What changed in this filing

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Item 1. Financial Statements

2020-09-14 compared with 2020-05-27 · 571 added, 383 removed, 344 unchanged (73% of the section changed)

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CURRENT LIABILITIES:

Accrued expenses

Accounts payable

Accounts payable and accrued expenses

Accrued taxes

Accounts payable –

4 unchanged sentences

EQUITY(DEFICIT):

Preferred stock ($.001 par value, 5,000,000 shares authorized, none issued and outstanding as of April 30, 2020 and October 31, 2019)

Common stock ($.001 par value, 1,000,000,000 shares authorized, 572,364,574 issued and outstanding as of April 30, 2020 and October 31, 2019)

Preferred stock 5,000,000 shares authorized;

Series A preferred stock ($.001 par value, 3,000,000 shares authorized, none issued and outstanding as of July 31, 2020 and October 31, 2019)

Common stock ($.001 par value, 1,000,000,000 shares authorized, 576,495,148 and 572,364,574 issued and outstanding as of July 31, 2020 and October 31, 2019, respectively)

Additional paid-in capital

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of Operations

For the Three Months Ended April 30,

For the Six Months

Ended April 30,

For the Three Months

Ended July 31,

For the Nine Months

Ended July 31,

Revenues - related parties

Total revenues

Excise tax on products

Total net revenues

Cost of revenue

Cost of revenue - related party

Cost of revenue –

Total cost of revenue

Operating expenses

Selling expenses

General & Administrative expenses

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of Cash Flows

For the Six Months Ended

For the Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

Adjustment to reconcile net income (loss) to net cash provided by operating activities:

Stock based compensation

Expenses contributed to capital

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related parties

Accounts payable

Accounts payable –

related party

Accrued expenses

Accrued taxes

Accounts payable and accrued expenses

Net cash provided by operating activities

6 unchanged sentences

accompanying notes are an integral part of these unaudited financial statements.

Kaival Brands Innovations Group, Inc.

Statement of Changes in Stockholders’

Brands Innovations Group, Inc.

of Changes in Stockholders’

Equity (Deficit)

For the Three and Six Months Ended April 30, 2020

the Three and Nine Months Ended July 31, 2020

Preferred Shares

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Balances, April 30, 2020

Issuance of common shares for compensation

Balances, July 31, 2020

The accompanying

notes are an integral part of these unaudited financial statements.

Brands Innovations Group, Inc.

of Changes in Stockholders’

the Three and Six Months Ended April 30, 2019

the Three and Nine Months Ended July 31, 2019

Preferred Shares

11 unchanged sentences

Balances, April 30, 2019

Expenses paid on behalf of the Company and contributed to capital

Balances, July 31, 2019

accompanying notes are an integral part of these unaudited financial statements.

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Organization and Description of Business

Brands Innovations Group, Inc.

Kaival Brands

Innovations Group, Inc.

(the “Company,”

2 unchanged sentences

“us,”

“our”), formerly known as Quick Start Holdings, Inc., was incorporated on September 4, 2018 in the State of Delaware.

or “our”),

formerly known as Quick Start Holdings, Inc., was incorporated on September 4, 2018 in the State of Delaware.

and USSE Delaware Merger

Corp., a Nevada Corporation (“USSE Nevada”), formerly known as Quick Start Holdings, Inc., was incorporated with the

Nevada Secretary of State on July 8, 1998 under the original name C&A Restaurants, Inc.

a Nevada Corporation (“USSE Nevada”), formerly known as Quick Start Holdings, Inc., was incorporated with the Nevada

Secretary of State on July 8, 1998 under the original name C&A Restaurants, Inc.

(“C&A Restaurants”).

On June 15, 2009, C&A Restaurants changed its name to USSE Corp.

September 19, 2018, USSE Nevada re-domiciled from Nevada to Delaware pursuant to a merger of USSE Nevada with and into USSE Delaware,

Inc., a Delaware corporation (“USSE Delaware”), with USSE Delaware as the surviving entity (the “Re-domestication

15, 2009, C&A Restaurants changed its name to USSE Corp.

Effective September

19, 2018, USSE Nevada re-domiciled from Nevada to Delaware pursuant to a merger of USSE Nevada with and into USSE Delaware, Inc.,

a Delaware corporation (“USSE Delaware”), with USSE Delaware as the surviving entity (the “Re-domestication

Merger”).

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Company Reorganization

September 4, 2018, USSE Delaware acquired 1,000 shares of common stock of the Company, which represented 100% of the Company’s

then-outstanding shares of common stock, for no consideration, resulting in the Company becoming a wholly-owned subsidiary of

USSE Delaware.

Also, immediately prior to the Holding Company Reorganization (as defined below), USSE Merger Sub, Inc., a Delaware

corporation (“USSE Merger Sub”), was the Company’s wholly-owned subsidiary.

September 19, 2018 (the “Effective Time”), and in accordance with the provisions set forth in Section 251(g) of the

Delaware General Corporation Law (“DGCL”), USSE Merger Sub, an indirect wholly-owned subsidiary of USSE Delaware and

the Company’s direct wholly-owned subsidiary merged with and into USSE Delaware, the Company’s then parent (the “Holding

Company Reorganization”).

4, 2018, USSE Delaware acquired 1,000 shares of common stock of the Company, which represented 100% of the Company’s then-outstanding

shares of common stock, for no consideration, resulting in the Company becoming a wholly-owned subsidiary of USSE Delaware.

immediately prior to the Holding Company Reorganization (as defined below), USSE Merger Sub, Inc., a Delaware corporation (“USSE

Merger Sub”), was the Company’s wholly-owned subsidiary.

19, 2018 (the “Effective Time”), and in accordance with the provisions set forth in Section 251(g) of the Delaware

General Corporation Law (“DGCL”), USSE Merger Sub, an indirect wholly-owned subsidiary of USSE Delaware and the Company’s

direct wholly-owned subsidiary merged with and into USSE Delaware, the Company’s then parent (the “Holding Company

Reorganization”).

USSE Delaware was the surviving corporation and the Company’s wholly-owned subsidiary.

Delaware also changed its name to USSE Corp.

USSE Delaware

also changed its name to USSE Corp.

following the Holding Company Reorganization.

completion of the Holding Company Reorganization, by virtue of the merger, and without any action on the part of the holder thereof,

each share of USSE Delaware’s common stock issued and outstanding immediately prior to the Effective Time of the Holding

Company Reorganization was automatically converted into one validly issued, fully paid, and non-assessable share of the Company’s

Upon completion

of the Holding Company Reorganization, by virtue of the merger, and without any action on the part of the holder thereof, each

share of USSE Delaware’s common stock issued and outstanding immediately prior to the Effective Time of the Holding Company

Reorganization was automatically converted into one validly issued, fully paid, and non-assessable share of the Company’s

common stock.

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and outstanding and held by USSE Delaware immediately prior to the Effective Time was cancelled.

resulted in the Company being authorized to issue up to 1,005,000,000 shares, which consisted of:

(i) 1,000,000,000 shares of

common stock, par value $0.001 per share, of which 66,397,574 shares were issued and outstanding;

(ii) 5,000,000 shares of preferred

stock, par value $0.001 per share, of which (a) 1,000,000 shares were designated as Convertible Series A, all of which were issued

and outstanding;

and (b) 500,000 shares were designated as Convertible Series B, of which 71,700 shares of Convertible Series

B preferred stock were issued and outstanding.

