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Item 8. Financial Statements and Supplementary Data

2026-01-29 compared with 2025-02-10 · 437 added, 557 removed, 845 unchanged (54% of the section changed)

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We have audited the accompanying consolidated

balance sheets of Kaival Brands Innovations Group, Inc.

and its subsidiaries (collectively, the “Company”) as of October 31,

balance sheet of Kaival Brands Innovations Group, Inc and its subsidiaries (collectively, the “Company”) as of October 31,

2025 and 2024, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years

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As discussed in Note 3 to the financial statements, the Company

has suffered recurring losses and negative cash flows from operations which raised substantial doubt about its ability to continue as

a going concern.

has suffered recurring losses and negative cash flows from operations which raise substantial doubt about its ability to continue as a

going concern.

Management's plans in regard to these matters are also described in Note 3.

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rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

We conducted our audit in accordance with

the standards of the PCAOB.

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Houston, Texas

February 7, 2025

January 28, 2026

Kaival Brands Innovations Group, Inc.

Consolidated Balance Sheets

receivable, net

Total current

Fixed assets,

of use asset - operating lease

AND STOCKHOLDERS’ EQUITY

payable - related party

Loans payable,

lease obligation - short term

Total current

lease obligation, net of current portion

and Contingencies (Note 11)

STOCKHOLDERS’

5,000,000 shares authorized

A Convertible Preferred stock ($ 0.001 par value, 3,000,000 shares authorized, none issued and outstanding as of October 31, 2024 and

October 31, 2025

Series B Convertible

Preferred stock ($ 0.001 par value, 900,000 shares authorized, 900,000 issued and outstanding as of October 31, 2024 and October 31, 2023)

Common stock ($ .001

par value, 1,000,000,000 shares authorized, 8,517,302 and 2,793,386 shares issued and outstanding as of October 31, 2024 and October

31, 2023, respectively)

paid-in capital

October 31, 2024

CURRENT ASSETS

Accounts receivable, net

Prepaid expenses

Total current assets

Fixed assets, net

Intangible assets, net

Right of use asset - operating lease

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

Accounts payable - related party

Loans payable, net

Accrued expenses

Operating lease obligation - short term

Total current liabilities

LONG TERM LIABILITIES

Operating lease obligation, net of current portion

TOTAL LIABILITIES

Commitments and Contingencies (Note 10)

STOCKHOLDERS’ EQUITY

LIABILITIES & STOCKHOLDERS’ EQUITY

Preferred stock;

5,000,000 shares authorized

Series A Convertible Preferred stock ($ 0.001 par value, 3,000,000 shares authorized, none issued and outstanding as of October 31, 2025 and October 31, 2024)

Series B Convertible Preferred stock ($ 0.001 par value, 900,000 shares authorized, 900,000 issued and outstanding as of October 31, 2025 and October 31, 2024)

Common stock ($.001 par value, 1,000,000,000 shares authorized, 11,593,402 and 8,517,302 shares issued and outstanding as of October 31, 2025 and October 31, 2024, respectively)

Additional paid-in capital

Accumulated deficit

( 54,093,115 )

( 37,463,230 )

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these

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Total revenues, net

Cost of revenues

Cost of revenue

Cost of revenue - related party

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General and administrative expenses

Gain on termination of operating lease

Loss on disposal of furniture and equipment

Loss on impairment of intangible assets

Total operating expenses

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Loss before income taxes provision

Provision for income taxes

( 16,648,827 )

( 6,679,624 )

Benefit from (provision for) income taxes

$ ( 16,629,885 )

$ ( 6,699,282 )

Preferred stock dividend

Net loss attributable to common shareholders

$ ( 16,652,385 )

$ ( 6,969,282 )

Net loss per common share - basic and diluted

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consolidated financial statements.

Brands Innovations Group, Inc.

Statements of Changes in Stockholders’ Equity

the years ended October 31, 2024, and 2023

Kaival Brands Innovations Group, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the years ended October 31, 2025, and 2024

Convertible Preferred Shares (Series B)

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Balances, October 31, 2023

Common shares issued for purchase of intangible assets

Preferred series B shares issued for purchase of intangible assets

Stock warrants issued for purchase of intangible assets

Common shares issued for services

Common shares issued for loan

Stock option expense, net of forfeitures

Stock warrant expense

Preferred stock dividend

Balances, October 31, 2023

$ ( 30,763,948 )

Rounding shares issued for reverse split

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Stock option expense, net of forfeitures

( 6,699,282 )

Balances, October 31, 2024

$ ( 37,463,230 )

Common shares issued for services

Preferred stock dividend

Issuance of common shares

Stock option expense

( 16,629,885 )

Balances, October 31, 2025

$ ( 54,093,115 )

The accompanying notes are an integral part of these

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CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 16,629,885 )

$ ( 6,699,282 )

Adjustments to reconcile net loss to net cash used in operating activities:

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Stock options expense

Stock warrant expense

Depreciation and amortization

Make-whole provision

Amortization of debt discount

Loss on extinguishment of debt

Gain on termination of operating lease

Loss on disposal of furniture and equipment

Loss on impairment on intangible assets

Bad debt expense

ROU operating lease expense

Inventory reserve

Write-off of inventory

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Accounts receivable

Other receivable - related party

Prepaid expenses

Income tax receivable

Accounts payable

Accounts payable - related party

( 1,068,134 )

Accrued expenses

Deferred revenue

Customer deposits

Customer refunds due

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Net cash used in operating activities

( 2,772,790 )

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid for equipment

Transaction acquisition costs

Net cash used in investing activities

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Payments on loans payable

( 2,486,594 )

Payments on loans payable - related party

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Proceeds from exercises of warrants

Net cash provided by financing activities

Payments on preferred dividends

Net cash (used in) provided by financing activities

Net change in cash

( 3,367,894 )

Beginning cash balance

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Common shares issued to settle related party accounts payable

Common shares issued for acquisition of intangible assets

Common shares issued for services-transaction cost

Series B preferred stock shares issued for acquisition of intangible assets

Stock warrants issued for acquisition of intangible assets

Common stock issued for note payable financing

The accompanying notes are an

integral part of these consolidated financial statements.

The accompanying notes are an integral part of these

consolidated financial statements.

KAIVAL BRANDS INNOVATIONS GROUP, INC.

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Bidi granted the Company an exclusive worldwide right to distribute the Products for sale and resale to non-retail level customers.

the Products consist primarily of the “Bidi Stick.”

Products consist primarily of the “Bidi Stick.”

On August 31, 2020, the Company formed Kaival Labs,

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utilized by the Company in connection with its marketing and promotion of the Products.

Currently, the Company no longer

sells BIDI ® Sticks.

International Trade Commission (ITC) claims against the Company

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 the Company’s business, operations, financial results, and reputation would be significantly

adversely impacted.

As a result of the ITC Complaint and other factors, the Company does not

expect any revenue from the sale of Bidi Sticks in the foreseeable future.

The Company’s primary source of revenue is from KBI

from royalties from PMI under the PMI License Agreement.

Impact of the FDA PMTA Decision and Subsequent

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and that the FDA should have gone through the notice and comment rulemaking process for this requirement.

On October 14, 2021, Bidi requested that the FDA re-review

the MDO and reconsider its position that Bidi did not include certain scientific data in its applications sufficient to allow the PMTAs

to proceed to scientific review.

On October 14, 2021, Bidi requested that the FDA re-review the MDO and reconsider

its position that Bidi did not include certain scientific data in its applications sufficient to allow the PMTAs to proceed to scientific

In light of this request, on October 22, 2021, pursuant to 21 C.F.R.

§ 10.35(a), the FDA issued

an administrative stay of Bidi’s MDO pending its re-review, permitting the Company to continue sales.

