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Item 7. Management’s Discussion and Analysis

2025-02-10 compared with 2024-02-14 · 348 added, 335 removed, 54 unchanged (93% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

This management’s Discussion

and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative

report on our financial condition, results of operations, and liquidity.

This discussion and analysis should be read in conjunction with

the audited Financial Statements and notes thereto for the year ended October 31, 2023, included under Item 8 – Financial Statements

and Supplementary Data in this Report.

The following discussion contains forward-looking statements that involve risks and uncertainties,

such as statements of our plans, objectives, expectations, and intentions.

Our actual results could differ materially from those discussed

in the forward-looking statements.

Please also see the cautionary language at the beginning of this Report regarding forward-looking

business is focused on the sales, marketing and distribution of ENDS products, also known as “e-cigarettes”, in a variety

Our primary product is the Bidi ® Stick as well as other products manufactured by our affiliate Bidi.

the exclusive worldwide right to market and distribute the Bidi ® Stick and certain other products manufactured by Bidi.

We intend to drive revenue growth primarily through wholesale and traditional retail channels, including convenience stores.

to the A&R Distribution Agreement, Bidi granted us an exclusive worldwide right to distribute Bidi’s ENDS and related components

(as more particularly set forth in the A&R Distribution Agreement and referred to herein as the products) for sale and resale to

both retail level customers and non-retail level customers.

Currently, the products consist solely of the “ BIDI ® Stick ”, Bidi’s

disposable, tamper resistant ENDS product made with medical-grade components, a UL-certified battery and technology designed

to deliver a consistent vaping experience for adult smokers 21 and over.

We presently distribute products to wholesalers and retailers

of ENDS products, having ceased all direct-to-consumer sales in February 2021.

Nirajkumar Patel, our Chief Science and Regulatory Officer

and director and an indirect controlling stockholder of our company, owns Bidi.

comes in a variety of flavor options for adult cigarette smokers.

We do not manufacture any of the products we resell.

Stick is manufactured by Bidi.

Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos,

and marketing materials to use with our commercial partners in connection with our marketing and promotion of the products.

We process all sales made only to non-retail customers, with all sales to

non-retail customers made through Bidi’s age-restricted website, www.wholesale.bidivapor.com.

We ceased all direct-to-consumer

sales in February 2021 in order to better ensure youth access prevention and to comply with the Prevent All Cigarette Trafficking (or

We provide all customer service and support at our own expense through QuikfillRx as described below.

We set the minimum prices

for all sales made by us.

We maintain adequate inventory levels of products in order to meet the demands of our non-retail customers and

deliver the products sold to these customers.

third party collaborator of ours is QuikfillRx, which does business as “Kaival Marketing Services” to reflect its contributions

to our company.

QuikfillRx provides us 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.

QuikfillRx provides these

services to us pursuant to a Services Agreement, most recently amended on November 9, 2022, which has a current term ending on October

31, 2025 (subject to potential one-year extensions) and pursuant to which QuikfillRx receives monthly cash compensation and was granted

certain equity compensation in the form of options.

also maintain key international licensing agreements with Philip Morris and its affiliates as described under Item 1 – Business.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

This management’s Discussion and Analysis

of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on

our financial condition, results of operations, and liquidity.

This discussion and analysis should be read in conjunction with the audited

Financial Statements and notes thereto for the year ended October 31, 2024, included under Item 8 – Financial Statements and Supplementary

Data in this Report.

The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements

of our plans, objectives, expectations, and intentions.

Our actual results could differ materially from those discussed in the forward-looking

Please also see the cautionary language at the beginning of this Report regarding forward-looking statements.

are engaged in the sale, marketing and distribution of electronic nicotine delivery system (“ENDS”) products, also known

as “e-cigarettes”, in a variety of favors.

Until October of 2024, our primary source of revenue has been the Bidi Stick as

we sold our inventory on hand.

However, on June 11, 2024, RAI Strategic Holdings, Inc., R.J.

Reynolds Vapor Company, R.J.

Reynolds Tobacco

Company, and RAI Services Company (collectively, the “RJ Reynolds Entities”) filed a patent infringement complaint with the

International Trade Commission (the “ITC”) against Bidi, us, and forty (40) other respondents (the “ITC Complaint”)

pursuant to Section 337 of the Tariff Act of 1930, as amended.

Specifically, the ITC Complaint alleges that one or more components or

elements of the Bidi Stick infringe U.S.

11,925,202, which is owned by one of the RJ Reynolds Entities.

The ITC Complaint

requests the ITC grant:

(a) temporary and permanent limited exclusion orders pursuant to Section 337(e) of the Tariff Act of 1930, as

amended, which would prohibit the importation of the Bidi Stick in the United States;

and (b) issue temporary and permanent cease and

desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit the sale and distribution of the Bidi Stick

in the United States.

No damages are recoverable in the proceedings before the ITC.

Since the initiation of the ITC Complaint,

we have not imported any Bidi Sticks and currently do not generate any revenue from the sale of Bidi Sticks.

current primary source of revenue is through an international licensing agreement with Philip Morris Products S.A.

a wholly owned affiliate of Philip Morris International Inc.

See “Item 1 Business--Philip Morris Deed of

Licensing Agreement”

have also entered into a Merger and Share Exchange Agreement (the “Merger Agreement”) with Delta Corp Holdings Limited, a

company incorporated in England and Wales (together with its successors and assigns, “Delta”), Delta Corp Holdings Limited,

a Cayman Islands exempted company (“Pubco”), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of

Pubco (“Merger Sub”) and Delta Corp Cayman Limited (the “Sellers”).