Company Reorganization

October 19, 2018, the Company issued 500,000,000 shares of restricted common stock and 400,000 shares of Convertible Series B

Preferred Stock to GMRZ Holdings LLC, a Nevada limited liability company (“GRMZ”), for services rendered to the Company.

This resulted

in the Company being authorized to issue up to 1,005,000,000 shares, which consisted of:

(i) 1,000,000,000 shares of common stock,

par value $0.001 per share, of which 66,397,574 shares were issued and outstanding;

(ii) 5,000,000 shares of preferred stock,

par value $0.001 per share, of which (a) 1,000,000 shares were designated as Convertible Series A, all of which were issued and

and (b) 500,000 shares were designated as Convertible Series B, of which 71,700 shares of Convertible Series B preferred

stock were issued and outstanding.

Post-Holding Company Reorganization

On October 19,

2018, the Company issued 500,000,000 shares of restricted common stock and 400,000 shares of Convertible Series B Preferred Stock

to GMRZ Holdings LLC, a Nevada limited liability company (“GRMZ”), for services rendered to the Company.

with the filing of the Company’s Amended and Restated Certificate of Incorporation with the Delaware Secretary of State

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from the status of authorized but unissued preferred stock.

February 6, 2019, the Company entered into a non-binding Share Purchase Agreement (the “Agreement”), by and among

the Company, GMRZ, and Kaival Holdings, LLC (formerly known as Kaival Brands Innovations Group, LLC), a Delaware limited liability

company (formerly known as Kaival Brands Innovations Group, LLC) (“KH”), pursuant to which, on February 20, 2019,

GMRZ sold 504,000,000 shares of the Company’s restricted common stock, representing approximately 88.06 percent of the Company’s

6, 2019, the Company entered into a non-binding Share Purchase Agreement (the “Agreement”), by and among the Company,

GMRZ, and Kaival Holdings, LLC (formerly known as Kaival Brands Innovations Group, LLC), a Delaware limited liability company

(formerly known as Kaival Brands Innovations Group, LLC) (“KH”), pursuant to which, on February 20, 2019, GMRZ sold

504,000,000 shares of the Company’s restricted common stock, representing approximately 88.06 percent of the Company’s

issued and outstanding shares of common stock, to KH, and KH paid GMRZ consideration in the amount set forth in the Agreement

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control of the Company, with KH becoming the Company’s largest controlling stockholder.

The sole members of KH are Nirajkumar

Patel and Eric Mosser.

The sole voting members of KH are

Nirajkumar Patel and Eric Mosser.

The Purchase Price was paid with personal funds of the members of KH.

July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc.

Effective July

12, 2019, we changed our corporate name from Quick Start Holdings, Inc.

to Kaival Brands Innovations Group, Inc.

change was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations Group, Inc., our wholly-owned Delaware

The name change

was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations Group, Inc., our wholly-owned Delaware

subsidiary formed solely for the purpose of the name change, with and into us.

We were the surviving entity.

the effective date of the merger, our name was changed to “Kaival Brands Innovations Group, Inc.”

and our Amended

and Restated Certificate of Incorporation, as amended (the “Charter”), was further amended to reflect our new legal

There were no other changes to our Charter.

we have 572,364,574 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

which is owned and controlled by Nirajkumar Patel and Eric Mosser, is our controlling stockholder, owning 504,000,000 shares of

our restricted common stock.

the quarter ended April 30, 2020, the Company commenced business operations.

The Company is focused on growing and incubating

innovative and profitable products into mature, dominant brands.

During the quarter ended April 30, 2020, the Company commenced

business operations as a result of becoming an exclusive distributor of certain electronic nicotine delivery systems and related

components (the “Products”) manufactured by Bidi Vapor, LLC (“Bidi”), a Florida limited liability company,

a related party company that is also owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer of the

On the effective

date of the merger, our name was changed to “Kaival Brands Innovations Group, Inc.”

and our Amended and Restated Certificate

of Incorporation, as amended (the “Charter”), was further amended to reflect our new legal name.

There were no other

changes to our Charter.

Share Cancellation and Exchange Agreement

On August 19, 2020, the Company entered into

a Share Cancellation and Exchange Agreement (the “Share Cancellation and Exchange Agreement”) with its controlling

stockholder, KH.

Pursuant to the

Share Cancellation and Exchange Agreement, KH returned to the Company 300,000,000 shares of the Company’s common stock (the

“Cancellation Shares”), which Cancellation Shares were cancelled and retired by the Company.

Following such cancellation,

KH owns 204,000,000 shares of the Company’s common stock.

August 19, 2020, the Company filed a Certificate of Designation of Preferences, Rights, and Limitations of the Series A Preferred

Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware, which authorized

a total of 3,000,000 shares, par value $0.01 per share, of Series A Preferred Stock (the “Series A Preferred Stock ”).

All series of preferred stock, whether now or hereafter designated,

may by their respective terms have a preference over the Series A Preferred Stock in respect of distribution upon liquidation,

dividends, or any other right or matter.

The number of shares so designated is three million (3,000,000)

shares, par value $0.001 per share, and such amount cannot be increased except by the favorable vote or the written consent of

the holders of at least a majority of the issued and outstanding shares of Series A Preferred Stock or by a resolution of the

Board of Directors.

Such number of shares of Series A Preferred Stock may be decreased by the written consent of the holders of

at least a majority of the issued and outstanding shares of Series A Preferred Stock or by a resolution of the Board of Directors;

provided, however,

that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of the shares

then outstanding plus the number of shares issuable upon exercise of outstanding rights, options, or warrants or upon conversion

of outstanding securities issued by the Company.

holders of the Series A Preferred Stock do not have any preferential dividend rights

and shall be entitled to receive dividends, if any, only if, when, and

as declared by the Board of Directors in its sole and absolute discretion.

The holders of the Series A Preferred Stock

have no voting rights.

At any time on or after November 1, 2023, each share of Series A Preferred Stock is convertible, at the

option of the holder thereof .

Notwithstanding the foregoing, the holders

of Series A Preferred Stock will be entitled to convert their shares of Series A Preferred Stock prior to November 1, 2023 if

any of the following events occur:

(i) a Change of Control (as defined in the Certificate of Designation) or (ii)

any other event as determined and agreed to by the Company and by the

holders holding a majority of the issued and outstanding shares of Series A Preferred Stock.

Each share of the Series A Preferred

Stock is convertible into one hundred shares of common stock, par value $0.001 per share.

In exchange for

the Cancellation Shares the Company issued 3,000,000 shares (the “Preferred Shares”) of its newly designated Series

A Preferred Stock to KH.

The exchange of the Cancellation Shares and the issuance of the Preferred Shares was intended to comply

with Section 3(a)(9) of the Securities Act of 1 933, as amended (the “Act”), in that the issuance was exempt

from the registration requirements of the Act because the exchange of the Cancellation Shares for the Preferred Shares was an

exchange between the Company, as issuer, with an existing stockholder, and no commission or other remuneration was paid or given

directly for the exchange.