Subsequently, the FDA decided

not to rescind the MDO and lifted its administrative stay on December 17, 2021.

Following the lifting of the FDA’s administrative

stay, Bidi filed a renewed motion to stay the MDO with the 11 th Circuit.

On February 1, 2022, the appellate court granted Bidi’s

motion to stay (i.e., put on hold) the MDO, again allowing the Company to continue sales pending the litigation on the merits.

Oral arguments

in the merits-based proceeding were held on May 17, 2022.

§ 10.35(a), the FDA issued an administrative stay of

Bidi’s MDO pending its re-review, permitting the Company to continue sales.

Subsequently, the FDA decided not to rescind the MDO

and lifted its administrative stay on December 17, 2021.

Following the lifting of the FDA’s administrative stay, Bidi filed a renewed

motion to stay the MDO with the 11 th Circuit.

On February 1, 2022, the appellate court granted Bidi’s motion to stay

(i.e., put on hold) the MDO, again allowing the Company to continue sales pending the litigation on the merits.

On August 23, 2022, the U.S.

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and comprehensive marketing and sales-access-restrictions plans designed to prevent youth appeal and access.

The FDA did not appeal to the 11 th Circuit’s decision.

FDA had until October 7, 2022 (45 days from the August 23, 2022, decision) to either request a panel rehearing or a rehearing “en

banc” (a review by the entire 11 th Circuit, not just the 3-judge panel that issued the decision), and until November

21, 2022 (90 days after the decision) to seek review of the decision by the U.S.

The FDA did not appeal to the 11 th Circuit’s

The FDA had until October 7, 2022 (45 days from the August 23, 2022, decision) to either request a panel rehearing or a rehearing

“en banc” (a review by the entire 11 th Circuit, not just the 3-judge panel that issued the decision), and until

November 21, 2022 (90 days after the decision) to seek review of the decision by the U.S.

Supreme Court.

No request for a rehearing was filed,

and no petition for a writ of certiorari was made to the Supreme Court.

On July 29, 2024, Bidi received a Recission of Marketing Denial

letter from FDA formally rescinding the MDO for the non-tobacco flavored BIDI® Stick PMTAs and putting those applications back into

the review process.

The Company is able to market and sell the non-tobacco flavored BIDI® Sticks, subject to the FDA’s enforcement

discretion, for the duration of the PMTA scientific review.

No request for a rehearing was

filed, and no petition for a writ of certiorari was made to the Supreme Court.

On July 29, 2024, Bidi received a Recission of Marketing

Denial letter from FDA formally rescinding the MDO for the non-tobacco flavored BIDI® Stick PMTAs and putting those applications

back into the review process.

On November 4, 2025, FDA issued a MDO for the PMTA for the non-tobacco flavored Bidi Sticks.

basis for this MDO is that Bidi Vapor’s PMTAs for non-tobacco flavored BIDI Stick did not include sufficient, robust evidence showing

that marketing the flavored products would be “appropriate for the protection of the public health” (APPH)—i.e., that

adult-smoker benefits (complete switching or significant cigarette reduction) would be large enough to outweigh the well-established youth-appeal

and youth-initiation risks of flavored ENDS.

In particular, FDA said the submission lacked the kind of comparative evidence (e.g., RCT/longitudinal

cohort comparing flavored vs tobacco-flavored ENDS) needed to demonstrate an added adult benefit.

FDA therefore concluded the applications

were insufficient and stopped further scientific review of other sections.

Accordingly, at this time, the non-tobacco flavored BIDI®

Stick is considered an adulterated tobacco product, the continued marketing and distribution of which is prohibited.

Separately, on or about May 13, 2022, the FDA placed

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denied on February 18, 2024.

The case is now proceeding on the merits, with Bidi’s opening merits brief filed on April 15, 2024.

FDA filed its response brief on June 7, 2024, and Bidi filed its reply brief on July 29, 2024.

The 11 th Circuit has indicated

that the oral argument will be held in April 2025.

The Company cannot provide any assurance as to the timing or outcome.

Unless the MDO

is ultimately remanded by the 11 th Circuit, the Classic BIDI® Stick is considered an adulterated tobacco product, the continued

marketing and distribution of which is prohibited.

Briefing on the merits proceeded, with Bidi filing the opening merits brief on April 15, 2024.

its response brief on June 7, 2024, and Bidi filed its reply brief on July 29, 2024.

Oral arguments were held before a three-judge panel

on the 11 th Circuit on April 2, 2025.

The Court issued a decision on April 24, 2025, upholding FDA’s denial order.

at this time, the Classic BIDI® Stick is considered an adulterated tobacco product, the continued marketing and distribution of which

is prohibited.

Risks and Uncertainties

The FDA has indicated

that it is prioritizing enforcement of unauthorized ENDS against companies (1) that never submitted PMTAs, (2) whose PMTAs have been

refused acceptance or filing by the FDA, (3) whose PMTAs remain subject to MDOs, and (4) that are continuing to market unauthorized synthetic

nicotine products after the July 13, 2022, cutoff.

Subject to FDA’s enforcement discretion, until the scientific review process

is complete on each of Bidi’s PMTA’s, the Company views the risk of FDA enforcement against Bidi as low and is no longer

marketing the Classic BIDI® Stick per the MDO.

The Company anticipates FDA will move forward with a review of Bidi’s PMTA

on remand, as directed by the Court;

however, the Company cannot provide any assurances as to the timing or outcome.

The FDA has indicated that it is prioritizing enforcement

of unauthorized ENDS against companies (1) that never submitted PMTAs, (2) whose PMTAs have been refused acceptance or filing by the FDA,

(3) whose PMTAs remain subject to MDOs, and (4) that are continuing to market unauthorized synthetic nicotine products after the July

13, 2022, cutoff.

Due to the MDOs Bidi is no longer marketing the Classic BIDI® Stick or the non-tobacco flavored BIDI® Sticks.

Merger and Share Exchange Agreement

On September 23, 2024,

we agreed with Delta Delta Corp Holdings Limited, a company incorporated in England and Wales (“Delta”) to effect a business

combination between us and Delta by entering into

a Merger and Share Exchange Agreement (the “Merger Agreement”) among us, 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 the shareholders of Delta.

Pursuant to the Merger Agreement, we

will effect a merger and share exchange involving the following transactions:

shall acquire all of the issued and outstanding shares of Delta from each holder of Delta shares in exchange for the issuance by

Pubco of ordinary shares in the capital of Pubco (the “Share Exchange”);

following to the completion of the Share Exchange, Merger Sub shall merge with and into us (the “Merger”), with us continuing

as the surviving entity in the Merger.;

Upon consummation of the transactions contemplated by the

Merger Agreement, including the Share Exchange and the Merger, each of us and Delta will become wholly owned subsidiaries of Pubco.

On September 23, 2024, the Company agreed with Delta

Corp Holdings Limited, a company incorporated in England and Wales (“Delta”) to effect a business combination between the

Company and Delta by entering into a Merger and Share Exchange Agreement (the “Merger Agreement”) among the Company, 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 the shareholders of Delta.

On September 11, 2025, the Company and Delta entered

into a Business Combination Termination and Release Agreement (the “Termination Agreement”) pursuant to Section 10.1(a) of

the Merger Agreement (the “Merger Agreement’) among the Company, Delta, Pubco, KAVL Merger Sub Inc.

and Delta Corp Cayman

Pursuant to the Termination Agreement, the Company

and Delta mutually terminated the Merger Agreement and all agreements between the parties that are ancillary thereto and Delta waived

any and all claims against the other party that in any way directly and/or indirectly arise out of, are based upon, or are in connection

with the Merger Agreement and any agreements ancillary thereto.

