What changed in this filing

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Item 1. Business

2025-02-10 compared with 2024-02-14 · 780 added, 669 removed, 123 unchanged (92% of the section changed)

8 unchanged sentences

for legal and accounting purposes on January 22, 2024 as if such split occurred as of the earliest period presented.

We are engaged in the sale, marketing

and distribution of electronic nicotine delivery system (“ENDS”) products, also known as “e-cigarettes”, in a

variety of favors.

Our primary product is the Bidi ® Stick as well as other products manufactured by our affiliate Bidi

Vapor LLC (“Bidi”).

We hold the exclusive worldwide right to market and distribute the Bidi ® Stick and certain

other products manufactured by Bidi.

Our current revenue generating activities are focused on driving sales growth of the BIDI ®

Stick, primarily through wholesale and traditional retail channels, including convenience stores.

Along with our affiliate Bidi, which

bears the bulk of the responsibility for U.S.

Food and Drug Administration (“FDA”) and other regulatory matters relating to

its products, we are committed to steadfast compliance with established FDA requirements regarding the use of our products.

At the same time, as the FDA regulatory

landscape and PMTA-related enforcement continues to evolve, we have faced challenges and industry-wide headwinds, which we are continuing

to navigate by pursuing new revenue opportunities by diversifying our platform through the distribution, development, and subsequent scaling

of other nicotine and non-nicotine products.

An important goal for our company is to leverage our existing presence with our sales channels

to establish an efficient platform from which to create shareholder value by developing and growing

current and potentially new business lines, revenues and, ultimately, positive cash flows and profitability.

We are engaged in the sale, marketing and distribution of electronic nicotine

delivery system (“ENDS”) products, also known as “e-cigarettes”, in a variety of favors.

Until October of 2024,

our primary source of revenue has been the Bidi Stick as we sold our inventory on hand.

However, on June 11, 2024, RAI Strategic Holdings,

Reynolds Vapor Company, R.J.

Reynolds Tobacco Company, and RAI Services Company (collectively, the “RJ Reynolds Entities”)

filed a patent infringement complaint with the International Trade Commission (the “ITC”) against Bidi, us, and forty (40)

other respondents (the “ITC Complaint”) pursuant to Section 337 of the Tariff Act of 1930, as amended.

Specifically, the ITC

Complaint alleges that one or more components or elements of the Bidi Stick infringe U.S.

11,925,202, which is owned by one

of the RJ Reynolds Entities.

The ITC Complaint requests the ITC grant:

(a) temporary and permanent limited exclusion orders pursuant to

Section 337(e) of the Tariff Act of 1930, as amended, which would prohibit the importation of the Bidi Stick in the United States;

(b) issue temporary and permanent cease and desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit

the sale and distribution of the Bidi Stick in the United States.

No damages are recoverable in the proceedings before the ITC.

Since the initiation of the ITC Complaint, we have not imported any Bidi Sticks and currently do not generate any revenue from the sale

of Bidi Sticks.

Our current primary source of revenue is through an international licensing agreement with Philip Morris Products S.A.

(“PMPSA”), a wholly owned affiliate of Philip Morris International Inc.

See “Philip Morris Deed

of Licensing Agreement” below.

We have also entered into a Merger

and Share Exchange Agreement (the “Merger Agreement”) with Delta Corp Holdings Limited, a company incorporated in England

and Wales (together with its successors and assigns, “Delta”), Delta Corp Holdings Limited, a Cayman Islands exempted company

(“Pubco”), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco (“Merger Sub”)

and Delta Corp Cayman Limited (the “Sellers”).

If the Merger Agreement is consummated, Pubco will become our parent and all

new officers and directors will be appointed by Pubco, except that pursuant to the Merger Agreement we have the right to appoint one director

to the Pubco board of directors and we have agreed to appoint any family member of Ankitaben Patel (the widow of our former CEO, Nirajkumar

Patel) and/or Nirajkumar Patel who is qualified and identified by Bidi for this role prior to the closing of the Merger Agreement.

we expect the transactions contemplated by the Merger Agreement to close (the “Closing”) in March or April of this year, no

assurances can be made that such transactions will close by then or ever.

The transactions contemplated by the Merger Agreement are described

in further detail below under “The Merger and Share Exchange Agreement.”

Merger and Share Exchange Agreement

On September 23, 2024, we entered into a definitive

Merger and Share Exchange Agreement (the “Merger Agreement”) with Delta Corp Holdings Limited, a company incorporated in England

and Wales (together with its successors and assigns, “Delta”), Delta Corp Holdings Limited, a Cayman Islands exempted company

(“Pubco”), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco (“Merger Sub”),

and Delta Corp Cayman Limited (the “Seller”).

Merger and Share Exchange

Pursuant to the Merger Agreement, the Parties will

effect a merger and share exchange involving the following transactions:

Pubco shall acquire all of the issued and outstanding shares of Delta from each holder of Delta shares in exchange for the issuance by Pubco of ordinary shares in the capital of Pubco (the “Share Exchange”);

immediately following to the completion of the Share Exchange, Merger Sub shall merge with and into us (the “Merger”), with us continuing as the surviving entity in the Merger.;

Upon consummation of the transactions contemplated by the Merger Agreement, including the Share Exchange and the Merger, each of us and Delta will become wholly owned subsidiaries of Pubco.

The Share Exchange, the Merger and the transactions related thereto are referred to herein as, the “Business Combination.”

In connection with the Merger:

All of our issued and outstanding shares of Series B Preferred Stock shall convert into shares of our common stock at a conversion rate of approximately 0.4 shares of our common stock for every share of our Series B Preferred Stock and be included as outstanding shares of our common stock immediately prior to the Merger;

Each of our outstanding stock options, if it has not been exercised prior to the Merger, shall be cancelled, retired and/or terminated and cease to represent a right to acquire, be exchanged for or convert into our common stock;

Each issued and outstanding share of our common stock immediately prior to the Merger shall automatically be converted into the right to receive one Pubco Ordinary Share (the “Merger Consideration”), following which all such shares of our common stock shall cease to be outstanding and shall automatically be canceled and shall cease to exist;

Each of our common warrants issued and outstanding immediately prior to the Merger shall be converted into one (1) Pubco ordinary warrant, and each of our pre-funded warrants issued and outstanding immediately prior to the Merger shall be converted into one (1) Pubco pre-funded warrant.

Each of the Pubco ordinary warrants shall have, and be subject to, substantially the same terms and conditions set forth in our common warrants, and each of the Pubco pre-funded warrants shall have, and be subject to, substantially the same terms and conditions set forth in our pre-funded warrants, except that they shall represent the right to acquire Pubco ordinary shares in lieu of shares of our common stock.

The Business Combination transactions value Pubco

as of the closing of the Business Combination as having an equity valuation of $301 million.

KAVL expects that the holders of our Common

Stock and the holders of Delta Shares will hold approximately 10% and 90% (inclusive of shares to be distributed to advisors), respectively,

of the Pubco Ordinary Shares immediately after the closing of the Business Combination (the “Closing”).

In addition, after the Closing, the holders of Delta

Shares (inclusive of shares to be distributed to financial advisors) will be entitled to receive an earnout of an additional $30,000,000

in Pubco Ordinary Shares (based on a share price equal to $31 million divided the number of our outstanding shares immediately prior to

the Closing) based on Pubco’s consolidated revenue, net income and EBITDA for the fiscal year ended December 31, 2025.

