Kaival Brands Innovations Group, Inc. 10-K

Item 9A Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15e and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer to allow for timely decisions regarding required disclosure. As of October 31, 2020, the end of the year covered by this Report, we carried out an evaluation, under the supervision of Mr. Patel, our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and the operation of our disclosure controls and procedures. Mr. Patel concluded that the disclosure controls and procedures were not effective as of the end of the year covered by this Report due to material weaknesses identified below. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting using the criteria in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Based on our evaluation under the framework in COSO, our management concluded that our internal control over financial reporting was ineffective as of October 31, 2020 based on such criteria. Deficiencies existed in the design or operation of our internal control over financial reporting that adversely affect our internal controls and that may be considered material weaknesses. A material weakness is a significant deficiency, or combination of deficiencies, in internal control over financial reporting that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As a result of the determination that there was a lack of resources to provide segregation of duties consistent with control objectives, the lack of a formal audit committee, and the lack of a formal review process that includes multiple levels of review over financial disclosure and reporting processes, management has determined that material weaknesses existed as of October 31, 2020. 22 The weaknesses and the related risks are not uncommon in a company of our size because of the limitations in the size and number of our staff. To address these material weaknesses, and subject to the receipt of additional financing or cash flows, we intend to undertake remediation measures to address the material weaknesses described in this Report, including implementing procedures pursuant to which we can ensure segregation of duties and hire additional resources to ensure appropriate review and oversight. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met under all potential conditions, regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Auditor’s Report on Internal Control Over Financial Reporting This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Report. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) that have occurred during the fourth quarter ended October 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 23 PART III Item 10. Directors, Executive Officers and Corporate Governance. Each of our directors holds office until the next annual meeting of our stockholders or until his successor has been elected and qualified, or until his death, resignation, or removal. Our executive officers are appointed by our Board and hold office until their death, resignation, or removal from office. Our current executive officers and directors and additional information concerning them are as follows: Name Age Position(s) Nirajkumar Patel 38 Chief Executive Officer, Chief Financial Officer, President, Treasurer, and a Director Eric Mosser 42 Chief Operating Officer, Secretary, and a Director Business Experience The following is a brief account of the education and business experience of our executive officers and directors during at least the past five years, indicating their principal occupation during the period, the name and principal business of the organization by which they were employed, and certain of their other directorships: Nirajkumar Patel, Chief Executive Officer, Chief Financial Officer, President, Treasurer, and a Director Mr. Nirajkumar Patel, age 38, attended AISSMS College of Pharmacy in Pune, India and received a Bachelor of Science Degree in Pharmacy in 2004. After moving to the United States in 2005, Mr. Patel became a United States citizen in 2008 and obtained a Master’s Degree in Chemistry from the Florida Institute of Technology in 2009. Mr. Patel is a prominent local businessman in Brevard County, Florida. In 2017 and 2018, Mr. Patel served as Vice President for the Board of the Indian Association of the Space Coast, located in Brevard County, Florida. Mr. Patel founded, and has served as a Board member of, the Florida Independent Liquor Stores Owners Association since 2017. In 2013, Mr. Patel launched Just Chill Products LLC, a highly successful developer/manufacturer of high-end CBD products, and has served as its Chief Executive Officer and Chief Science Officer since 2017. In 2017, Mr. Patel created Relax Lab Inc., a producer/manufacturer of a CBD relaxation beverage, and currently serves as its Chief Executive Officer and Chief Science Officer. In 2017, Mr. Patel also created RLX Lab LLC, a producer/manufacturer of a non-CBD relaxation beverage, and currently serves as its Chief Executive Officer and Chief Science Officer. In 2017, Mr. Patel also founded KC Innovations Lab Inc., a CBD white-label manufacturing service and developer/producer of best-selling white-label CBD products including cosmetics, edibles, beverages, topicals, and vape oils, and currently serves as its Chief Executive Officer and Chief Science Officer. Additional companies that are owned by Nirajkumar Patel, the Chief Executive Officer and Chief Financial Officer of the Company, and/or his wife include Beach Food Store created in 2004, Diya Food Store