Management's Discussion and Analysis of Financial Condition and Results of
Operations is designed to provide a reader of the financial statements with a
narrative report on our financial condition, results of operations, and
liquidity. This discussion and analysis should be read in conjunction with the
unaudited Financial Statements and notes thereto for the three and nine months
ended July 31, 2021 included under Item 1 - Financial Statements in this
Quarterly Report and our audited Financial Statements and notes thereto for the
year ended October 30, 2020 contained in our Annual Report on Form 10-K. The
following discussion contains forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations, and
intentions. Our actual results could differ materially from those discussed in
the forward-looking statements. Please also see the cautionary language at the
beginning of this Quarterly Report regarding forward-looking statements.
The discussions of our results as presented in this Quarterly Report include use
of the non-GAAP term "gross profit." Gross profit is determined by deducting the
cost of goods sold from operating revenue. Cost of goods sold includes direct
and indirect labor, materials, services, fixed costs, and variable overhead.
Gross profit should not be considered an alternative to operating income or net
income, which are determined in accordance with GAAP. We believe that gross
profit, although a non-GAAP financial measure, is useful and meaningful to
investors as a basis for making investment decisions. It provides investors with
information that demonstrates our cost structure and provides funds for our
total costs and expenses. We use gross profit in measuring the performance of
our business. Other companies may calculate gross profit in a different manner.
Impact of COVID-19
In March 2020, the WHO declared the outbreak of COVID-19 as a pandemic based on
the rapid increase in global exposure. COVID-19 continues to spread throughout
the world, including the United States. Our business operations, which commenced
during this pandemic, continue to be operational; however, we were indirectly
negatively impacted by COVID-19.
We were indirectly impacted by supply chain issues and regulatory oversight.
First, COVID-19 impacted Bidi's ability to quality test and develop its new
product, the BIDI®Pouch, in line with its targeted release date, which
negatively impacted our ability to begin distribution of the BIDI®Pouch.
Throughout the year and during the Premarket Tobacco Product Application
("PMTA") process, the Food and Drug Administration ("FDA") reiterated their
enhanced scrutiny over ENDS products and raised the bar. Together with Bidi, we
have not only invested significant financial resources into developing state of
the art procedures, policies and technology around compliance but had also
refused to relax our own internal standards when we observed some distributers
and retailers relaxing their standards. We believe that retailers and
distributers relaxed their standards for two reasons: (i) due to COVID-19,
government enforcement of regulations were very limited due to imposed social
restrictions, resulting in less in-person monitor enforcement by government
officials and (ii) retail stores experienced light foot traffic from customers
due to COVID-19 restrictions and fears, which resulted in relaxed compliance in
an effort to generate revenue. The relaxation of standards by certain retailers
significantly impacted our revenues.
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Impact of FDA PMTA Decision
Prior to the September 9, 2021 court-order deadline for the FDA to make PMTA
determinations for pending applications, we believe that many retailers and
distributors were reluctant to take on new inventory. We believe these
retailers, were concerned with the potential for sitting on inventory that after
September 9, 2021 could be ruled adulterated or misbranded by the FDA and, thus,
illegal to sell.
Separately, we believe there were other retailers willing to purchase
counterfeit or sub-optimal products from manufacturers who were selling these
products at significantly reduced prices. These manufacturers were willing, we
believe, to significantly reduce sales prices because they realized they would
likely not receive the FDA's PMTA authorization on September 9, 2021 and were
attempting to recognize any revenues associated with what they believe will
likely be unsellable product following the deadline. Both of these unanticipated
consequences resulted in the third quarter of fiscal 2021 being an extremely
challenging quarter for us.