Representations and Warranties;

Pursuant to the Merger Agreement, the parties (other

than Merger Sub) made customary representations and warranties for transactions of this type.

All of the representations and warranties

of the parties will not survive Closing.

The covenants and agreements of the Parties Sellers that by their terms are to be performed at

or after the Closing shall, in each case, survive until fully performed.

In addition, the parties to the Merger Agreement agreed to be

bound by certain covenants that are customary for transactions of this type, including obligations of the parties during the period (the

“Interim Period”) between the date of the execution of the Merger Agreement and the Closing to use commercially reasonable

efforts to operate their respective businesses in the ordinary course, and to refrain from taking certain specified actions without the

prior written consent of the other party, in each case, subject to certain exceptions and qualifications.

The covenants and agreements

of the parties that are by their terms to be performed prior to the Closing will not survive the Closing.

The covenants and agreements

of the parties that by their terms are to be performed at or after the Closing shall, in each case, survive until fully performed.

Closing Conditions

Pursuant to the Merger Agreement, the obligations

of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain customary closing conditions

of the respective parties, including, without limitation:

(i) the representations and warranties of the Company, Delta, Pubco and Sellers

being true and correct subject to the materiality standards contained in the Merger Agreement;

(ii) material compliance by the Parties

of their respective pre-closing covenants and agreements, subject to the standards contained in the Merger Agreement;

(iii) the approval

by the Company’s stockholders of the Business Combination and certain other matters;

(iv) the absence of any Material Adverse Effect

(as defined in the Merger Agreement) with respect to Delta, Pubco or us since the effective date of the Merger Agreement that is continuing

(v) the consummation of the Share Exchange;

(vi) the expiration or termination, as applicable, of any waiting period (and

any extension thereof) applicable to the consummation of the Merger Agreement under any antitrust laws;

(vi) the receipt of certain specified

regulatory or third party consents;

(vii) no governmental authority of competent jurisdiction shall have enacted any law or order in effect

at the time of Closing which has the effect of making the Merger or other ancillary transactions illegal or otherwise prohibiting consummation

of the Merger or ancillary transactions (a “Legal Restraint”);

(viii) the Registration Statement (as defined below) being

declared effective by the U.S.

Securities and Exchange Commission (the “SEC”);

(ix) the memorandum and articles of incorporation

of Pubco have been amended and restated as mutually agreed upon by Pubco, Delta and us;

(x) the entry into certain ancillary agreements

as of the Closing, including a new registration rights agreement with Pubco in form and substance reasonably acceptable to us and Delta;

(xi) the approval of the listing of the Pubco Ordinary Shares on Nasdaq (or such other national securities exchange);

(xii) the Company

having no indebtedness, no outstanding convertible securities other than our warrants and sufficient cash and cash equivalents to pay

its unpaid transaction expenses, (xiii) the amendment of certain engagement agreements with a financial advisor being in full force and

and (xiv) the receipt of certain closing deliverables.

of Business During the Interim Period

During the period between the execution of the Merger

Agreement and the Closing (“Interim Period”), the conduct of the Company’s and Delta’s respective businesses will

be subject to the restrictions contained in the Merger Agreement, which include, without limitation, restrictions on:

(i) amending, waiving

or otherwise changing its organizational documents;

(ii) issuing, granting selling, pledging or disposing its equity securities or any

options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, or other securities,

including any securities convertible into or exchangeable for any of its equity securities or other security interests of any class and

any other equity-based awards;

(iii) taking corporate actions such as stock splits, combinations, recapitalizations, subdivisions or pay

any dividends or make any other distributions on its equity or redeem, purchase or otherwise acquire any of its securities;

(iv) incurring

or guaranteeing any indebtedness not made in the ordinary course of business in excess of specified thresholds;

(v) terminating, waiving

or assigning any material right under any material agreement to which the Company is a party or entering into any material contract (other

than certain exceptions set forth in the Merger Agreement);

(vi) establishing a new subsidiary or new line of business;

(vii) failing

to keep in force insurance policies or coverage;

(viii) waiving, releasing, assigning, settling or compromising litigation in excess of

specified thresholds;

(ix) mergers and acquisitions activity;

(x) adopting a plan of liquidation, dissolution, merger, consolidation,

restructuring, recapitalization or other reorganization;

(xi) entering into any agreement, understanding or arrangement with respect to

the voting or transfer of its equity;

(xii) hiring employees and adopting benefit plans;

entering into, amending waiving or terminating

(other than terminations in accordance with their terms) any transaction with any related party to the Company (other than compensation

and benefits and advancement of expenses, in each case, provided in the ordinary course of business;

and (xiii) authorizing or agreeing

to taking any of the foregoing actions.

The Parties covenants during the Interim Period also

contain a customary no shop, subject to a customary fiduciary out, requirements regarding the registration statement to be filed by Pubco

with the SEC with respect to the Business Combination, and the related stockholder meeting to be held by us to approve the Merger Agreement

and the Business Combination, and certain provisions regarding any financing that may be sought by the parties in connection with the

Transactions.

Indemnification

of Directors and Officers

The parties agreed in the Merger Agreement to customary

exculpation, indemnification and advancement of expenses existing in favor of our specified current or former directors and officers as

provided therein.

Post-Closing Board of Directors

and Officers of Pubco

The board of directors of Pubco upon the Closing shall be comprised of one

individual designated by us as described above and up to six (6) individuals that are designated by Delta prior to Closing.

executive officer and chief financial officer of Pubco upon Closing shall be the same individuals serving in those capacities at Delta

prior to Closing.

The Merger Agreement may be terminated time prior

to the Closing, including, among others, (i) by the mutual written consent of the Company and Delta, (ii) by written notice by the Company

or Delta to the other if any of the conditions to the Closing have not been satisfied or waived by February 15, 2025;

(iii) by written

notice by either the Company or Delta to the other if a Legal Restraint has become final and non-appealable;

(iv) by written notice by

Delta to the Company if there has been a breach by the Company of any of its representations, warranties, covenants or agreements contained

in the Merger Agreement, or if any representation or warranty of the Company becomes untrue or inaccurate, such that the related condition

to Closing will not be satisfied;

(v) by written notice by the Company to Delta if there has been a breach by Delta of any of its representations,

warranties, covenants or agreements contained in the Merger Agreement, or if any representation or warranty of Delta becomes untrue or

inaccurate such that the related condition to Closing will not be satisfied;

(vi) by written notice by us to Delta, if there shall have

been a Material Adverse Effect on the Delta or Pubco following the date of the Merger Agreement which is uncured and continuing;

by written notice by Delta to us, if there shall have been a Material Adverse Effect on us following the date of the Merger Agreement

which is uncured and continuing;

(viii) by written notice by either the Company or Delta to the other if a special stockholder meeting

is held for the purpose of approving the Merger Agreement and Transactions and such approval is not obtained at such meeting;

written notice by us to Delta or Delta to us, if we accept a takeover proposal or our board of directors changes its recommendation with

respect to the Merger Agreement and Transactions, in either case, pursuant to its fiduciary out rights as set forth in the Merger Agreement;

or (x) by written notice by Delta to us, if we have not delivered to Delta and Pubco duly executed copies of Voting Agreements by us and

the holders of our securities obligated thereunder representing at least a majority of the outstanding shares of Kaival common stock on

or prior to October 31, 2024.