created in 2010, Cloud Nine 2012 created in 2012, and JC Products of USA, LLC created in 2013. We believe that Mr. Patel is qualified to serve on our Board because of his prior and current management experience, as well as his business experience with our intended market. Eric Mosser, Chief Operating Officer, Secretary, and a Director Mr. Eric Mosser, age 42, attended Arizona State University and studied Business Management and then graduated from Rio Salado College with an Associate’s Degree in Applied Science in Computer Technology in 2004. With extensive previous corporate work history in Information Technology, Mr. Mosser worked from 2012 to 2014 as Director of Information Technology at Timbercon Inc., a fiber-optic design company and ITAR manufacturing facility in Oregon. In 2014, Mr. Mosser created Lasermycig LLC, a specialized custom laser-engraving service for electronic cigarettes and vaporizers and served as its Chief Executive Officer until 2020. Upon meeting Mr. Nirajkumar Patel in 2015, Mr. Mosser immediately founded Chillcorp Ltd., a full-service corporation dedicated solely to the complete internal and external operations of Just Chill Products LLC, Relax Lab Inc., RLX Lab LLC, and KC Innovations Lab Inc., and served as its Chief Executive Officer until 2020. We believe that Mr. Mosser is qualified to serve on our Board because of his current management and business experience. 24 Committees of the Board We currently do not have nominating, compensation, or audit committees, or committees performing similar functions, nor do we have a written nominating, compensation, or audit committee charter. Currently, our entire Board is performing the functions of such committees. In lieu of an Audit Committee, our Board is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results, and effectiveness of the annual audit of our financial statements and other services provided by our independent registered public accounting firm. Our Board, our Chief Executive Officer, and our Chief Financial Officer review our internal accounting controls, practices, and policies. Audit Committee Financial Expert Our Board has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K . We intend to establish an Audit Committee in the future, and identify an individual to serve as an independent director and as the audit committee financial expert. Involvement in Certain Legal Proceedings None of our executive officers and directors have been involved in or a party to any of the following events or actions during the past ten years: 1. Any petition under the federal bankruptcy laws or any state insolvency laws filed by or against, or an appointment of a receiver, fiscal agent, or similar officer by a court for the business or property of such person, a partnership in which such person was a general partner at or within two years before the time of such filing, or any corporation or business association of which such person was an executive officer either at or within two years prior to the time of such filing; 2. Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, such person from, or otherwise limiting, the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director, or employee of any investment company, bank, savings and loan association, or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; or (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; 4. Being the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) above, or to be associated with persons engaged in any such activity; 5. Being found by a court of competent jurisdiction (in a civil action) or the SEC to have violated a Federal or State securities law, and the judgment has not been subsequently reversed, suspended, or vacated; 6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated; 7. Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of :(i) any Federal or State securities or commodities law or regulation; (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 8. Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. 25 Code of Ethics We have not adopted a formal Code of Ethics. We have a limited number of employees at this time. We intend to adopt a formal Code of Ethics in the future. Nomination of Directors As of February 11, 2021, we had not effected any material changes to the procedures by which our stockholders may recommend nominees to our Board. We do not have any defined policy or procedural requirements for stockholders to submit recommendations or nominations for directors. Our Board believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to our Board and we do not have any specific process or procedure for evaluating such nominees. Our Board will assess all candidates, whether submitted by management or stockholders, and make recommendations for election or appointment. A stockholder who wishes to communicate with our Board may do so by directing a written request addressed to the Company with the address appearing on the first page of this Report. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC. Based solely on a review of the copies of such forms that were received by the Company, except for following, the Company is not aware of any failures to file reports or report transactions in a timely manner during the year ended October 31, 2020: (i) a Form 4 for Mr. Mosser to report 4 transactions; (ii) a Form 4 for Mr. Mosser to report 3 transactions; (iii) a Form 4 for Mr. Patel to report 4 transactions; and (iv) a Form 4 for Mr. Patel to report 3 transactions. Family Relationships There are no family relationships among our directors or executive officers. Arrangements There are no arrangements or understandings between an executive officer or director and any other person pursuant to which he was selected as an executive officer or director. 