Company: KAVL
Filing Date: 2025-03-17
Form Type: 10-Q
Source: 0001731122-25-000399
Chunk: 85

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-03-17
Form: 10-Q
Item: Item 2
Chunk 85
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.2 million in the same period of the prior fiscal year. Revenues decreased
in the first quarter of 2025, primarily due to a decrease in product sales to customers.

Cost of Revenue, Net and Gross Profit:

Gross profit in the first quarter of fiscal year 2025
was approximately $0.2 million, or approximately 100.0% of revenues, net, compared to approximately $1.2 million gross profit or
approximately 37.3%, of revenues, net, for the first quarter of fiscal year 2024. Total cost of revenue, net was zero for the first quarter
of fiscal year 2025, compared to approximately $2.0 million, or approximately 62.7% of revenue, net for the first quarter of fiscal year
2024. The decrease is due to the reduction of product sales to customers during the three months January 31 ,2025.

Operating Expenses:

Total operating expenses
were approximately $4.3 million for the first quarter
of fiscal year 2025, compared to approximately $2.9 million for the first quarter of fiscal year 2024. The increase is primarily   from stock compensation
expense of $2.9 million for share-based awards to management and members of the board of directors. For the first quarter of fiscal year
2025, operating expenses consisted primarily of professional fees of approximately $3.4 million, and all other general and administrative
expenses of approximately $0.9 million. General and administrative expenses in the first quarter of fiscal year 2025 consisted primarily
of salaries and wages, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes. For the
first quarter of fiscal year 2024, operating expenses consisted primarily of advertising and promotion fees of approximately $0.4 million,
stock option expense of approximately $0.3 million, professional fees of approximately $0.8 million, and all other general and administrative
expenses of approximately $1.4 million. General and administrative expenses in the first quarter of fiscal year 2024 consisted primarily
of salaries and wages, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes.

Income Taxes:

During the first quarter of fiscal year 2025, we did
not accrue a provision for income taxes, due to the pre-tax loss of approximately ($4.0) million. Similarly, we did not accrue a provision
for income taxes, due