As of the date of this Quarterly Report on

Form 10-Q, the Company has 277,282,630 shares of common stock issued and outstanding and 3,000,000 shares of Series A Preferred

Stock issued and outstanding.

is focused on growing and incubating innovative and profitable products into mature, dominant brands.

In March 2020, the

Company commenced business operations as a result of becoming the exclusive distributor of certain electronic nicotine

delivery systems and related components (the “Products”) manufactured by Bidi Vapor, LLC (“Bidi”), a

Florida limited liability company, and a related party company that is also owned by Nirajkumar Patel, the Chief Executive

Officer and Chief Financial Officer of the Company.

March 9, 2020, the Company entered into an exclusive distribution agreement (the “Distribution Agreement”) with Bidi,

a related party company, which Distribution Agreement was amended and restated on May 21, 2020 (the “A&R Distribution

Agreement”) in order to clarify some of the provisions.

Agreement”).

Pursuant to the A&R Distribution Agreement, Bidi granted the

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level customers.

Currently, the Products

consist primarily of the “Bidi Stick.”

In connection with the A&R Distribution

Agreement, the Company entered into non-exclusive sub-distribution agreements, 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”).

March 31, 2020, the Company entered into a service agreement (the “Service Agreement”) with QuikfillRx LLC, a Florida

limited liability company (“QuikfillRx”), whereby QuikfillRx has agreed to provide 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 will be provided

by QuikfillRx as requested from time to time by the Company.

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.

Currently, the Products consist primarily of the “Bidi Stick.”

In connection

with the A&R Distribution Agreement, the Company entered into non-exclusive sub-distribution agreements, 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 March 31, 2020, the Company entered into

a service agreement (the “Service Agreement”) with QuikfillRx LLC, a Florida limited liability company (“QuikfillRx”),

whereby QuikfillRx has agreed to provide 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 will be provided by QuikfillRx as requested from time to time by the Company.

On June 2, 2020, the Company entered into the

First Amendment to the Service Agreement (the “First Amendment”

and, collectively with the Service Agreement, the “Amended

Service Agreement”) with QuikfillRx.

Pursuant to the terms of the First Amendment,

the parties modified the amount of General Compensation (as defined below) to be paid to QuikfillRx.

“General Compensation”

consists of the following:

(i) for the Services provided in March 2020, the Company paid QuikfillRx an amount equal to $86,000;

(ii) for the Services provided in April 2020, the Company paid QuikfillRx an amount equal to $100,000;

(iii) each calendar month

commencing May 2020 through October 2020, the Company will pay QuikfillRx an amount equal to $125,000 per month for the Services

to be performed during such calendar month;

(iv) if the parties agree to extend the term of the Amended Service Agreement beyond

the original expiration date of October 31, 2020, then for the period between November 1, 2020 and October 31, 2021, the Company

will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar month;

and (iv) if the parties agree

to extend the term of the Amended Service Agreement beyond October 31, 2021, then for the period between November 1, 2021 and October

31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month.

January 2020, the World Health Organization (the “WHO”) announced a global health emergency because of COVID-19, which

originated 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.

of the date of issuance of these unaudited financial statements, our operations have not been significantly impacted.

No impairments

were recorded as of April 30, 2020 and no triggering events or changes in circumstances had occurred.

were recorded as of July 31, 2020 and no triggering events or changes in circumstances had occurred.

However, the full impact

of the COVID-19 pandemic continues to evolve subsequent to the three and six months ended April 30, 2020 and as of the date these

of the COVID-19 pandemic continues to evolve subsequent to the three and nine months ended July 31, 2020 and as of the date these

unaudited financial statements are issued.

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commenced business operations have not been impacted.

Note 2 –

Basis of Presentation and Significant Accounting Policies

of Presentation

accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles

generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission

(the “SEC”) and should be read in conjunction with the audited financial statements and notes thereto for the year

ended October 31, 2019 on Form 10-K filed with the SEC.

In the opinion of management, all adjustments, consisting of normal recurring

adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented

have been reflected herein.

The results of operations for the interim period are not necessarily indicative of the results to

be expected for the full year.

Notes to the financial statements, which would substantially duplicate the disclosures contained

in the audited financial statements for the year ended October 31, 2019, as reported in the Annual Report on Form 10-K filed with

the SEC on January 27, 2020, have been omitted.

Basis of Presentation

accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting

principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and

Exchange Commission (the “SEC”) and should be read in conjunction with the audited financial statements and notes

thereto for the year ended October 31, 2019, as reported in the Company’s Annual Report on Form 10-K filed with the

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

Notes to the financial statements, which would substantially duplicate the disclosures contained in the audited

financial statements for the year ended October 31, 2019, as reported in the Annual Report on Form 10-K filed with the SEC on

January 27, 2020, have been omitted.

Accounting Policies

Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance

for Doubtful Accounts

are stated at cost, net of an allowance for doubtful accounts.

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may be required.

As of April 30, 2020, the Company did not have any allowance for doubtful accounts based on management’s

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.

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.

As of April 30, 2020, the inventories only consisted of

finished goods.

Company adopted ASC 606, Revenue from Contracts with Customers (Topic 606), in the second quarter of fiscal year 2020,

as this was the first quarter that the Company generated revenues.

Under ASC 606, the Company recognizes revenue when a customer

obtains control of promised goods, in an amount that reflects the consideration that the Company expects to receive in exchange

for the goods.

To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following

(1) identify the contracts with a customer;

As of July 31, 2020, the Company did not have any allowance for doubtful accounts based on management’s

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.

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.

As of July 31, 2020, the

inventories only consisted of finished goods.

Reclassifications

Reclassifications have been made to conform with current period presentation.

Revenue Recognition

The Company adopted ASC 606, Revenue from

Contracts with Customers (Topic 606), in the second quarter of fiscal year 2020, as this was the first quarter that the

Company generated revenues.

Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods,

in an amount that reflects the consideration that the Company expects to receive in exchange for the goods.

revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:

the contracts with a customer;

(2) identify the performance obligations in the contract;

(3) determine

the transaction price;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenue

when or as the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is

probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer.

The Company generates products revenue from

the sale of the Products (as defined above) to retail and 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’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 the Company transfers a promised good to a customer and when the customer pays for that good is short.

offers credit sales arrangements to non-retail (or wholesale) customers and monitors the collectability of each credit sales periodically.

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.

and (5) recognize revenue when or as the

entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that

the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer.

Company excludes from the transaction price sales taxes, excise taxes and value added taxes imported at the time of the sales.

These taxes are not billed to customers by the Company.

We use the term net revenues to refer to our operating revenues from

the sale of our products, including shipping and handling charges billed to customers, net of sales and promotion incentives,

and excise taxes.

The Company generates products revenue from the sale of the Products (as defined above) to retail and 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’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 periodically.

There have not been significant credits

or returns and as such no reserve for sales returns and allowances has been deemed necessary.

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

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Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards

Board, or FASB, issued ASU 2014-09, “

Revenue from Contracts with Customers (ASC 606),”

and issued subsequent

amendments to the initial guidance or implementation guidance between August 2015 and November 2017 within ASU 2015-04, ASU 2016-08,

ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-13, and ASU 2017-14 (collectively, including ASU 2014-09, “ASC 606”).

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount

that reflects the consideration which the entity expects to receive in exchange for those goods or services.