Note 2 – Basis of Presentation and Significant

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Accounts Receivable and Reserve for Credit Losses

Accounts receivable pertain to contracts with customers

Accounts receivable pertains to contracts with customers

who are granted credit by the Company in the ordinary course of business and are recorded at the invoiced amount.

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does not bear interest.

Accounts receivable presented on the consolidated balance sheet are adjusted for any write-offs and net of allowance

Accounts receivable presented on the consolidated balance sheets are adjusted for any write-offs and net of allowance

for credit losses.

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The reserve for credit losses is measured on a collective basis when similar risk characteristics

upon management’s assessment of the accounts receivable aging and the customers’ payment history, the Company has determined

that no reserve for credit losses is required as of October 31, 2024 and October 31, 2023.

Based upon management’s assessment of the accounts

receivable aging and the customers’ payment history, the Company has determined that no reserve for credit losses is required as

of October 31, 2025 and October 31, 2024.

On January 22, 2024, the FDA issued an MDO on Bidi

Vapor’s “Classic” BIDI ® Stick PMTA, which Bidi is currently appealing before the 11 th Circuit Court

Vapor’s “Classic” BIDI ® Stick PMTA, which was subsequently upheld by the 11 th Circuit Court of

The Company evaluated the impact of this MDO to the financial statements and recorded an estimated accrual for potential customer

returns of the “Classic” products of $ 46,775 and $ 113,243 as of October 31, 2024, and October 31, 2023, respectively,

which is included in accrued expenses in the consolidated balance sheets.

returns of the “Classic” products of zero and $ 46,775 as of October 31, 2025, and October 31, 2024, respectively, which is

included in accrued expenses in the consolidated balance sheets.

On November 4, 2025, FDA issued a MDO for the PMTA

for the non-tobacco flavored Bidi Sticks.

Financial instruments, which are potentially subject

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costs of completion and the estimated costs necessary to make the sale.

During fiscal year 2024 and 2023, the Company recognized inventory write

offs of $ 61,927 and $ 105,057 , respectively, related to short-coded Bidi sticks that were no longer saleable.

During fiscal year 2025 and 2024, the Company recognized inventory

write offs of zero 0 and $ 61,927 , respectively, related to short-coded Bidi sticks that were no longer saleable.

On January 22, 2024, the FDA issued an MDO on Bidi

Vapor’s “Classic” BIDI ® Stick PMTA, which Bidi is currently appealing before the 11 th Circuit Court

The Company evaluated the impact of this MDO to the financial statements and recognized a full reserve for all remaining “Classic”

products on hand amounting to $ 313,654 and $ 381,512 as of October 31, 2024, and October 31, 2023, respectively.

Vapor’s tobacco-flavored “Classic” BIDI ® Stick PMTA.

The appeal of that denial order before the 11 th

Circuit Court of Appeals was unsuccessful.

The Company evaluated the impact of this MDO to the financial statements and recognized a full

reserve for all remaining “Classic” products on hand amounting to $ 313,654 as of October 31, 2024.

The Company has zero inventory

as of October 31, 2025.

The Company determines if a contract contains a lease

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of 12 months or less are not recognized on the balance sheet.

During the fiscal year ended October 31, 2025, the

Company determined that it would no longer be using the leased office space in its business operations and the lease liability was written

off and recognized a net gain on termination of operating lease of $ 59,823 .

Impairment of Long-Lived Assets

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regarding future growth rates and operating expense levels can have a significant impact on the expected future cash flows and impairment

No impairment of long-lived assets was identified for the years ended October 31, 2024

and 2023, respectively.

The Company evaluated its intangible assets for impairment and recognized

an impairment loss of $ 9,895,503 for the year ended October 31, 2025.

No impairment loss of long-lived assets was identified for the

year ended October 31, 2024.

Revenue Recognition

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with customers depicts the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

Deferred Revenue

The Company accepts partial payments for orders from

wholesale customers, which it holds as deposits or deferred revenue, until the Company has received full payment and orders are shipped

to the customer.

Revenue for these orders is recognized at the time of shipment to the customer.

As of October 31, 2024, and October 31,

2023, the Company has no amounts in deposits from customers.

Customer Refunds

In the normal course of business, the Company issues

credits for product returns and certain customer incentives related to rebates, discounts and promotions.

When such credits exceed amounts

receivable from customers, the Company recognizes such excess amounts as customer refunds which will be applied against future product

As of October 31, 2024, and October 31, 2023, the Company had zero 0 and $ 392,406 refunds due to various customers, respectively.

Products Revenue

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of the PMI Markets that PMI may enter has been expanded to cover certain additional territories.

Net Reconciliation Payment to

As a result of the changes to the PMI License Agreement described in paragraphs 1 through 3 above, the value of such changes was

calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023.

On September 8, 2023, the

Company received the Net Reconciliation Payment from PMPSA of $ 134,981 pursuant to this provision.

Net Reconciliation Payment

As a result of the changes to the PMI License Agreement described in paragraphs 1 through 3 above, the value of such changes

was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023.

The KBI License Agreement provides that KBI shall

pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development

costs incurred for entry to specific international markets.

During the year ended October 31, 2024, the Company paid license fees of

approximately $ 220,000 to Bidi.

As of October 31, 2024 and 2023, $ 131,683

respectively, of license fees are owed to Bidi.

pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such general

and administrative costs incurred for insurance.

During the year ended October 31, 2025, the Company paid license fees of approximately

$266,215 to Bidi.

As of October 31, 2025 and 2024, $ 50,000 and 131,683 , respectively, of license fees are owed to Bidi.

As of October 31, 2025, amounts receivable from PMPSA

in connection with the PMI license agreement pertaining to royalties totaled $ 263,367 .

As of October 31, 2023, amounts receivable from

PMPSA in connection with the PMI License Agreement totaled $ 1,002,196 of which $ 289,672 and $ 712,524 pertain to royalties

and reimbursement of certain non-recurring engineering costs, respectively.

in connection with the PMI license agreement pertaining to royalties totaled $ 120,000 , of which $ 120,000 and $ 0 pertain to royalties and

reimbursements of certain non-recurring engineering costs, respectively.

As of October 31, 2024, amounts receivable from PMPSA in connection

with the PMI license agreement pertaining to royalties totaled $ 263,367 , of which $ 263,367 and $ 0 pertain to royalties and reimbursements

of certain non-recurring engineering costs, respectively

Net Loss Per Share

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net loss per share calculation as their inclusion would be antidilutive.

of October 31, 2024, and 2023, there were 5,944,276 and 691,654 , respectively, units of common stock equivalents that consists of options

and warrants units, as well as 357,120 shares issuable upon preferred stock conversions, that were excluded from the current and prior

period diluted loss per share calculation as their effect is anti-dilutive.

As of October 31, 2025, and

2024, there were 5,810,353 and 5,944,276 , respectively, units of common stock equivalents that consists of options and warrants units,

as well as 357,120 shares issuable upon preferred stock conversions, that were excluded from the current and prior period diluted loss

per share calculation as their effect is anti-dilutive.

Concentration of Revenues and Accounts Receivable

No revenue concentration from the sale of Products

existed for the year ended October 31, 2025.

For the year then ended October 31, 2024, (i) 21 %

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2, 2024, QuikTrip Corporation terminated its consignment arrangement with the Company.

For the year then ended October 31, 2023, (i) 16%

or $ 1,986,970 of the revenue from the sale of Products, solely consisting of the BIDI® Stick, was generated from GPM Investments,

LLC, (ii) 15% or $ 1,842,511 was generated from H.T.

Hackney Co, (iii) 15% or $ 1,817,310 was generated from FAVS Business, LLC, (iv) 14%

or $ 1,759,563 was generated from C Store Master, and (v) approximately 12% or $ 1,501,439 was generated from QuikTrip Corporation.

No accounts receivable concentration from the sale

of Products existed as of October 31, 2025.