26 Item 11. Executive Compensation. The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers, which is defined herein as (i) all individuals serving or having served as our principal executive officer or officers during the year ended October 31, 2020 and (ii) our other most highly compensated executive officer who was serving as an executive officer at the end of the year ended October 31, 2020. Name and principal position Fiscal Year Ended October 31, Salary ($) Bonus ($) Stock Awards ($) (1) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Nirajkumar Patel, President, CEO, CFO, Treasurer, and Director 2019 0 0 0 0 0 0 0 0 2020 92,000 60,000 91,678 0 48,707 0 0 292,385 Eric Mosser, COO, Secretary, and Director 2019 0 0 0 0 0 0 0 0 2020 80,000 40,000 52,625 0 87,760 0 0 260,385 (1) Reflects the fair value of stock awards during the years in accordance with FASB ASC 718, Compensation – Stock Compensation, using actual forfeitures that were immaterial. For valuation assumptions, refer to Note 2, “ Share-based Compensation ,” to the audited consolidated financial statements for the year ended October 31, 2020. Narrative Discussion of Summary Compensation Table of Named Executive Officer The following is a narrative discussion of the material information that we believe is necessary to understand disclosed in the foregoing Summary Compensation Table. The following narrative disclosure is separated into sections, with a separate section for each of our named executive officers. With respect to fiscal year 2019, we did not pay our named executive officers any compensation. On May 28, 2020, our Board approved an annual base salary equal to $144,000 for our Chief Executive Officer and an annual base salary equal to $120,000 for our Chief Operating Officer. On January 21, 2021, our Board approved an increase in annual base salaries equal to $180,000 for our Chief Executive Officer and $144,000 for our Chief Operating Officer. The annual base salaries will be reviewed by our Board on an annual basis Nirajkumar Patel During the fiscal year ended October 31, 2020, we paid a base salary of approximately $92,000 to Nirajkumar Patel, our Chief Executive Officer and Chief Financial Officer. In May 2020, our Board approved a cash bonus award to Mr. Patel equal to $30,000 for every $25 million in gross revenues generated by us. On the same date, our Board also approved an equity bonus award to Mr. Patel of 90,000 restricted shares of our common stock for every $50 million in accumulated gross revenues generated by us. Based on the cash bonus award, we paid Mr. Patel a cash bonus of $60,000 based on our meeting the gross revenue benchmarks. We issued the following stock-based compensation to Mr. Patel during fiscal year 2020: Grant Date Number of Shares of our Common Stock Price Per Share Aggregate Value 5/28/20 150,000 $0.14 $21,000 8/31/20 94,500 $0.80 $75,600 27 We also paid approximately $48,700 in non-equity incentive plan compensation, which consisted of cash paid in lieu of a vested RSU issuance. The aggregate value is based on the value on the vesting date for the shares that would have been issued. Eric Mosser During the fiscal year ended October 31, 2020, we paid a base salary of approximately $80,000 to Eric Mosser, our Chief Operating Officer. In May 2020, our Board approved a cash bonus award to Mr. Mosser equal to $20,000 for every $25 million in gross revenues generated by us. On the same date, our Board also approved an equity bonus award to Mr. Mosser of 75,000 restricted shares of our common stock for every $50 million in accumulated gross revenues generated by us. Based on the cash bonus award, we paid Mr. Mosser a cash bonus of $40,000 based on our gross revenue benchmarks. We issued the following stock-based compensation to Mr. Mosser during fiscal year 2020: Grant Date Number of Shares of our Common Stock Price Per Share Aggregate Value 5/28/20 150,000 $0.14 $21,000 8/31/20 50,000 $0.80 $40,000 We also paid approximately $87,800 in non-equity incentive plan compensation, which consisted of cash paid in lieu of vested a RSU issuance. The aggregate value is based on the value on the vesting date for the shares that would have been issued. Outstanding Equity Awards at Fiscal Year-End Stock Awards (a) Name (g) Number of Shares or Units of Stock that Have Not Vested (#) (h) Market Value of Shares or Units of Stock that Have Not Vested ($) Nirajkumar Patel 8,550,000 (1) 2,565,000 Eric Mosser 6,550,000 (2) 1,965,000 (1) Includes 6,000,000 RSUs that only vest in the event of a change of control (as such term is defined in the Stock and Incentive Compensation Plan (the “Incentive Plan”)) or we achieve in excess of $1 billion in accumulated total gross revenues during the period beginning on March 9, 2020 (the day we commended business operations) and ending on October 31, 2023 (the end of our fiscal year 2023). The remaining RSUs vest over a period of three years, beginning in May 2020, with a portion vesting every three months. (2) Includes 4,000,000 RSUs that only vest in the event of a change of control (as such term is defined in the Incentive Plan) or we achieve in excess of $1 billion in accumulated total gross revenues during the period beginning on March 9, 2020 (the day we commended business operations) and ending on