In addition, the standard

requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, “

Revenue from Contracts with Customers (ASC

and issued subsequent amendments to the initial guidance or implementation guidance between August 2015 and November

2017 within ASU 2015-04, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-13, and ASU 2017-14 (collectively, including

ASU 2014-09, “ASC 606”).

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or

services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those

goods or services.

In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and

cash flows arising from contracts with customers.

The Company adopted the standard from the second quarter of fiscal year 2020.

The adoption of ASC 606 did not have any impact on

our previously reported consolidated financial statements in any prior period nor did it result in a cumulative effect adjustment

to retained earnings.

The adoption of ASC 606 did not have any impact on our previously reported consolidated financial statements in any prior period

nor did it result in a cumulative effect adjustment to retained earnings.

Note 3 –

Going Concern

Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a

going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.

to March 2020, the Company demonstrated adverse conditions that raised substantial doubt about the Company’s ability to continue

The Company’s

financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern that

contemplates the realization of assets and liquidation of liabilities in the normal course of business.

Prior to March

2020, the Company demonstrated adverse conditions that raised substantial doubt about the Company’s ability to continue

as a going concern.

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to both retail level customers and non-retail level customers.

April, in connection with the A&R Distribution Agreement, the Company entered into the A&R Sub-Distribution Agreements

with certain third-party counterparties, whereby we appointed such counterparties as non-exclusive sub-distributors.

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 Territory.

With these agreements

in effect, the Company has established sources of revenue to cover its operating costs and achieved net income of $2,782,900 during

the six months ended April 30, 2020.

As of April 30, 2020, the Company has a

positive working capital of $2,765,171.

in connection with the A&R Distribution Agreement, the Company entered into the A&R Sub-Distribution Agreements with

certain third-party counterparties, whereby the Company appointed such 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 Territory.

With these agreements in effect, the Company has established sources of revenue to cover its operating costs and achieved

net income of $3,721,069 during the nine months ended July 31, 2020.

As of July 31, 2020, the Company has a positive working

capital of $4,023,496.

Management plans

4 unchanged sentences

on the reasons above, and management does not have substantial doubt of the Company’s ability to continue as a going concern.

These 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 the Company cannot continue as a going concern.

Stockholder Equity

These 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 the Company cannot continue as

a going concern.

Note 4 –

Commitments and Contingencies

On March 31, 2020, and as amended on June 2, 2020, the Company entered into the Amended Service Agreement with QuikfillRx,

whereby QuikfillRx agreed to provide the Company with to the Services, consisting of sales management, website development

and design, graphics, content, public communication, social media, management and analytics, and market and other research.

The Services will be provided by QuikfillRx as requested from time to time by the Company.

a result of the First Amendment, “General Compensation”

consists of the following:

(i) for the Services (as defined

in the Service Agreement) 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 will pay QuikfillRx an amount equal to $125,000 per month for the Services to be performed during

such calendar month;

(iv) if the parties agree to extend the term of the Service Agreement beyond the original expiration date

of October 31, 2020, then for the period between November 1, 2020 and October 31, 2021, the Company will pay QuikfillRx $125,000

per month for the Services to be performed during such calendar month;

and (iv) if the parties agree to extend the term of the

Service Agreement beyond October 31, 2021, then for the period between November 1, 2021 and October 31, 2022, the Company will

pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month.

In addition, pursuant to the Amended Service Agreement, the Company will pay QuikfilRx an amount equal to 0.9% of the Applicable

Gross Quarterly Sales, 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, subject to certain conditions, and an amount equal to 0.27% of

the Applicable Gross Quarterly Sales, which amount must be paid in cash.

Note 5 –

Stockholders’

Paid-In Capital

Company’s Chief Executive Officer and Chief Financial Officer, Mr.

Nirajkumar Patel, paid expenses on behalf of the Company

totaling $16,257 during the six months ended April 30, 2020, which is considered a

contribution to the Company with no expectation of repayment and is recorded as additional paid-in capital.

Company’s Chief Operating Officer, Mr.

Eric Mosser, paid expenses on behalf of the Company totaling $10,900 during the six

months ended April 30, 2020, which is considered a contribution to the Company with

no expectation of repayment and is recorded as additional paid-in capital.

The Company’s

Chief Executive Officer and Chief Financial Officer, Mr.

Nirajkumar Patel, paid expenses on behalf of the Company totaling $16,257

during the nine months ended July 31, 2020, which is considered a contribution to the

Company with no expectation of repayment and is recorded as additional paid-in capital.

The Company’s

Chief Operating Officer, Mr.

Eric Mosser, paid expenses on behalf of the Company totaling $10,900 during the nine months ended

July 31, 2020, which is considered a contribution to the Company with no expectation

of repayment and is recorded as additional paid-in capital.

of Common Stock Issued

During the quarter ended July 31, 2020, 3,320,574 shares of common stock, valued and expensed at $202,555, were issued to

QuikfillRx as compensation for the Services rendered to the Company.

During the quarter ended July 31, 2020, 9.5 million shares of common stock were granted to seven employees of the Company.

810,000 shares of common stock, valued and expensed at $117,600, were issued to these employees as bonus compensation.

shares granted to the seven employees at July 31, 2020 totaled 8,690,000 shares and are valued at $1,242,400.

Note 6 –

Related-Party Transactions

and Accounts Receivable

the six months ended April 30, 2020, the Company generated $22,460, $9,030, $880, and $110 of revenue from Cloud Nine 2012, Inc.,

JC Products of USA, LLC, Shree Maharaj, Inc., and Bhawani Krupa, Inc., respectively.

During the nine

months ended July 31, 2020, the Company generated $65,000, $18,990, $2,420, and $110 of revenue from Cloud Nine 2012, Inc., JC

Products of USA, LLC, Shree Maharaj, Inc., and Bhawani Krupa, Inc., respectively.

All of these companies are owned by Nirajkumar

Patel, the Chief Executive Officer and Chief Financial Officer of the Company, and/or his wife.

As of April 30, 2020, the Company

has accounts receivable from Cloud Nine 2012, Inc., Shree Maharaj, Inc., and Bhawani Krupa, Inc.

in the amount of $4,080, $880,

and $110, respectively.

and Accounts Payable

the six months ended April 30, 2020, the Company purchased $18,318,219 of products from Bidi and sold $18,301,800 of goods to

retail and non-retail customers.

As of April 30, 2020, the Company had accounts payable to Bidi of $1,278,638.

As of July 31, 2020, the Company

has accounts receivable from Cloud Nine 2012, Inc.

and Bhawani Krupa, Inc.

in the amount of $19,800 and $110, respectively.

Purchases and Accounts Payable

the nine months ended July 31, 2020, the Company purchased $47,771,211 of

Products from Bidi and sold $55,010,416 of Products to retail and non-retail customers.

As of July 31, 2020, the Company had accounts

payable to Bidi of $4,286,852.

Bidi is owned by Nirajkumar Patel, the Company’s Chief Executive Officer and

Chief Financial Officer.

Contributed Capital

During the six months ended April 30, 2020,

the Company’s Chief Executive Officer / Chief Financial Officer and Chief Operating Officer provided contributed capital

of $16,257 and $10,900, respectively, to the Company.

For additional information, see Note 4, Additional Paid-in Capital .

the home office space and warehouse of our management at no cost.