QuikTrip Corporation with an outstanding balance of

$ 205 accounted for 100% of the total accounts receivable from customers as of October 31, 2024.

FAVS Business LLC with an outstanding balance of $ 302,400 ,

C Store Master with an outstanding balance of $ 300,590 , and QuikTrip Corporation with an outstanding balance of $ 164,987 accounted for

approximately 35 % , 35 % , and 19 % of the total accounts receivable from customers, respectively, as of October 31, 2023.

Share-Based Compensation

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Black-Scholes-Merton option-pricing model.

The fair value of each option granted during the years

then ended October 31, 2024, and October 31, 2023, was estimated on the date of grant using the Black-Scholes-Merton option-pricing model

with the weighted average assumptions in the following table:

There were no options granted during the fiscal twelve-month

period ended October 31, 2025.

The fair value of each option granted during the fiscal year then ended October 31, 2024, was estimated

on the date of grant using the Black-Scholes-Merton option-pricing model with the weighted average assumptions in the following table:

Schedule of weighted average assumptions

As of October

Expected dividend yield

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214.72 - 225.52 %

270.98 – 286.91

Risk-free interest rate

3.78 - 4.63 %

The expected term of options granted represents the

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financial condition, results of operations, or cash flow.

The Company has Federal net operating loss (“NOL”)

carryforwards, consisting of total deferred tax assets, totaling approximately $ 29.8 million and state NOL carryforwards, consisting of

total deferred tax liabilities, totaling approximately $ 0.3 million.

With the changes instituted by the CARES Act, the Federal NOLs have

an indefinite life and will not expire.

The Company’s federal and state tax returns for the 2021, 2022, and 2023 tax years generally

remain subject to examination by U.S.

The Company has Federal net operating loss

(“NOL”) carryforwards, consisting of total deferred tax assets, totaling approximately $ 34.2 million and state NOL

carryforwards, consisting of total deferred tax liabilities, totaling approximately $ 0.4 million.

With the changes instituted

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

The Company’s federal and state tax returns

for the 2022, 2023, and 2024 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 of the deferred tax asset will not be realized.

After consideration of all the evidence, both positive and negative, management has determined that a valuation allowance of $ 8,703,742

for the year ended on October 31, 2024, and a valuation allowance of $ 7,319,289 for the year ended on October 31, 2023 were necessary

to reduce the total net deferred tax asset to the amount that will more likely than not be realized pursuant to ASC 740 for those fiscal

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 of the deferred tax asset will not be realized.

After consideration of all the evidence, both positive and

negative, management has determined that a valuation allowance of $ 10.1 million for the year ended on October 31, 2025, and a

valuation allowance of $ 8,703,742

for the year ended on October 31, 2024 were necessary to reduce the total net deferred tax asset to the amount that will more likely

than not be realized pursuant to ASC 740 for those fiscal years.

Fair Value of Financial Instruments

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are described below:

1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets

or liabilities.

2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

or indirectly, including quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar

assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability

(e.g., interest rates);

and inputs that are derived principally from or corroborated by observable market data by correlation or

3 – Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based

upon certain market assumptions and pertinent information available to management as of October 31, 2024 and 2023.

The respective

carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of

these instruments.

These financial instruments include cash, accounts receivable, accounts payable, accrued expenses and

loans payable .

As of October 31, 2024, and 2023, the Company did not have any financial assets or liabilities measured

and recorded at fair value on a recurring basis.

Recent Accounting Pronouncements – Not

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates);

and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions

and pertinent information available to management as of October 31, 2025 and 2024.

The respective carrying value of certain on-balance-sheet

financial instruments approximated their fair values due to the short-term nature of these instruments.

These financial instruments include

cash, accounts receivable, accounts payable, accrued expenses and loans payable.

As of October 31, 2025, and 2024, the Company did not

have any financial assets or liabilities measured and recorded at fair value on a recurring basis.

Segment Reporting

In accordance with ASC 280, Segment

Reporting , the Company has identified one reportable segment, which aligns with how the Chief Operating Decision Maker

(“CODM”), consisting of the Company’s Chief Executive Officer, assesses financial performance and allocates

resources across the Company’s operations.

The measure of segment profit or loss is net loss as per the consolidated

statements of operations and the measure of segment assets is total assets reported on the consolidated balance sheets.

Recently Adopted Accounting Pronouncement

In November 2023, the FASB issued ASU 2023-07, “Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure

requirements, primarily through enhanced disclosures about significant segment expenses.

The purpose of the amendment is to enable investors

to better understand an entity’s overall performance and assess potential future cash flows.

The Company adopted ASU 2023-07 in

this Annual Report on Form 10-K and will adopt the interim disclosures in the first quarter of 2026.

ASU 2023-07 was adopted

retrospectively to all periods presented in the financial statements.

The adoption of this standard did not have a material impact on

the Company’s consolidated financial statements.

Recent Accounting Pronouncement – Not

In December 2023, the Financial Accounting Standards

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The Company is currently evaluating the impact of adopting this standard on its income tax disclosures.

In November 2023, the FASB issued ASU 2023-07, “Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure

requirements, primarily through enhanced disclosures about significant segment expenses.

The purpose of the amendment is to enable investors

to better understand an entity’s overall performance and assess potential future cash flows.

The guidance is effective for fiscal

years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption

The guidance is to be applied retrospectively to all prior periods presented in the financial statements.

The Company is continuing

to evaluate the impact of adopting this new guidance but does not expect it to have a material impact on the Company’s financial

Note 3 – Going Concern

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Company has incurred recurring losses and negative cash flows from operations for the years ended October 31, 2025 and 2024.

will need significant additional funds to satisfy its

outstanding payables, fund its working capital, and fully implement its business plan.

In addition, the Company’s 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 the uncertainty in the Company’s ability to continue to sell the Bidi Stick given the patent infringement claim

filed by RJ Reynolds.

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.

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.

there is no assurance that the Company 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 faced by the

will need significant additional funds to satisfy its outstanding payables, fund its working capital, and fully implement its business

In addition, the Company’s ability to continue as a going concern is adversely affected by the FDA’s denial of Bidi’s

PMTA for its non-tobacco flavored Bidi ® Stick as well as the Company’s inability to continue to sell the Bidi Stick

given the patent infringement claim filed by RJ Reynolds.

Likewise, in April 2025 the 11 th Circuit upheld FDA’s MDO

for the Classic BIDI® Stick.

Subsequently, on November 4, 2025, FDA issued a MDO for the PMTA for the non-tobacco flavored Bidi

All of these factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

The Company plans to continue developing strategies

for similar or expanded operations for the Company’s business to help the Company’s ability to determine where its business

will be viable going forward.

Until such time, if ever, the Company can generate substantial product revenues, management plans to

finance its cash needs through public or private equity offerings or debt financing.

However, there is no assurance that the Company 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 faced by the Company.

The accompanying consolidated financial statements

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

Note 4 – Acquisition of GoFire Assets

On May 30, 2023

(the “Closing Date”), the Company and Kaival Labs entered into an Asset Purchase Agreement (the “GoFire

APA”) with GoFire, Inc.

(“GoFire”) to purchase certain intellectual property assets of GoFire consisting of

various patents concerning electronic vaporizers and related technologies (the “Purchased Assets”) in exchange for

equity securities of the Company and certain contingent cash consideration.

The Company participated in this transaction with the

intent to diversify its product offerings and create both near and long-term revenue opportunities.

The Purchased Assets consist of

19 existing and 47 pending patents with novel

technologies related to vaporization and inhalation.

