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 President & Chief Operating Officer and our Interim Chief Financial Officer to allow for timely decisions regarding required disclosure. As of October 31, 2023, the end of the year covered by this Report, we carried out an evaluation under the supervision and with the participation of members of our management, including our President & Chief Operating Officer and our Chief Financial Officer, of the effectiveness of the design and the operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Our management has concluded, based on their evaluation, 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 Framework), 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, taken as a whole, as of October 31, 2023, based on such criteria. Material weaknesses existed in the design or operation of certain of our internal controls over financial reporting that adversely affect our internal controls. 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 may not be prevented or detected. Management determined that there was a lack of resources to provide segregation of duties consistent with control objectives, the lack of sufficient and consistent real time remote communications, and the lack of a fully developed formal review process that includes multiple levels of review over financial disclosure and reporting processes. However, management has been in the process of implementing new controls that should mitigate, if not fully eliminate certain identified risks in our control over financial reporting. The weaknesses and the related risks are not uncommon in a company of our size because of the limitations in the location, size and number of our staff. To address these material weaknesses, and subject to the receipt of additional financing or cash flows, we have undertaken certain remediation measures to date to address the material weaknesses described in this Report, including implementing procedures pursuant to which we can ensure proper segregation of duties and hire additional resources to ensure appropriate review and oversight, as well as more timely formal communications processes, more diligent review and approval of all disbursements and more timely review of all banking transactions sales orders and inventory management. 41 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, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not Applicable. Item 10. Directors, Executive Officers and Corporate Governance. The following table and text set forth the names and ages of our directors and executive officers as of the date of this Report. Our board of directors (the “Board”) is comprised of only one class of directors. Also provided herein are brief descriptions of the business experience of each director and executive officer during the past five years (based on information supplied by them) and an indication of directorships held by each director in other public companies subject to the reporting requirements under the Federal securities laws. During the past ten years, none of our directors or executive officers has been involved in any legal proceedings that are material to an evaluation of the ability or integrity of such person: Name Age Position(s) Dates in Position or Office Nirajkumar Patel (1) 40 Chief Science & Regulatory Officer and Director June 24, 2022– Current Barry M. Hopkins (2) 72 Director, Executive Chairman and Interim Chief Executive Officer and President March 19, 2023– Current Roger Brooks (3) 78 Director March 17, 2021– Current George Chuang (4) 55 Director June 30, 2021– Current David Worner (5) 45 Director March 19, 2023– Current Mark Thoenes (6) 70 Director August 1, 2023 – Current Stephen Sheriff (7) 34 Chief Operating Officer and Investor Relations Officer August 22, 2023– Current Thomas Metzler (8) 47 Chief Financial Officer, Treasurer, and Secretary August 1, 2023– Current 42 (1) Mr. Patel served as our Chief Executive Officer and Chief Financial Officer from February 20, 2019, until June 24, 2022. (2) Mr. Hopkins was appointed as our Executive Chairman on November 6, 2023 and Interim Chief Financial Officer and President on December 22, 2023. (3) Mr. Brooks serves as Chair of the Audit Committee and a member of the Governance and Nominating, and Compensation Committees. (4) Mr. Chuang serves as a member of the Compensation, Audit and Governance and Nominating Committees. (5) Mr. Worner serves as chair of the Compensation Committee and a member of the Audit and Governance and Nominating Committee. (6) Mr. Thoenes was appointed to the Board effective August 1, 2023. From June 30, 2021 until August 1, 2023, he served as our Interim Chief Financial Officer. (7) Mr. Sheriff was appointed as our Chief Operating Officer on August 22, 2023. (8) Mr. Metzler was appointed as our Chief Financial, Treasurer, and Secretary of our company on August 1, 2023. Nirajkumar Patel, Chief Science & Regulatory Officer, and Director. Nirajkumar Patel 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 Science & Regulatory Officer and director of our company, and/or his wife include Beach Food Store created in 2004, Diya Food Store created in 2010, Cloud Nine 2012 created in 2012, JC Products of USA, LLC created in 2013 and Just Pick, LLC. 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 within our business industry. Barry M. Hopkins, Executive Chairman and Interim Chief Executive Officer and President. Mr. Barry Hopkins has decades of experience in business development, performance management, and retail, having spent over thirty years with Altria, one of the world’s largest producers and marketers of tobacco, cigarettes and related products. While at Altria, Mr. Hopkins served in various roles, including District Manager, Vice President of Sales, Vice President of Trade Marketing, and Vice President of National accounts. In 2005, Mr. Hopkins founded Ideas in Motion, a consulting company. For seven years while running Ideas in Motion, Mr. Hopkins consulted with Turning Point Brands, a consumer products company that markets and distributes products including alternative smoking accessories and consumables. Mr. Hopkins eventually joined Turning Point Brands in 2012 as a Senior Executive and gradually transitioned to other senior level roles including Senior Vice President of Sales and Marketing, and Senior Vice President of Executive Organizational Development. Mr. Hopkins remained at Turning Point Brands for over eleven years and, while there, garnered recognition for the development and implementation of a systematic connection process that ultimately resulted in eight record setting quarters exceeding all prior sales and profit objectives. 