If the Merger Agreement is consummated, Pubco

will become our parent and all new officers and directors will be appointed by Pubco, except that pursuant to the Merger Agreement we

have the right to appoint one director to the Pubco board of directors and we have agreed to appoint any family member of Ankitaben Patel

(the widow of our former CEO, Nirajkumar Patel) and/or Nirajkumar Patel who is qualified and identified by Bidi for this role prior to

the closing of the Merger Agreement.

While we expect the transactions contemplated by the Merger Agreement to close (the “Closing”)

in March or April of this year, no assurances can be made that such transactions will close by then or ever.

The transactions contemplated

by the Merger Agreement are described in further detail below under “ Item 1 Business--The Merger and Share Exchange Agreement .”

Material Items, Trends

and Risks Impacting Our Business

We believe that the following

items and trends may be useful in better understanding the results of our operations.

Dependence on Bidi

and Nirajkumar Patel

We are wholly dependent on Bidi

to supply the BIDI® Sticks to us for distribution.

Accordingly, any supply or other issues that impact Bidi indirectly impact us

and our ability to operate our business.

Moreover, and while we are seeking to diversify our product offerings, the loss of our relationship

with Bidi would substantially harm the viability of our business, which constitutes an on-going risk factor to our business.

Bidi is controlled by Nirajkumar

Patel, our Chief Science and Regulatory Officer and a director of our company.

Moreover, Kaival Holdings, an entity controlled by Mr.

Patel, is our majority stockholder.

In addition, our corporate headquarters is leased to us by an affiliate of Mr.

Therefore, Mr.

Patel has the power and ability to control or influence our business.

As of October 31, 2023 our company had an accounts payable to Mr.

Patel and Bidi in the amount of $2,474,817.

Dependence on QuikfillRx,

LLC and Distributors

substantially dependent on QuikfillRx, LLC (d/b/a Kaival Marketing Services, or KMS) to provide key marketing, sales and other support

services to us.

In addition, we rely on third-party brokers and distributors to introduce and place our products into our historic foundation

of convenience stores and more recently into new retail channels, including dollar, grocery and mass-merchandisers.

The loss of one or

more of these key relationships would have a material adverse effect on our business.

We believe that the following items and trends may

be useful in better understanding the results of our operations.

On June 11, 2024, the RJ Reynolds Entities filed the

ITC Complaint.

The ITC Complaint requests the ITC grant:

(a) temporary and permanent limited exclusion orders pursuant to Section 337(e)

of the Tariff Act of 1930, as amended, which would prohibit the importation of the Bidi Stick in the United States;

and (b) issue temporary

and permanent cease and desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit the sale and distribution

of the Bidi Stick in the United States.

No damages are recoverable in the proceedings before the ITC.

If the Company or Bidi is prohibited

from importing the Bidi Stick, then our business, operations, financial results, and reputation would be significantly adversely impacted.

Bidi disputes the patent infringement claims set forth in the ITC Complaint by the RJ Reynolds Entities and plans to vigorously defend

the ITC Investigation.

A Commission determination regarding temporary relief is expected in October or December 2024.

A final Commission

determination on permanent relief is not expected until late 2025 or early 2026.

The asserted patent expires in October 2026 as would

any exclusion order that the ITC enters as a result of the ITC Complaint.

As a result of the ITC Complaint and other factors

we do not expect any significant revenue from the sale of Bidi Sticks in the foreseeable future.

Our primary source of revenue is from

KBI from royalties from PMI under the PMI License Agreement.

PMI Licensing Agreement and International Distribution

On June 13, 2022, we, through

our wholly owned subsidiary, KBI, entered into the PMI License Agreement with PMPSA, a wholly owned affiliate of PMI, for the development

and distribution of ENDS products in certain markets outside of the United States, subject to market (or regulatory assessment).

PMI License Agreement grants to PMPSA a license of certain intellectual property rights relating to Bidi’s ENDS device, known as

the BIDI® Stick in the United States, as well as potentially newly developed devices, to permit PMPSA to manufacture, promote, sell,

and distribute such ENDS device and newly developed devices, in international markets, outside of the United States.

On July 25, 2022, we announced

the launch of PMPSA’s custom-branded self-contained e-vapor product, pursuant to the licensing agreement.

The product, a self-contained

e-vapor device initially called VEEBA and more recently rebranded as VEEV NOW, has been custom developed and was initially distributed

VEEV NOW was then commercially launched by PMPSA in Europe in February 2023, with additional market launches planned this

On August 12, 2023, we executed and entered into a Deed of Amendment No.

1 (the “PMI License Amendment”) with PMPSA,

Bidi and KBI.

Pursuant to the PMI License Amendment (which was effective on June 30, 2023), resulting in a Net Reconciliation Payment

to KBI and ongoing quarterly royalty payments.

The ability of PMPSA to generate

sales of its licensed products is important to our results of operations since we derive royalty revenue from PMPSA sales.

relationship with PMPSA deteriorate or terminate, or if PMPSA is unable to generate meaningful sales of its licensed products, our business

and results of operations would be materially harmed.

Ability to Develop and Monetize the GoFire Intellectual

purchased certain vaporizer and inhalation-related technology from GoFire in May 2023 with the goal of diversifying our business and

lessening our dependence on BIDI.