Due to increased pressure from, among others, tobacco control and public health
groups, members of Congress, academic institutions, family advocacy
organizations and attorneys general, we believe that the FDA has used the
September 9, 2021 PMTA deadline to effectively "ban" flavored ENDS by denying
nearly all pending PMTAs for such products. As of September 10, 2021, the FDA
announced that it has taken action on over 93% of applications and issued
Marketing Denial Orders ("MDOs") for more than 992,000 flavored ENDS products,
while issuing zero marketing authorizations. Unfortunately, despite submitting a
comprehensive PMTA and continuing to develop robust and reliable
product-specific scientific evidence demonstrating the public health benefit of
its flavored ENDS products, Bidi, along with nearly every other company in the
ENDS industry, received a MDO for its non-tobacco flavored BIDI® Sticks,
including its Arctic (menthol) BIDI®Stick, which the FDA mischaracterized as
"flavored". However, because its Arctic BIDI® Stick is menthol, Bidi believes
its menthol BIDI® Stick is not subject to the MDO. This position is aligned with
the FDA's public statements and press releases stating that tobacco and menthol
ENDS are not deemed flavored products subject to the MDOs. Accordingly, along
with the Classic (tobacco) BIDI® Stick, Bidi intends to continue to manufacture
and market its Arctic (menthol) BIDI®Stick for distribution by us.
Historically, substantially all of our revenues were derived from sales of
flavored BIDI® Sticks, including the Arctic (menthol) BIDI® Stick, sales of
which constituted approximately 15.2% and 18.5%, respectively, of our total
sales of BIDI® Sticks for the three and nine months ended July 31, 2021.
Generally, substantially all of the ENDS industry revenue is derived from the
sales of flavored products.
Following the issuance of the MDOs, nearly all manufacturers, not only BIDI,
will be limited to manufacturing and selling only tobacco and menthol ENDS
products. Accordingly, we believe that consumers are likely to modify their
purchases to shift to products that are available and, thus, that a substantial
amount of our revenue that had previously been generated from sales of flavored
BIDI® Sticks (other than Arctic) may be replaced through sales of the Classic
(tobacco) and Arctic (menthol) BIDI® Sticks, given that consumers will only be
able to purchase, on a legal basis, non-flavored ENDS products. Accordingly, we
believe revenues for tobacco and menthol ENDS products will restore some or all
of the revenue we derived from the sale of flavored products. Moreover, based on
sales and consumer data, we believe that our consumers are loyal to the Bidi
brand and BIDI® Sticks and that they thus are likely to continue to purchase our
Classic (tobacco) and Arctic (menthol) BIDI® Sticks in lieu of the flavored
BIDI® Sticks they may have bought in the past.
If the FDA disagrees with Bidi's position, issues a warning letter, or takes
other action against Bidi resulting in us not being able to distribute the
menthol (Arctic) BIDI® Stick in the United States, or consumers do not purchase
the tobacco (Classic) or menthol (Arctic) BIDI® Sticks, our revenues and,
thereby our financial results and condition, would be materially adversely
affected. Our financial results and condition will also be significantly
impacted by our ability to continue to sell the Arctic (menthol) BIDI® Stick and
the degree to which sales of the Classic (tobacco) and Arctic (menthol) BIDI®
Sticks replace sales of flavored products that are now prohibited.
In addition, Bidi informed us that it is not wavering in its commitment to
demonstrating that all its BIDI® Stick products are appropriate for the
protection of the public health and proving to the FDA that these products
should remain on the market as an alternative for adult cigarette smokers. In
this regard, Bidi is appealing the MDO and plans on continuing to complete
multiple ongoing studies, including a clinical pharmacokinetic, or PK, study,
and several actual use and perception and intention studies to support its PMTA.
Preliminary results from these studies indicate that, compared to
tobacco-flavored ENDS, the flavored BIDI® Sticks do indeed provide an added
benefit for adult cigarette smokers while outweighing any risks to youth posed
by flavored ENDS, particularly when considering Bidi's stringent youth access
prevention measures. In addition, as FDA is currently focusing on non-tobacco
and non-menthol ENDS, Bidi will continue to market its Classic (tobacco) and
Arctic (menthol) BIDI® Sticks, respectively.
As has become clear, the PMTA decision process will result in the elimination of
the vast majority of all ENDS products from the marketplace, as these
applications did not include the product specific scientific evidence needed to
justify marketing authorization, which Bidi is developing.
Despite this MDO, we continue to believe that Bidi has the potential to be one
of only a handful of companies that will not only survive but rise above the
demanding scrutiny of the new regulatory world while continuing to deliver a
premium and preferred vape experience, as reflected by the BIDI® Stick leading
the market share in the disposable ENDS category confirmed by Nielsen reports
dated June 29, 2021.