Pursuant to the terms of the GoFire APA, the Company

paid to GoFire, in addition to certain contingent cash consideration described below, consideration in the form of equity securities of

the Company consisting of (i) an aggregate of 95,239 shares of Common Stock (the “APA Shares”); (ii) 900,000 shares of

newly-designated Series B Convertible Preferred Stock, par value $ 0.001 per share, (the “Series B Preferred Stock” and the

shares of Common Stock underlying the Series B Preferred, the “Series B Conversion Shares”), the rights, preferences and terms

of which are set forth in a Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the “Certificate

of Designation”), and (iii) a common stock purchase warrant to purchase 95,239 shares of Common Stock (the “Warrant”

and the shares of Common Stock underlying the Warrant, the “Warrant Shares”).

As additional consideration for the Purchased

Assets, any cannabis-specific (meaning cannabis, hemp or cannabinoid) royalties that are generated by Kaival Labs from or due to the Purchased

Assets, from the Closing Date until January 1, 2027, will be subject to a contingent cash payment (“CCP”).

Prior to the earlier

(i) the Company achieving less than or equal to $15,000,000 in aggregate gross cannabis-specific royalties from any Kaival Labs licensing

agreements, and (ii)

January 1, 2027, the Company shall pay GoFire a CCP equal to 50% of the aggregate gross cannabis-specific royalties generated by the

Purchased Assets.

After the earlier of:

(i) the Company achieving greater than $15,000,000 in aggregate gross cannabis-specific royalties,

and (ii) January 1, 2027, the Company shall pay GoFire a CCP equal to 10% of the aggregate gross cannabis-specific royalties generated

by the Purchased Assets until January 1, 2027.

Pursuant to the GoFire APA, the Company is required to use commercially reasonable efforts

to register the APA Shares and Warrant Shares with the SEC for distribution to GoFire’s stockholders and/or public resale by such

stockholders within 180 days of the Closing Date.

In addition, if any Series B Preferred Stock remains outstanding nineteen (19) months

after the Closing Date, the Company shall use commercially reasonable efforts to file with the SEC a subsequent registration statement

registering the distribution to GoFire’s stockholders and/or public resale Series B Conversion Shares by such stockholders.

such subsequent registration statement is required, the Company will use its commercially reasonable efforts to obtain effectiveness

of such subsequent registration statement within nineteen (19) months of the Closing Date, and if the Company does not so register the

Series B Conversion Shares within nineteen (19) months of the Closing Date, the Company will issue to GoFire or its designee an additional

ten percent (10%) of all of the Series B Conversion Shares underlying the then outstanding shares of Series B Preferred Stock.

the securities issued as consideration for the Purchased Assets are subject to a lock-up agreement that terminates one hundred eighty

(180) days from the Closing Date.

The Company has determined that the acquisition

of the Purchased Assets constitutes an asset acquisition and has recorded the assets under a cost accumulation model.

acquired and liabilities assumed are recognized at cost, which is the consideration the acquirer transferred to the seller, as well

as direct transaction costs, on the acquisition date.

The cost of the acquisition is then allocated to the assets acquired based on

their relative fair values.

The cost of acquisition does not include any contingent consideration related to contingent cash

payments as those obligations are contingent in future amount of royalties and will be recognized when the contingency is resolved,

and the consideration is paid or becomes payable.

Goodwill is not recognized in an asset acquisition.

The Purchased Assets have been

recorded at a cost of $11,795,975 and are included in Intangible Assets in the consolidated balance sheet.

The consideration paid for the GoFire APA was as follows

(see Note 5):

Schedule of consideration paid

Series B Preferred Stock

Common Stock Warrants

Transaction Costs

Total consideration

The fair value of the Common Stock is based on the

publicly traded share price as of the acquisition date and represents a Level 1 measurement.

The fair value of the Series B Preferred Stock and

Common Stock Warrants were determined using the Black-Scholes Option Pricing model.

The fair value measurements are based on significant

unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

Note 4 – Intangible Assets

The Company’s intangible assets include patents

and technology that were acquired pursuant to the GoFire APA.

The cost and accumulated amortization of the intangible assets amounted

to $ 11,795,975 and $ 1,114,064 as of October 31, 2024, respectively and $ 11,795,975 and $ 327,666 as of October 31, 2023, respectively.

Amortizable patents and technology have a useful life of 15.0 years with a weighted average remaining useful life of 13.7 years and 14.6

and technology that were acquired pursuant to the GoFire Asset Purchase Agreement (“GoFire APA”).

The cost and accumulated amortization

and impairment of the intangible assets amounted to $ 11,795,975

and $ 11,795,975

as of October 31, 2025, respectively and $ 11,795,975 and

$ 1,114,064 as

of October 31, 2024, respectively.

Amortizable patents and technology have a useful life of 15.0

years with a weighted average remaining useful life of 0

years and 13.7

years as of October 31, 2025 and October 31, 2024, respectively.

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and administrative expenses in the consolidated statements of operations.

Future amortization expense of intangible assets is as follows:

Schedule of future amortization expense of intangible assets

Year ending October

Year ending October 31, 2026

Year ending October 31, 2027

Year ending October 31, 2028

Year ending October 31, 2029

As of October 31, 2025, as a result of the termination of the merger and

share exchange agreement with Delta and the uncertainty in the Company’s ability to monetize and generate future cash flows from

the GoFire patents, the Company recognized an impairment loss on the intangible assets of $ 9,895,503 .

Note 5 – Loans Payable

Insurance Loans

On May 10, 2024, the Company obtained two insurance

The first loan is a nine-month loan from First Insurance Bank to finance the annual D&O insurance, with the principal amount

of $ 381,077 and subject to an effective interest rate of 7.45 % .

The second loan is a nine-month loan from IPFS Corporation to finance

the annual D&O insurance, with the principal amount of $ 94,404 and subject to an effective interest rate of 11.15 % .

As of October

31, 2024, the outstanding balance of the Insurance loans amounted to $ 207,616 .

On May 20, 2023, the Company obtained a

nine-month loan from Westfield Bank to finance the annual D&O insurance.

The principal amount was $ 342,001

On May 10, 2024, the Company obtained two

insurance loans.

The first loan is a nine-month loan from First Insurance Bank to finance the annual D&O insurance, with the

principal amount of $ 381,077

and subject to an effective interest rate of 7.45 %.

As of October 31, 2024, and October 31, 2023, the remaining balance was zero 0 and

The second loan is a nine-month loan from IPFS Corporation to finance the annual D&O insurance, with the principal amount of

and subject to an effective interest rate of 11.15 %.

As of October 31, 2025 and October 31, 2024, the outstanding balance of the insurance loans amounted to zero 0

and $ 207,616 ,

respectively.

For the year ended October 31,2025, the Company recorded $ 6,781 for total amortization

for insurance loans.

Loan Agreements

On May 9, 2023, the Company entered into two loan

agreements which are collateralized by all assets of the Company until the loans are repaid in full.

As illustrated in the following table,

under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount,

which is collected by the lenders at the disclosed weekly payment rate.

The Company’s former Chief Executive Officer, Eric Mosser

personally guarantees the performance of these loans.

These loans were fully paid on December 4, 2023, upon their maturity.

On November 29, 2023, the Company entered into two

loan agreements which are collateralized by all assets of the Company until the loans are repaid in full.

As illustrated in the following

table, under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase

Amount, which is collected by the lenders at the disclosed weekly payment rate.

The Company’s former Chief Executive Officer, Eric

Mosser personally guarantees the performance of these loans.

These loans were fully paid on June 13, 2024, upon their maturity.

The following table shows the loan agreements as of

October 31, 2024:

Schedule of loan agreements

Inception Date

Purchase Price

Purchased Amount

Outstanding Balance

Payment frequency

Deferred Finance Fees

November 29, 2023

The following table shows the loan agreements as of

October 31, 2023:

Inception Date

Purchase Price

Purchased Amount

Outstanding Balance

Payment frequency

Deferred Finance Fees

The Company has accounted for these agreements as

loans under ASC 860 because while the Company provided rights to current and future receipts, the Company still had control over the receipts.