We do not expect that the acquired assets will generate immediate revenue for us, and while we believe

this to be a transformative acquisition for us and we are already seeking to develop and monetize the acquired assets, we can give no

assurances at this time that either (i) the patent applications we acquired will eventuate in issued patents or (ii) we will be able

to enter into successful monetizing arrangements with respect to these assets.

of our Products and Regulation

products (including both our core Bidi Stick products and any products that we may develop from the GoFire assets) are and will be heavily

regulated by the FDA, which has broad regulatory powers.

As described under Item 1 – Business – FDA PMTA and MDO Determinations,

Related Court Actions and the Impact on Our Business, the outcome FDA actions and related proceedings against or by Bidi (including the

January 2024 MDO regarding Classic Bidi Sticks) could have a material adverse impact on our ability to operate our business given our

reliance on Bidi.

In addition to the de facto FDA flavor ban that has resulted from the denial of nearly all PMTAs for flavored ENDS,

ENDS products that are non-tobacco flavored continue to face the threat of prohibition at the local level, as many state and local authorities

and attorneys general push for bans or request the FDA to deny PMTAs for flavored ENDS.

In addition, a number of states and localities

have banned the sale of non-tobacco flavored tobacco products.

For example, in November 2022 California passed Proposition 31, which

prohibits the sale of non-tobacco flavored tobacco products, including e-cigarettes, in retail locations.

Thus, the non-tobacco flavored

BIDI® Sticks are not permitted to be sold in California retail locations.

We anticipate more states and localities will take this

Several other states have banned flavored ENDS, including New York, New Jersey, Rhode Island, and Massachusetts, with several

more considering similar bans (e.g., Maryland, and Connecticut).

competition in the market for e-cigarettes from illicit sources may have an adverse effect on our overall sales volume, restricting our

ability to increase selling prices and damaging our brand equity and reputation.

Illicit trade and tobacco trafficking in the form of

counterfeit products, smuggled genuine products, and locally manufactured products on which applicable taxes or regulatory requirements

are evaded, represent a significant and growing threat to the legitimate tobacco industry, including the Bidi products we sell.

addition, the market for ENDS products is subject to a great deal of uncertainty and is still evolving.

ENDS products, having recently

been introduced to market over the past 10 to 15 years, are at a relatively early stage of development, and represent core components

of a market that is evolving rapidly, highly regulated, and characterized by a number of market participants.

Rapid growth in the use

of, and interest in, ENDS products is recent, and may not continue on a lasting basis.

With respect to the GoFire assets, the underlying

technology touches on hemp/cannabis, nutraceutical and healthcare applications in addition to nicotine, all of which are heavily regulated

by the FDA and other federal and state agencies.

The demand and market acceptance for all of these products is subject to a high level

of uncertainty.

Therefore, we are subject to all the business risks associated with a new enterprise in an evolving market.

On June 13, 2022, we, through our wholly owned subsidiary,

KBI, entered into the PMI License Agreement with PMPSA, a wholly owned affiliate of PMI, for the development and distribution of ENDS

products in certain markets outside of the United States, subject to market (or regulatory assessment).

The PMI License Agreement grants

to PMPSA a license of certain intellectual property rights relating to Bidi’s ENDS device, known as the BIDI® Stick in the United

States, as well as potentially newly developed devices, to permit PMPSA to manufacture, promote, sell, and distribute such ENDS device

and newly developed devices, in international markets, outside of the United States.

On July 25, 2022, we announced the launch of PMPSA’s

custom-branded self-contained e-vapor product, pursuant to the licensing agreement.

The product, a self-contained e-vapor device initially

called VEEBA and more recently rebranded as VEEV NOW, has been custom developed and was initially distributed in Canada.

then commercially launched by PMPSA in Europe in February 2023, with additional market launches planned this year.

On August 12, 2023,

we executed and entered into a Deed of Amendment No.

1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI.

the PMI License Amendment (which was effective on June 30, 2023), resulting in a Net Reconciliation Payment to KBI and ongoing quarterly

royalty payments.

The ability of PMPSA to generate sales of its licensed

products is important to our results of operations since we derive royalty revenue from PMPSA sales.

Should our relationship with PMPSA

deteriorate or terminate, or if PMPSA is unable to generate meaningful sales of its licensed products, our business and results of operations

would be materially harmed.

Ability to Develop and Monetize the GoFire Intellectual Property

We purchased certain vaporizer

and inhalation-related technology from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence on BIDI.

We do not expect that the acquired assets will generate immediate revenue for us, and while we believe this to be a transformative acquisition

for us and we are already seeking to develop and monetize the acquired assets, we can give no assurances at this time that either (i)

the patent applications we acquired will eventuate in issued patents or (ii) we will be able to enter into successful monetizing arrangements

with respect to these assets.

Nature of our Products

and Regulation

Competition in the market for e-cigarettes from illicit

sources may have an adverse effect on our overall sales volume, restricting our ability to increase selling prices and damaging our brand

equity and reputation.

Illicit trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products, and locally

manufactured products on which applicable taxes or regulatory requirements are evaded, represent a significant and growing threat to the

legitimate tobacco industry, including the products we sell.

Although we combat counterfeiting of our Products by engaging in certain

tactics, such as requiring all sales force personnel to randomly collect our Products from retailers in order to be tested by our quality

control team, maintaining a quality control group that is responsible for identifying counterfeit products and surveillance of retailers

we suspect are selling counterfeit Products through our own secret shopper force, no assurance can be given that we will be able to detect

or stop sales of all counterfeit products.