Note 6 - Concentration

Financial instruments, which potentially subject

the Company to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable,

Concentration of Purchases and Accounts

For the six months

ended April 30, 2020, 100% of the inventories of products ,

primarily consisting of the “Bidi Stick,”

the nine months ended July 31, 2020, Nirajkumar Patel, the Company’s Chief Executive Officer and Chief Financial Officer,

and Eric Mosser, the Company’s Chief Operating Officer, contributed capital of $16,257 and $10,900, respectively, to the

For additional information, see Note 5, Stockholders’

utilized the home office space and warehouse of our management at no cost through July 31, 2020.

Concentration

instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of purchases of inventories,

accounts payable, accounts receivable, and revenue.

Concentration

of Purchases and Accounts Payable

the nine months ended July 31, 2020, 100% of the inventories of Products, primarily consisting of the “Bidi Stick,”

were purchased from Bidi, a related party, in the amount of $47,771,211.

It also accounted for 100% of the total accounts payable as of April 30, 2020.

Concentration of Revenues and Accounts

For the six months ended April 30, 2020, approximately

36% of the revenue from the sale of products, primarily consisting of the “Bidi Stick,”

was generated from Favs Business,

LLC in the amount of $8,003,396.

Favs Business, LLC, Midwest Distribution, and

GW Trading Inc.

accounted for approximately 32%, 13%, and 11%, respectively, of the total accounts receivable as of April 30, 2020.

Company is subject to federal income taxes and state income tax in the U.S.

It also accounted for 100% of the total accounts payable

- related party as of July 31, 2020.

Concentration

of Revenues and Accounts Receivable

the three months ended July 31, 2020, approx imately 56% of the revenue from the sale of Products,

primarily consisting of the “Bidi Stick”, was generated from Favs Business, LLC (“Favs Business”) in the

amount of $18,325,140.

months ended July 31, 2020, approximately 48% of the revenue from the sale of Products, primarily consisting of the “Bidi

Stick,”

was generated from Favs Business in the amount of $26,328,535.

Favs Business

accounted for approximately 71% of the total accounts receivable as of July 31, 2020.

Note 8 –

is subject to federal income taxes and state income tax in the United States.

Significant judgment is required in determining the

provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting

principles and complex tax laws.

Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and reduced the U.S.

federal corporate tax

rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited

the deduction of interest expense for certain companies.

The Company fulfilled and shipped all of the Products from Florida and,

thus, it is subject to the state corporate income tax of Florida with a tax rate of 4.458%.

During the six months ended April 30, 2020,

the Company generated taxable income of $2,782,900 and, thus, accrued $784,000 of federal income tax and $166,432 of state income

Significant components

of the Company’s deferred tax assets and liabilities as of April 30, 2020 and October 31, 2019 after applying enacted corporate

income tax rate, is net operating loss carryforward of $0 and $15,377, and a valuation allowance of $0 and $15,377, respectively,

provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of

accounting principles and complex tax laws.

and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and reduced the U.S.

federal corporate tax rate from

35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction

of interest expense for certain companies.

The Company fulfilled and shipped all of the Products from Florida and, thus, it is

subject to the state corporate income tax of Florida with a tax rate of 4.458%.

the nine months ended July 31, 2020, the Company generated taxable income of $4,991,910 and, thus, accrued $1,048,301 of federal

income tax and $222,540 of

state income tax.

Significant components of the Company’s

deferred tax assets and liabilities as of July 31, 2020 and October 31, 2019 after applying enacted corporate income tax rate,

is net operating loss carryforward of $0 and $15,377, and a valuation allowance of $0 and $15,377, resp ectively,

which is a total deferred tax asset of $0.

The Company’s tax returns for 2018 and 2019 remain open to examination.

Subsequent Events

August 1, 2020, the Company began leasing office space consisting of 1,595 square feet as its main corporate office in Grant,

Florida for $1,000 per month.

The five-year lease agreement is with related party, Just Pick, LLC (“Just Pick”).

Patel, our Chief Executive Officer and Chief Financial Officer, is also an officer of Just Pick.

August 19, 2020, t he Company entered into the Share Cancellation and Exchange Agreement with KH, its majority stockholder,

whereby KH returned the Cancellation Shares to the Company for cancellation.

Following such cancellation, KH owns 204,000,000

shares of the Company’s common stock.

In connection therewith, and in exchange for

the Cancellation Shares, the Company issued the Preferred Shares consisting of 3,000,000 shares of Series A Preferred Stock, to

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3 unchanged sentences

This discussion and analysis should

be read in conjunction with the unaudited Financial Statements and notes thereto for the three and six months ended April 30,

be read in conjunction with the unaudited Financial Statements and notes thereto for the three and nine months ended July 31,

2020 included under Item 1 –

42 unchanged sentences

Company Reorganization

September 4, 2018, USSE Delaware acquired 1,000 shares of common stock of the Company, which represented 100% of the Company’s

then-outstanding shares of common stock, for no consideration, resulting in the Company becoming a wholly-owned subsidiary of

USSE Delaware.

Also, immediately prior to the Holding Company Reorganization, USSE Merger Sub was the Company’s wholly-owned

the Effective Time, and in accordance with the provisions set forth in Section 251(g) of the DGCL, USSE Merger Sub, an indirect

wholly-owned subsidiary of USSE Delaware and the Company’s direct wholly-owned subsidiary, merged with and into USSE Delaware,

the Company’s then parent.

USSE Delaware was the surviving corporation and the Company’s wholly-owned subsidiary.

On September 4, 2018, USSE Delaware acquired

1,000 shares of our common stock, which represented 100% of our then-outstanding shares of common stock, for no consideration,

resulting in us becoming a wholly-owned subsidiary of USSE Delaware.

Also, immediately prior to the Holding Company Reorganization,

USSE Merger Sub was our wholly-owned subsidiary.

At the Effective Time, and in accordance with

the provisions set forth in Section 251(g) of the DGCL, USSE Merger Sub, an indirect wholly-owned subsidiary of USSE Delaware and

our direct wholly-owned subsidiary, merged with and into USSE Delaware, our then parent.

USSE Delaware was the surviving corporation

and our wholly-owned subsidiary.

USSE Delaware also changed its name to USSE Corp.

following the Holding Company Reorganization.

completion of the Holding Company Reorganization, by virtue of the merger, and without any action on the part of the holder thereof,

each share of USSE Delaware’s common stock issued and outstanding immediately prior to the Effective Time of the Holding

Company Reorganization was automatically converted into one validly issued, fully paid, and non-assessable share of the Company’s

common stock.

Additionally, each share of USSE Delaware’s preferred stock issued and outstanding immediately prior to the

Effective Time was converted into one validly issued, fully paid, and non-assessable share of the Company’s preferred stock,

having the same designations, rights, powers, and preferences, and the qualifications, limitations, and restrictions thereof,

as the corresponding share of USSE Delaware’s preferred stock.

Each share of the Company’s common stock issued and

outstanding and held by USSE Delaware immediately prior to the Effective Time was cancelled.

resulted in the Company being authorized to issue up to 1,005,000,000 shares, which consisted of:

(i) 1,000,000,000 shares of

common stock, par value $0.001 per share of which 66,397,574 shares were issued and outstanding;

(ii) 5,000,000 shares of preferred

stock, par value $0.001 per share, of which (a) 1,000,000 shares were designated as Convertible Series A, all of which were issued

and outstanding;

and (b) 500,000 shares were designated as Convertible Series B, of which 71,700 shares of Convertible Series

B preferred stock were issued and outstanding.