43 Roger Brooks, Director. Mr. Roger Brooks has served as the Chairman, Treasurer, and Co-founder of Abierto Networks, a digital media and engagement technology company focused on the convenience store, retail, and other similar consumer market segments, since 2005. At Abierto Networks, Mr. Brooks has also served on the Compensation Committee since 2005. Prior to his roles at Abierto Networks, from 1998 to 2008, Mr. Brooks was the lead independent director and member of the compensation and audit committees for Moldflow Corporation, a Nasdaq-listed software company that was sold to Autodesk, Inc. in 2008. From February 2016 to June 2019, Mr. Brooks served as an independent director of Lytron, Incorporated, a closely held international industrial solutions company. From 1998 to 2002, Mr. Brooks served as President, Chief Executive Officer, and member of the board for Intelligent Controls, Inc., a publicly traded software and instrumentation company, which was sold to Franklin Electric Co. Inc. Mr. Brooks was President, Chief Executive Officer, and a board member of Dynisco, Inc. from 1987 to 1996 where he grew the company from $10 million of sales to an international company with over $100 million of sales. Mr. Brooks holds a Bachelor of Arts degree from the University of Connecticut and a Master of Business Administration degree from New York University, Stern Graduate Business School. He is also a graduate of the Stanford University Executive Management Program. Mr. Brooks extensive experience gained from his roles as an executive officer and director of numerous public companies, as well as experience in the convenience store, retail, and other consumer markets will be invaluable to the Board and qualifies him for service as a director. George Chuang, Director. Mr. George Chuang has served as the Chief Executive Officer of Lucy Labs, Inc. since July 2017 and as the Chair of the Board of Directors of Lucy Labs, Inc. since November 2021. Prior to that, he served as the co-managing principal of Hillside Advisors LLC from June 2015 to July 2017. Mr. Chuang was also the principal owner of USB Media, Inc., a technology B2B company he founded in 2007. During his career, Mr. Chuang spent time at Chase Manhattan Bank as an assistant Treasurer for their Credit Risk Department, as a management consultant at Price Waterhouse Management Consulting, and served as the Chief Administrative Officer for several equity product sales groups at Lehman Brothers. In addition, Mr. Chuang spent eight years as a Principal at Pacific Partnership Advisors LLC, a consulting firm with offices in New York and Beijing, which facilitated cross-border transactions. Mr. Chuang graduated from the University of Chicago and obtained a Master of Business Administration degree at Yale University. Mr. Chuang’s experience in capital markets and global supply chain knowledge, as well as his business experience in start-up companies, qualifies him for service as a director. David Worner, Director. Mr. David Worner began his career in public accounting and is currently the Chief Executive Officer of GrowthPath Partners, a transactional accounting and advisory firm which he founded in July 2021. From August 2012 to June 2021, Mr. Worner served as a partner at NOW CFO, a national finance and accounting consulting firm. Prior to his time at NOW CFO, Mr. Worner worked as a Controller at Covario, an independent provider of search marketing agency services, from August 2010 until August 2012. Prior to his time at Covario, from September 2006 to August 2012, he worked as an Accounting Manager for Securities and Exchange Commission Reporting and SOX Management for NTN Buzztime, a company that produces interactive entertainment across different platforms. Mr. Worner received a bachelor’s degree in accounting from the University of New Orleans in 2005. 44 Mark Thoenes, Director . Mr. Mark Thoenes, has more than 35 years of diverse financial and operational leadership to our company. From June 30, 2021 to August 1, 2023, he served as our Interim Chief Financial Officer on a consulting basis. He has been a licensed Certified Public Accountant since 1984 and began his career with Ernst & Young Global Limited. From 2000 to 2010, Mr. Thoenes served as the Executive Vice President/Chief Financial Officer of Rentrak Corporation (“Rentrak”), a publicly traded company listed on Nasdaq and headquartered in Portland, Oregon. Founded in 1977, Rentrak went public in 1986, and remained a public company until it was acquired by comScore, Inc. in 2016, after Mr. Thoenes left Rentrak. For the past eleven years, Mr. Thoenes has been the President of MLT Consulting Services, LLC, a full-service business/financial consulting firm. Stephen Sheriff, Chief Operating Officer and Investor Relations Officer. Mr. Stephen Sheriff brings over a decade of finance and entrepreneurial leadership to his role as Chief Operating Officer and Investor Relations Office. Since August 2022, he has served as our Director of Administration & Communications. In this role, he managed our investor, public relations and human resource programs in addition to overall responsibility for the development and implementation of key programs and initiatives, including customer and vendor relations. Since January 2022, he has also served as co-founder and Managing Partner of Riverhill Group, a management consulting firm focused on assisting early-stage companies in the areas of funding, scaling and expanding operations. Since 2012, he has also been a Managing Partner at Riverhill Ventures, a socially conscious, strategic investment and consulting firm primarily focused on quick service restaurants, natural foods and consumer brands. Through his Riverhill-related experiences, Mr. Sheriff has been an investor in and advisor to several early-stage companies. From September 2018 to September 2020, he also was an Associate at Solebury Trout (now Solebury Strategic Communications), a leading life sciences-focused investor relations firm based in New York City. Mr. Sheriff received his Bachelor of Arts in Counseling Psychology from Delaware Valley University. Thomas Metzler, Chief Financial Officer, Treasurer, and Secretary. Mr. Thomas Metzler brings over 20 years of finance and operational experience in the vaping and consumer products sector to our company. Since June 2019, he has worked as an accounting and operational consultant. From April 2013 to June 2019, Mr. Metzler served as Managing Director of a Division of Turning Point Brands (NYSE: TPB), a manufacturer, marketer and distributor of branded alternative smoking accessories and consumables with active ingredients. At Turning Point Brands, Mr. Metzler led a team to transform the process of financial management efficiencies, which improved cost controls, managed inventory turn, developed strategic product promotions to accelerate product distribution, and built strategic alliances with suppliers. Mr. Metzler also developed & monitored key performance indicators which generated record growth with retail and wholesale distributors. He also provided post-acquisition assistance to integrate newly acquired entities into Turning Point Brands and advocated for the vapor industry by meeting with the White House’s OMB/OIRA office, and various congressional and senatorial offices. Mr. Metzler was a significant contributor as a Standard Technical Panel member in developing UL 8139- Electrical Systems of Electronic Cigarettes and Vaping Devices, a safety standard that evaluates the electrical and battery systems of vaping devices and electronic cigarettes. Mr. Metzler was a licensed CPA for over 20 years, during which time he provided accounting and related consulting services to many companies. He began his career working with public and private companies in the assurance practice at PricewaterhouseCoopers LLP in Boston. Mr. Metzler earned a B.S. in Accounting from Canisius College. December 2023 Management Changes On December 21, 2023, Eric Mosser, the Company’s then Chief Executive Officer and President of our company, provided written notice to our board of directors of his resignation as a member of the board, effective immediately. Mr. Mosser’s resignation is not due to any disagreements between him and our company or our board of directors. In connection with his resignation, on December 21, 2023, we and Mr. Mosser entered into an amendment to Mr. Mosser’s employment agreement with our company, dated August 1, 2023. Pursuant to such amendment, effective December 21, 2023, Mr. Mosser resigned as Chief Executive Officer and President of our company and became a Senior Advisor to our company and the Chief Executive Officer of KBI. Mr. Moser will report to Barry M. Hopkins, our Executive Chairman, until such time as a new Chief Executive Officer and President are appointed. At such time, Mr. Mosser shall report to our Chief Executive Officer as a Senior Advisor. Pursuant to the Amendment, Mr. Mosser’s base salary shall be $251,000 per annum, effective as of January 1, 2024. 