In addition, while we may bring suits against retailers and distributors that sell certain

counterfeit products, no assurance can be given that we will be successful in any such suits or that such suits will be successful in

stopping other retailers or distributors from selling.

Counterfeit Products

Our Products (included in

this context any products that we may develop from the GoFire Purchased Assets) are and will be heavily regulated by the FDA, which has

broad regulatory powers.

The market for ENDS products is subject to a great deal of uncertainty and is still evolving.

ENDS products,

having recently been introduced to market over the past 10 to 15 years, are at a relatively early stage of development, and represent

core components of a market that is evolving rapidly, highly regulated, and characterized by a number of market participants.

in the use of, and interest in, ENDS products is recent, and may not continue on a lasting basis.

With respect to the GoFire Purchase

Assets, the underlying technology touches on hemp/cannabis, nutraceutical and healthcare applications in addition to nicotine, all of

which are heavily regulated by the FDA and other federal and state agencies.

The demand and market acceptance for all of these products

is subject to a high level of uncertainty.

Therefore, we are subject to all the business risks associated with a new enterprise in an

evolving market.

Some of our Product offerings

12 unchanged sentences

pathway for CBD through legislation.

In addition to the de facto

FDA flavor ban that has resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tobacco flavored continue

to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans or request

the FDA to deny PMTAs for flavored ENDS.

In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco

Recently, for example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products,

including e-cigarettes, in retail locations.

Thus, the non-tobacco flavored BIDI® Sticks are not permitted to be sold in California

retail locations.

We anticipate more states and localities will take this approach.

Several other states and localities have banned flavored

ENDS, including Washington, D.C., New York (and New York City), New Jersey, Rhode Island, Illinois (and Chicago), Utah and Massachusetts,

with several more considering similar bans (e.g., Maryland and Connecticut).

to Meet Demand for our Products

Increased demand for our products

and have opened new distribution channels for us through which we can sell our products.

However, a sharp increase in demand for products

will require us to use cash and/or obtain financing in order to purchase products from Bidi for resale in the marketplace.

we are faced with the risk that such cash or financing will not be available in sufficient amounts or on terms acceptable to us (or at

all) to meet the market demand for products.

Our inability to fulfill this demand will damage our reputation and could materially impact

on our ability to increase sales of products which, in turn, would adversely impact the results of our operations.

purchases of tobacco products are historically affected by economic conditions, such as changes in employment, salary and wage levels,

the availability of consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing

and future economic conditions.

has been experiencing an environment of material inflation in recent quarters, and this condition

may impact discretionary consumer purchases, such as the BIDI® Stick.

Demand for our products may also decline during recessionary

periods or at other times when disposable income is lower, and taxes may be higher.

of COVID-19 throughout the world as well as increasing tensions with China over the past several years and Russia’s February 2022

invasion of Ukraine has created global economic uncertainty, which may cause partners, suppliers, and potential customers to closely

monitor their costs and reduce activities.

Any of the foregoing could materially adversely affect the supply chain for Bidi and our products,

and any supply chain distribution for products could have a materially adverse effect on the results of operations.

We believe that the

matters described under “FDA PMTA Determinations, 11 th Circuit Decision and Impact on Our Business” could have

decreased demand for our Products and would likely have negative opportunities to distribution channels for us through which we could

sell our Products.

However, an unlikely increase in demand for the Products would require us to raise cash and/or obtain financing in

order to purchase Products from Bidi for resale in the marketplace.

As a result, we are faced with the risk that such cash or financing

will not be available in sufficient amounts or on terms acceptable to us (or at all) to meet the market demand for the Products.

inability to fulfill this demand will damage our reputation and could materially impact our ability to increase sales of the Products

which, in turn, would adversely impact our results of operations.

Consumer purchases of tobacco

products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of

consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic

has been experiencing an environment of material inflation in recent quarters, and this condition may impact discretionary

consumer purchases, such as the BIDI® Stick.

Demand for our products may also decline during recessionary periods or at other times

when disposable income is lower, and taxes may be higher.

The spread of COVID-19 throughout

the world as well as increasing tensions with China over the past several years has created global economic uncertainty, which may cause

partners, suppliers, and potential customers to closely monitor their costs and reduce activities.

Any of the foregoing could materially

adversely affect the supply chain for Bidi and our Products, and any supply chain distribution for the Products could have a material

adverse effect on our results of operations.

Going Concern

Our financial statements are prepared

in accordance with U.S.

GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities

in the normal course of business within one year after the date the consolidated financial statements are issued.

In accordance with Financial Accounting

Standards Board (or FASB), Accounting Standards Update (or ASU) No.

2014-15, Presentation of Financial Statements – Going Concern

(Subtopic 205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt

about our ability to continue as a going concern within one year after the date that the financial statements are issued.

Our financial statements are prepared in accordance

GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal

course of business within one year after the date the consolidated financial statements are issued.

In accordance with Financial Accounting Standards

Board (or FASB), Accounting Standards Update (or ASU) No.

2014-15, Presentation of Financial Statements – Going Concern (Subtopic

205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about

our ability to continue as a going concern within one year after the date that the financial statements are issued.

As shown in the accompanying consolidated

financial statements, we will need significant additional funds to satisfy our outstanding payables, fund our working capital, and fully

implement our business plan as we seek to grow our revenues and ultimately achieve positive cash flow and profitability.

financial statements, we have incurred recurring

losses and negative cash flows from operations.