Future Strategic Opportunities
With the FDA's effective ban of flavored ENDS products through its denial of
nearly all pending PMTAs for such products, we expect that only tobacco and
menthol ENDS products will be available for marketing and distribution in the
United States. While this will clearly change the traditional and future
industry landscape, for manufacturers whose tobacco and/or menthol ENDS products
remain on the market as their pending PMTAs undergo FDA scientific review, it
represents a much larger market opportunity per-formulation due to the
elimination of flavors.
As the FDA continues to issue MDOs, we believe Bidi will be one of the only
remaining players in the disposable ENDS market, since many of Bidi's
competitors in this space only marketed flavored disposable ENDS. Based upon
information released by the FDA, we believe that only 7% of the domestic players
in this industry remain. Prior to these recent PMTA determinations, we captured
an approximately 37% market share within the ENDS market. That market share was
captured from a market containing more than one hundred other brands.
In addition to the continued domestic opportunity, we believe that international
markets provide an exciting growth opportunity for us. The estimated total
addressable global market for ENDS products is approximately $36.7 billion. As
previously announced, Bidi has received approval to market and distribute
products within 11 international markets, including the United Kingdom, France,
Russia, and the Czech Republic. Bidi has also secured significant intellectual
property protections similar to those received in the United States from the
European Union, China, and several other regions and countries. It is also
important to note that the nicotine formulation in the Bidi® Stick has been
modified and approved at the 2% level to meet the criteria for distribution in
the United Kingdom and Europe.
These international market approvals Bidi has previously secured are for the
full formulation lineup, including all flavors. Because the FDA's PMTA
restrictions and guidelines do not pertain to international markets, Bidi
intends to continue manufacturing its full product lineup, for distribution by
us in these international markets.
Corporate History
We were incorporated on September 4, 2018 in the State of Delaware. Effective
July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc. to
Kaival Brands Innovations Group, Inc. The name change was effected through a
parent/subsidiary short-form merger of Kaival Brands Innovations Group, Inc.,
our wholly-owned Delaware subsidiary formed solely for the purpose of the name
change, with and into us. We were the surviving entity.
Change of Control
On February 6, 2019, we entered into a Share Purchase Agreement (the "Share
Purchase Agreement"), by and among us, GMRZ Holdings LLC, a Nevada limited
liability company ("GMRZ"), our then-controlling stockholder, and Kaival
Holdings, LLC, a Delaware limited liability company ("KH"), pursuant to which,
on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted common
stock, representing approximately 88.06 percent of our then issued and
outstanding shares of common stock, to KH, and KH paid GMRZ consideration in the
amount set forth in the Share Purchase Agreement. The consummation of the
transactions contemplated by the Share Purchase Agreement resulted in a change
in control, with KH becoming our largest controlling stockholder. Nirajkumar
Patel and Eric Mosser are the sole voting members of KH.
Share Cancellation and Exchange Agreement
On August 19, 2020, we entered into a Share Cancellation and Exchange Agreement
(the "Exchange Agreement") with our controlling stockholder, KH. Nirajkumar
Patel and Eric Mosser, our current officers and directors, are the only voting
members of KH. Pursuant to the Exchange Agreement, KH returned to us 300,000,000
shares of our common stock (the "Cancellation Shares"), which were cancelled and
retired by us.
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On August 19, 2020, we filed a Certificate of Designation of Preferences,
Rights, and Limitations of the Series A Preferred Stock (the "Series A
Certificate of Designation") with the Secretary of State of the State of
Delaware, which authorized a total of 3,000,000 shares of Series A Preferred
Stock.
In exchange for the Cancellation Shares, we issued 3,000,000 shares (the
"Preferred Shares") of our newly designated Series A Preferred Stock to KH. The
exchange of the Cancellation Shares and the issuance of the Preferred Shares is
intended to comply with Section 3(a)(9) of the Securities Act, in that the
issuance is exempt from the registration requirements of the Securities Act
because the exchange of the Cancellation Shares for the Preferred Shares was an
exchange between us, as issuer, with an existing stockholder, and no commission
or other remuneration was paid or given directly for the exchange.
Our Business
We are focused on growing and incubating innovative and profitable products into
mature, category-dominant brands. In March 2020, we commenced business
operations after becoming the exclusive distributor of the Products manufactured
by Bidi, and a related party company that is also owned by Nirajkumar Patel, our
Chief Executive Officer.