October 31, 2023 (the end of our fiscal year 2023). The remaining RSUs vest over a period of three years, beginning in May 2020, with a portion vesting every three months. Potential Payments Upon Termination or Change-of-Control Other than the RSUs mentioned above in “Outstanding Equity Awards at Fiscal Year-End”, none of our named executive officers are entitled to any payments upon termination or change-of-control. Retirement or Similar Benefit Plans There are no arrangements or plans in which we provide retirement or similar benefits for our named executive officers. Employment Agreements We do not have formal written employment agreements with any of our named executive officers. Director Compensation During fiscal year 2020, our sole directors, Mr. Patel and Mr. Mosser were also our named executive officers. They did not receive any compensation in their capacities as directors. 28 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities Authorized for Issuance Under Equity Compensation Plans A summary of our securities authorized for issuance under equity compensation plans as of October 31, 2020 is as follows: Plan Category (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity compensation plans approved by security holders - - - Equity compensation plans not approved by security holders - - 15,100,000 Total - - 15,100,000 Plans Not Approved by Stockholders On May 28, 2020, our Board adopted the Incentive Plan. The following is a summary of the principal features of the Incentive Plan. The summary of the Incentive Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Incentive Plan. Background . The purpose of the Incentive Plan is to enhance stockholder value by linking the compensation of our employees, officers, directors, and consultants to increases in the price of our common stock and the achievement of other performance objectives and to encourage ownership in the Company by key personnel whose long-term employment is considered essential to our continued progress and success. The Incentive Plan is also intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees and directors to act in stockholders’ interest and share in our success. The various types of incentive awards that may be provided under the Incentive Plan are intended to enable us to respond to changes in compensation practices, tax laws, accounting regulations, and the size and diversity of its business. We will not offer incentive stock options under the Incentive Plan. All of our employees, officers, directors, and consultants will be eligible to be granted awards under the Incentive Plan. The Incentive Plan will be administered by our Board. All awards made under the Incentive Plan will be subject to the recommendations and approvals of our Board. Stock Subject to the Incentive Plan . Subject to the terms of the Incentive Plan, the maximum aggregate number of shares of our common stock that may be subject to or delivered under awards granted pursuant to the Incentive Plan is 100,000,000 shares. Shares subject to awards that have been canceled, expired, settled in cash, or not issued or forfeited for any reason (in whole or in part) will not reduce the aggregate number of shares that may be subject to or delivered under awards granted under the Incentive Plan and be available for future awards granted under the Incentive Plan. 29 Eligibility . We may grant awards under the Incentive Plan to employees, officers, directors, and consultants. Types of Awards . The Incentive Plan provides for options not qualifying as “incentive” stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, stock appreciation rights, shares of restricted stock, and other stock-based awards. Award Limitation . Non-employee directors may not be granted awards in excess of the 200,000 shares of our common stock in any calendar year. Term and Amendments . Unless terminated by our Board, the Incentive Plan will continue to remain effective until no further awards may be granted and all awards granted under the Incentive Plan are no longer outstanding. Our Board may at any time, and from time to time, amend the Incentive Plan; provided, that no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the Incentive Plan without the holder’s consent. Security Ownership of Certain Beneficial Owners and Management Common Stock The following table sets forth, as of February 11, 2021, the number of shares of common stock owned of record and beneficially by (i) each of our current directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than 5% of our outstanding common stock. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to the number of shares indicated as beneficial owned by them. Name and Address Amount and Nature of Beneficial Ownership (Common Stock) (1) Percentage of Class (1) Nirajkumar Patel (2) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 204,464,500 (2) 73.24% Eric Mosser (3) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 204,300,000 (3) 73.18% Current Executive Officers and Directors as a Group (2 Persons) 204,764,500 88.06% Kaival Holdings, LLC (formerly known as Kaival Brands Innovations Group, LLC) (4) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 204,000,000 73.35% _________________________________________ (1) Applicable percentage of ownership is based on 279,171,677 shares of common stock outstanding as of February 11, 2021. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock that are currently exercisable within 60 days of February 11, 2021 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any person. (2) Nirajkumar Patel serves as our Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director. Consists of 204,000,000 shares of our common stock held by KH, an entity over which Mr. Patel has shared dispositive and voting authority. (3) Eric Mosser serves as our Chief Operating Officer, Secretary, and a director of the Company. Consists of 204,000,000 shares of our common stock held by KH, an entity over which Mr. Mosser has shared dispositive and voting authority. (4) Nirajkumar Patel and Eric Mosser are the sole voting members of KH. 30 Preferred Stock The following table sets forth, as of February 11, 2021, the number of shares of our Series A Preferred Stock owned of record and beneficially by (i) each of our current directors, (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of Series A Preferred Stock. Beneficial ownership has been determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to shares. Unless otherwise indicated, the persons named in the table have sole voting and investment power with respect to the number of shares indicated as beneficial owned by them. Name and Address Amount and Nature of Beneficial Ownership (Series A Preferred Stock) (1) Percentage of Class (1) Nirajkumar Patel (2) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 3,000,000 100% Eric Mosser (3) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 3,000,000 (3) 100% Current Executive Officers and Directors as a Group (2 Persons) 3,000,000 100% Kaival Holdings, LLC (formerly known as Kaival Brands Innovations Group, LLC) (4) 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 3,000,000 100% _________________________________________ (1) Applicable percentage of ownership is based on 3,000,000 shares of Series A Preferred Stock outstanding as of February 11, 2021. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Series A Preferred Stock that are currently exercisable within 60 days of February 11, 2021 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any person. (2) Nirajkumar Patel serves as our Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director. Consists of 3,000,000 shares of our Series A Preferred Stock held by KH, an entity over which Mr. Patel has shared dispositive and voting authority. (3) Eric Mosser serves as our Chief Operating Officer, Secretary, and a director of the Company. Consists of 3,000,000 shares of our Series A Preferred Stock held by KH, an entity over which Mr. Mosser has shared dispositive and voting authority. (4) Nirajkumar Patel and Eric Mosser are the sole voting members of KH. 31 Item 13. Certain Relationships and Related Transactions. Revenue and Accounts Receivable During the year ended October 31, 2020, we generated sales of $233,955 from seven companies owned by Nirajkumar Patel, our Chief Executive Officer and Chief Financial Officer, and/or his wife. As of October 31, 2020, the Company has accounts receivable from two related parties that are owned by Mr. Patel and/or his wife in the amount of $15,360. Purchases and Accounts Payable During the year ended October 31, 2020, we purchased $53,981,351 of products from and sold $64,976,676 of goods to retail and non-retail customers. As of October 31, 2020, we had accounts payable to Bidi of $1,409,461. Bidi is owned and controlled by Nirajkumar Patel, our Chief Executive Officer and Chief Financial Officer. Contributed Capital Our Chief Executive Officer and Chief Financial Officer, Mr. Nirajkumar Patel, paid expenses on our behalf totaling $16,257 during the year ended October 31, 2020, which is considered a contribution to us with no expectation of repayment and is recorded as additional paid-in capital. Our Chief Operating Officer, Mr. Eric Mosser, paid expenses on our behalf totaling $10,900 during the year ended October 31, 2020, which is considered a contribution to us with no expectation of repayment and is recorded as additional paid-in capital. Concentration of Purchases and Accounts Payable For the year ended October 31, 2020, 100% of our inventory, primarily consisting of the “Bidi Stick”, were purchased from Bidi, a related party, in the amount of $53,981,351 It also accounted for 100% of the total accounts payable as of October 31, 2020. Common Shares Issued During the year ended October 31, 2020, we withheld 226,000 shares of common stock with a value of $223,762 to satisfy tax obligations due upon issuances of shares to our employees. 32 Office Space On August 1, 2020, we began leasing office space consisting of 1,595 square feet as its main corporate office in Grant, Florida for $1,000 per month. The five-year lease agreement is with related party, Just Pick. Nirajkumar Patel, our Chief Executive Officer and Chief Financial Officer, is also an officer of Just Pick. Review, Approval, and Ratification of Transactions with Related Persons We follow ASC 850, Related Party Disclosures , for the identification of related parties and disclosure of related party transactions. When and if we contemplate entering into a transaction in which any executive officer, director, nominee, or any family member of the foregoing would have a direct or indirect interest, regardless of the amount involved, the terms of such transaction are presented to our board of directors (other than any interested director, if possible) for approval, and documented in the board minutes. Director Independence We are not listed on any exchange that requires directors to be independent. We have not: · Established our own definition for determining whether our directors or nominees for directors are “independent,” nor have we adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current directors would not be deemed to be “independent” under any applicable definition given that they are our officers; nor · Established any committees of our Board. Item 14. Principal Accounting Fees and Services. Below is the aggregate amount of fees billed for professional services rendered by MaloneBailey, LLP, our principal accountants with respect to our fiscal year ended October 31, 2020 and October 31, 2019. 