We will need significant additional funds to satisfy our outstanding payables, fund our

working capital, and fully implement our business plan .

our ability to continue as a going concern is adversely affected by the uncertainty surrounding Bidi’s PMTA process with FDA and

outcome of Bidi’s petition with the 11th Circuit Court of Appeals regarding the FDA’s January 2024 MDO relating to Classic

Bidi ® Stick as well as our negative cash flows from operations, significant recurring losses and present need for additional

All of these factors raise substantial doubt regarding our ability to continue as a going concern.

Our management plans to continue

similar operations with increased marketing and enhanced efforts to increase sales, which we believe will result in increased revenue

and ultimately net income and positive cash flow from operations.

However, there is no assurance

that our plans will be able to generate expected or greater amounts of revenues or ever achieve profitability due to the factors listed

above as well as the regulation and public perception of ENDS products and the various other risks we face.

The accompanying consolidated

financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of

assets or the amounts and classification of liabilities that may result from the outcome of these or other risks or uncertainties.

Bidi ® Stick as well as the uncertainty in the Company’s ability to continue to sell the Bidi Stick given the patent

infringements claim filed by RJ Reynolds.

All of these factors raise substantial doubt regarding our ability to continue as a going

Our management plans

to continue developing strategies on similar or expanded operations of our business to help our ability to determine where our business

will be viable going forward.

Until such time, if ever,

we can generate substantial product revenues, management plans to finance our cash needs through public or private equity offerings or

debt financing.

However, there is no assurance that we will be able

to raise additional capital, generate revenues or achieve profitability due to the factors listed above as well as the regulation and

public perception of ENDS products and the various other risks we face.

The accompanying consolidated financial statements do not include

any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification

of liabilities that may result from the outcome of these or other risks or uncertainties.

Liquidity and Capital Resources

We believe we will not have sufficient

cash on hand as of the date of this Report to support our operations for at least 12 months.

As of October 31, 2023, we had working capital

of approximately $2 million and total cash of approximately $0.5 million.

As discussed above, this condition and other factors raise substantial

doubt regarding our ability to continue as a going concern.

We intend to generally rely on

cash from operations and equity and debt offerings to the extent necessary and available, to satisfy our liquidity needs.

There are several

factors that could result in the need to raise additional funds, including a decline in revenue, a lack of anticipated sales growth, increased

costs and our potential plan to redeem for cash the shares of our Series B Preferred Stock issued in connection with our GoFire asset

purchase in May 2023.

Our efforts are directed toward generating positive cash flow and, ultimately, profitability.

As our efforts during

our fiscal 2023 and since have not generated positive cash flows, we will need to raise additional capital.

Should capital not be available

to us at reasonable terms, other actions will become necessary, including implementing cost control measures and additional efforts to

increase sales.

We may also be required to take more strategic actions such as exploring strategic options for the sale of our company,

the creation of joint ventures or strategic alliances under which we will pursue business opportunities, or other alternatives.

we have, or have access to, the financial resources to weather the impacts of the FDA’s PMTA process and Bidi’s receipt of

MDOs from the FDA in 2021 and 2024, which are subject to additional FDA action and ongoing court proceedings, respectively.

will require further financing for the next twelve months, given our operating results.

Net cash flows used in operations

was approximately $3.0 million for fiscal year ended 2023, compared to cash flow used in operations of approximately $5.7 million for

fiscal year ended 2022.

The decrease in cash flows used in operations for the fiscal year ended 2023 compared to the fiscal year ended

2022 was primarily due to changes in Other receivable – related party, Income tax receivable, and Accounts payable – related

party (such related party being our affiliate, Bidi, as described further below under Results of Operations).

Net cash flows used in investing

activities was $315,769 for the fiscal year ended 2023, compared to zero cash flow used in investing activities for the fiscal year ended

We believe we will not generate sufficient revenue

to support our operations for at least twelve months.

As of October 31, 2024, we had working capital of approximately $3.0 million and

total cash of approximately $3.9 million.

As discussed above, this condition and other factors raise substantial doubt regarding our ability

to continue as a going concern.

We intend to generally

rely on cash from operations and equity and debt offerings to the extent necessary and available, to satisfy our liquidity needs.

are several factors that could result in the need to raise additional funds, including a decline in revenue, a lack of anticipated sales

growth, and increased costs.

Our efforts are directed

toward generating positive cash flow and, ultimately, profitability.

As our efforts during our fiscal 2024 and since have not generated

positive cash flows, we will need to raise additional capital.

Should capital not be available to us at reasonable terms, other actions

will become necessary, including implementing cost control measures and additional efforts to generate sales.

We may also be required to take more strategic actions such as exploring strategic options for the sale of our company, the creation

of joint ventures or strategic alliances under which we will pursue business opportunities, or other alternatives.

We believe we have,

or have access to, the financial resources to weather the impacts of the FDA’s PMTA process and Bidi’s receipt of MDOs from

the FDA in 2021 and 2024, which are subject to additional FDA action and ongoing court proceedings, respectively.

However, we will require

further financing for the next twelve months, given our operating results.

Net cash flows used in operations was approximately

$0.7 million for fiscal year ended 2024, compared to cash flow used in operations of approximately $3.0 million for fiscal year ended

The decrease in cash flows used in operations for the fiscal year ended 2024 compared to the fiscal year ended 2023 was primarily

due to changes in Other receivable – related party, Accounts receivable, Income tax receivable, and Accounts

payable – related party (such related party being our affiliate, Bidi, as described further below under Results of Operations).