If the Merger Agreement is terminated by us or Delta

as a result of a willful breach of a representation, warranty or covenant by the other party, then the breaching party will pay the non-breaching

party a termination fee in the amount of $750,000 plus disbursements of all documented, out-of-pocket expenses up to $250,000.

if we or Delta terminate the Merger Agreement, as a result of our accepting a superior offer to the transactions contemplated by Business

Combination from a third party, then a termination fee of $1.3 million plus reasonable expenses up to $1 million shall be payable by us

The foregoing description of the Merger Agreement

does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement filed as Exhibit

2.1 to this Current Report on Form 8-K and incorporated herein by reference.

The Merger Agreement provides investors with information

regarding its terms and is not intended to provide any other factual information about the parties.

Any terms not defined herein shall

have the same meaning attributed to them in the Merger Agreement.

Voting Agreements

Concurrently with the entry into the Merger Agreement,

the Company, Delta and Pubco entered into voting and support agreements (“Voting Agreements”) with certain of our executive

officers and directors (the “Voting Support Parties”).

Pursuant the Voting Agreements, the Voting Support Parties have agreed

to vote (in person or by proxy), or consent to any action by written consent or resolution with respect to, as applicable, their shares

of our Common Stock (i) in favor of, and adopt, Business Combination and the Merger Agreement, (ii) in opposition to:

(A) any takeover

proposal as described in the Merger Agreement and any and all other proposals (x) for the acquisition of us, (y) that could reasonably

be expected to delay or impair our ability to consummate the Business Combination, or (z) which are in competition with or materially

inconsistent with the Merger Agreement or any related agreements;

(B) other than as contemplated by the Merger Agreement, any material

change in (x) our capitalization or any amendment of our organizational documents or (y) our corporate structure or business;

other action or proposal involving any company affiliated with us that is intended, or would reasonably be expected, to prevent, impede,

interfere with, delay, postpone or adversely affect in any material respect the Business Combination or would reasonably be expected to

result in any of the conditions to the Closing under the Merger Agreement not being fulfilled.

Each Voting Support Party has also granted Delta (or

any designee of Delta) until the termination of the Voting Agreements, an irrevocable proxy and has appointed Delta (or any designee of

Delta) as their attorney-in-fact in respect of matters related to the Merger as specified in the Merger Agreement.

Each Voting Support Party has also agreed that until

the termination of the Voting Agreement, subject to certain exceptions, the Voting Support Party will not, nor will it cause its Affiliates

to without the prior written consent of Pubco and Delta, (i) offer for sale, sell (including short sales), transfer, tender, pledge, encumber,

assign or otherwise dispose of (including by gift), or enter into any contract, option, derivative, hedging or other agreement or arrangement

or understanding (including any profit-sharing arrangement) with respect to, or consent to, a transfer of, any or all of our securities,

(ii) grant any proxies or powers of attorney with respect to any or all of the securities;

(iii) permit to exist any lien of any nature

whatsoever (subject to certain exceptions) with respect to any or all of our securities;

or (iv) take any action that would have the effect

of preventing, impeding, interfering with or adversely affecting the Voting Support Party’s ability to perform its obligations under

the Voting Agreement.

The Voting Agreements will automatically terminate

upon the earlier of (i) the mutual written consent of each of Pubco, Delta, the Company, and the Voting Support Party, (ii) the effective

time of the Merger, and (iii) the date of termination of the Merger Agreement in accordance with its terms.

A majority of the holders of our common stock have

entered into Voting Agreements or agreements that are the same as the Voting Agreements.

Business Strategy

to our focus on driving revenue through distribution of the BIDI® Stick, we intend to build our revenue by executing key internal

strategic initiatives.

Accomplishing these financial goals will depend on a number of factors including our ability to execute these strategies.

Our current business strategy is

to consummate the Business Combination.

If and when this occurs, we will be a wholly owned subsidiary of Pubco and we do not know and

have not discussed what Delta’s business strategy for the Company will be in the future.

If the Business Combination is not consummated,

then we will focus our revenue through PMI and by executing key internal strategic initiatives.

Because of the ITC Complaint and FDA PMTA

Determinations, we do not foresee receiving any significant revenue from the sales of Bidi Sticks.

If the Business Combination is not

consummated, accomplishing these financial goals will depend on a number of factors including our ability to execute these strategies.

Representative key initiatives include:

the core business:

the growth and management of strategic alliances with market leaders within dense, established e-cigarette markets;

of internal national account sales team to drive new revenue opportunities and manage key strategic third-party vendor and broker

alliances to maximize targeted market penetration;

for high-caliber, experienced talent that create impact and add value to our organization quickly;

financial management and capital planning:

an efficient, scalable organizational infrastructure to support our expected growth and diversification;

overall business processes to deliver greater value to our customers;

product innovation and strategic expansion:

in our core organizational capabilities to provide diversified, revenue generative opportunities both through our existing distribution

network and beyond;

development of internal data processes to drive growth and diversification efforts;

third-party licensing opportunities through our vaporization and inhalation-related intellectual property portfolio which we acquired

from GoFire Inc.

2024 and beyond, we plan on exploring strategic acquisition and collaboration arrangements that generate revenue, positive cash flows

and profitable operations in order to expand the scale of our company by capitalizing on our traditional retail outlet other other

distribution relationships.

We will continue to align ourselves with progressive,

proven, performance-based partners, which may include the development and expansion of key financial services relationships as we seek

to diversify through data-driven decisions.

Maximizing the core

Continuing the growth and

management of strategic alliances with market leaders within dense, established e-cigarette markets;

Development of internal national account sales team to drive new revenue opportunities

and manage key strategic third-party vendors and broker alliances to maximize targeted market penetration;

Search for high-caliber, experienced talent that creates impact and add value

to our organization quickly;

Effective financial

management and capital planning:

Establishing an efficient,

scalable organizational infrastructure to support our expected growth and diversification;

Improving overall business

processes to deliver greater value to our customers;

Data-driven product

innovation and strategic expansion:

Investing in our core organizational

capabilities to provide diversified, revenue generative opportunities both through our existing distribution network and beyond;

Further development of

internal data processes to drive growth and diversification efforts;

Pursuing third-party licensing

opportunities through our vaporization and inhalation-related intellectual property portfolio which we acquired from GoFire Inc.

During 2025 and beyond, we plan on exploring strategic acquisition and collaboration

arrangements that generate revenue, positive cash flows and profitable operations in order to expand the scale of our company by capitalizing

on our traditional retail outlet and other distribution

relationships.

If the Business Combination

is not consummated, we will continue to align ourselves with progressive, proven, performance-based partners, which may include the development

and expansion of key financial services relationships as we seek to diversify through data-driven decisions.

Description of Business Segments & Key Agreements

Bidi Vapor, LLC Distribution Agreement

On March 9, 2020, we entered into

an exclusive distribution agreement (the “Distribution Agreement”) with our affiliate Bidi, which Distribution Agreement was

amended and restated on May 21, 2020, April 20, 2021, on June 10, 2022, and on November 17, 2022 (collectively, the “A&R Distribution

Pursuant to the A&R Distribution Agreement, Bidi granted us an exclusive worldwide right to distribute Bidi’s

ENDS (as more particularly set forth in the A&R Distribution Agreement) for sale and resale to both retail level customers and non-retail

level customers.