The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid.

On August 9, 2023, the Company entered into a Securities

2 unchanged sentences

(giving effect to original issue discount of $65,000).

The Note matures on February 8, 2024 (the “Maturity Date”) and bears

The Note matured on February 8, 2024 (the “Maturity Date”) and had

interest at the rate of 10% per annum.

Interest shall be payable on a monthly basis beginning on the date that is one month following

the date of issuance of the Note.

Provided no event of default (as defined in the Note) is in effect as of the Maturity Date, the Company

may elect to extend the Maturity Date for a period of six (6) months.

Pursuant to the terms of the

SPA, the Company paid a commitment fee to AJB in the form of 19,048 shares of Common Stock

(the “Commitment Fee Shares”) with a relative fair value of $ 130,478 which was recognized as discount to the note.

discount and issuance costs are amortized over the term of the note.

Amortization expense amounted to $ 38,273 and $ 122,273 for

the years ended October 31, 2024 and October 31, 2023, respectively.

Under the SPA, the Company has the right to repurchase

half of the Commitment Fee Shares if the Note is repaid in full prior to maturity.

Interest was payable on a monthly basis beginning on the date one month following the date of issuance

Pursuant to the terms of the SPA, the Company paid a commitment fee to AJB in the form of 19,048 shares of Common Stock (the

“Commitment Fee Shares”) with a relative fair value of $130,478 which was recognized as discount to the note.

The debt discount

and issuance costs were amortized over the term of the note.

Amortization expense amounted to zero and $38,273 for the years ended October

31, 2025, and 2024, respectively.

Under the SPA, the Company had the right to repurchase

half of the Commitment Fee Shares if the Note was repaid in full prior to maturity.

On December 1, 2023, the Company fully paid the loan

2 unchanged sentences

to retain all of the Commitment Fee Shares.

The Company recognized $ 98,432 as loss on extinguishment of debt for the year then ended October

As of October 31, 2024 and October 31, 2023 the carrying value of the loan and unamortized debt discount and issuance costs

were 0 zero and zero and $ 513,295 and 136,705 , respectively.

The Company recognized $ 98,432 as loss on extinguishment of debt for the year ended October

As of October 31, 2025 and October 31, 2024, the carrying value of the Note was zero.

Note 6 – Leases

The Company capitalizes all leased assets pursuant

to ASU 2016-02, Leases (Topic 842) (“Topic 842”), which requires lessees to recognize right-of-use (“ROU”) assets

and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than

12 months and classified as either financing or operating leases.

The Company excludes short-term leases having initial terms of 12 months

or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

The Company does not have financing leases and only

one operating lease for office space and inventory storage space with Just Pick, LLC (“Just Pick”), a related party that was

owned and controlled by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company (see Note 9).

Certain of the

Company’s leases, have and may in the future, include renewal options, which have been and might be in the future, included in the

calculation of the lease liabilities and right of use assets when the Company is reasonably certain to exercise the option.

Cash flow information related to leases was as follows:

have one operating lease for office space and inventory storage space with Just Pick, LLC (“Just Pick”), a related party that

was owned and controlled by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company (see Note 8).

the Company’s leases, have and may in the future, include renewal options, which have been and might be in the future, included

in the calculation of the lease liabilities and right of use assets when the Company is reasonably certain to exercise the option.

Schedule of cash flow information related to leases

4 unchanged sentences

Operating cash flows from operating leases

The following table provides the maturities of lease liabilities as of

October 31, 2024:

Schedule of maturities of lease liabilities

Year ending October 31, 2025

Year ending October 31, 2026

Year ending October 31, 2027

Year ending October 31, 2028

Total future undiscounted lease payments

Imputed interest

Present value of lease liabilities

$ ( 102,410 )

$ ( 198,392 )

As of October 31, 2025, the Company had no lease liability.

As of October 31, 2025, the Company had no additional

leases which had not yet commenced.

On April 23, 2025, the Company received a letter

of demand from Just Pick, LLC, noting that the Company was in breach of the lease as base rent and operating expenses have not been

paid since January 8, 2025.

On April 30, 2025, the Company responded and provided Just Pick, LLC with a termination notice.

April 30, 2025, the Company determined that it would no longer be using the leased office space in its business and recorded a loss

on the ROU assets of $ 707,626 ,

In May 2025, the Company paid the total unpaid lease payments through May 2025 amounting to $ 78,217 .

On January 7, 2026, the Company executed a settlement agreement with Just Pick where both parties agreed to no further payments

remaining for the office lease liability.

The lease liability was written off as of October 31, 2025 and the Company recognized a

net gain of approximately $ 59,000 from the termination of the lease.

Note 7 – Stockholders’ Equity

29 unchanged sentences

B Preferred Stock will automatically convert to Common Stock upon the occurrence of a Change of Control (as defined in the GoFire APA).

As of October 31, 2024, the Company had accrued a dividend

of $ 382,500 payable to Series B shareholders.

On December 3, 2024, the Company paid accrued dividends of $ 405,000 to Series B shareholders.

As of October 31, 2025, the Company had

zero accrued dividend payable to Series B shareholders and no further dividends will be accrued or paid.

Pursuant to the GoFire APA, the Company is required

to use commercially reasonable efforts to register the APA Shares and Warrant Shares with the SEC for distribution to GoFire’s stockholders

and/or public resale by such stockholders within 180 days of the Closing Date.

In addition, if any Series B Preferred Stock remains outstanding

nineteen (19) months after the Closing Date, the Company shall use commercially reasonable efforts to file with the SEC a subsequent registration

statement registering the distribution to GoFire’s stockholders and/or public resale Series B Conversion Shares by such stockholders.

If such subsequent registration statement is required, the Company will use its commercially reasonable efforts to obtain effectiveness

of such subsequent registration statement within nineteen (19) months of the Closing Date, and if the Company does not so register the

Series B Conversion Shares within nineteen (19) months of the Closing Date, the Company will issue to GoFire or its designee an additional

ten percent (10%) of all of the Series B Conversion Shares underlying the then outstanding shares of Series B Preferred Stock.

the securities issued as consideration for the Purchased Assets are subject to a lock-up agreement that terminates one hundred eighty

(180) days from the Closing Date.

As of October 31, 2025, the Company made an accrual for the additional ten percent (10%) of all of the

Series B Conversion Shares of $ 39,283 .

Reverse Stock Split

On January 22, 2024, the Company filed a

Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the

State of Delaware to affect a 1-for-21

reverse stock split (the “2024 Reverse Stock Split”) of the shares of the Common Stock.

Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market.

No fractional shares were issued in connection

with the 2024 Reverse Stock Split.

Any fractional shares of the Company’s Common Stock that would have otherwise resulted from

the 2024 Reverse Stock Split were rounded up to the nearest whole number.

In connection with the 2024 Reverse Stock Split, the Board

approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or exercisable into

shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity compensation

All historical share and per-share amounts reflected throughout these accompanying consolidated

financial statements have

been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented.

The par value per share of the Common Stock was not affected by the 2024 Reverse Stock Split .

During the year ended October 31, 2024, the Company

issued 1,746,500

shares of common stock in connection with the June 2024 Public Offering (see below).

On January 22, 2024, the Company filed a Certificate

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

to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares of the Common Stock.

The 2024 Reverse

Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market.

No fractional shares were issued in connection with the 2024

Reverse Stock Split.

Any fractional shares of the Company’s Common Stock that would have otherwise resulted from the 2024 Reverse

Stock Split were rounded up to the nearest whole number.

In connection with the 2024 Reverse Stock Split,

the Board approved appropriate

and proportional adjustments to all outstanding securities or other rights convertible or exercisable into shares of the Common Stock,

including, without limitation, all preferred stock, warrants, options, and other equity compensation rights.