Net cash flows used in investing activities was zero

for the fiscal year ended 2024, compared to approximately $0.3 million cash flow used in investing activities for the fiscal year ended

The cash used in investing activities for the fiscal year ended 2023 consisted of cash used for the purchase of warehouse equipment

and used for the transaction acquisition costs associated with the purchase of the GoFire, intellectual property.

Net cash flows provided by financing

activities was $136,789 for the fiscal year ended 2023, compared to $1.6 million provided by financing activities for the fiscal year

The cash provided by financing activities for the fiscal year ended 2023 consisted primarily of short-term financing.

Net cash flows provided by financing activities was

approximately $4.1 million for the fiscal year ended 2024, compared to approximately $0.1 million provided by financing activities for

the fiscal year ended 2023.

The cash provided by financing activities for the fiscal year ended 2024 consisted primarily from the issuance

of common shares, warrants, pre-funded warrants, and proceeds from short-term financing.

Results of Operations

Fiscal year ended

October 31, 2023, compared to fiscal year ended October 31, 2022

for fiscal year 2023 were approximately $13.1 million, compared to

approximately $12.8 million in fiscal year 2022.

Revenues slightly increased in fiscal year 2023, primarily due to royalties received

Cost of Revenue,

Net and Gross Profit (Loss):

profit in fiscal year 2023 was approximately $2.6 million, compared to approximately $1.2 million for fiscal year 2022.

Total cost of

revenue was approximately $10.5 million for fiscal year 2023, compared to approximately $11.5 million for fiscal year 2022.

increase in gross profit volume is primarily driven by the decrease in cost of revenue.

Fiscal year ended October 31, 2024, compared

to fiscal year ended October 31, 2023

Revenues for fiscal

year ended 2024 were approximately $6.9 million, compared to approximately $13.1 million in fiscal year ended 2023.

Revenues decreased

in fiscal year ended 2024, primarily due to sales pressure related to the MDO received in January 2024, which resulted in the decrease

in the number of sticks sold to customers.

Cost of Revenue, Net and Gross Profit (Loss):

Gross profit in fiscal year ended 2024 was approximately

$2.6 million, compared to approximately $2.6 million for fiscal year ended 2023.

Total cost of revenue was approximately $4.3 million

for fiscal year ended 2024, compared to approximately $10.5 million for fiscal year ended 2023.

The slight increase in gross profit volume

is primarily driven by the decrease in cost of revenue.

Operating Expenses:

Total operating expenses

were approximately $13.2 million for fiscal year 2023, compared to approximately $15.6 million for fiscal year 2022.

For the fiscal year

2023, operating expenses consisted primarily of advertising and promotion fees of approximately $2.5 million, stock option compensation

expense of approximately $3.2 million, professional fees of approximately $2.7 million, salaries and wages of $2.0 million, and all other

general and administrative expenses of approximately $2.0 million.

In fiscal year 2022, operating expenses consisted primarily of advertising

and promotion fees of approximately $2.7 million, stock option compensation expense of approximately $6.0 million, professional fees of

approximately $3.2 million, salaries and wages of $1.7 million, and all other general and administrative expenses of approximately $2.0

We expect future operating expenses to increase as we seek to generate increased sales growth and invest in our infrastructure

to support the planned business growth.

Total operating expenses were approximately $8.3 million

for fiscal year ended 2024, compared to approximately $13.2 million for fiscal year ended 2023.

For the fiscal year ended 2024, operating

expenses consisted primarily of advertising and promotion fees of approximately $0.7 million, stock option compensation expense of approximately

$0.1 million, professional fees of approximately $2.9 million, salaries and wages of $1.8 million, and all other general and administrative

expenses of approximately $2.8 million.

In fiscal year ended 2023, operating expenses consisted primarily of advertising and

promotion fees of approximately $2.5 million, stock option compensation expense of approximately $3.2 million, professional fees of approximately

$2.7 million, salaries and wages of $2.0 million, and all other general and administrative expenses of approximately $2.8 million.

Income Taxes:

have Federal net operating loss (“NOL”) carryforwards of approximately $23.8 million and state NOL carryforwards of approximately

$186 thousand.

With the changes instituted by the CARES Act, the Federal NOLs have an indefinite life and will not expire.

and state tax returns for the 2021 and 2022 tax years generally remain subject to examination by U.S.

We have Federal net operating loss (“NOL”)

carryforwards of approximately $29.8 million and state NOL carryforwards of approximately $0.4 million.

With the changes instituted by

the CARES Act, the Federal NOLs have an indefinite life and will not expire.

Our federal and state tax returns for the 2022 and 2023 tax

years generally remain subject to examination by U.S.

and various state authorities.

A valuation allowance is recorded to reduce the deferred tax asset if, based on the weight of the evidence, it is more likely than not

that some portion or all the deferred tax assets will not be realized.

Management determined that a valuation allowance of approximately

$7.3 million for the year ended on October 31, 2023, was necessary to reduce the deferred tax asset to the amount that will more likely

than not be realized.

refer to Note 10, Income Tax, in the Notes to the Consolidated Financial Statements in this Report for additional information related

to our income taxes.

loss for fiscal year 2023 was approximately $11.1 million, or $(4.13) basic and diluted net loss per share, compared to a net loss of

approximately $(14.4) million, or $(7.60) basic and diluted net loss per share, for fiscal year 2022.