45 On December 22, 2023, our board of directors appointed Mr. Hopkins as Interim Chief Executive Officer and President of our company, to serve in such capacity until a successor is duly appointed and approved by our board. Mr. Hopkins is our principal executive officer. Executive Chairman On November 6, 2023, our Board, pursuant to the powers of the Board provided for under applicable Delaware law, approved the creation of the new officer position of Executive Chairman and appointed Barry M. Hopkins, the then Chairman of the Board, to the office of Executive Chairman. The duties and responsibilities of the Executive Chairman are as follows: 1. The Executive Chairman acts as the principal executive officer of our company, with the President and Chief Executive Officer continuing to have primary responsibility for managing our day-to-day operations under the supervision of the Executive Chairman. The Executive Chairman shall provide advice and consultation to our President and Chief Executive Officer and our other officers regarding the overall management of our business and affairs, All significant strategic initiatives and projects of our company require prior consultation with and approval by the Executive Chairman. 2. Define our strategic direction and, working with the President and Chief Executive Officer and other officers of our company, ensure that our strategic direction is (a) properly communicated to the Board for its approval as required or deemed appropriate and (b) implemented by our company. 3. Chair annual and special Board meetings and annual stockholder meetings and, subject to availability and invitation, attend meetings of the committees of the Board. 4. Provide guiding principles for the proper functioning of Board and its committees in accordance with applicable laws, rules and regulations. 5. Foster and promote the integrity of the Board and a culture where the Board works harmoniously for the long-term benefit of our company and its stockholders. 6. Act as liaison between the Board and our officers to ensure that strategic policy and other decisions of the Board are fully presented to and discussed, debated, and decided by the Board. 7. Consult with Board members outside the regularly scheduled meetings of the Board as required. 8. Ensure that there is efficient communication among the Executive Chairman, the President and Chief Executive Officer, and our other officers and employees and Board members. 9. Partner with the President and Chief Executive Officer, work to strengthen our relationships with existing customers and foster key relationships that lead to new business. In this regard, the Executive Chairman will act as our representative with current and potential commercial partners and also potential sources of financing. Family Relationships There are no family relationships among any of our directors or executive officers. Arrangements Other than with respect to the Series B Director as described under “Description of Capital Stock-–-Preferred Stock—Series B Preferred Stock—Series B Director”, 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. 46 Directors and Executive Officers Qualifications Although we have not formally established any specific minimum qualifications that must be met by each of our officers, we generally evaluate the following qualities: educational background, diversity of professional experience, including whether the person is a current or was a former chief executive officer or chief financial officer of a public company or the head of a division of a prominent international organization, knowledge of our business, integrity, professional reputation, independence, wisdom, and ability to represent the best interests of our stockholders. The Governance and Nominating Committee of the Board prepares policies regarding director qualification requirements and the process for identifying and evaluating director candidates for adoption by our Board. The above-mentioned attributes, along with the leadership skills and other experiences of our officers and Board members described above, provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of stockholder value appreciation through organic and acquisition growth. Director Independence Under Nasdaq standards, a director is not “independent” unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line tests for independence set forth by the Nasdaq rules. Our Board has undertaken a review of its composition, the composition of its committees and the independence of our directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. Based on these standards, the Board has determined that Messrs. Worner, Brooks, and Chuang are “independent” directors within the meaning of listing rules of the Nasdaq Stock Market. All the members of the Audit, Compensation and Governance and Nominating Committees were also independent during our fiscal year ended October 31, 2023. Our Board is presently considering changes to the composition of the Compensation and Governance and Nominating Committees given Mr. Hopkins’ assumption of the role as our principal executive officer in November 2023. In making determinations regarding director independence, our Board considered the relationships that each non-employee director has with us and all other facts and circumstances our Board deemed relevant in determining their independence, including the director’s beneficial ownership of our Common Stock and the relationships of our non-employee directors with certain of our significant stockholders. Meetings of the Board and Board Committees Our Board has an Audit Committee, a Compensation Committee and Governance and Nominating Committee. The entire Board met 10 times, including telephonic meetings, during fiscal 2023. All directors attended at least 75% of our Board meetings held during the time each director served on our Board. Audit Committee. The Audit Committee currently consists of Roger Brooks (Chair), David Worner and George Chuang. The Audit Committee met 4 times during fiscal 2023. The meetings included discussions with management and with our independent registered public accounting firm to discuss our interim and annual financial statements, and the effectiveness of our financial and accounting functions and organization. The Audit Committee acts pursuant to a written charter adopted by our Board, a copy of which can be accessed at our corporate website at https://ir.kaivalbrands.com/governance/governance-documents/default.aspx. Changes to this charter from time to time will be posted on our website at such address. The purpose of the Audit Committee is to represent and assist the Board in its general oversight of our accounting and financial reporting processes, audits of our financial statements, and our internal control and audit functions. Management is responsible for (a) the preparation, presentation, and integrity of our financial statements; (b) accounting and financial reporting principles; and (c) our internal controls and procedures designed to promote compliance with accounting standards and applicable laws and regulations. Our independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards. 47 Our Board has determined that the Audit Committee is comprised entirely of independent members as defined under applicable SEC rules and the Nasdaq Rules. Our Board has determined that Mr. Brooks, the Chair of the Audit Committee, is an “audit committee financial expert” as defined under SEC rules. Compensation Committee. The Compensation Committee currently consists of David Worner (Chair), Barry Hopkins and Roger Brooks. The Compensation Committee met 6 times during fiscal 2023. Our Board is presently considering changes to the composition of the Compensation Committee given Mr. Hopkins’ assumption of the role as our principal executive officer in November 2023. The Compensation Committee acts pursuant to a written charter adopted by our Board, a copy of which can be accessed at our corporate website at https://ir.kaivalbrands.com/governance/governance-documents/default.aspx. Changes to this charter from time to time will be posted on our website at such address. The purpose of the Compensation Committee is to discharge the responsibilities of the Board relating to compensation of our executives, to produce an annual report on executive compensation for inclusion in our annual proxy statement, and to oversee and advise the Board on the adoption of policies that govern our compensation programs, including stock and benefit plans. The Compensation Committee is responsible for determining executive compensation, including approving recommendations regarding equity awards for all of our executive officers, setting base salary amounts, and fixing compensation levels. This includes reviewing and making recommendations to our Board regarding corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating, at least annually, the Chief Executive Officer’s performance in light of these goals and objectives, and reviewing and making recommendations to our Board regarding the Chief Executive Officer’s compensation level based on such evaluation. The Compensation Committee also annually reviews director compensation to ensure non-employee directors are adequately compensated for the time expended in fulfilling their duties to us, as well as the skill-level required by us of members of our Board. After the Compensation Committee completes their annual review, they make recommendations to our Board regarding director compensation. The Compensation Committee is authorized to engage compensation consultants, if they deem necessary, to assist with the Compensation Committee’s responsibilities related to our executive compensation program and the director compensation program. Governance and Nominating Committee. The Governance and Nominating Committee currently consists of Barry Hopkins (Chair), David Worner and Roger Brooks. The Governance and Nominating Committee did not meet as such during fiscal 2023. Our Board is presently considering changes to the composition of the Governance and Nominating Committee given Mr. Hopkins’ assumption of the role as our principal executive officer in November 2023. The Governance and Nominating Committee acts pursuant to a written charter adopted by our Board, a copy of which can be accessed at our corporate website at https://ir.kaivalbrands.com/governance/governance-documents/default.aspx . Changes to this charter from time to time will be posted on our website at such address. The purpose of the Governance and Nominating Committee is to determine the slate of director nominees for election to our Board, to identify and recommend candidates to fill Board vacancies occurring between annual stockholder meetings, to review our policies and programs that relate to matters of corporate responsibility, including public issues of significance to our company and our stockholders, and any other related matters required by the federal securities laws . The Governance and Nominating Committee determines the qualifications, qualities, skills, and other expertise required to be a director and to develop, and recommend to our Board for its approval, criteria to be considered in selecting nominees for director. The Nominating Committee and our Board believe that at this time, it is unnecessary to adopt criteria for the selection of directors. Instead, the Nominating Committee and our Board believe that the desirable background of a new individual member of our Board may change over time and that a thoughtful, thorough selection process is more important than adopting criteria for directors. 48 The Governance and Nominating Committee will also identify, recruit, and screen candidates for our Board, consistent with criteria approved by our Board. The Nominating Committee and our Board are fully open to utilizing whatever methodology is efficient in identifying new, qualified directors when needed, including industry contacts of our directors or professional search firms. The Governance and Nominating Committee also considers any director candidates recommended by our stockholders pursuant to the procedures described in this Proxy Statement and any nominations of director candidates validly made by stockholders in accordance with applicable laws, rules, and regulations, and the provisions of our charter documents. There were no fees paid or due to third parties in fiscal 2023 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees. Director Diversity The following chart sets forth the board diversity information required by Nasdaq for our directors as of the date of this Report: Board Diversity Matrix Total Number of Directors 5 Female Male Non-Binary Did Note Disclose Gender Part I: Gender Identity Directors — 6 — — Part II: Demographic Background African American or Black — 1 — — Alaskan Native or Native American — — — — Asian — 2 — — Hispanic or Latinx — — — — Native Hawaiian or Pacific Islander — — — — White — 3 — — Two or More Races or Ethnicities — — — — LGBTQ+ — — — — Code of Ethics On March 17, 2021, our Board adopted a Code of Ethics and Business Conduct, that applies to all directors, senior officers, and employees of the Company (the “Code of Ethics”). The Code of Ethics was adopted to enhance and clarify our personnel’s understanding of our standards of ethical business practices, promote awareness of ethical issues that may be encountered in carrying out an employee’s or director’s responsibilities, and sets forth how to address ethical issues that may arise. A copy of the Code of Ethics is available on our corporate website at https://ir.kaivalbrands.com/governance/governance-documents/default.aspx . Compensation Committee Interlocks and Insider Participation None of our executive officers currently serve, or have served during the last year, as a member of the board of directors or compensation committee of any entity, other than us, that has one or more executive officers serving as a member of our Board. Executive Compensation Summary Compensation Table 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, 2023, (ii) each of our two other most highly compensated executive officers who were serving as executive officers at the end of the year ended October 31, 2023, and (iii) any individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the fiscal year ended October 31, 2023. 