Currently, the products consist solely of the “ BIDI® Stick, ” Bidi’s disposable, tamper

resistant ENDS product made with medical-grade components, a UL-certified battery and technology designed to deliver a consistent vaping

experience for adult smokers 21 and over.

We presently distribute products to wholesalers and retailers of ENDS products, having ceased

all direct-to-consumer sales in February 2021.

Nirajkumar Patel, our Chief Science and Regulatory Officer and director and an indirect

controlling shareholder of our company, owns Bidi.

BIDI® Stick comes in a variety

of flavor options for adult cigarette smokers.

We do not manufacture any of the products we resell.

The BIDI® Stick is manufactured

Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos, and marketing materials

to use with our commercial partners in connection with our marketing and promotion of Bidi products.

The A&R Distribution Agreement

extends the previous one-year, annual renewable term to an initial term of ten years, which automatically renews for another ten-year

term if we satisfy certain minimum purchase thresholds.

The A&R Distribution Agreement also provides us with a right of first refusal

in the event Bidi receives an offer that would constitute a “change of control transaction,” as well as a right of first

refusal to act as the exclusive distributor of any and all future products of Bidi that arise out of or related to ENDS and components

related to ENDS, or arise out of or related to the tobacco-derived nicotine industry.

In connection with the A&R

Distribution Agreement, we entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and restated

by the parties in order to clarify certain provisions (all such sub-distribution agreements, as amended and restated, are collectively

referred to as the “Sub-Distribution Agreements”), whereby we appointed the counterparties as non-exclusive sub-distributors.

Pursuant to the Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale products in such quantities as they should

need to properly service non-retail customers within the continental United States (the “Territory”).

We process all sales made to non-retail

customers, with all sales to non-retail customers made through Bidi’s age-restricted website, www.wholesale.bidivapor.com.

all direct-to-consumer sales in February 2021 in order to better ensure youth access prevention and to comply with the Prevent All Cigarette

Trafficking Act (known as the PACT Act).

We provide all customer service and support at our own expense.

We set the minimum prices for

all sales made by us.

We maintain adequate inventory levels of products in order to meet the demands of our non-retail customers and

deliver products sold to these customers.

A key third party collaborator

of ours is QuikfillRx, a Florida limited liability company which does business as “Kaival Marketing Services” to reflect

its contributions to our company.

QuikfillRx provides us with certain services and support relating to sales management, website development

and design, graphics, content, social media, management and analytics, and market and other research.

QuikfillRx provides these services

to us pursuant to a Services Agreement, most recently amended on November 9, 2022, which has a current term ending on October 31, 2025

(subject to potential one-year extensions) and pursuant to which QuikfillRx receives monthly cash compensation and was granted certain

equity compensation in the form of options.

Kaival Labs, Inc.

& Kaival Brands International,

On August 31, 2020, we formed

Kaival Labs, Inc., a Delaware corporation (herein referred to as “Kaival Labs”), as a wholly owned subsidiary for the purpose

of developing our own branded and white-label products and services, of which none has commenced as of the date of this Report.

not yet launched any Kaival-branded products, nor has it begun to provide white label wholesale solutions for other product manufacturers.

We have, and may continue to,

utilize Kaival Labs to acquire or license complimentary businesses or assets.

On May 30, 2023, through Kaival Labs, we acquired certain

vaporization and inhalation-related intellectual property from GoFire, Inc.

(“GoFire”) in exchange for equity securities for

our company and contingent cash consideration.

The goal of this acquisition is to diversify our product offerings and create near and

longer-term revenue opportunities in the form of potential licenses for the acquired technology and our development of new products based

on the purchased assets.

In the near term, we expect to seek third-party licensing opportunities in the cannabis, hemp/CBD, nicotine and

nutraceutical markets.

Longer term, we believe we can utilize the purchased assets to create innovative and market-disruptive products,

including patent protected vaporizer devices and related hardware and software applications.

No assurances can be given, however, that

the GoFire assets will generate revenue for us in the future or otherwise create the value for our company that we anticipate.

On March 11, 2022, we formed Kaival

Brands International, LLC, a Delaware limited liability company (herein referred to as “KBI”), as a wholly owned subsidiary

for the purpose of entering into an international licensing agreement with Philip Morris Products S.A.

(“PMPSA”), a wholly

owned affiliate of Philip Morris International Inc.

On August 31, 2020,

we formed Kaival Labs, Inc., a Delaware corporation (herein referred to as “Kaival Labs”), as a wholly owned subsidiary for

the purpose of developing our own branded and white-label products and services, of which none has commenced as of the date of this Report.

We have not launched any Kaival-branded products, nor have

we begun to provide white label wholesale solutions for other product manufacturers.

May 30, 2023, through Kaival Labs, we acquired certain vaporization and inhalation-related intellectual property from GoFire, Inc.

in exchange for equity securities for our company and contingent cash consideration.

The goal of this acquisition is to diversify our

product offerings and create near and longer-term revenue opportunities in the form of potential licenses for the acquired technology

and our development of new products based on the purchased assets.

In the near term, we expect to seek third-party licensing opportunities

in the cannabis, hemp/CBD, nicotine and nutraceutical markets.

Longer term, we believe we can utilize the purchased assets to create

innovative and market-disruptive products, including patent protected vaporizer devices and related hardware and software applications.

No assurance can be given, however, that the GoFire assets will generate revenue for us in the future or otherwise create the value for

our company that we anticipate.

On March 11, 2022, we formed Kaival Brands International,

LLC, a Delaware limited liability company (herein referred to as “KBI”), as a wholly owned subsidiary for the purpose of entering

into an international licensing agreement with Philip Morris Products S.A.

(“PMPSA”), a wholly owned affiliate of Philip Morris

International Inc.

(“PMI”), as described further below.

FDA PMTA and MDO Determinations, Related Court

Actions and the Impact on Our Business

Non-Tobacco Flavored BIDI ®

In September 2021, in connection

with the Bidi’s Premarket Tobacco Product Application (“PMTA”) process for BIDI ® Stick, the U.S.

Food and Drug Administration (“FDA”) effectively “banned” non-tobacco flavored ENDS by denying nearly all then-pending

PMTAs for such products (including Bidi’s).

Following the issuance by the FDA of a related Marketing Denial Order (“MDO”)

regarding these ENDS products, manufacturers were required to stop selling non-tobacco flavored ENDS products.

Bidi, along with nearly

every other company in the ENDS industry, received a MDO for its non-tobacco flavored ENDS products.

With respect to Bidi, the MDO covered

all non-tobacco flavored BIDI® Sticks, including its Arctic (menthol) BIDI® Stick.

As a result, beginning in September 2021,

Bidi pursued multiple avenues to challenge the MDO.

First, on September 21, 2021, separate from the judicial appeal of the MDO in its

entirety, Bidi filed a 21 C.F.R.

§10.75 internal FDA supervisory review request specifically of the decision to include the Arctic

(menthol) BIDI® Stick in the MDO.

In May 2022, the FDA issued a determination that it views the Arctic BIDI® Stick as a non-tobacco

flavored ENDS product, and not strictly a menthol flavored product.

29, 2021, Bidi petitioned the U.S.

Court of Appeals for the Eleventh Circuit (or the 11 th Circuit) to review the FDA’s

denial of the PMTAs for its non-tobacco flavored BIDI® Stick ENDS (including the Arctic BIDI® Stick), arguing that it was arbitrary

and capricious under the Administrative Procedure Act (or the APA), as well as ultra vires, for the FDA not to conduct any scientific

review of Bidi’s comprehensive applications, as required by the Tobacco Control Act (or the TCA), to determine whether the BIDI®

Sticks are “appropriate for the protection of the public health”.

Bidi further argued that the FDA violated due process and

the APA by failing to provide fair notice of the FDA’s new requirement for ENDS companies to conduct long-term comparative smoking

cessation studies for their non-tobacco flavored products compared to tobacco-flavored ENDS products, and that the FDA should have gone

through the notice and comment rulemaking process for this requirement.

23, 2022, the 11 th Circuit set aside (i.e., vacated) the MDO issued to the non-tobacco flavored BIDI® Sticks and remanded

Bidi’s PMTA back to the FDA for further review.

Specifically, the 11 th Circuit held that the MDO was “arbitrary

and capricious” in violation of the APA because the FDA failed to consider the relevant evidence before it, specifically Bidi’s

aggressive and comprehensive marketing and sales-access-restrictions plans designed to prevent youth appeal and access.

The 11 th Circuit’s

opinion further indicated that the FDA did not properly review the data and evidence that it has long made clear are critical to the

“appropriate for the protection of the public health” standard for PMTAs set forth in the Tobacco Control Act including,

in Bidi’s case, “product information, scientific safety testing, literature reviews, consumer insight surveys, and details

about our company’s youth access prevention measures, distribution channels, and adult-focused marketing practices,” which

“target only existing adult vapor product users, including current adult smokers,” as well as our retailer monitoring program

and state-of-the-art anti-counterfeit authentication system.

Because a MDO must be based on a consideration of the relevant factors,

such as the marketing and sales-access-restrictions plans, the denial order was deemed arbitrary and capricious, and vacated by the FDA.

FDA did not appeal to the 11th Circuit’s decision.

The FDA had until October 7, 2022 (45 days from the August 23, 2022 decision)

to either request a panel rehearing or a rehearing “en banc” (a review by the entire 11 th Circuit, not just the

3-judge panel that issued the decision), and until November 21, 2022 (90 days after the decision) to seek review of the decision by the

Supreme Court.

No request for a rehearing was filed, and no petition for a writ of certiorari was made to the Supreme Court.

light of the 11 th Circuit decision, we have had the continued ability to market and sell the non-tobacco flavored BIDI®

Sticks, subject to the FDA’s enforcement discretion, for the duration of the PMTA scientific review.

The FDA has indicated that

it is prioritizing enforcement of unauthorized ENDS against companies (1) that never submitted PMTAs, (2) whose PMTAs have been refused

acceptance or filing by the FDA, (3) whose PMTAs remain subject to MDOs, and (4) that are continuing to market unauthorized synthetic

nicotine products after the July 13, 2022 cutoff.

As none of these scenarios apply to Bidi, we believe the current risk of FDA enforcement

the PMTA was remanded, Bidi has continued to update its application with the results of new studies, including a nationwide population

prevalence study on the BIDI® Stick that is currently undergoing peer review for publication.

on or about May 13, 2022, the FDA placed the tobacco-flavored Classic BIDI® Stick into the final Phase III scientific review, and

in September 2022 completed a remote regulatory assessment of Bidi and its contract manufacturer in China, SMISS Technology Co.

in relation to the pending PMTA for the Classic BIDI® Stick.

March 20, 2023 Bidi received its anticipated deficiency letter for the Classic BIDI® Stick PMTA, outlining FDA’s remaining

scientific questions.

On June 18, 2023, Bidi, provided a timely, comprehensive response to the FDA’s deficiency letter.

January 22, 2024, FDA issued a MDO for the Classic BIDI® Stick.

While this development precludes us from marketing the Classic BIDI®

Stick, which could have a material adverse affect on our company, the FDA’s decision does not involve the ten PMTAs for Bidi Vapor ’ s

non-tobacco flavored devices described above which are still under the FDA ’ s scientific

Those ten products remain available for sale, subject to FDA ’ s enforcement discretion.

In response to the Classic BIDI®

Stick MDO, on January 26, 2024, Bidi filed a petition requesting that the 11 th Circuit review the MDO, which Bidi believes

was, among other things, arbitrary and capricious, in violation of the Administrative Procedure Act.

Bidi is also seeking a stay of the

MDO pending the outcome of the litigation.

No assurances can be given on the outcome.

Potential Product Offerings & Opportunities

May 2023 we acquired 19 existing and 47 pending patents with novel technologies related to vaporization and inhalation technologies from

The GoFire patent portfolio includes novel technologies across extrusion dose control, product preservation, tracking and tracing

usage, multiple modalities (i.e., different methods of vaporizing) and child safety.

The patents and patent applications cover territories

including the United States, Australia, Canada, China, the EPO (European Patent Organization), Israel, Japan, Mexico, New Zealand and

The portfolio also includes a proprietary mobile device software application that is used in conjunction with certain patents

in the portfolio.

the near term, we expect to seek third-party licensing opportunities in the cannabis, hemp/CBD, nicotine, nutraceutical and pharmaceutical

markets, as a means of monetizing our patents.

Longer term, we believe we can utilize the acquired patents to create innovative and market-disruptive

products for its growing base of adult consumers, including patent protected vaporizer devices and related hardware and software applications.

described above, we hope to generate revenue from this acquired intellectual property via licensing and product development activities.

However, there can be no assurance that we will be able to implement this strategy.

we market and place our ENDS products into national distribution channels through long-standing industry relationships in accordance

with the A&R Distribution Agreement and with the assistance of QuikfillRx.

We process all sales made to non-retail customers.

long-term marketing strategy remains based on FDA compliance and our commitment to preventing underage access to our ENDS products.

such, we steer away from social media marketing and, instead, are more focused on ground-level marketing and advertising within authorized

retailer locations (i.e., advertisement on retail partners’ back-bar tobacco products area).

Part of this ground-level marketing

effort focuses on supporting our authorized partner stores and distributors in spreading brand awareness of our ENDS products to their

adult (21 years of age and older) consumer base by providing in-store marketing materials.

stores also have access to online informative videos about the Bidi story, which can be used to educate and assist in training all of

their staff members about the core values of Bidi.

From a recycling initiative to the commitment to preventing underage ENDS use, and

stand against the illicit market of ENDS products, we believe that together with Bidi, we are taking the necessary steps to ensure that

our partners are aligned with our community goals.

also attend trade shows at established expos throughout the United States and we have a dedicated sales and marketing team that focuses

on these efforts and more.

We conduct our sales and marketing

activities in close coordination with our consultant QuikfillRx.

Pursuant to our Service Agreement with QuikfillRx (most recently amended

as of November 9, 2022), QuikfillRx provides services and support relating to our sales management function (including, without limitation,

services and support relating to business planning and strategy development, staffing and recruitment, training and onboarding, direct

sales and marketing, and monitoring and results evaluation), website development and design, graphics, content, public communication,

social media, management and analytics, and market and other research.

Philip Morris Deed of Licensing Agreement

On June 13, 2022, KBI entered

into the PMI License Agreement with PMPSA, effective as of May 13, 2022 (the “PMI Commencement Date”).

Pursuant to the PMI

License Agreement, KBI granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property

to make, distribute, and sell disposable nicotine e-cigarette products based on the intellectual property in certain international markets

set forth in the PMI License Agreement (or the PMI Markets).

We have the exclusive international distribution rights to products and,

in order to allow KBI to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution

rights for the PMI Markets to KBI as set forth in a Capital Contribution Agreement, dated June 10, 2022.

The sublicense granted to PMPSA

is exclusive in the PMI Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products

in the PMI Markets for the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement).

PMSPA will be responsible for any regulatory filings necessary to sell products in the PMI Markets.

Both KBI and PMPSA agree to work

together in the registration and maintenance of the Intellectual Property, but KBI will bear all costs and expenses to implement the

registration strategy.

Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted

certain rights with respect to potential future products.

The initial term of the PMI License

Agreement is five (5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon

minimum key performance indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically

terminate at the end of the initial license term.

In consideration for the grant

of the licensed rights, PMPSA agreed to pay to KBI a royalty payment for the sale of each unit of product manufactured and sold.

before the launch of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed minimum

royalty, equal to a percentage of the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month

period following the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty

payment for all markets for each applicable twelve (12)-month period.

PMPSA may require modification of certain products to be sold under

the PMI Licensing Agreement to be modified for a PMI Market.

Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over

sales, marketing, product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific

PMI Markets in which to launch commercialization and determine what product types are to be promoted in each market, subject to sales

and marketing plans and annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI.

The PMI License Agreement contains

customary representations, warranties, covenants, and indemnification provisions;

however, KBI’s liability under the PMI License

Agreement is capped at the greater of:

On June 13, 2022, KBI entered into the PMI License

Agreement with PMPSA, effective as of May 13, 2022 (the “PMI Commencement Date”).

Pursuant to the PMI License Agreement, KBI

granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property to make, distribute, and

sell disposable nicotine e-cigarette products based on the intellectual property in certain international markets set forth in the PMI

License Agreement (or the PMI Markets).

We have the exclusive international distribution rights to products and, in order to allow KBI

to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution rights for the PMI Markets

to KBI as set forth in a Capital Contribution Agreement, dated June 10, 2022.

The sublicense granted to PMPSA is exclusive in the PMI

Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products in the PMI Markets for

the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement).

PMSPA will be

responsible for any regulatory filings necessary to sell products in the PMI Markets.

Both KBI and PMPSA agree to work together in the

registration and maintenance of the Intellectual Property, but KBI will bear all costs and expenses to implement the registration strategy.

Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted certain rights with

respect to potential future products.

The initial term of the PMI License Agreement is five

(5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon minimum key performance

indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically terminate at the end of

the initial license term.

In consideration for the grant of the licensed rights,

PMPSA agreed to pay to KBI a royalty payment for the sale of each unit of product manufactured and sold.

In addition, before the launch

of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed minimum royalty, equal

to a percentage of the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following

the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty payment for all

markets for each applicable twelve (12)-month period.

PMPSA may require modification of certain products to be sold under the PMI Licensing

Agreement to be modified for a PMI Market.

Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over sales, marketing,

product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific PMI Markets in which

to launch commercialization and determine what product types are to be promoted in each market, subject to sales and marketing plans and

annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI.

The PMI License Agreement contains customary representations,

warranties, covenants, and indemnification provisions;

however, KBI’s liability under the PMI License Agreement is capped at the

(i) Ten Million Dollars ($10,000,000);

or (ii) an amount equal to the total of the royalties due

to KBI (but not yet paid) plus the royalties (including the guaranteed royalty payment) paid to KBI pursuant to the PMI License Agreement

during the immediately preceding twelve (12) consecutive months, provided that such amount shall not exceed Thirty Million Dollars ($30,000,000).

These royalties may be initially offset on a limited basis by jointly agreed upon costs such as development costs incurred for entry

to specific international markets.

On August 12, 2023, we executed

and entered into a Deed of Amendment No.

or (ii) an amount equal to the total of the royalties due to KBI (but not yet paid)

plus the royalties (including the guaranteed royalty payment) paid to KBI pursuant to the PMI License Agreement during the immediately

preceding twelve (12) consecutive months, provided that such amount shall not exceed Thirty Million Dollars ($30,000,000).

These royalties

may be initially offset on a limited basis by jointly agreed upon costs such as development costs incurred for entry to specific international

On August 12, 2023, we executed and entered into a

Deed of Amendment No.

1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI.

Pursuant to the PMI License

Amendment (which has an effective date of June 30, 2023), the following material changes have been made to the PMI License Agreement:

Pursuant to the PMI License Amendment (which

has an effective date of June 30, 2023), the following material changes have been made to the PMI License Agreement:

(i) Royalty Rate .

11 unchanged sentences

The guaranteed royalty payment owed to KBI under the PMI License Agreement has been eliminated.

Instead, royalties will be paid on a

quarterly basis going forward based on actual sales.

Instead, royalties will be paid on a quarterly

basis going forward based on actual sales.

Any unpaid guaranteed royalty has been cancelled.

5 unchanged sentences

of the PMI Markets that PMI may enter has been expanded to cover certain additional territories.

Reconciliation Payment to KBI .

As a result of the changes to the PMI License Agreement described in paragraphs (i) thought (iii)

above, the value of such changes was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through

June 30, 2023.

On September 8, 2023, the Company received the

Net Reconciliation Payment from PMPSA of $134,981 pursuant to this provision.

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.

In March 2023, PMPSA announced the launch of a product (now

called VEEV NOW) under the PMI License Agreement.

In connection with the PMI License

Agreement, we, Bidi, and PMPSA also entered into a deed of letter to require specific performance of the duties and obligations set forth

in the PMI License Agreement if KBI is unable or fails to sublicense the intellectual property to PMPSA pursuant to the PMI License Agreement

and/or is unable or fails to perform certain of its obligations or grant the rights pursuant to the PMI License Agreement.

we, Bidi, and PMPSA entered into a guarantee, whereby we and Bidi guarantee to PMPSA up to 50% of all of KBI’s monetary obligations

set forth in the PMI License Agreement if KBI fails to perform or discharge certain of its obligations in the PMI License Agreement.

In November 2023, KBI, Bidi and

PMPSA agreed to initiate a pilot project, pursuant to which PMPSA would manufacture up to an agreed upon number of Bidi Sticks with PMI’s

own e-liquid for commercialization in Canada.

Based on the results of the pilot, we and PMPSA may consider appropriate changes or amendments

to the PMI License Agreement to accommodate the manufacturing and sales of Bidi Sticks containing PMI e-liquids in Canada.

As of the date

of this Report, we do not believe this pilot program is, overall, material to our business or results of operations.

(vi) Net Reconciliation Payment

As a result of the changes to the PMI License Agreement described in paragraphs (i) thought (iii) above, the value of such

changes was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023.

8, 2023, the Company received the Net Reconciliation Payment from PMPSA of $134,981 pursuant to this provision.

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.

In March 2023, PMPSA announced the launch of

a product (now called VEEV NOW) under the PMI License Agreement.

In connection with the PMI License Agreement, we,

Bidi, and PMPSA also entered into a deed of letter to require specific performance of the duties and obligations set forth in the PMI

License Agreement if KBI is unable or fails to sublicense the intellectual property to PMPSA pursuant to the PMI License Agreement and/or

is unable or fails to perform certain of its obligations or grant the rights pursuant to the PMI License Agreement.

In addition, we, Bidi,

and PMPSA entered into a guarantee, whereby we and Bidi guarantee to PMPSA up to 50% of all of KBI’s monetary obligations set forth

in the PMI License Agreement if KBI fails to perform or discharge certain of its obligations in the PMI License Agreement.

In November 2023, KBI,

Bidi and PMPSA agreed to initiate a pilot project, pursuant to which PMPSA would manufacture up to an agreed upon number of Bidi Sticks

with PMI’s own e-liquid for commercialization in Canada.

Based on the results of the pilot, we and PMPSA may consider appropriate

changes or amendments to the PMI License Agreement to accommodate the manufacturing and sales of Bidi Sticks containing PMI e-liquids

As of the date of this Report, we do not believe this pilot program is, overall, material to our business or results of operations

and have yet to determine the longer-term plan.

On December 16, 2024, KBI and Bidi received a letter

from PMPSA that notified us of their intention to discontinue the licensing agreement of their 2ml products due to the lack of profitability

and the analysis that it would likely not turn profitable.

They confirmed that this decision would not affect the commercialization activities

under the licensing agreement of the 5ml and 18ml vaping products.

KBI License Agreements

On June 10, 2022, Bidi entered

into a License Agreement (the “License Agreement:) with KBI, pursuant to which KBI has the exclusive irrevocable license to use

Bidi’s licensed intellectual property to the extent necessary for KBI to fulfill its obligations set forth in the PMI License Agreement.

On June 10, 2022, Bidi entered into a License Agreement

(the “License Agreement:) with KBI, pursuant to which KBI has the exclusive irrevocable license to use Bidi’s licensed intellectual

property to the extent necessary for KBI to fulfill its obligations set forth in the PMI License Agreement.

Such irrevocable license includes:

(i) the right of KBI to grant sub-licenses to PMPSA under the PMI License Agreement for the express

purposes set forth in the PMI License Agreement, but for no other purpose;

(ii) the right of KBI to grant to PMPSA the right to grant

sub-sub-licenses in the manner set forth in the PMI License Agreement, but for no other purpose;

and (iii) certain branding rights to

the extent (but only to the extent) necessary to permit KBI to perform its obligations to PMPSA as set forth in the PMI License Agreement.

Pursuant to the License Agreement,

if at any time, KBI receives any license of PMPSA intellectual property from PMPSA or any of its affiliates in the manner contemplated

by the PMI License Agreement, KBI will grant Bidi an irrevocable sub-license of all right, title, and interest of KBI in and to that

PMPSA intellectual property.

In addition, Bidi and KBI agree that any amount payable and all net royalties payable to KBI under the PMI

License Agreement will be apportioned equally between Bidi and KBI in a manner such that each will ultimately receive fifty percent (50%)

The License Agreement contains

customary representations, warranties, covenants, and indemnification provisions.

Currently, our potential distribution

network reach is approximately 48,000 stores in the United States.

Our products can be found in many national and regional convenience-store

chains, such as QuikTrip and GPM Investments, as well as at convenience stores (known in the industry as “c-stores”) serviced

through distributors such as S.

Abraham and Sons and H.T.

Finally, our products are also accessible to adults 21 years of

age and older through the age-gated digital delivery service mobile application, GoPuff, in more than 50 cities across the United States.

(i) the right of KBI to grant sub-licenses to PMPSA under the PMI License Agreement for the express purposes set forth in the PMI License

Agreement, but for no other purpose;

(ii) the right of KBI to grant to PMPSA the right to grant sub-sub-licenses in the manner set forth

in the PMI License Agreement, but for no other purpose;

and (iii) certain branding rights to the extent (but only to the extent) necessary

to permit KBI to perform its obligations to PMPSA as set forth in the PMI License Agreement.

Pursuant to the License Agreement, if at any time,

KBI receives any license of PMPSA intellectual property from PMPSA or any of its affiliates in the manner contemplated by the PMI License

Agreement, KBI will grant Bidi an irrevocable sub-license of all right, title, and interest of KBI in and to that PMPSA intellectual property.

In addition, Bidi and KBI agree that any amount payable and all net royalties payable to KBI under the PMI License Agreement will be apportioned

equally between Bidi and KBI in a manner such that each will ultimately receive fifty percent (50%) thereof.

The License Agreement contains customary representations,

warranties, covenants, and indemnification provisions.

Bidi Vapor, LLC Distribution Agreement

March 9, 2020, we entered into an exclusive distribution agreement (the “Distribution Agreement”)

with our affiliate Bidi, which Distribution Agreement was amended and restated on May 21, 2020, April 20, 2021, on June 10, 2022, and

on November 17, 2022 (collectively, the “A&R

Distribution Agreement”).

Pursuant to the A&R Distribution Agreement, Bidi granted us an exclusive worldwide right to distribute

Bidi’s ENDS (as more particularly set forth in the A&R Distribution Agreement) for sale and resale to both retail level customers

and non-retail level customers.

Currently, the products consist solely of the “ BIDI® Stick, ” Bidi’s disposable,

tamper resistant ENDS product made with medical-grade components, a UL-certified battery and technology designed to deliver a consistent

vaping experience for adult smokers 21 and over.

We had distributed products to wholesalers and retailers of ENDS products, having ceased

all direct-to-consumer sales in February 2021.

BIDI® Stick comes in a variety of flavor options

for adult cigarette smokers.

We do not manufacture any of the products we resell.

The BIDI® Stick is manufactured by Bidi through

its contract manufacturer in China.

Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos,

and marketing materials to use with our commercial partners in connection with our marketing and promotion of Bidi products.

The A&R Distribution Agreement extends the previous

one-year, annual renewable term to an initial term of ten years, which automatically renews for another ten-year term if we satisfy certain

minimum purchase thresholds.

The A&R Distribution Agreement also provides us with a right of first refusal in the event Bidi receives

an offer that would constitute a “change of control transaction,” as well as a right of first refusal to act as the exclusive

distributor of any and all future products of Bidi that arise out of or related to ENDS and components related to ENDS, or arise out of

or related to the tobacco-derived nicotine industry.

In connection with the

A&R Distribution Agreement, we entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and

restated by the parties in order to clarify certain provisions (all such sub-distribution agreements, as amended and restated, are collectively

referred to as the “Sub-Distribution Agreements”), whereby we appointed the counterparties as non-exclusive sub-distributors.

Pursuant to the Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale products in such quantities as they should

need to properly service non-retail customers within the continental United States (the “Territory”).

These agreements were

terminated in the current year.