The decrease in net loss for

the fiscal year 2023, as compared to net loss in fiscal year 2022, is attributable to the revenues and expenses factors noted above.

Weighted-average Common Stock outstanding were 2,721,080 on October 31, 2023, as compared to 1,890,971 on October 31, 2022.

in the weighted-average shares in fiscal year 2023 was primarily attributable to the issuance of 118,668 shares of Common Stock.

Accrued Expenses:

During fiscal year 2023, we accrued

approximately $81,300 for two quarterly bonuses and approximately $58,400 for approved expenses payable to QuikfillRx based on our applicable

gross quarterly sales for the six months ended October 31, 2023.

During fiscal year 2022, we accrued approximately $33,900 for a quarterly

bonus and approximately $18,000 for approved expenses payable to QuikfillRx based on our applicable gross quarterly sales for the three

months ended October 31, 2022.

Excise taxes totaling approximately $5,800 were accrued based on taxable sales during the fourth

quarter of fiscal year 2023, compared to excise taxes of approximately $6,600 that were accrued in fiscal year 2022 based on taxable

sales during the fourth quarter of fiscal year 2022.

A valuation allowance is recorded to reduce the deferred

tax asset if, based on the weight of the evidence, it is more likely than not that some portion or all the deferred tax assets will not

Management determined that a valuation allowance of approximately $8.7 million for the year ended on October 31, 2024, was

necessary to reduce the deferred tax asset to the amount that will more likely than not be realized.

Please refer to Note 10, Income Tax, in the Notes

to the Consolidated Financial Statements in this Report for additional information related to our income taxes.

Net loss for fiscal year ended 2024 was approximately

$(6.7) million, or $(1.62) basic and diluted net loss per share, compared to a net loss of approximately $(11.1) million, or $(4.13) basic

and diluted net loss per share, for fiscal year 2023.

The decrease in net loss for the fiscal year 2024, as compared to net loss in fiscal

year 2023, is attributable to the revenues and expenses factors noted above.

Weighted-average Common Stock outstanding were 4,313,900

on October 31, 2024, as compared to 2,721,080 on October 31, 2023.

The increase in the weighted-average shares in fiscal year 2024 was

primarily attributable to the issuance of 5,723,916 shares of Common Stock.

Concentrations:

Financial instruments, which potentially

subject us to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and

Financial instruments, which potentially subject

us to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue.

Concentration of Purchases and Accounts Payable-

Related Party:

For the year ended October 31,

2023, 100% of the inventories of products, consisting solely of the BIDI ® Stick, were purchased from Bidi, a related party

company that is owned by Nirajkumar Patel, our Chief Science and Regulatory Officer and director, in the amount of approximately $12.8 million,

as compared to $1.5 million for the year ended October 31, 2022.

October 31, 2023, a credit of $3.0 million was applied from the related-party receivable balance to the related part accounts payable

After this was applied, we had no related party receivable balance.

As of October 31, 2023, the related party accounts payable

balance related to purchases of inventories was $1.5 million.

There was no related party accounts payable balance as of October 31, 2022.

As of October 31,2022, we had a related party receivable balance

due from Bidi of $3,704,132 of which $1,539,486 and $2,164,646 were classified as current and non-current respectively.

the year ended October 31, 2024, 100% of the inventories of products, consisting solely of

the BIDI ® Stick, were purchased from Bidi, a related party, in the amount

of $0.3 million, as compared to $12.8 million for the year ended October 31, 2023.

As of October 31, 2024, we had no related party receivable

As of October 31, 2024, there was $131,683 of related party accounts payable.

On October 31, 2023, a credit of $3.0 million

was applied from the related-party receivable balance to the related party accounts payable balance.

After this was applied, we had no

related party receivable balance as of October 31, 2023.

As of October 31, 2023, the related party accounts payable balance related to

purchases of inventories was $1.5 million.

Concentration of Revenues and Accounts Receivable:

For the fiscal year 2023, (i)

approximately 15% of the revenue from the sale of Products, solely consisting of the BIDI ® Stick, was generated from GPM

Investments, LLC in the amount of approximately $2.0 million, (ii) approximately 14% from H.T.

Hackney Co in the amount of $1.8 million,

(iii) approximately 14% from FAVS Business, LLC in the amount of $1.8 million, (iv) approximately 13% from C Store Master in the amount

of $1.8 million, and (v) approximately 11% from QuikTrip Corporation in the amount of $1.5 million.

For the fiscal year 2022, (i) approximately

31% of the revenue from the sale of Products, solely consisting of the BIDI ® Stick, was generated from Favs Business

in the amount of approximately $3.9 million, (ii) approximately 15% of the revenue from the sale of the Products was generated from H.T.

in the amount of approximately $1.9 million, and (iii) approximately 12% of the revenue from the sale of Products, solely

consisting of the BIDI Stick, was generated from GPM, in the amount of approximately $1.5 million.

FAVS Business LLC with an outstanding

balance of approximately $302,000, C Store Master with an outstanding balance of approximately $301,000, and QuikTrip Corporation with

an outstanding balance of approximately $165,000 accounted for approximately 35%, 35%, and 19% of the total accounts receivable from customers,

respectively, as of October 31, 2023.

Favs Business with an outstanding balance of approximately $375,000 and QuikTrip Corporation, with

an outstanding balance of approximately $85,000, accounted for approximately 65% and 15% of the total accounts receivable from customers,

respectively, as of October 31, 2022.

