Kaival Brands Reports Fiscal 2022 Second Quarter F
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Posted On: 06/21/2022 8:41:39 AM
Kaival Brands Reports Fiscal 2022 Second Quarter Financial Results
https://www.prnewswire.com/news-releases/kaiv...71794.html
Recently Signed Agreement with Affiliate of Philip Morris International Could Dramatically Drive Global Distribution; Accelerate Delivery of a Smoke-Free Future
GRANT, Fla., June 21, 2022 /PRNewswire/ -- Kaival Brands Innovations Group, Inc. (NASDAQ: KAVL) ("Kaival Brands," the "Company," or "we"
, the exclusive U.S. distributor of all products manufactured by Bidi Vapor, LLC ("Bidi Vapor" , which are intended for adults 21 and over, today announced its financial results for the fiscal 2022 second quarter ended April 30, 2022.
Corporate Updates Subsequent to the Fiscal Second Quarter 2022
The Company's recently formed, wholly owned subsidiary, Kaival Brands International, LLC ("KBI" , entered into an international licensing agreement with Philip Morris Products S.A. ("PMPSA" , a wholly owned affiliate of Philip Morris International Inc. ("PMI" (NYSE: PM), for the development and distribution of electronic nicotine delivery system ("ENDS" products in markets outside of the U.S., 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 U.S., 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 U.S.
PMI's international distribution network will potentially create substantial new "capital-light" revenue stream.
Management Comments
Niraj Patel, Chief Executive Officer and Founder of Kaival Brands stated, "Our results demonstrate strong execution and resiliency in our business, as revenues in the second quarter of fiscal year 2022 rose 11% as compared to revenues in the first quarter of fiscal year 2022. The recently announced international licensing agreement with PMPSA, a wholly owned affiliate of PMI, is a major milestone in the Company's efforts to expand the global sales and distribution of the BIDI® Stick. From a balance sheet perspective, the international licensing agreement has the potential to generate substantial returns on capital for the Company, given the low cash investment needed to reach a significant number of potential new consumers."
Financial Results for Fiscal Second Quarter 2022
Revenues: Revenues decreased by approximately $15.7 million in the second quarter of fiscal year 2022, compared to the same period of fiscal year 2021. In February 2022, Bidi Vapor was granted a judicial stay on the marketing denial order ("MDO" previously issued by the U.S. Food and Drug Administration (the "FDA" prohibiting the marketing and sale of non-tobacco flavored BIDI® Sticks, which had significantly impacted our revenues in previous quarters. As a result of the grant of the judicial stay of the MDO, our revenues increased in the second quarter of fiscal 2022, as compared to first quarter of fiscal 2022. We expect this trend to continue as renewed distribution ramps up and sales of non-tobacco flavored BIDI® Sticks increase, subject to the court ruling in Bidi Vapor's favor in the pending merits-based case, and subject to the FDA's enforcement discretion.
Cost of Revenue, Net, and Gross Profit (Loss): Gross profit in the second quarter of fiscal year 2022 was approximately $387,700, or approximately 12.7% of revenues, net, compared to approximately $6.3 million gross profit, or approximately 34.6% of revenues, net, for the second quarter of fiscal year 2021. Total cost of revenue, net was approximately $2.7 million, or approximately 87.3% of revenue, net for the second quarter of fiscal year 2022, compared to approximately $11.9 million, or approximately 65.4% of revenue, net for the second quarter of fiscal year 2021. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date credits/discounts/rebates given to customers, totaling approximately $499,000, resulting in an offset to revenue, net, during the second quarter of fiscal year 2022.
Operating Expenses: Total operating expenses were approximately $5.4 million for the second quarter of fiscal year 2022, compared to approximately $10.4 million for the second quarter of fiscal year 2021. For the second quarter of fiscal year 2022, operating expenses consisted primarily of advertising and promotion fees of approximately $761,000, stock-based compensation expense of approximately $2.5 million, professional fees of approximately $163,000 and general and administrative expenses of approximately $2.0 million. General and administrative expenses in the second quarter of fiscal year 2022 consisted primarily of salaries and wages, stock option expense, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes. For the second quarter of fiscal year 2021, operating expenses were approximately $10.4 million, consisting primarily of advertising and promotion fees of approximately $801,000, professional fees totaling approximately $7.3 million, and general and administrative expenses of approximately $2.3 million. General and administrative expenses in the second quarter of fiscal year 2021 consisted primarily of salaries and wages, insurance, banking fees, business fees, and other service fees. We expect future operating expenses to increase while we increase the footprint of our business and generate increased sales growth.