Upon completion of the Holding Company Reorganization,

by virtue of the merger, and without any action on the part of the holder thereof, each share of USSE Delaware’s common stock

issued and outstanding immediately prior to the Effective Time of the Holding Company Reorganization was automatically converted

into one validly issued, fully paid, and non-assessable share of our common stock.

Additionally, each share of USSE Delaware’s

preferred stock issued and outstanding immediately prior to the Effective Time was converted into one validly issued, fully paid,

and non-assessable share of our preferred stock, having the same designations, rights, powers, and preferences, and the qualifications,

limitations, and restrictions thereof, as the corresponding share of USSE Delaware’s preferred stock.

Each share of our common

stock issued and outstanding and held by USSE Delaware immediately prior to the Effective Time was cancelled.

This resulted in us being authorized to issue

up to 1,005,000,000 shares, which consisted of:

(i) 1,000,000,000 shares of common stock, par value $0.001 per share of which

66,397,574 shares were then issued and outstanding;

(ii) 5,000,000 shares of preferred stock, par value $0.001 per share, of which

(a) 1,000,000 shares were designated as Convertible Series A, all of which were then issued and outstanding;

and (b) 500,000 shares

were designated as Convertible Series B, of which 71,700 shares of Convertible Series B preferred stock were then issued and outstanding.

Company Reorganization

October 19, 2018, the Company issued 500,000,000 shares of restricted common stock and 400,000 shares of Convertible Series B

Preferred Stock to GMRZ for services rendered to the Company.

with the filing of the Company’s Amended and Restated Certificate of Incorporation with the Delaware Secretary of State

on October 22, 2018, every issued and outstanding share of Convertible Series A preferred stock was converted into 1.25 shares

of common stock with shareholders’

economic rights preserved.

Additionally, at the same time, every share of Convertible

Series B preferred stock, issued and outstanding was converted into ten shares of common stock with stockholders’

rights adversely affected in the conversion.

Immediately following the conversion of the aforementioned shares, and upon filing

of the Amended and Restated Certificate of Incorporation, the authorized and unissued shares of Convertible Series A and Convertible

Series B preferred stock were cancelled.

As of October 22, 2018, Convertible Series A and Series B preferred stock were removed

from the status of authorized but unissued preferred stock.

February 6, 2019, the Company entered into the Agreement, by and among the Company, GMRZ, and KH, pursuant to which, on February

20, 2019, GMRZ sold 504,000,000 shares of the Company’s restricted common stock, representing approximately 88.06 percent

of the Company’s issued and outstanding shares of common stock, to KH, and KH paid GMRZ the Purchase Price.

The consummation

of the transactions contemplated by the Agreement resulted in a change in control of the Company, with KH becoming the Company’s

largest controlling stockholder.

Nirajkumar Patel and Eric Mosser are members of KH.

The Purchase Price was paid with personal

funds of the members of KH.

July 12, 2019, the Company changed its corporate name from Quick Start Holdings, Inc.

On October 19, 2018, we issued 500,000,000

shares of restricted common stock and 400,000 shares of Convertible Series B Preferred Stock to GMRZ for services rendered to us.

Commensurate with the filing of our Amended

and Restated Certificate of Incorporation with the Delaware Secretary of State on October 22, 2018, every issued and outstanding

share of Convertible Series A preferred stock was converted into 1.25 shares of common stock with stockholders’

rights preserved.

Additionally, at the same time, every share of Convertible Series B preferred stock, issued and outstanding was

converted into ten shares of common stock with stockholders’

economic rights adversely affected in the conversion.

following the conversion of the aforementioned shares, and upon filing of the Amended and Restated Certificate of Incorporation,

the authorized and unissued shares of Convertible Series A and Convertible Series B preferred stock were cancelled.

As of October

22, 2018, Convertible Series A and Series B preferred stock were removed from the status of authorized but unissued preferred stock.

On February 6, 2019, we entered into the Agreement,

by and among us, GMRZ, and KH, pursuant to which, on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted common stock,

representing approximately 88.06 percent of our then issued and outstanding shares of common stock, to KH, and KH paid GMRZ the

Purchase Price.

The consummation of the transactions contemplated by the Agreement resulted in a change in control, with KH becoming

our largest controlling stockholder.

Nirajkumar Patel and Eric Mosser are the sole voting members of KH.

The Purchase Price was

paid with personal funds of the members of KH.

Effective July 12, 2019, we changed our corporate

name from Quick Start Holdings, Inc.

to Kaival Brands Innovations Group, Inc.

The name change was effected through a parent/subsidiary short-form merger of Kaival Brands Innovations Group, Inc., the Company’s

wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into the Company.

The Company were

the surviving entity.

the effective date of the merger, the Company’s name was changed to “Kaival Brands Innovations Group, Inc.”

Charter, was further amended to reflect the Company’s new legal name.

The name change was effected through a parent/subsidiary

short-form merger of Kaival Brands Innovations Group, Inc., the Company’s wholly-owned Delaware subsidiary formed solely

for the purpose of the name change, with and into us.

We were the surviving entity.

On the effective date of the merger, our name

was changed to “Kaival Brands Innovations Group, Inc.”

and the Charter, was further amended to reflect our new legal

There were no other changes to its Charter.

the quarter ended April 30, 2020, the Company commenced business operations.

Share Cancellation and Exchange Agreement

On August 19, 2020, we entered into a Share

Cancellation and Exchange Agreement with our controlling stockholder, KH.

Nirajkumar Patel and Eric Mosser, our current officers

and directors, are the only voting members of KH.

Pursuant to the Agreement, KH returned to us

the Cancellation Shares, consisting of 300,000,000 shares of our common stock, which Cancellation Shares have now been cancelled

and retired by us.

On August 19, 2020, we filed the Certificate

of Designation with the Secretary of State of the State of Delaware, which authorizes a total of 3,000,000 shares of Series A Preferred

In exchange for the Cancellation Shares, we

issued the Preferred Shares, consisting of 3,000,000 shares of Series A Preferred Stock to KH.

The exchange of the Cancellation

Shares and the issuance of the Preferred Shares is intended to comply with Section 3(a)(9) of the Act, in that the issuance is

exempt from the registration requirements of the Act because the exchange of the Cancellation Shares for the Preferred Shares was

an exchange between us, as issuer, with an existing stockholder, and no commission or other remuneration was paid or given directly

for the exchange.

we market and place the Products into national distribution channels through long-standing industry relationships in accordance

8 unchanged sentences

Thus, Bidi and we are under common

to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos, and marketing materials to be utilized

by us in connection with our marketing and promotion of the Products.

We engaged QuikfillRx in March 2020 and, pursuant to the

Service Agreement, QuikfillRx agreed to provide us with the Services, as we may request from time to time.

to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos, and marketing materials to be

utilized by us in connection with our marketing and promotion of the Products.