For the fiscal year 2024, (i) approximately 21% of the revenue from the sale

of Products, solely consisting of the BIDI ® Stick, was generated from QuikTrip Corporation in the amount of approximately

$1.2 million, (ii) approximately 12% from GPM Investments in the amount of $0.7 million, and (iii) approximately 11% from FAVS Business,

LLC in the amount of $0.7 million.

For the fiscal year 2023, (i) approximately 16% of the revenue from the sale of Products, solely consisting

of the BIDI ® Stick, was generated from GPM Investments, LLC in the amount of approximately $2.0 million, (ii) approximately

15% from H.T.

Hackney Co in the amount of $1.8 million, (iii) approximately 15% from FAVS Business, LLC in the amount of $1.8 million,

(iv) approximately 14% from C Store Master in the amount of $1.8 million, and (v) approximately 12% from QuikTrip Corporation in the amount

of $1.5 million.

Corporation with an outstanding balance of approximately $205 accounted for 100% of the

total accounts receivable from customers, as of October 31, 2024.

FAVS Business

LLC with an outstanding balance of approximately $302,000, C Store Master with an outstanding

balance of approximately $301,000, and QuikTrip Corporation with an outstanding balance of

approximately $165,000 accounted for approximately 35%, 35%, and 19% of the total accounts

receivable from customers, respectively, as of October 31, 2023.

Cash and cash equivalents

We consider all highly liquid

investments with an original maturity of three months or less when purchased to be cash equivalents.

There were no cash equivalents on

October 31, 2023, or October 31, 2022.

Cash on October 31, 2023, and October 31, 2022, were $0.5 million and $3.7 million, respectively.

We consider all highly liquid investments with an

original maturity of three months or less when purchased to be cash equivalents.

There were no cash equivalents on October 31, 2024, or

October 31, 2023.

Cash as of October 31, 2024, and October 31, 2023, was $3.9 million and $0.5 million, respectively.

Critical Accounting Policies and Estimates

Our financial statements are prepared

in accordance with generally accepted accounting principles in the United States, (“GAAP”).

Our financial statements are prepared in accordance

with generally accepted accounting principles in the United States, (“GAAP”).

The preparation of the consolidated financial

7 unchanged sentences

form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results could differ from those estimates.

We believe that the assumptions

associated with our revenue recognition have the greatest potential impact on our financial statements.

Therefore, we consider this to

be our only critical accounting policy and we do not consider any of our estimates to be critical accounting estimates.

However, we consider Revenue Recognition

the most critical accounting policy for the Company that could create a material misevaluation of Product Revenue if not adhered to and

implemented successfully.

We adopted ASC 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), in the

second quarter of fiscal year 2020, as this was the first quarter that we generated revenues.

Under ASC 606, we recognize revenue when

a customer obtains control of promised goods, in an amount that reflects the consideration that we expect to receive in exchange for

results could differ from those estimates.

We believe that the assumptions associated with our

revenue recognition have the greatest potential impact on our financial statements.

Therefore, we consider this to be our only critical

accounting policy and we do not consider any of our estimates to be critical accounting estimates.

However, we consider Revenue Recognition the most

critical accounting policy for the Company that could create a material misevaluation of Product Revenue if not adhered to and implemented

successfully.

Under ASC 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), we recognize revenue when

a customer obtains control of promised goods, in an amount that reflects the consideration that we expect to receive in exchange for the

To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps:

8 unchanged sentences

Products Revenue

We generate product revenue from the sale of our products to non-retail customers.

We recognize 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.

However, when we enter a consignment agreement with a new

customer, once we ship and deliver the requested amount of the products the customer ordered to it distribution center for its retail

sales location, we retain ownership of the delivered products until they are delivered to their retail stores.

When the products are sold

in the stores and the funds, as stated in the consignment agreement, are remitted to us, then we record the revenues in our financial

We determined that a customer obtains control of the product upon shipment when title of such product and risk of loss transfer

to the customer.

Our shipping and handling costs are fulfillment costs, and such amounts are classified as part of cost of sales.

advance payment is not considered a significant financing component because the period between when we transfer a promised good to a customer

and when the customer pays for that good is short.

We offer credit sales arrangements to non-retail (or wholesale) customers and monitor

the collectability of each credit sale routinely.

Quantitative and

Qualitative Disclosures about Market Risk.

We qualify as a smaller reporting

company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

We generate product revenue from the sale

of our products to non-retail customers.

We recognize 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.

However, when we enter

a consignment agreement with a new customer, once we ship and deliver the requested amount of the products the customer ordered to it s

distribution center for its retail sales location, we retain ownership of the delivered products until they

are delivered to their retail stores.

When the products are sold in the stores and the funds, as stated in the consignment agreement,

are remitted to us, then we record the revenues in our financial records.

We determined that a customer obtains control of the product

upon shipment when title of such product and risk of loss transfer to the customer.

Our shipping and handling costs are fulfillment costs,

and such amounts are classified as part of cost of sales.

The advance payment is not considered a significant financing component

because the period between when we transfer a promised good to a customer and when the customer pays for that good is short.

credit sales arrangements to non-retail (or wholesale) customers and monitor the collectability of each credit sale routinely .

Quantitative and Qualitative Disclosures

about Market Risk.

We qualify as a smaller reporting company, as defined

by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

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-K

Item 7. Management’s Discussion and Analysis