Income Taxes: During the second quarter of fiscal year 2022, we did not accrue a tax provision for income taxes, due to the pre-tax loss of approximately ($5.1) million, compared to a tax provision of approximately $187,000 for the second quarter of fiscal year 2021, due to the amount of pre-tax income for that three-month period. However, we did report a tax benefit of approximately $5,800. The reduction from the second quarter of fiscal year 2021 was due to the pre-tax operating loss recognized during the second quarter of fiscal year 2022.
Net Loss: As a result of decreased revenue, the net loss for the second quarter of fiscal year 2022 was approximately ($5.0) million, or ($0.16) basic and diluted loss per share, compared to a net loss of approximately ($4.3) million, or ($0.18) basic and diluted earnings per share, for the second quarter of fiscal year 2021. The increase in the net loss for the second quarter of fiscal year 2022, as compared to the second quarter of fiscal year 2021, is primarily attributable to the decreased revenues and increase in customer credits/discounts/rebates, as noted above.
Six months ended April 30, 2022, compared to six months ended April 30, 2021
Revenues: Revenues for the first six months of fiscal year 2022 were approximately $6.0 million, compared to $55.5 million in the same period of the prior fiscal year. Revenues decreased in the first six months of fiscal year 2022 compared to fiscal year 2021, generally due to (i) Bidi Vapor's receipt of the MDO, which limited our ability during the first six months of fiscal year 2022 to sell flavored BIDI® Sticks in the United States and (ii) increased competition. In February 2022, Bidi Vapor was granted a judicial stay on the MDO previously issued by the FDA banning the marketing and sale of non-tobacco flavored BIDI® Sticks, amongst banning these non-tobacco flavored sticks with other industry competitors. As a result of the judicial stay of Bidi Vapor's MDO, we have begun to experience an upward trajectory in our revenue as renewed distribution ramps up and sales of non-tobacco flavored BIDI® Sticks products increase, which sales remain subject to FDA's enforcement discretion (and assuming that Bidi Vapor is successful in its currently pending merits-based case). We also anticipate that if the FDA begins enforcement against illegally-marketed or synthetic-nicotine vaping products, there may be an increased demand for compliant and legal vaping products, such as the BIDI® Stick.
Cost of Revenue and Gross Profit: Gross loss in the first six months of fiscal year 2022 was approximately ($303,000), compared to gross profit of approximately $11.1 million profit for the first six months of fiscal year 2021. Total cost of revenue was approximately $6.2 million for the first six months of fiscal year 2022, compared to $44.4 million for the first six months of fiscal year 2021. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date credits/discounts/rebates given to customers, totaling approximately $1.4 million, resulting in an offset to revenue, net, during the six months ended April 30, 2022.
Operating Expenses: Total operating expenses were approximately $7.5 million for the first six months of fiscal year 2022, compared to approximately $14.7 million for the first six months of fiscal year 2021. For the first six months of fiscal year 2022, operating expenses consisted of commissions paid pursuant to a service agreement of approximately $1.4 million and general and administrative expenses consisting of amortized stock option expense of approximately $2.8 million, professional fees of approximately $1.4 million, salaries and wages of approximately $939,000, and all other general and administrative expenses of approximately $1.0 million. General and administrative expenses in the first six months of fiscal year 2022 consisted primarily of legal fees, salaries, other professional fees, merchant fees, and other service fees. Total operating expenses for the first six months of fiscal year 2021 were approximately $14.7 million. These operating expenses consisted primarily of advertising and promotion fees of approximately $1.8 million; professional fees of approximately $9.7 million; salary, wages, commissions, and bonuses of approximately $1.8 million; stock-based compensation expense of approximately $580,000; professional fees of approximately $163,000; and general and administrative expenses of approximately $820,000, which consisted primarily of insurance, banking fees, merchant fees, business fess and other service fees.
Cash Position: As of April 30, 2022, the Company had working capital of approximately $13.4 million and total cash of $4.7 million.
Liquidity and Capital Resources: Cash flow used in operations was approximately $(4.6) million for the first six months of fiscal year 2022, compared to $(5.2) million used in operations for the first six months of fiscal year 2021. The decrease in cash flow used in operations for the first six months of fiscal year 2022 compared to the first six months of fiscal 2021 was primarily due to the decrease in stock-based compensation, accounts receivable, and accounts payable, offset by an increase in stock option expense, which is a non-cash item.