All historical share and

per-share amounts reflected throughout these accompanying consolidated financial statements have been retroactively adjusted to reflect

the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented.

The par value per share of the Common Stock

was not affected by the 2024 Reverse Stock Split.

During the year ended October 31, 2025, the Company

issued 2,174,456

shares of common stock from exercises of pre-funded warrants (see below).

issued 3,025,000 fully vested shares of common stock, respectively, to directors, officers and an employee pursuant to grants under the

Company’s Amended and Restated 2020 Stock and Incentive Compensation Plan.

During the year ended October 31, 2025, the Company issued 51,100 shares

of common stock through an ATM offering raising $ 24,293 and

paid fees of $ 850 to

Maxim for net proceeds of $ 23,443 .

During the year ended October 31, 2024, the Company

issued 52,949

shares of common stock for rounding of shares related to the Reverse Split.

issued 1,746,500 shares of common stock in connection with the June 2024 Public Offering (see below).

During the year ended October 31, 2024, the Company

issued 16,667

shares of common stock to a FINRA member broker-dealer in connection with the termination of its relationship with such broker

The fair value was $ 62,000

based on the closing price of the common stock on the termination date and recorded as stock-based compensation.

issued 2,174,456 shares of common stock from exercises of pre-funded warrants (see below).

During the year ended October 31, 2024, the Company

issued 333,200

shares of common stock from exercises of warrants for total consideration of $ 385,746 .

issued 52,949 shares of common stock for rounding of shares related to the Reverse Split.

During the year ended October 31, 2024, the Company

issued 1,400,144

shares of common stock to settle the related party payable to Bidi of $ 1,275,000 .

The Company recognized a loss on the settlement of the payable of $ 142,786 .

issued 16,667 shares of common stock to a FINRA member broker-dealer in connection with the termination of its relationship with such

broker dealer.

The fair value was $ 62,000 based on the closing price of the common stock on the termination date and recorded as stock-based

compensation.

During the year ended October 31, 2024, the Company

issued 95,239

shares of Common Stock as consideration for the acquisition of the GoFire Purchased Assets.

The Company also issued 4,381

shares of Common Stock as compensation for advisory services rendered in connection with the GoFire APA.

issued 333,200 shares of common stock from exercises of warrants for total consideration of $ 385,746 .

During the year ended October 31, 2024, the Company

issued 19,048

common shares with a value of $ 130,478

as part of a loan issued on August 9, 2023.

issued 1,400,144 shares of common stock to settle the related party payable to Bidi of $ 1,275,000 .

The Company recognized a loss on the

settlement of the payable of $ 142,786 .

June 2024 Public Offering

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The aggregate gross proceeds

to the Company from the June 2024 Public Offering were approximately $ 5,997,720 , before deducting

placement agent fees and expenses and other transaction costs of $ 744,993 .

Of the total gross

proceeds, $ 2,672,145 and $ 3,325,575 were allocated

to the common stock and the pre-funded warrants, respectively.

to the Company from the June 2024 Public Offering were approximately $ 5,997,720 , before deducting placement agent fees and expenses and

other transaction costs of $ 744,993 .

Of the total gross proceeds, $ 2,672,145 and $ 3,325,575 were allocated to the common stock and the

pre-funded warrants, respectively.

See further Common Warrants and Pre-Funded Warrants

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$ 10.08 - 602.28

10.08 - 20.72

Cancelled, forfeited, or expired

( 7,763,571 )

2.81 - 545.58

Outstanding, October 31, 2024

2 unchanged sentences

( 5,999,707 )

$ 15.33 - 602.28

Outstanding, October 31, 2025

4 unchanged sentences

the Company recognized $ 38,637 and $ 108,234 , respectively of stock option expense related to outstanding stock options.

The weighted-average

grant-date fair value of the options granted during the fiscal years ended October 31, 2024 and October 31, 2023 were $ 5.03 and $ 15.81 , respectively.

No options were

granted during the twelve-months ended October 31, 2025.

The weighted-average grant-date fair value of the options granted during the

fiscal years ended October 31, 2024 was $ 5.03 .

The total fair value of stock options that vested

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Schedule of warrant information

October 31, 2022

Aggregate Number

Exercise Price Range

Outstanding, October 31, 2023

$ 12.39 - 126.00

forfeited, or expired

October 31, 2023

( 2,508,200 )

Cancelled, forfeited, or expired

12.39 - 15.33

forfeited, or expired

Outstanding, October 31, 2024

$ 1.16 - 126.00

October 31, 2024

Cancelled, forfeited, or expired

Outstanding, October 31, 2025

$ 1.16 - 126.00

October 31, 2024

Exercisable, October 31, 2025

$ 1.16 - 126.00

1 unchanged sentence

approximately 3.56 years for Common Stock warrants outstanding as of October 31, 2025.

of October 31, 2024, the intrinsic value of outstanding stock warrants was zero.

June 2024 Public Offering Warrants

The Company issued a common stock purchase warrant

to purchase an aggregate of 5,882,250 shares of Common Stock in connection with the June 2024 Public Offering with an initial exercise

price of $ 1.53 per share (equal to 100% of the public offering price of each unit sold in this offering).

The warrant is exercisable immediately

and will expire five years from the date of issuance.

However, if, on the date that is 30 calendar days immediately following the Closing

Date (the “Reset Date”), the Reset Price (as defined below) is less than the exercise price of the Common Warrants on the

Reset Date, then the exercise price of the Common Warrants shall be decreased to the Reset Price.

“Reset Price” means 100%

of the arithmetic average of the daily VWAPs during the five trading days immediately preceding the Reset Date, provided, that in no event

shall the Reset Price be less than $0.574 per share (subject to adjustment for reverse and forward stock splits, recapitalizations and

similar transactions following the date of the securities purchase agreement).

Immediately after the Reset Date, the Reset Exercise Price

is $ 1.1577 per share.

As of October 31, 2024, June 2024 Public Offering Warrants to purchase 5,549,050 shares of Common Stock remain outstanding.

GoFire Acquisition Warrants

The Company issued a common stock purchase warrant

to purchase an aggregate of 95,240 shares of Common Stock as consideration for the acquisition of the GoFire Purchased Assets.

is exercisable for a period of four ( 4 ) years from the Closing Date.

The exercise price for the Warrant Shares is $ 63.00 , $ 84.00 , $ 105.00

and $ 126.00 per share, respectively, for each of four tranches of 23,810 Warrant Shares.

The exercise prices of the Warrant are subject

to customary stock-based (but not price-based) adjustments upon the occurrence of stock splits and the like involving the Common Stock.

The Warrant is exercisable on a cash basis only, except that the Warrant may be exercised on a “cashless basis” if at the

time of exercise there is not an effective registration statement under the Securities Act of 1933, as amended covering the public resale

of the Warrant Shares.

As of October 31, 2024, GoFire Acquisition Warrants to purchase 95,240 shares of Common Stock remain outstanding.

September 2021 Public Offering Warrants

The Company issued a common stock purchase warrant

to purchase a total of 193,036 shares of Common Stock in connection with the Company’s underwritten public offering in September

2021, at an exercise price of $ 39.90 per share.

These warrants expire in 2026.

As of October 31, 2024, September 2021 Public Offering

Warrants to purchase 110,396 shares of Common Stock remain outstanding.

Other Warrants

The Company issued a common stock purchase warrant

to purchase an aggregate of 17,524 shares of Common Stock as compensation for advisory services rendered directly related to the GoFire

The warrant is exercisable for a period of five (5) years from the Closing Date.

The exercise price for the warrant shares is $ 14.70

The warrant is non-exercisable or transferrable for six months after the date of the closing of APA other than as permitted

by FINRA Rule 5110.