We engaged QuikfillRx in March 2020 and,

pursuant to the Amended Service Agreement, QuikfillRx agreed to provide us with the Services, as we may request from time to

process all sales made to retail customers and non-retail customers, with all sales to retail customers to be made through the

20 unchanged sentences

We believe that our cash provided by operations will be sufficient for the next twelve months.

a result of the commencement of business operations, we have begun hiring employees and intend to hire additional independent

contractors and/or employees in the future.

We cannot provide any assurance as to the timing of the hiring of any additional independent

contractors or employees, the number of independent contractors or employees that we may hire, and whether acceptable independent

contractors or employees will be available to us at that time.

Historically,

we have had a negative working capital, no revenues, and negative cash flows from operating activities.

In the past, these conditions

raise substantial doubt about our ability to continue as a going concern.

For the foreseeable future, we will be devoting our efforts

to our recently commenced business operations.

However, we cannot provide any assurances that management’s plan with respect

to our newly commenced business operations will be successful.

At the time of filing this Quarterly Report, the previously reported

going concern has been alleviated, and management does not have substantial doubt of the Company’s ability to continue as

a going concern .

The unaudited financial statements

filed as part of this Quarterly Report 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

As a result of the commencement of business

operations, in March 2020, we began hiring employees and intend to hire additional independent contractors and/or employees in

We cannot provide any assurance as to the timing of the hiring of any additional independent contractors or employees,

the number of independent contractors or employees that we may hire, and whether acceptable independent contractors or employees

will be available to us at that time.

Prior to March 2020, we demonstrated adverse

conditions that raised substantial doubt about our ability to continue as a going concern.

These adverse conditions were negative

financial trends, specifically operating loss, working capital deficiency, and other adverse key financial ratios.

had not established any source of revenue to cover its operating costs.

Our management funded operating expenses with related party

contributions to capital.

However, on March 9, 2020, we commenced business

operations upon entering into the A&R Distribution Agreement with Bidi, a related party company, whereby Bidi granted us an

exclusive worldwide right to distribute the Products for sale and resale to both retail level customers and non-retail level customers.

In April, in connection with the A&R Distribution

Agreement, we entered into the A&R Sub-Distribution Agreements with certain third-party counterparties, whereby we appointed

such 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 Territory.

these agreements in effect, we have established sources of revenue to cover our operating costs and achieved net income of

$3,721,069 during the nine months ended July 31, 2020.

As of July 31, 2020, we had a positive working capital of

Management plans

to continue similar operations with increased marketing, which we believe will result in increased revenue and net income.

there is no assurance that management’s plan will be successful due to the current economic climate in the United States

and globally.

At the time of filing this Quarterly Report, the previously reported going concern has been alleviated based on the

reasons above, and management does not have substantial doubt our ability to continue as a going concern.

These 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.

The unaudited

financial statements filed as part of this Quarterly Report 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.

and Capital Resources

have no known demands or commitments and are not aware of any events or uncertainties as of April 30, 2020 that will result in

have no known demands or commitments and are not aware of any events or uncertainties as of July 31, 2020 that will result in

or that are reasonably likely to materially increase or decrease our current liquidity.

April 30, 2020, we had working capital of approximately $2.8 million and total cash of approximately $2.0 million.

July 31, 2020, we had working capital of approximately $4.0 million and total cash of approximately $2.7 million.

that we have commenced business operations, we intend to generally rely on cash from operations and equity and debt offerings,

14 unchanged sentences

effect on our sales, earnings, and liquidity.

flow provided by operations was approximately $2.0 million for the first six months of fiscal year 2020, compared to $0 for the

first six months of fiscal year 2019.

The increase in cash flow from operations for the first six months of fiscal year 2020 was

mainly due to the increase in net income.

We anticipate continued improvement in our cash flows provided by operations in future

years based on the minimum purchase obligations set forth in the A&R Sub-Distribution Agreements, partially offset by increases

in costs as we ramp up our sales and marketing efforts.

flow provided by operations was approximately $2.7 million for the first nine months of fiscal year 2020, compared to $0 for the

first nine months of fiscal year 2019.

The increase in cash flow from operations for the first nine months of fiscal year 2020

was mainly due to the increase in net income.

We anticipate continued improvement in our cash flows provided by operations in

future years based on the minimum purchase obligations set forth in the A&R Sub-Distribution Agreements, partially offset

by increases in costs as we ramp up our sales and marketing efforts.

of Operations

months ended April 30, 2020, compared to three months ended April 30, 2019

for the second quarter of fiscal year 2020 were approximately $22.5 million, compared to $0 in the same period of the prior fiscal

During the second quarter of fiscal year 2020, we entered into the A&R Distribution Agreement, pursuant to which we

were granted the exclusive, worldwide right to distribute the Products.

In connection therewith, we entered into the A&R Sub-Distribution

Agreements and other agreements with counterparties and granted such sub-distributors the right to distribute the Products to

non-retail customers within the Territory.

of Revenue and Gross Profit:

profit in the second quarter of fiscal year 2020 was approximately $4.2 million, compared to $0 for the second quarter of fiscal

Total cost of revenue –

related party was approximately $18.3 million for the second quarter of fiscal year 2020,

compared to $0 for the second quarter of fiscal year 2019.

The increase in gross profit is entirely driven by the commencement

of sales of the Products during the second quarter of fiscal year 2020.

operating expenses were approximately $458,000 for the second quarter of fiscal year 2020, compared to approximately $4,000 for

the second quarter of fiscal year 2019.

For the second quarter of fiscal year 2020, operating expenses consisted of advertising

and promotion expenses of approximately $186,000, shipping expenses of approximately $74,000, and general and administrative expenses

of approximately $198,000.

Advertising and promotion expenses in the second quarter of fiscal year 2020 consisted primarily of

the expenses incurred for marketing the Products and fees paid to QuikfillRx for the Services.

General and administrative expenses

in the second quarter of fiscal year 2020 consisted primarily of legal fees, salaries, merchant fees, and other service fees.

Total operating expenses for the second quarter of fiscal 2019 consisted solely of general and administrative expenses, which

were primarily from legal fees incurred.

We expect future operating expenses to continue to increase while we generate increased

sales growth.

the second quarter of fiscal year 2020, we accrued approximately $950,000 for income taxes, compared to $0 for the second quarter

months ended July 31, 2020, compared to three months ended July 31, 2019

Revenues for the third quarter of fiscal year

2020 were approximately $32.4 million, compared to $0 in the same period of the prior fiscal year.

During the second quarter of

fiscal year 2020, we entered into the A&R Distribution Agreement, pursuant to which we were granted the exclusive, worldwide

right to distribute the Products.

In connection therewith, we entered into the A&R Sub-Distribution Agreements and other agreements

with counterparties and granted such sub-distributors the right to distribute the Products to non-retail customers within the Territory.

Cost of Revenue and Gross Profit:

Gross profit in the third quarter of fiscal year 2020 was approximately $4.4 million, compared to $0 for the third quarter

of fiscal year 2019.

Income (Loss):

income for the second quarter of fiscal year 2020 was approximately $2.8 million, or $0.00 basic and diluted earnings per share,

compared to net loss of approximately $4,000, or $0.00 basic and diluted loss per share, for the second quarter of fiscal year

The increase in net income for the second quarter of fiscal year 2020, as compared to the second quarter of fiscal year

2019, is attributable to the commencement of sales of the Products.