49 Name and principal position Fiscal Year Ended October 31, Salary ($) Bonus ($) Stock Awards ($) (1) (2) Option Awards ($) (1) Non-Equity Incentive Plan Compensation ($) (3) Nonqualified Deferred Compensation Earnings ($) Total ($) Nirajkumar Patel, Chief Science & Regulatory Officer, and Director 2022 244,000 30,000 42,584 2,139,989 57,709 0 2,514,282 2023 276,000 0 0 364,994 0 0 640,994 Eric Mosser, former CEO, President, and Director (4) 2022 226,577 20,000 37,707 1,854,991 57,709 0 2,196,984 2023 300,000 0 0 699,941 0 0 999,941 Mark Thoenes, former Interim CFO(5) 2022 347,201 (6) 0 0 310,998 0 0 658,193 2023 298,050 0 0 30,650 0 0 328,700 Thomas Metzler, CFO 2023 61,076 0 0 150,000 0 0 211,076 Stephen Sheriff, COO 2022 31,250 0 0 29,000 0 0 60,250 2023 146,528 7,500 0 75,808 0 0 229,836 (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 related to the 2022 option awards, refer to Note 2, “ Share-Based Compensation ,” to the accompanying audited consolidated financial statements for the year ended October 31, 2023. (2) Includes fair value of shares withheld by us to pay for taxes. (3) Consisted of cash paid in lieu of vested RSUs. (4) Mr. Mosser resigned as our Chief Executive Officer and President on December 21, 2023. Barry M. Hopkins became our Executive Chairman and principal executive officer (and later Interim Chief Executive Officer and President) following the conclusion of our fiscal year ended October 31, 2023. (5) Mr. Thoenes resigned as our Interim Chief Financial Officer on August 1, 2023 (6) Consulting fees pursuant to the Consulting Agreement (as defined below). See “Narrative Discussion” for additional information. Narrative Discussion 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. On February 6, 2023, we granted stock option awards to Nirajkumar Patel, Chief Science and Regulatory Office, to acquire up to 23,810 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Patel’s services as Chief Science and Regulatory Officer. The option shares are exercisable at a price of $15.33 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. On February 6, 2023, we granted stock option awards to Eric Mosser, our then President and Chief Operating Officer, to acquire up to 23,810 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Mosser’s services as President and Chief Operating. The option shares are exercisable at a price of $15.33 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. 50 On March 3, 2023, we granted stock option awards to Mark Thoenes, then our Interim Chief Financial Officer, to acquire up to 2,381 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Thoenes’ services as Interim Chief Financial Officer. The option shares are exercisable at a price of $12.81 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. On August 1, 2023, we granted stock option awards to Eric Mosser, our then Chief Executive Officer and President to acquire up to 27,004 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Mosser’s services as Chief Executive Officer and President. The option shares are exercisable at a price of $12.41 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. On August 1, 2023, we granted stock option awards to Thomas Metzler, our Chief Financial Officer, Treasurer and Secretary to acquire up to 12,091 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Metzler’s services as Chief Financial Officer, Treasurer, and Secretary. The option shares are exercisable at a price of $12.41 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. On August 22, 2023, we granted stock option awards to Stephen Sheriff, our Chief Operating Officer to acquire up to 7,524 shares of Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Sheriff’s services as Chief Operating Officer. The option shares are exercisable at a price of $10.08 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. Nirajkumar Patel During the fiscal year ended October 31, 2023, we paid a base salary of approximately $276,000 to Nirajkumar Patel, our Chief Science & Regulatory Officer , compared to a base salary of approximately $244,000 for the fiscal year ended October 31, 2022. 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 3,572 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 $30,000 in fiscal year 2022 based on our meeting the gross revenue benchmarks that year and $0 in fiscal year 2023 . We issued the following stock compensation to Mr. Patel during fiscal years 2023 and 2022: Vesting and/or Issuance Date Number of Shares of our Common Stock Price Per Share Aggregate Value 11/5/2021 751 $ 37.80 $ 28,368 2/5/2022 698 $ 20.37 $ 14,216 During fiscal year 2022, we paid approximately $57,709 in non-equity incentive plan compensation, which consisted of cash paid in lieu of a vested RSU issuance. The aggregate values are based on the value of the vesting date for the shares that would have been issued. 51 Eric Mosser During the fiscal year ended October 31, 2023, we paid a base salary of approximately $300,000 to Eric Mosser, our former Chief Executive Officer and President who resigned such positions on December 21, 2023, compared to $226,577 for the fiscal year ended October 31, 2022. 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 298 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 $20,000 in fiscal year 2022 based on our meeting the gross revenue benchmarks that year and $0 in fiscal year 2023. We issued the following stock compensation to Mr. Mosser during fiscal years 2023 and 2022: Vesting and/or Issuance Date Number of Shares of our Common Stock Price Per Share Aggregate Value 11/5/2021 671 $ 37.80 $ 25,330 2/5/2022 608 $ 20.37 $ 12,377 During fiscal year 2022 we paid approximately $57,709 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. Mark Thoenes Effective June 30, 2021, we entered into a Consulting Agreement, dated June 14, 2021, with Mr. Thoenes (the “Consulting Agreement”), Pursuant to the Consulting Agreement, we agreed to pay Mr. Thoenes a rate of $130 per hour and will reimburse him for usual and customary business expenses. We paid approximately $347,671 and $298,050 to Mr. Thoenes pursuant to the Consulting Agreement during the fiscal years 2022 and 2023 respectively. The total fair market value of these stock options on March 3, 2023 was $30,650. The Consulting Agreement was for a term of approximately 6 months, or until December 31, 2021, and was extended by the parties to July 31, 2023. Mr. Thoenes was assisting us as Interim Chief Financial Officer. He resigned this position on August 1, 2023. Outstanding Equity Awards at Fiscal Year-End October 31, 2023 Stock Option Awards Name Number of Stock Options that Have Not Vested (#) Market Value of Stock Options that Have Not Vested ($) Nirajkumar Patel 11,905 182,504 Eric Mosser (resigned in December 2023) 38,909 517,650 Thomas Metzler 12,092 150,064 Stephen Sheriff 8,715 94,100 Potential Payments Upon Termination or Change-of-Control Other than the stock options 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. 