Cash flow used in financing activities was approximately $1.5 million for the first six months of fiscal year 2022, compared to $78,000 for the first six months of fiscal year 2021. Cash provided by financing activities during the first six months of fiscal year 2022 resulted from the exercise of warrants by various stockholders. The cash used in financing activities for the first six months of fiscal year 2022 and fiscal year 2021 consisted of cash used for the settlement of restricted stock units issued to employees.
https://www.prnewswire.com/news-releases/kaiv...71794.html
Recently Signed Agreement with Affiliate of Philip Morris International Could Dramatically Drive Global Distribution; Accelerate Delivery of a Smoke-Free Future
GRANT, Fla., June 21, 2022 /PRNewswire/ -- Kaival Brands Innovations Group, Inc. (NASDAQ: KAVL) ("Kaival Brands," the "Company," or "we"
, the exclusive U.S. distributor of all products manufactured by Bidi Vapor, LLC ("Bidi Vapor" , which are intended for adults 21 and over, today announced its financial results for the fiscal 2022 second quarter ended April 30, 2022. Corporate Updates Subsequent to the Fiscal Second Quarter 2022
The Company's recently formed, wholly owned subsidiary, Kaival Brands International, LLC ("KBI"
, entered into an international licensing agreement with Philip Morris Products S.A. ("PMPSA" , a wholly owned affiliate of Philip Morris International Inc. ("PMI" (NYSE: PM), for the development and distribution of electronic nicotine delivery system ("ENDS" products in markets outside of the U.S., 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 U.S., 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 U.S.
PMI's international distribution network will potentially create substantial new "capital-light" revenue stream.
Management Comments
Niraj Patel, Chief Executive Officer and Founder of Kaival Brands stated, "Our results demonstrate strong execution and resiliency in our business, as revenues in the second quarter of fiscal year 2022 rose 11% as compared to revenues in the first quarter of fiscal year 2022. The recently announced international licensing agreement with PMPSA, a wholly owned affiliate of PMI, is a major milestone in the Company's efforts to expand the global sales and distribution of the BIDI® Stick. From a balance sheet perspective, the international licensing agreement has the potential to generate substantial returns on capital for the Company, given the low cash investment needed to reach a significant number of potential new consumers."
Financial Results for Fiscal Second Quarter 2022
Revenues: Revenues decreased by approximately $15.7 million in the second quarter of fiscal year 2022, compared to the same period of fiscal year 2021. In February 2022, Bidi Vapor was granted a judicial stay on the marketing denial order ("MDO"
previously issued by the U.S. Food and Drug Administration (the "FDA" prohibiting the marketing and sale of non-tobacco flavored BIDI® Sticks, which had significantly impacted our revenues in previous quarters. As a result of the grant of the judicial stay of the MDO, our revenues increased in the second quarter of fiscal 2022, as compared to first quarter of fiscal 2022. We expect this trend to continue as renewed distribution ramps up and sales of non-tobacco flavored BIDI® Sticks increase, subject to the court ruling in Bidi Vapor's favor in the pending merits-based case, and subject to the FDA's enforcement discretion. Cost of Revenue, Net, and Gross Profit (Loss): Gross profit in the second quarter of fiscal year 2022 was approximately $387,700, or approximately 12.7% of revenues, net, compared to approximately $6.3 million gross profit, or approximately 34.6% of revenues, net, for the second quarter of fiscal year 2021. Total cost of revenue, net was approximately $2.7 million, or approximately 87.3% of revenue, net for the second quarter of fiscal year 2022, compared to approximately $11.9 million, or approximately 65.4% of revenue, net for the second quarter of fiscal year 2021. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date credits/discounts/rebates given to customers, totaling approximately $499,000, resulting in an offset to revenue, net, during the second quarter of fiscal year 2022.
Operating Expenses: Total operating expenses were approximately $5.4 million for the second quarter of fiscal year 2022, compared to approximately $10.4 million for the second quarter of fiscal year 2021. For the second quarter of fiscal year 2022, operating expenses consisted primarily of advertising and promotion fees of approximately $761,000, stock-based compensation expense of approximately $2.5 million, professional fees of approximately $163,000 and general and administrative expenses of approximately $2.0 million. General and administrative expenses in the second quarter of fiscal year 2022 consisted primarily of salaries and wages, stock option expense, insurance, lease expense, project expenses, banking fees, business fees and state and franchise taxes. For the second quarter of fiscal year 2021, operating expenses were approximately $10.4 million, consisting primarily of advertising and promotion fees of approximately $801,000, professional fees totaling approximately $7.3 million, and general and administrative expenses of approximately $2.3 million. General and administrative expenses in the second quarter of fiscal year 2021 consisted primarily of salaries and wages, insurance, banking fees, business fees, and other service fees. We expect future operating expenses to increase while we increase the footprint of our business and generate increased sales growth.