Pursuant to the A&R Distribution Agreement, Bidi granted to us an exclusive
worldwide right to distribute the Products for sale and resale to both retail
level customers and non-retail level customers. The newly amended and restated
distribution agreement extends the previous one-year, annual renewable term to
an initial term of ten years, which automatically renews for another five-year
term; provided, that we satisfy certain minimum purchase thresholds. The newly
amended and restated distribution agreement also provides us with a right of
first refusal in the event Bidi receives an offer that would constitute a
"change of control transaction," as well as a right of first refusal to act as
the exclusive distributor of any and all future products of Bidi that arise out
of or related to ENDS and components related to ENDS, arise out of or relate to
the synthetic nicotine industry, or arise out of or related to the
tobacco-derived nicotine industry.
Current Product Offerings
Pursuant to the A&R Distribution Agreement, we sell and resell electronic
nicotine delivery systems, which we may refer to herein as "ENDS Products", or
"e-cigarettes", to both retail level customers and non-retail level customers.
Our primary Product we resell is the "BIDI® Stick," a disposable,
tamper-resistant ENDS product that comes in a variety of flavor options for
adult cigarette smokers. In addition to the BIDI® Stick, we anticipated
launching distribution of the "BIDI® Pouch" in the fall of 2021. The initial,
planned February 2021 BIDI® Pouch roll out had been delayed due to COVID-19
based manufacturing and supply chain constraints. Due to these complications and
in effort to prevent future bottlenecks, Bidi decided to move manufacturing
in-house. The BIDI® Pouch provided a tobacco-free nicotine formulation, which
contains natural fibers and a chew-base filler in six different flavors.
However, the BIDI® Pouch product is now being placed on temporary hold
domestically due to the likelihood of the FDA enforcement of synthetic nicotine
products as drugs, which will require a PMTA determination from the FDA. More
specifically, while the BIDI® Pouch, which made with synthetic (tobacco-free)
nicotine, would not fall within the meaning of a tobacco product as set forth in
the Food, Drug and Cosmetic Act ("FDCA"), the FDA could take the position that
such product is a drug. A drug is defined in Section 201(g) of the FDCA, in
pertinent part, as "articles intended for use in the diagnosis, cure,
mitigation, treatment, or prevention of disease in man or other animals" (i.e.,
the "disease" or "therapeutic benefit" prong) or "articles (other than food)
intended to affect the structure or function of the body of man or other
animals" (i.e., the "structure/function" prong). Given nicotine's well-known
structure/function effect on the body there is a chance the FDA will take the
position that synthetic nicotine products, such as the BIDI® Pouch, are subject
to the FDA's drug authority and can only be marketed with an approved New Drug
Application (even if no disease or therapeutic benefit claims are made). Indeed,
prior to the enactment of the Tobacco Control Act, the FDA historically took the
position that any product with added nicotine (other than traditional tobacco
products) was a drug, even when marketed for recreational use and without
specific claims of smoking cessation or other therapeutic benefit. It is, of
course, illegal to distribute a drug without the FDA's approval. Given these
concerns, Bidi has decided not to launch the synthetic-nicotine BIDI® Pouch at
this time but will instead seek a PMTA marketing authorization from the FDA for
the BIDI® Pouch made with tobacco-derived nicotine. We do not manufacture any of
the Products we resell. The BIDI® Stick and BIDI® Pouch are manufactured by
Bidi. Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us
with all branding, logos, and marketing materials to be utilized by us in
connection with our marketing and promotion of our Products.
On July 14, 2021, we announced plans to launch our first Kaival-branded product,
a Hemp CBD product. In addition to our Kaival-branded formulation, we anticipate
that we will also provide white label, wholesale solutions for other product
manufacturers through our subsidiary, Kaival Labs.
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All CBD products will be produced and distributed strictly in compliance under
the 2018 Farm Bill, which defines hemp as the plant Cannabis sativa and any part
of the plant with a delta-9 THC concentration of not more than 0.3 percent by
dry weight. According to the 2018 Farm Bill, hemp-derived products can be
offered for retail sale in the many forms: smoke, pouch, tinctures, topicals,
capsules, vape oil and gummies/edibles. We plan to utilize Bidi's patented BIDI®
Stick delivery mechanism in order to provide a similar, premium experience in
the initial CBD product line. We expect our industrial-grade hemp CBD formula to
provide greater bioavailability than many market peers, resulting in a better
consumer experience in less usage.
Liquidity and Capital Resources
We have no known demands or commitments and are not aware of any events or
uncertainties as of July 31, 2021 that will result in or that are reasonably
likely to materially increase or decrease our current liquidity.
At July 31, 2021, we had working capital of approximately $6.4 million and total
cash of approximately $938,000.
Now that we have commenced business operations, we intend to generally rely on
cash from operations and equity and debt offerings, to the extent necessary and
available, to satisfy our liquidity needs. There are a number of factors that
could result in the need to raise additional funds, including a decline in
revenue or a lack of anticipated sales growth and increased costs. Our efforts
are directed toward generating positive cash flow and profitability. If these
efforts are not successful, we may need to raise additional capital. Should
capital not be available to us at reasonable terms, other actions may become
necessary in addition to cost control measures and continued efforts to increase
sales. These actions may include exploring strategic options for the sale of the
Company, the creation of joint ventures or strategic alliances under which we
will pursue business opportunities, or other alternatives. We believe we have
the financial resources to weather any short-term impacts of COVID-19; however,
we are unable to presently estimate any potential future impacts from COVID-19
and an extended impact could have a material and adverse effect on our sales,
earnings, and liquidity.
Cash Flows:
Cash flow used in operations was approximately $6.3 million for the first nine
months of fiscal year 2021, compared to $2.7 million provided by operations for
the first nine months of fiscal year 2020. The increase in cash flow used in
operations for the first nine months of fiscal year 2021 compared to the first
nine months of fiscal 2020 was primarily due to decreased revenues and increased
operating expenses, resulting in a net loss.
Cash flow used in financing activities was approximately $202,000 for the first
nine months of fiscal year 2021, compared to $0 for the first nine months of
fiscal year 2020. The cash used in financing activities for the first nine
months of fiscal year of 2021 consisted of cash used for the settlement of RSUs
issued to employees.
Results of Operations
Three months ended July 31, 2021, compared to three months ended July 31, 2020
Revenues:
Revenues for the third quarter of fiscal year 2021 were approximately $3.4
million, compared to $32.4 million in the same period of the prior fiscal year.
Revenues decreased in the third quarter of fiscal year 2021 primarily due to
increased competition resulting from the lack of enforcement by federal and
state authorities against sub-par and low-priced vaping products that continued
to enter the market illegally without FDA authorization.
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Cost of Revenue and Gross Profit (Loss):
Gross loss in the third quarter of fiscal year 2021 was approximately $84,000,
or approximately 2.5% of gross revenues, compared to $4.4 million gross profit,
or approximately 13.6% of gross revenues, for the third quarter of fiscal year
2020. Total cost of revenue was approximately $3.5 million, or approximately
102.5% of gross revenues, for the third quarter of fiscal year 2021, compared to
$28.0 million, or approximately 86.4% of gross revenues, for the third quarter
of fiscal year 2020. The decrease in gross profit is primarily driven by the
decrease in overall sales and the recognition of accumulated year-to-date
credits/discounts taken by customers, resulting in an offset to gross revenues
during the third quarter of fiscal year 2021.
Operating Expenses:
Total operating expenses were approximately $3.4 million for the third quarter
of fiscal year 2021, compared to approximately $1.5 million for the third
quarter of fiscal year 2020. For the third quarter of fiscal year 2021,
operating expenses consisted primarily of advertising and promotion fees of
approximately $711,000, professional fees totaling $945,000 and general and
administrative expenses of approximately $1.7 million. General and
administrative expenses in the third quarter of fiscal year 2021 consisted
primarily of salaries and wages, stock option expense, insurance, banking fees,
business fees, and other service fees. We expect future operating expenses to
continue to increase while we generate increased sales growth.
Income Taxes:
During the third quarter of fiscal year 2021, we accrued approximately $300 for
state income taxes, compared to $320,000 for the third quarter of fiscal year
2020. The reduction from the third quarter of fiscal year 2020 was due to the
pre-tax operating loss recognized during the third quarter of fiscal year 2021.
Please refer to Note 8, Income Tax, in the Notes to the Consolidated Financial
Statements in this Quarterly Report for additional information related to our
income taxes.