The warrant may be exercised as to all or a lesser number of shares of Common Stock for a period of five ( 5 ) years

after the Closing Date.

The Company entered into a financial advisor and placement agent agreement in April 2023 with an advisor.

of the consideration for the advisor’s services, the Company will issue warrants to purchase an aggregate of 17,143 shares of Common

Stock at an exercise price of $ 15.33 per share and a term of 5 years.

During the twelve (12) month engagement period, the Company will

grant the advisor warrants to purchase 1,429 shares of Common Stock each month.

The Company issued the first six (6) months of warrants

to purchase 8,572 shares of Common Stock upon the execution of the agreement and will issue monthly warrants each month at a rate of 1,429

warrants per month until 17,143 warrants have been issued in aggregate.

The Company issued warrants to purchase a total of 15,715 shares

of Common Stock.

The Company entered into a financial advisor and placement

agent agreement in August 2023 with an advisor.

As part of the consideration for the advisor’s services, the Company issued warrants

to purchase an aggregate of 3,673 shares of common stock at an exercise price of $ 12.39 per share and a term of 5 years.

The total Other Warrants to purchase 36,912 shares

of Common Stock were cancelled on December 15, 2023.

As of October 31, 2025, the intrinsic value of

outstanding stock warrants was zero.

Pre-Funded Warrants

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The Company received proceeds amounting to $ 1,450 from the cash exercise of the Pre-funded

As of October 31, 2024, there were no Pre-Funded Warrants outstanding.

As of October 31, 2024 and October 31, 2025, there were no Pre-Funded Warrants outstanding.

Note 8 – Related-Party Transactions

7 unchanged sentences

pursuant to the June 2024 Public Offering noted above.

This loan was fully paid on June 25, 2024, and as of October 31, 2024, had

an outstanding balance of zero.

This loan was fully paid on June 25, 2024 and has no remaining outstanding balance.

Revenue and Accounts Receivable

During the fiscal year ended October 31, 2024, the

Company recognized revenue of $ 5,950 from one company owned by Nirajkumar Patel, the former Chief Executive Officer and former Director of

the Company, and/or his wife.

During the fiscal year ended October 31, 2023, the

Company recognized revenue of $ 10,828 from three companies owned by Nirajkumar Patel, the

former Chief Executive Officer and a former Director of the Company, and/or his wife.

During the fiscal years ended October 31, 2025

and October 31, 2024, the Company recognized revenue of zero 0 and $ 5,950 from one company owned by Nirajkumar Patel, the former

Chief Executive Officer and former Director of the Company, and/or his wife.

There was no accounts receivable balance for these transactions as of October

31, 2025 and October 31, 2024.

Purchases and Accounts Payable

During the fiscal year ended October 31, 2024, 100% of the inventories of Products,

consisting solely of the BIDI® Stick, were purchased from Bidi, a related party controlled by Nirajkumar Patel, the former Chief

Executive Officer and Director of the Company, in the amount of $ 250,560 , As of October 31, 2024, the Company had $ 0 in accounts payable

to Bidi from inventory purchases.

During the fiscal year ended October 31, 2023, the

Company purchased Products equal to $ 12,747,006 from Bidi, a related party company that is

also owned by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company.

As of October 31, 2023, the Company had

an accounts payable balance of $ 1,521,491 to Bidi.

The KBI License

agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets

due to jointly agreed costs such development costs incurred for entry to specific international markets.

During the year ended

October 31, 2024, the Company paid license fees of approximately $ 220,000 to

As of October 31, 2024, the Company has a payable to Bidi of $ 131,683

related to the PMI License Agreement of which $ 108,215

was paid in December 2024.

There were no purchases of inventory from Bidi for

the year ended October 31, 2025 and no amounts owed to Bidi for inventory purchases as of October 31, 2025.

During the fiscal year ended October 31, 2024, 100%

of the inventories of Products, consisting solely of the BIDI® Stick, were purchased from Bidi, a related party controlled by Nirajkumar

Patel, the former Chief Executive Officer and Director of the Company, in the amount of $ 250,560 , As of October 31, 2024, the Company

had $ 0 in accounts payable to Bidi from inventory purchases.

The KBI License agreement provides that KBI shall

pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development

costs incurred for entry to specific international markets.

During the years ended October 31, 2025 and October 31, 2024, the Company

paid license fees of approximately $ 266,215 and $ 220,000 to Bidi, respectively.

As of October 31, 2024, the Company has

a payable to Bidi of $ 131,683 related to the PMI License Agreement of which $ 108,215 was paid in December 2024.

As of October 31, 2025,

the Company has a payable of approximately $ 50,000 related to the PMI License Agreement of which $ 37,500 was paid in January 2026.

Leased Office Space and Storage Space

June 10, 2022, the Company entered into a Lease Agreement with Just Pick, owned and controlled by Nirajkumar Patel, the former Chief

Executive Officer and Director of the Company.

The Company had $ 198,392 and $ 190,541 in operating lease expenses for the years ended

October 31, 2024 and October 31, 2023, respectively.

On June 10, 2022, the Company entered into a Lease

Agreement with Just Pick, owned and controlled by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company.

Company had $ 140,533 and $ 198,392 in operating lease expenses for the years ended October 31, 2025 and October 31, 2024, respectively.

Note 9 – Income Tax

9 unchanged sentences

There is no difference between the income tax computed at the combined federal and state statutory rate to the income tax effective

Significant components of the tax expense recognized

in the accompanying statements of operations for the years ended October 31, 2024, and October 31, 2023, are as follows:

Significant components of the tax (benefit)

expense recognized in the accompanying statements of operations for the years ended October 31, 2025, and October 31, 2024, are as

Schedule of components of income tax expense

4 unchanged sentences

Tax provision:

Total net deferred taxes are comprised of the following

on October 31, 2024, and October 31, 2023:

Total net deferred taxes are comprised of the following on October 31,

2025, and October 31, 2024:

Schedule of deferred tax assets and liabilities

8 unchanged sentences

Valuation Allowance

( 10,102,099 )

( 8,703,742 )

Net Deferred Tax Asset

20 unchanged sentences

On March 31, 2020, the Company entered into a service

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

whereby QuikfillRx provides the Company with certain services and support relating to sales management, website development and design,

graphics, content, public communication, social media, management and analytics, and market and other research (collectively, the “Services”).

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

QuikfillRx provides the Company with certain services and support relating to sales management, website development and design, graphics,

content, public communication, social media, management and analytics, and market and other research (collectively, the “Services”).

Effective as of November 9, 2022, the Company entered

48 unchanged sentences

adversely impacted.

Note 12 – Subsequent Events

On January 2, 2025, the Company issued 3,025,000 fully

vested shares of common stock to directors, officers and an employee pursuant to grants under the Company’s Amended and Restated

2020 Stock and Incentive Compensation Plan.

On December 3, 2024, the Company paid accrued dividends

of $ 405,000 to Series B Preferred shareholders.

On various dates from November 2024 through January 2025, the Company received

reimbursements of non-recurring engineering costs from PMPSA totaling $ 932,937 which have been fully remitted to Bidi.

11 – Subsequent Events

During December 2025, the Company issued 4,892,000

shares of common stock through its ATM offering raising $ 1,111,858

and paid fees and expenses of $ 96,415

to Maxim for net proceeds of $ 1,015,443 .

During December 2025, the Company canceled 2,950,000 shares of common

stock issued to the Directors and Officers of the Company in January 2025 in relation to the terminated merger agreement with Delta.

The Company’s stock was delisted from the Nasdaq Stock Market on

December 23 , 2025 and is currently trading on the OTC Pink Limit Market.

Changes in and Disagreements with Accountants on Accounting

1 unchanged sentence

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 8. Financial Statements and Supplementary Data