52 Employment Agreements Eric Mosser . On August 1, 2023, we entered an employment agreement with Mr. Mosser. Pursuant to the terms of the agreement, Mr. Mosser was paid an annual salary of $300,000 and receives health care insurance and other customary benefits. There was no fixed period outlined in the agreement, rather Mr. Mosser’s employment was at will, meaning that either party may terminate the employment at any time for any reason or no reason. In addition to Mr. Mosser’s base salary, Mr. Mosser was entitled to bonuses at the discretion of the Compensation Committee of our Board. Mr. Mosser resigned his positions with our company in December 2023. Thomas Metzler . On August 1, 2023, we entered an employment agreement with Mr. Metzler pursuant to which he serves as our Chief Financial Officer. Pursuant to the terms of the agreement, Mr. Metzler is paid an annual salary of $240,000 and receives health care insurance and other customary benefits. In addition to Mr. Metzler’s base salary, Mr. Metzler is entitled to bonuses at the discretion of the Compensation Committee of our Board, up to 30% of his base salary. Pursuant to his employment agreement, we granted to Mr. Metzler, effective August 1, 2023, an option to purchase 12,092 shares of the Common Stock with an exercise price of $12,41 per share. Such option vests over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36 per month until fully vested. Mr. Metzler’s employment agreement contains customary clawback language, which states that any incentive-based compensation granted to Mr. Metzler, including any annual incentive bonus and stock options, that is subject to recovery under any law, government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required pursuant to applicable rules and our company’s Compensation Clawback Policy. The agreement also contains customary provisions for confidentiality and matters related to intellectual property and company property. Mr. Metzler’s employment is at will, meaning that either he or our company may terminate the employment at any time for any reason or no reason. The employment agreement also allows for termination by us for “Cause” or by Mr. Metzler without “Good Reason,” as defined in the agreement. If we terminate Mr. Metzler’s employment for Cause, or if he terminates without Good Reason, Mr. Metzler will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement for business expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without any additional severance or termination payments. If we terminate Mr. Metzler without Cause, or if he terminates for Good Reason, Mr. Metzler will be entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his base salary, increasing to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously granted. Stephen Sherrif . On August 22, 2023, we entered an employment agreement with Mr. Sheriff pursuant to which he serves as of Chief Operating Officer. Pursuant to the terms of the agreement, Mr. Sheriff is paid an annual salary of $225,000 and receives health care insurance and other customary benefits. In addition to Mr. Sherrif’s base salary, Mr. Sheriff is entitled to bonuses at the discretion of the Compensation Committee of our Board, up to 30% of his base salary. Pursuant to his employment agreement, we granted to Mr. Sheriff, effective August 22, 2023, an option to purchase 7,524 shares of the Common Stock with an exercise price of $9.24 per share. Such option vests over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36 per month until fully vested. Mr. Sheriff’s employment agreement contains customary clawback language, which states that any incentive-based compensation granted to Mr. Metzler, including any annual incentive bonus and stock options, that is subject to recovery under any law, government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required pursuant to applicable rules and our company’s Compensation Clawback Policy. The agreement also contains customary provisions for confidentiality and matters related to intellectual property and company property. Mr. Sheriff’s employment is at will, meaning that either he or our company may terminate the employment at any time for any reason or no reason. The employment agreement also allows for termination by us for “Cause” or by Mr. Sheriff without “Good Reason,” as defined in the agreement. If we terminate Mr. Sheriff’s employment for Cause, or if he terminates without Good Reason, Mr. Sheriff will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement for business expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without any additional severance or termination payments. If we terminate Mr. Sheriff without Cause, or if he terminates for Good Reason, Mr. Sheriff will be entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his base salary, increasing to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously granted. Barry M. Hopkins . On February 8, 2024, we entered an employment agreement with Barry M. Hopkins under which he serves as our Executive Chairman. Pursuant to the terms of the agreement, Mr. Hopkins is paid an annual salary of $300,000 and receives health care insurance and other customary benefits. In addition to Mr. Hopkins’ base salary, Mr. Hopkins is entitled to bonuses at the discretion of the Compensation Committee of our Board, up to 40% of his base salary. Pursuant to his employment agreement, we granted to Mr. Hopkins, effective February 8, 2024, an option to purchase 63,881 shares of the Common Stock with an exercise price of $5.25 per share (which was the fair market value of the Common Stock when he was appointed as our Executive Chairman on November 9, 2023). Such option vests over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36 per month until fully vested. Mr. Hopkins’ employment agreement contains customary clawback language, which states that any incentive-based compensation granted to Mr. Hopkins, including any annual incentive bonus and stock options, that is subject to recovery under any law, government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required pursuant to applicable rules and our company’s Compensation Clawback Policy. The agreement also contains customary provisions for confidentiality and matters related to intellectual property and company property. Mr. Hopkins’ employment is at will, meaning that either he or our company may terminate the employment at any time for any reason or no reason. The employment agreement also allows for termination by us for “Cause” or by Mr. Hopkins without “Good Reason,” as defined in the agreement. If we terminate Mr. Hopkins’ employment for Cause, or if he terminates without Good Reason, Mr. Hopkins will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement for business expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without any additional severance or termination payments. If we terminate Mr. Hopkins without Cause, or if he terminates for Good Reason, Mr. Hopkins will be entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his base salary, increasing to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously granted. Nirajkumar Patel . We do not have formal written employment agreements with Mr. Patel. Director Compensation In fiscal year 2023, we compensated our independent directors as follows: Name of Director (1) Fees Earned or Paid in Cash Option Awards Total Paul Reuter (2) $ 100,000 $ 91,249 $ 191,249 Roger Brooks 87,500 91,249 178,749 George Chuang 87,500 91,249 178,749 Barry M. Hopkins (3) 37,500 108,749 146,249 David Worner 37,500 108,749 146,249 James P. Cassidy (4) 16,667 0 16,667 (1) Mr. Patel is a named executive officer and, accordingly, his compensation is included in the “Summary Compensation Table” above. Mr. Patel did not receive any compensation for their service as a director for the fiscal year ended October 31, 2023. (2) Mr. Reuter resigned from the Board on March 18, 2023. (3) Mr. Hopkins was appointed as our Executive Chairman and principal executive officer in November 2023. (4) Mr. Cassidy resigned from the Board on January 25, 2024. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information with respect to compensation plans under which our equity securities are authorized for issuance as of the end of fiscal year 2023: 53 Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise and grant price of outstanding options, warrants and rights Number of securities remaining available for future issuance Equity compensation plans approved by security holders 0 0 0 Equity compensation plans not approved by security holders 2,044 $ 377.58 6,713,749 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 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 4,761,905 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. 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 54 The following table sets forth, as of the date of this Report, 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 (1) Amount and Nature of Beneficial Ownership (Common Stock) (2) Percentage of Class (2) Nirajkumar Patel (3) 1,976,248 69.43 % Stephen Sheriff (4) 7,596 * Roger Brooks (5) 6,746 * George Chuang (6) 6,746 * Barry M. Hopkins (7) 0 * David Worner (8) 0 * Mark Thoenes (9) 9,604 * Thomas Metzler (10) 0 * Current Executive Officers and Directors as a Group (8 Persons) 2,006,940 70.51 % Kaival Holdings, LLC, 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 (12) 1,917,400 67.36 % * Less than 1.0% (1) The address for each person listed above is 4460 Old Dixie Highway, Grant-Valkaria, Florida 32949, unless otherwise indicated. (2) Applicable percentage of ownership is based on 2,846,335 shares of Common Stock outstanding as of the date of this Report. 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 as of the date of this Report 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. (3) Nirajkumar Patel serves as our Chief Science & Regulatory Officer, and director. Consists of 1,917,400 shares of our Common Stock held by Kaival Holdings, an entity over which Mr. Patel has shared dispositive and voting authority, and approximately 52,381 shares of our Common Stock issuable upon the exercise of vested options, and excludes approximately 11,905 shares of our Common Stock issuable upon the exercise of unvested options. 55 (4) Stephen Sheriff serves as our Chief Operating Officer. Consists of 6,405 shares of our Common Stock and approximately 1,191 shares of our Common Stock issuable upon the exercise of vested options, and excludes approximately 8,715 shares of our Common Stock issuable upon the exercise of unvested options. (5) Roger Brooks serves as a member of our board. Consists of approximately 6,746 shares of our Common Stock issuable upon the exercise of vested options and excludes approximately 5,953 shares of our Common Stock issuable upon the exercise of unvested options. (6) George Chuang serves as a member of our board. Consists of approximately 6,746 shares of our Common Stock issuable upon the exercise of vested options and excludes approximately 5,953 shares of our Common Stock issuable upon the exercise of unvested options. (7) Barry M. Hopkins serves as our Executive Chairman and Interim Chief Executive Officer and President. Excludes approximately 5,953 shares of our Common Stock issuable upon the exercise of unvested options. (8) David Worner serves as a member of our board. Excludes approximately 5,953 shares of our Common Stock issuable upon the exercise of unvested options. (9) Mark Thoenes serves as a member of our board. Consists of 80 shares of our Common Stock and approximately 9,524 shares of our Common Stock issuable upon the exercise of vested options. (10) Thomas Metzler serves as our Chief Financial Officer, Secretary and Treasurer. Excludes approximately 12,092 shares of our Common Stock issuable upon the exercise of unvested options. Nirajkumar Patel and Eric Mosser (our former Chief Executive Officer and President) are the sole voting members of Kaival Holdings, with Mr. Patel holding voting control. Item 13. Certain Relationships and Related Party Transactions Since the beginning of our fiscal year, we have entered into or participated in the following transactions with related persons: Revenue During the year ended October 31, 2023, the Company recognized revenue of $10,828 from three companies owned by Nirajkumar Patel, the Chief Science and Regulatory Officer and a director of the Company, and/or his wife. Purchases and Accounts Payable During the year ended October 31, 2023, 100% of the inventories of products, consisting solely of the BIDI® Stick, were purchased from Bidi, a related party controlled by Nirajkumar Patel, in the amount of $ 12,747,006. As of October 31, 2023, the Company product valued at $4,057,025 were held in inventory. In addition, as of October 31, 2023, the Company had an accounts payable balance to Bidi related to purchase of inventories of $1,521,491. The KBI License Agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development costs incurred for entry to specific international markets. During the year ended October 31, 2023, the Company paid license fees of approximately $150,000 to Bidi. As of October 31, 2023 and 2022, no additional license fees are owed to Bidi. As of October 31, 2023, the Company had accounts payable to Bidi of $712,524 for NRE and $240,802 for reimbursement of insurance expense . 56 Leased Office Space and Storage Space We capitalize all leased assets pursuant to ASU 2016-02, Leases (Topic 842) (“Topic 842”), which requires lessees to recognize right-of-use (“ROU”) assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than 12 months and classified as either financing or operating leases. We exclude short-term leases having initial terms of 12 months or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. On June 10, 2022, we entered into the 2022 Lease with Just Pick for approximately 21,332 rentable square feet combined in our principal office building and warehouse, together with all improvements thereon. Just Pick is considered a related party because our Chief Science and Regulatory Officer and director, Mr. Nirajkumar Patel, owns and controls Just Pick. Receivables Purchase Arrangements On November 29, 2023, we entered into two receivables purchase transactions pursuant to: (i) a Future Receivables Sale and Purchase Agreement, dated November 29, 2023, between Clearview Funding Solutions LLC (“Clearview”) and our company (the “Clearview Agreement”), and (ii) a Future Receivables Sale and Purchase Agreement, dated November 29, 2023, between Mr. Advance LLC (“Advance”) and our company (the “Advance Agreement”). Pursuant to the Clearview Agreement, we sold future receivables in the principal amount of $864,000 (the “Clearview Future Receivables”) to Clearview in a private transaction for a purchase price of $600,000 (giving effect to original issue discount of $264,000). In connection with the sale of the Clearview Future Receivables, we also paid an origination fee to Clearview for underwriting and application costs of $36,520, resulting in net proceeds to us of $563,480 (gross of advisory fees). Our obligations under the Clearview Agreement are personally guaranteed by Eric Mosser, our former Chief Executive Officer and President. Pursuant to the Advance Agreement, we sold future receivables in the principal amount of $864,000 (the “Advance Future Receivables”) to Advance in a private transaction for a purchase price of $600,000 (giving effect to original issue discount of $264,000). In connection with the sale of the Advance Future Receivables, we also paid an origination fee to Advance for underwriting and related expenses of $36,035, resulting in net proceeds to us of $563,965 (gross of advisory fees). Our obligations under the Advance Agreement are also personally guaranteed by Mr. Mosser. Policies and Procedures for Related Party Transactions 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. 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, 2023, and October 31, 2022. 2023 2022 Audit and review fees $ 286,725 $ 195,000 Audit-related fees — 10,000 Tax fees — — All other fees — — Total $ 286,725 $ 205,000 57 Pre-Approval Policies and Procedures All audit fees are approved by the Audit Committee of our Board. The Audit Committee reviews, and in its sole discretion, pre-approves, our independent auditors’ annual engagement letter, including proposed fess and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-related Fees,” “All Other Fees,” and “Tax Fees,” as applicable, were pre-approved by our Audit Committee. The Audit Committee may not engage independent auditors to perform the non-audit services prohibited by law or regulations. 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 No. Exhibit 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 are 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 Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective July 20, 2021, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2021, and is incorporated herein by reference thereto. 3.6 Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock, dated May 30, 2023, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto. 3.7 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective January 22, 2024, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2024, and is incorporated herein by reference thereto. 4.1 Description of Securities* 4.2 Form of senior indenture, filed as Exhibit 4.4 to our Registration Statement on Form S-3 filed with the Securities and Exchange Commission on July 30, 2021, and is incorporated herein by reference thereto. 58 4.3 Form of Warrant, filed as Exhibit 4.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto. 4.4 Warrant Agency Agreement, dated as of September 29, 2021, by and between Kaival Brands Innovations Group, Inc. and VStock Transfer, LLC, as warrant agent, filed as Exhibit 4.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto. 4.5 Common Stock Purchase Warrant issued to GoFire, Inc on May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto. 10.1 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. 10.2 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. 10.3 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. (1) 10.4 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. (1) 10.5 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. (1) 10.6 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. (1) 10.7 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. 10.8 Amended and Restated 2020 Stock and Incentive Compensation Plan, which was filed as an annex to our Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 4, 2022 and is incorporated herein by reference thereto . 10.9 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. 59 10.10 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. 10.11 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. 10.12 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. 10.13 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. 10.14 Consulting Agreement, by and between Kaival Brands Innovations Group, Inc. and Russell Quick, dated March 16, 2021, which was filed as Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021, and is incorporated herein by reference thereto. 10.15 Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021, which was filed as Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021 and is incorporated herein by reference thereto. 10.16 Independent Director Agreement, dated June 30, 2021, by and between the Company and George Chuang, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto. 10.17 Consulting Agreement, dated June 14, 2021, by and between the Company and Mark Thoenes, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto. 10.18 Amended and Restated Independent Director Agreement, dated March 29, 2021, by and between the Company and Roger Brooks, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto. 10.19 Amendment to Amended and Restated Independent Director Agreement, dated July 19, 2021, by and between the Company and Roger Brooks, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on July 23, 2021, and is incorporated herein by reference thereto. 10.20 Lease Agreement by and between the Company and Just Pick, LLC, dated June 10, 2022, which was filed as Exhibit 10.24 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto. 10.21 Deed of Licensing Agreement by and between Kaival Brands International, LLC and Philip Morris Products S.A., dated as of June 13, 2022, which was filed as Exhibit 10.26 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto. (1) + 10.22 Fourth Amendment to Service Agreement, dated November 9, 2022 between the Company and QuikfillRx, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto. + 60 10.23 Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto. 10.24 Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto. 10.25 Asset Purchase Agreement by and among Kaival Brands Innovations Group, Inc., Kaival Labs, Inc., and GoFire, Inc., dated May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto. 10.26 Employment Agreement by and between the Company and Thomas Metzler, dated August 1, 2023, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2023, and is incorporated herein by reference thereto. 10.27 Deed of Amendment to Deed of License Agreement, executed and entered into by the Company on August 12, 2023, by and among Philip Morris Products S.A., Kaival Brands International, LLC, Bidi Vapor, LLC and the Company. which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 19, 2023, and is incorporated herein by reference thereto.*+ 10.28 Employment Agreement by and between the Company and Stephen Sheriff, dated August 22, 2023, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 28, 2023, and is incorporated herein by reference thereto. 10.29 Employment Agreement by and between the Company and Barry Hopkins, dated February 8, 2024.* 19.1 Amended and Restated Insider Trading Policy* 21.1 List of Subsidiaries* 23.1 Consent of Independent Registered Public Accounting Firm* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934* 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code* 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code* 97.1 Compensation Clawback Policy* 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* 61 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Presentation Linkbase Document* 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* *Filed herewith. + + Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Regulation S-K, Item 601(b)(10).as the Company has determined they are both not material and are of the type that the Company treats as private or confidential. (1) Schedules and Exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any Schedule or Exhibit so furnished. Item 16. Form 10-K Summary. None. 62 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/ Barry M. Hopkins Barry M. Hopkins Executive Chairman, Interim Chief Executive, and President (Principal Executive Officer) Dated: February 13, 2024 Pursuant to the requirements of the Securities Exchange Act of 1934, 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/ Barry M. Hopkins Barry M. Hopkins Executive Chairman, Interim Chief Executive Officer, and President (Principal Executive Officer) Dated: February 13, 2024 By: /s/ Thomas Metzler Thomas Metzler Chief Financial Officer, Treasurer, and Secretary Dated: February 13, 2024 By: /s/ Nirajkumar Patel Nirajkumar Patel Chief Science and Regulatory Officer and Director Dated: February 13, 2024 By: /s/ Roger Brooks Roger Brooks Director Dated: February 13, 2024 By: /s/ George Chuang George Chuang Director Dated: February 13, 2024 By: /s/ Mark Thoenes Mark Thoenes Director Dated: February 13, 2024 By: /s/ David Worner David Worner Director Dated: February 13, 2024 63