Net Income (Loss):
As a result of the items noted above, the net loss for the third quarter of
fiscal year 2021 was approximately $3.4 million, or $(0.15) basic and diluted
loss per share, compared to net income of approximately $2.6 million, or $0.05
basic and diluted earnings per share, for the third quarter of fiscal year 2020.
The decrease in net income for the third quarter of fiscal year 2021, as
compared to the third quarter of fiscal year 2020, is primarily attributable to
the decreased revenues, customer credits/discounts used and increased expenses,
as noted above.
Nine months ended July 31, 2021, compared to nine months ended July 31, 2020
Revenues:
Revenues for the first nine months of fiscal year 2021 was approximately $59.0
million, compared to $54.9 million in the same period of the prior fiscal
year. This 7.5% revenue increase year-over-year was achieved, despite the
disruption in the industry, primarily due to the strong business partnerships we
have with our major customers.
Cost of Revenue and Gross Profit:
Gross profit in the first nine months of fiscal year 2021 was approximately
$11.0 million, or approximately 18.6% of gross revenues, compared to $6.9
million, or approximately 12.6% of gross revenues, for the first nine months of
fiscal year 2020. Total cost of revenue was approximately $48.0 million, or
approximately 81.4% of gross revenues, for the first nine months of fiscal year
2021, compared to $48.0 million, or approximately 87.4% of gross revenues, for
the first nine months of fiscal year 2020.
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Operating Expenses:
Total operating expenses were approximately $18.1 million for the first nine
months of fiscal year 2021, compared to approximately $1.9 million for the first
nine months of fiscal year 2020. For the first nine months of fiscal year 2021,
operating expenses consisted of advertising and promotion expenses of
approximately $2.5 million general and administrative expenses of approximately
$4.9 million and $10.7 million of professional fees. General and administrative
expenses in the first nine months of fiscal year 2021 consisted primarily of
legal fees, salaries, bonuses, professional fees, merchant fees, and other
service fees. Total operating expenses for the first nine months of fiscal year
2020 consisted of approximately $1.0 million of general and administrative
expenses, which were primarily from legal fees incurred and approximately
$916,000 in advertising and promotion expenses. We expect future operating
expenses to continue to increase while we generate increased sales growth.
Income Taxes:
During the first nine months of fiscal year 2021, we accrued
approximately $292,844 for income taxes, compared to $1.3 million for the first
nine months of fiscal year 2020, due to the overall decrease in taxable income
between the two fiscal years. Please refer to Note 8, Income Tax, in the Notes
to the Consolidated Financial Statements in this Quarterly Report for additional
information related to our income taxes.
Net Income (Loss):
As a result of the items noted above, the net loss for the first nine months of
fiscal year 2021 was approximately $7.4 million, or $(0.32) basic and diluted
loss per share, compared to the net income for first nine months of fiscal year
2020 of approximately $3.7 million, or $0.08 basic and diluted earnings per
share. The decrease in net income for the first nine months of fiscal year 2021,
as compared to the first nine months of fiscal year 2020, is attributable to the
decreased sales, customer credits/discounts used and increased overall operating
expenses, as noted above.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources that is material to investors.
Critical Accounting Policies and Estimates
Other than the policy changes disclosed in Note 2, Basis of Presentation and
Significant Accounting Policies, to the unaudited Consolidated Financial
Statements in Item 1 of Part I of this Quarterly Report, there have been no
material changes to our critical accounting policies and estimates during the
three and nine months ended July 31, 2021 from those disclosed in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of our Annual Report on Form 10-K for the year ended October 31,
2020.
Recently Adopted Accounting Pronouncements
See Note 2, Basis of Presentation and Significant Accounting Policies, to the
unaudited Consolidated Financial Statements in Item 1 of Part I of this
Quarterly Report for a description of recent accounting pronouncements and
accounting changes.
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Emerging Growth Company
We are an "emerging growth company," that is exempt from certain financial
disclosure and governance requirements for up to five years as defined in the
Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). The JOBS Act eases
restrictions on the sale of securities and increases the number of stockholders
a company must have before becoming subject to the SEC's reporting and
disclosure rules. We have not elected to use the extended transition period for
complying with new or revised accounting standards under Section 102(b)(2) of
the JOBS Act, that allows us to delay the adoption of new or revised accounting
standards that have different effective dates for public and private companies
until those standards apply to private companies.
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