Total cost of revenue was approximately $27.9 million for the third quarter of fiscal year 2020, compared

to $0 for the third quarter of fiscal year 2019.

The increase in gross profit is entirely driven by the sales of the Products

during the third quarter of fiscal year 2020.

Operating Expenses:

Total operating expenses were approximately $1.5 million for the third quarter of fiscal year 2020, compared to $27,135 for

the third quarter of fiscal year 2019.

For the third quarter of fiscal year 2020, operating expenses consisted of commissions

paid pursuant to the Amended Service Agreement of approximately $769,000 and general and administrative expenses of approximately

General and administrative expenses in the third quarter of fiscal year 2020 consisted primarily of legal fees,

salaries, professional fees, merchant fees, and other service fees.

Total operating expenses for the third quarter of fiscal

2019 consisted solely of general and administrative expenses, which were primarily from legal fees incurred.

We expect future

operating expenses to continue to increase while we generate increased sales growth.

During the third quarter of fiscal year 2020, we accrued approximately $320,000 for income taxes, compared to $0 for the third

quarter of fiscal year 2019.

Please refer to Note 8, Income Tax, in the Notes to the Financial Statements in this Quarterly

Report for additional information related to our income taxes.

Net Income (Loss):

Net income for the third quarter of fiscal year 2020 was approximately $2.6 million, or $0.00 basic and diluted earnings per

share, compared to net loss of approximately $27,000, or $0.00 basic and diluted loss per share, for the third quarter of

fiscal year 2019.

The increase in net income for the third quarter of fiscal year 2020, as compared to the third quarter of

fiscal year 2019, is attributable to the commencement of sales of the Products.

Weighted-average

common stock shares outstanding were 572,364,574 in the second quarters of fiscal year 2020 and fiscal year 2019.

months ended April 30, 2020, compared to six months ended April 30, 2019

for the first half of fiscal year 2020 was approximately $22.5 million, compared to $0 in the same period of the prior fiscal

During the first half of fiscal year 2020, we entered into the A&R Distribution Agreement, pursuant to which we were

granted the exclusive, worldwide right to distribute the Products.

In connection therewith, we entered into the A&R Sub-Distribution

Agreements and other agreements with counterparties and granted such sub-distributors the right to distribute the Products to

non-retail customers within the Territory.

common stock shares outstanding were 575,746,039 in the third quarter of fiscal year 2020 and 572,364,574 for the third

quarter of fiscal year 2019.

months ended July 31, 2020, compared to nine months ended July 31, 2019

for the first nine months of fiscal year 2020 was approximately $54.9 million, compared to $0 in the same period of the prior

During our second fiscal quarter for 2020, we entered into the A&R Distribution Agreement, pursuant to which

we were granted the exclusive, worldwide right to distribute the Products.

In connection therewith, we entered into the A&R

Sub-Distribution Agreements and other agreements with counterparties and granted such sub-distributors the right to distribute

the Products to non-retail customers within the Territory.

of Revenue and Gross Profit:

profit in the first half of fiscal year 2020 was approximately $4.2 million, compared to $0 for the first half of fiscal year

Total cost of revenue –

related party was approximately $18.3 million for the first half of fiscal year 2020, compared

to $0 for the first half of fiscal year 2019.

The increase in gross profit is entirely driven by the commencement of sales of

the Products during the first half of fiscal year 2020.

Total operating expenses were approximately

$471,000 for the first half of fiscal year 2020, compared to approximately $18,000 for the first half of fiscal year 2019.

the first half of fiscal year 2020, operating expenses consisted of advertising and promotion expenses of approximately $186,000,

shipping expenses of approximately $74,000, and general and administrative expenses of approximately $211,000.

Advertising and

promotion expenses in the first half of fiscal year 2020 consisted primarily of the expenses incurred for marketing the Products

and fees paid to QuikfillRx for the Services.

General and administrative expenses in the first half of fiscal year 2020 consisted

primarily of legal fees, salaries, paid of bonuses, merchant fees, and other service fees.

Total operating expenses for the first

half of fiscal year 2019 consisted solely of general and administrative expenses, which were primarily from legal fees incurred.

We expect future operating expenses to continue to increase while we generate increased sales growth.

the first half of fiscal year 2020, we accrued approximately $950,000 for income taxes, compared to $0 for the first half of fiscal

Income (Loss):

income for the first half of fiscal year 2020 was approximately $2.8 million, or $0.00 basic and diluted earnings per share, compared

to net loss of approximately $18,000, $0.00 basic and diluted loss per share, for the first half of fiscal year 2019.

in net income for the first half of fiscal year 2020, as compared to the first half of fiscal year 2019, is attributable to the

commencement of sales of the Products.

profit in the first nine months of fiscal year 2020 was approximately $6.9 million, compared to $0 for the first nine months of

fiscal year 2019.

Total cost of revenue was approximately $47.9 million for the first nine months of fiscal year 2020, compared

to $0 for the first nine months of fiscal year 2019.

The increase in gross profit is entirely driven by the commencement of sales

of the Products during the first nine months of fiscal year 2020.

Total operating expenses were approximately $1.9 million for the first nine months of fiscal year 2020, compared to approximately

$45,000 for the first nine months of fiscal year 2019.

For the first nine months of fiscal year 2020, operating expenses consisted

of commissions of approximately $1.0 million and general and administrative expenses of approximately $916,000.

administrative expenses in the first nine months of fiscal year 2020 consisted primarily of legal fees, salaries, bonuses,

professional fees, merchant fees, and other service fees.

Total operating expenses for the first nine months of fiscal year

2019 consisted solely of general and administrative expenses, which were primarily from legal fees incurred.

We expect future

operating expenses to continue to increase while we generate increased sales growth.

During the first nine months of fiscal year 2020, we accrued approximately $1.3 million for income taxes, compared to $0 for

the first nine months of fiscal year 2019.

Please refer to Note 8, Income Tax, in the Notes to the Financial Statements in

this Quarterly Report for additional information related to our income taxes.

Net Income (Loss):

Net income for the first nine months of fiscal year 2020 was approximately $3.7 million, or $0.01 basic and diluted earnings

per share, compared to net loss of approximately $45,000, $0.00 basic and diluted loss per share, for the first nine months

of fiscal year 2019.

The increase in net income for the first nine months of fiscal year 2020, as compared to the first nine

months of fiscal year 2019, is attributable to the commencement of sales of the Products.

Weighted-average

common stock shares outstanding were 572,364,574 in the first half of fiscal year 2020 and fiscal year 2019.

common stock shares outstanding were 573,499,956 in the first nine months of fiscal year 2020 and 572,364,574 for the first nine

months of the fiscal year 2019.

Sheet Arrangements

5 unchanged sentences

Financial Statements in Item 1 of Part I of this Quarterly Report, there have been no material changes to our critical accounting

policies and estimates during the six months ended April 30, 2020 from those disclosed in Item 7, Management’s Discussion

policies and estimates during the nine months ended July 31, 2020 from those disclosed in Item 7, Management’s Discussion

and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended October 31,

8 unchanged sentences

restrictions on the sale of securities and increases the number of stockholders a company must have before becoming subject to

the Securities and Exchange Commission’s reporting and disclosure rules.

the SEC’s reporting and disclosure rules.

We have elected to use the extended transition

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements