |||||||
Aggregate intrinsic value | $ 0 | $ 0 | $ 0 | $ 0 |
Related-Party Transactions (Det
Related-Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Apr. 30, 2022 | Apr. 30, 2021 | Apr. 30, 2022 | Apr. 30, 2021 | |
Related Party Transaction [Line Items] | ||||
Revenue from related parties | $ 11,245 | $ 61,545 | ||
Accounts receivable from related parties | 61,545 | 61,545 | ||
Revenues | 3,060,024 | 18,149,079 | 5,901,907 | 55,510,598 |
Liability for rent | 21,900 | 21,900 | ||
Nirajkumar Patel [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenue from related parties | 31,150 | |||
Seven Companies [Member] | ||||
Related Party Transaction [Line Items] | ||||
Revenues | 765 | |||
Bidi Vapor [Member] | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable | $ 3,394,759 | $ 38,001,633 | 3,394,759 | 38,001,633 |
MMS Distro [Member] | ||||
Related Party Transaction [Line Items] | ||||
Sale of Products | $ 9,214,320 | $ 75,065,602 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Apr. 30, 2022 USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
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 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 approved an award of 7,500 restricted shares of the 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 6,250 restricted shares of the 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 quarter ended April 30, 2021, the $75 million and $100 million accumulated revenue targets were both achieved and the Company determined that the fair market value of the 13,750 shares, or approximately $70,785, and the cash bonuses totaling $100,000 should be accrued at April 30, 2021. |
Accumulated revenue | $ 125,000 |
Cash bonuses | $ 50,000 |
[custom:GeneralCompensationDescription] | 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) for each calendar month between November 1, 2020 and October 31, 2021, the Company paid QuikfillRx $125,000 per month for the Services to be performed during such calendar month; (iv) 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; and (v) if the parties agree to extend the term of the Amended Service Agreement beyond October 31, 2022, then for the period between November 1, 2022 and October 31, 2021, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month. |
Acquired quqrterly bonus | $ 35,803,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | 6 Months Ended | ||||
Jun. 13, 2022 USD ($) | Jun. 10, 2022 USD ($) ft² | Apr. 30, 2022 USD ($) | Jun. 14, 2022 USD ($) shares | Oct. 31, 2021 USD ($) $ / shares shares | |
Subsequent Event [Line Items] | |||||
Issuance of warrants | shares | 4,053,750 | ||||
Exercise price | $ / shares | $ 1.90 | ||||
Warrants exercised | $ 1,566,190 | ||||
Aggregate intrinsic value | $ 0 | $ 0 | |||
Weighted average remaining term | 4 years 6 months | ||||
Rent paid | $ 1,000 | ||||
Subsequent Event [Member] | |||||
Subsequent Event [Line Items] | |||||
Issuance of warrants | shares | 3,000 | ||||
Warrants exercised | $ 5,700 | ||||
Rentable area | ft² | 21,332 | ||||
Royalty payment | $ 1,000,000 | ||||
Subsequent Event [Member] | Year One [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | $ 17,776 | ||||
Subsequent Event [Member] | Year Two [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | 18,665 | ||||
Subsequent Event [Member] | Year Three [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | 19,554 | ||||
Subsequent Event [Member] | Year Four [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | 20,443 | ||||
Subsequent Event [Member] | Year Five [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | 22,220 | ||||
Subsequent Event [Member] | Year Six [Member] | |||||
Subsequent Event [Line Items] | |||||
Rent paid | $ 23,998 | ||||
Subsequent Event [Member] | Minimum [Member] | |||||
Subsequent Event [Line Items] | |||||
Lease term | 1 year | ||||
Subsequent Event [Member] | Maximum [Member] | |||||
Subsequent Event [Line Items] | |||||
Lease term | 5 years |