Kaival Brands Innovations Group, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On July 20, 2021, our Common Stock began trading on the Nasdaq Capital Market under the trading symbol “KAVL.” On February 8, 2024, the last reported sales price of our Common Stock was $2.70. Holders As of February 6, we had approximately 7,400 record holders of our Common Stock. Dividends Our authorized Common Stock consists of 1,000,000,000 shares with a par value of $0.001 per share. There were 2,793,386 shares of Common Stock issued and outstanding as of October 31, 2023 as compared to 2,674,718 shares of the Common Stock issued and outstanding as of October 31, 2022. Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities Common Stock Our authorized Common Stock consists of 1,000,000,000 shares with a par value of $0.001 per share. There were 2,793,386 shares of Common Stock issued and outstanding as of October 31, 2023 as compared to 2,674,718 shares of the Common Stock issued and outstanding as of October 31, 2022. During the year ended October 31, 2023, we issued 95,239 shares of Common Stock as consideration for the acquisition of intellectual property assets from GoFire. We also issued 4,381 shares of Common Stock as compensation for advisory services rendered in connection with the GoFire APA. During the year ended October 31, 2023, we issued 19,048 shares of Common Stock as part of a loan transaction with AJB Investments entered into on August 9, 2023. Such loan has been repaid in full as of the date of this Report. During the fiscal year ended October 31, 2022, third parties exercised warrants to purchase 40,744 shares of our Common Stock for net proceeds of $1,625,650. During the fiscal year ended October 31, 2022, we issued 5,870 shares of Common Stock with the fair value of $172,379 to employees for services RSUs that were settled with common shares. Of the shares issued to employees, 2,130 shares were withheld by us to satisfy tax withholding obligations equal to $59,862. During the fiscal year ended October 31, 2022, 618 shares of our Common Stock were issued to an individual as compensation for consulting services rendered to us. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering). During the fiscal year ended October 31, 2022, 731 shares of our Common Stock were issued to QuikfillRx, LLC as compensation for marketing and promotion services rendered to us. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering). 32 During the fiscal year ended October 31, 2022, 539 shares of our Common Stock were issued to an individual as compensation for professional legal services rendered to us. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of shares of our Common Stock did not involve any public offering). During the fiscal year ended, October 31, 2022, all 3,000,000 shares of Series A Preferred Stock were converted into shares of Common Stock by Kaival Holdings, our majority stockholder. The conversion of 3,000,000 shares of Series A Preferred Stock, at a conversion rate of 0.3968, equaled 1,190,477 shares of Common Stock. As a result, the authorized, preferred stock of the Company consists of 5,000,000 shares with a par value of $0.001 per share, with 0 shares of preferred stock issued or outstanding as of October 31, 2022. Series B Convertible Preferred Stock We issued 900,000 shares of the Series B Preferred Stock as consideration for the acquisition of intellectual property assets from GoFire in May 2023. The Series B Preferred Stock carries no voting rights except: (i) with respect to the ability of the holders of a majority of the then outstanding Series B Preferred Stock (the “Majority Holders”), to nominate a director to our board of directors, and (ii) that the vote of the Majority Holders is necessary for effecting any amendment to the Company’s Certificate of Incorporation or Certificate of Designation that affects the Series B Preferred Stock. The Series B Preferred Stock is redeemable at our option at a redemption price of $15 per share, subject to potential downward adjustments based on the trading price of the Common Stock. Subject to additional limitations in the GoFire APA, the Series B Preferred Stock holds seniority over the Common Stock and each other class of series of securities now existing or hereafter authorized with respect to dividend rights, the distribution of assets upon liquidation, and dissolution and redemption rights. Upon a liquidation and winding up of our company, the holders of Series B Preferred Stock are entitled to a liquidation preference of $15 per share (the “Liquidation Preference”), though the redemption may be adjusted downward based on the trading price of the Common Stock at the time of liquidation. The holders of Series B Preferred Stock are entitled to receive a dividend equal to 2% of the Liquidation Preference, accruing from May 30, 2023 and payable on the eighteen-month anniversary of May 30, 2023. No preemptive rights are granted to the holders of Series B Preferred Stock. The Majority Holders have the ability to cause a voluntary conversion of the Series B Preferred Stock into Common Stock at a conversion rate of 0.3968 shares of Common Stock per share of Series B Preferred Stock which may only occur on or after the following dates 18 month, 24 month, 36, month, 48 month, and 60 month anniversary of the original issuance date; and only up to 180,000 number of shares of Series B Preferred Stock on each of the these dates. All shares of Series B Preferred Stock will automatically convert to Common Stock upon the occurrence of a Change of Control (as defined in the GoFire APA).