Income Taxes: During the second quarter of fiscal year 2022, we did not accrue a tax provision for income taxes, due to the pre-tax loss of approximately ($5.1) million, compared to a tax provision of approximately $187,000 for the second quarter of fiscal year 2021, due to the amount of pre-tax income for that three-month period. However, we did report a tax benefit of approximately $5,800. The reduction from the second quarter of fiscal year 2021 was due to the pre-tax operating loss recognized during the second quarter of fiscal year 2022.
Net Loss: As a result of decreased revenue, the net loss for the second quarter of fiscal year 2022 was approximately ($5.0) million, or ($0.16) basic and diluted loss per share, compared to a net loss of approximately ($4.3) million, or ($0.18) basic and diluted earnings per share, for the second quarter of fiscal year 2021. The increase in the net loss for the second quarter of fiscal year 2022, as compared to the second quarter of fiscal year 2021, is primarily attributable to the decreased revenues and increase in customer credits/discounts/rebates, as noted above.
Six months ended April 30, 2022, compared to six months ended April 30, 2021
Revenues: Revenues for the first six months of fiscal year 2022 were approximately $6.0 million, compared to $55.5 million in the same period of the prior fiscal year. Revenues decreased in the first six months of fiscal year 2022 compared to fiscal year 2021, generally due to (i) Bidi Vapor's receipt of the MDO, which limited our ability during the first six months of fiscal year 2022 to sell flavored BIDI® Sticks in the United States and (ii) increased competition. In February 2022, Bidi Vapor was granted a judicial stay on the MDO previously issued by the FDA banning the marketing and sale of non-tobacco flavored BIDI® Sticks, amongst banning these non-tobacco flavored sticks with other industry competitors. As a result of the judicial stay of Bidi Vapor's MDO, we have begun to experience an upward trajectory in our revenue as renewed distribution ramps up and sales of non-tobacco flavored BIDI® Sticks products increase, which sales remain subject to FDA's enforcement discretion (and assuming that Bidi Vapor is successful in its currently pending merits-based case). We also anticipate that if the FDA begins enforcement against illegally-marketed or synthetic-nicotine vaping products, there may be an increased demand for compliant and legal vaping products, such as the BIDI® Stick.
Cost of Revenue and Gross Profit: Gross loss in the first six months of fiscal year 2022 was approximately ($303,000), compared to gross profit of approximately $11.1 million profit for the first six months of fiscal year 2021. Total cost of revenue was approximately $6.2 million for the first six months of fiscal year 2022, compared to $44.4 million for the first six months of fiscal year 2021. The decrease in gross profit is primarily driven by the decrease in overall sales and the recognition of accumulated year-to-date credits/discounts/rebates given to customers, totaling approximately $1.4 million, resulting in an offset to revenue, net, during the six months ended April 30, 2022.
Operating Expenses: Total operating expenses were approximately $7.5 million for the first six months of fiscal year 2022, compared to approximately $14.7 million for the first six months of fiscal year 2021. For the first six months of fiscal year 2022, operating expenses consisted of commissions paid pursuant to a service agreement of approximately $1.4 million and general and administrative expenses consisting of amortized stock option expense of approximately $2.8 million, professional fees of approximately $1.4 million, salaries and wages of approximately $939,000, and all other general and administrative expenses of approximately $1.0 million. General and administrative expenses in the first six months of fiscal year 2022 consisted primarily of legal fees, salaries, other professional fees, merchant fees, and other service fees. Total operating expenses for the first six months of fiscal year 2021 were approximately $14.7 million. These operating expenses consisted primarily of advertising and promotion fees of approximately $1.8 million; professional fees of approximately $9.7 million; salary, wages, commissions, and bonuses of approximately $1.8 million; stock-based compensation expense of approximately $580,000; professional fees of approximately $163,000; and general and administrative expenses of approximately $820,000, which consisted primarily of insurance, banking fees, merchant fees, business fess and other service fees.
Cash Position: As of April 30, 2022, the Company had working capital of approximately $13.4 million and total cash of $4.7 million.
Liquidity and Capital Resources: Cash flow used in operations was approximately $(4.6) million for the first six months of fiscal year 2022, compared to $(5.2) million used in operations for the first six months of fiscal year 2021. The decrease in cash flow used in operations for the first six months of fiscal year 2022 compared to the first six months of fiscal 2021 was primarily due to the decrease in stock-based compensation, accounts receivable, and accounts payable, offset by an increase in stock option expense, which is a non-cash item.
Cash flow used in financing activities was approximately $1.5 million for the first six months of fiscal year 2022, compared to $78,000 for the first six months of fiscal year 2021. Cash provided by financing activities during the first six months of fiscal year 2022 resulted from the exercise of warrants by various stockholders. The cash used in financing activities for the first six months of fiscal year 2022 and fiscal year 2021 consisted of cash used for the settlement of restricted stock units issued to employees.
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