2020 2019 Audit and review fees $ 75,000 $ 16,000 Audit-related fees - - Tax fees - - All other fees - - Total $ 75,000 $ 16,000 Pre-Approval Policies and Procedures Currently, we do not have a separately designed Audit Committee. Instead, our entire Board performs those functions. Accordingly, our Board was responsible for pre-approving all services provided by our independent registered public accounting firm. The above fees were reviewed and approved by our Board. 33 PART IV Item 15. Exhibits, Financial Statement Schedules. (a) Financial Statements 1. Our financial statements are listed in the index under Item 8 of this document; and 2. All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto. (b) Exhibits required by Item 601 of Regulation S-K. Exhibit Number Description 3.1 Restated Certificate of Incorporation, which was filed as Exhibit 3.1 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on March 25, 2019, and is incorporated herein by reference thereto. 3.2 Bylaws, which were filed as Exhibit 3.2 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on February 19, 2019, and is incorporated herein by reference thereto. 3.3 Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on June 20, 2019, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto. 3.4 Certificate of Correction, as filed with the Secretary of State of the State of Delaware on July 15, 2019, which was filed as Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto. 3.5 Certificate of Designation of the Preferences, Rights, and Limitations of the Series A Preferred Stock, as filed with the Secretary of State of the State of Delaware on August 19, 2020, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto. 4.1 Description of Securities.* 10.1 Exclusive Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Bidi Vapor LLC, dated March 9, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 9, 2020, and is incorporated herein by reference thereto. 10.2 Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated March 31, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2020, and is incorporated herein by reference thereto. 10.3 First Amendment to Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated June 2, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.4 Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated April 3, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2020, and is incorporated herein by reference thereto. 10.5 Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated April 11, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 13, 2020, and is incorporated herein by reference thereto. 10.6 Amended and Restated Exclusive Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Bidi Vapor LLC, dated May 21, 2020, which was filed as Exhibit 10.5 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. 10.7 Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated May 21, 2020, which was filed as Exhibit 10.6 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. 33 10.8 Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated May 25, 2020, which was filed as Exhibit 10.7 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. 10.9 Share Cancellation and Exchange Agreement, by and between the Company and Kaival Holdings, LLC, dated August 19, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto. 10.10 2020 Stock and Incentive Compensation Plan, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.11 Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.12 Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.13 Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.14 Form of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto. 10.15 Lease Agreement by and between Kaival Brands Innovations Group, Inc., and Just Pick, LLC, dated July 15, 2020, which was filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 14, 2020, and is incorporated herein by reference thereto. 10.16 Patent Contribution Agreement, by and between Kaival Brands Innovations Group, Inc., and Next Generation Labs, LLC dated September 28, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 28, 2020, and is incorporated herein by reference thereto. 21.1 Subsidiaries* 31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* 32.1 Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code* 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Presentation Linkbase Document* *Filed herewith. Item 16. Form 10-K Summary. None. 34 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Kaival Brands Innovations Group, Inc. By: /s/ Nirajkumar Patel Nirajkumar Patel Chief Executive Officer, Chief Financial Officer, President, Treasurer, and a Director (Principal Executive Officer) Dated: February 12, 2021 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Nirajkumar Patel Nirajkumar Patel Chief Executive Officer, Chief Financial Officer, President, Treasurer, and a Director Dated: February 12, 2021 By :/s/ Eric Mosser Eric Mosser Chief Operating Officer, Secretary, and a Director Dated: February 12, 2021 35