On October 25, 2024, we entered into a letter agreement

with Bidi, pursuant to which we (i) agreed with Bidi that “Products” as defined in the A&R Distribution Agreement means

and includes (and has always meant and included) only the following items, to the exclusion of all other items and products (including,

without limitation, the Excluded Products):

(a) the “Bidi Stick”, which is an electronic nicotine delivery system, or “e-cigarette”,

at 6% nicotine (including all available flavors) in the versions previously sold by Manufacturer to Distributor;

and (b) acrylic displays

preloaded with one hundred (100) such “Bidi Sticks;” (ii) waived and fully relinquished:

(a) our Right of First Offer, Right

of First Refusal, and all other rights (if any) with respect to all Future Products (whether previously introduced, or introduced hereafter,

by Manufacturer) pursuant to the Distribution Agreement;

and (b) all of its rights with respect to a Bona Fide Offer pursuant to Section

4.F of the A&R Distribution Agreement;

(iii) released Bidi from all claims arising out of events that occurred prior to the Effective

Date of the A&R Distribution Agreement and (iv) acknowledged the existence of that certain matter styled In the Matter of Certain

Disposable Vaporizer Devices and Components Thereof, Inv.

337-TA-1410 before the United States International Trade Commission, and

agreed that neither said matter not any outcome thereof or resolution resulting therefrom that affects Bidi shall constitute a breach

or other default by Bidi under the A&R Distribution Agreement

A key third party collaborator of ours was QuikfillRx, a Florida limited

liability company which did business as “Kaival Marketing Services” to reflect its contributions to our company.

provided us with certain services and support relating to sales management, website development and design, graphics, content, social

media, management and analytics, and market and other research.

QuikfillRx provided these services to us pursuant to a Services Agreement,

most recently amended on November 9, 2022, which had a term ending on October 31, 2025 (subject to potential one-year extensions) and

pursuant to which QuikfillRx received monthly cash compensation and was granted certain equity compensation in the form of options.

Agreement was terminated in February 2024.

Other Potential Product Offerings & Opportunities

In May 2023 we acquired 19 existing and 47 pending

patents with novel technologies related to vaporization and inhalation technologies from GoFire.

The GoFire patent portfolio includes

novel technologies across extrusion dose control, product preservation, tracking and tracing usage, multiple modalities (i.e., different

methods of vaporizing) and child safety.

The patents and patent applications cover territories including the United States, Australia,

Canada, China, the EPO (European Patent Organization), Israel, Japan, Mexico, New Zealand and South Korea.

The portfolio also includes

a proprietary mobile device software application that is used in conjunction with certain patents in the portfolio.

We expect to continue seeking third-party licensing opportunities in the cannabis,

hemp/CBD, nicotine, nutraceutical and pharmaceutical markets, as a means of monetizing our patents.

Longer term, we believe we can utilize

the acquired patents to create innovative and market-disruptive products for its growing base of adult consumers, including patent protected

vaporizer devices and related hardware and software applications.

As described above, we hope to generate revenue from

this acquired intellectual property via licensing and product development activities.

However, there can be no assurance that we will

be able to implement this strategy.

Concentrations

1 unchanged sentence

Related Party:

For 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 company

that is owned by Nirajkumar Patel, our Chief Science and Regulatory Officer and director, in the amount of approximately $12.8 million,

as compared to $1.5 million for the year ended October 31, 2022.

On October 31, 2023, a credit

of $2,954,470 was applied from the related-party receivable balance to the related party accounts payable balance.

After this was applied,

we had no related party receivable balance.

For the year ended

October 31, 2024, 100% of the inventories of Products, consisting solely of the BIDI® Stick, were purchased from Bidi, a related

party company that is owned by KMDD Trust, in the amount of approximately $0.3 million, as compared to $12.8 million for

the year ended October 31, 2023.

On October 31, 2024, we had a related party receivable

balance of zero.

As of October 31, 2024, the related party accounts payable balance was $131,683.

year 2023, such inventories accounted for 100% of the total related party accounts payable.

There was no related party accounts payable

balance as of October 31, 2022.

On October 31, 2023, a credit of $2,954,470 was applied

from the related-party receivable balance to the related party accounts payable balance.

After this was applied, we had no related party

receivable balance.

As of October 31, 2023, the related party accounts payable balance was $1,521,491.

In fiscal year 2023, such inventories

accounted for 100% of the total related party accounts payable.

Concentration of Revenues and Accounts Receivable:

For the year ended October 31,

2023, a substantial portion of our revenues from the sale of Products, solely consisting of the BIDI® Stick, were derived from the

following customers:

(i) GPM Investments generated approximately 15%, (ii) H.T.

Hackney Co generated approximately 14%, (iii) FAVS Business,

LLC generated approximately 14%, (iv) C Store Master generated approximately 13%, and (v) QuikTrip Corporation generated approximately

For the year ended October 31, 2024, a substantial portion of our revenues

from the sale of Products, solely consisting of the BIDI® Stick, were derived from the following customers:

(i) Favs Business, LLC

(“Favs Business”) generated approximately 31%, (ii) H.T.

generated approximately 15%, and (iii) GPM generated

approximately 12%.

In addition, FAVS Business LLC, C Store Master, and QuikTrip Corporation accounted for approximately 35%, 35%, and

19% of the total accounts receivable from customers, respectively, as of October 31, 2023.

Favs Business and QuikTrip Corporation accounted

for approximately 65% and 15% of the total accounts receivable from customers, respectively, as of October 31, 2022.

(i) QuikTrip Corporation

generated approximately 21%, (ii) GPM Investments generated approximately 12%, and (iii) FAVS Business, LLC generated approximately 11% .

For the year ended October 31, 2023, a substantial portion of our revenues

from the sale of Products, solely consisting of the BIDI® Stick, were derived from the following customers:

(i) GPM Investments generated

approximately 16%, (ii) H.T.

Hackney Co generated approximately 15%, (iii) FAVS Business, LLC generated approximately 15%, (iv) C Store

Master generated approximately 14%, and (v) QuikTrip Corporation generated approximately 12%.

Environment and Government Regulation Related

to our Operations

Because we are only a wholesale

distributor of products, namely the BIDI® Stick, we are only subject to Federal, state, and international laws pertaining to a distributor,

not a manufacturer, of ENDS products.

Our business is dependent entirely

on the resale of products provided by Bidi;

thus, there is a significant risk that our business could be materially adversely affected

if Bidi, as the manufacturer, does not properly abide by any Federal, state, or international laws that regulate ENDS products.

in production or availability of products from Bidi would hamper our ability to operate as we would be limited in our ability to supply

our customers if our inventory ran low or ceased to exist entirely.

As a manufacturer of ENDS products,

Bidi is responsible for abiding by and following various rules and regulations pertaining to the manufacturing of the ENDS products we

sell and any lapse in abiding by any pertinent rules and regulations may negatively impact our ability to operate.

As a distributor,

we are also subject to various rules and regulations.

Some of the below may not directly apply to us at this time due to the nature of

our present operations.

Because we are only a wholesale distributor of products,

namely the BIDI® Stick, we are only subject to Federal, state, and international laws pertaining to a distributor, not a manufacturer,

of ENDS products.

Our business is dependent entirely on the resale of

products provided by Bidi;

thus, there is a significant risk that our business could be materially adversely affected if Bidi, as the

manufacturer, does not properly abide by any Federal, state, or international laws that regulate ENDS products.

Any lapse in production

or availability of products from Bidi would hamper our ability to operate as we would be limited in our ability to supply our customers

if our inventory ran low or ceased to exist entirely.

As a manufacturer of ENDS products, Bidi is responsible

for abiding by and following various rules and regulations pertaining to the manufacturing of the ENDS products we sell and any lapse

in abiding by any pertinent rules and regulations may negatively impact our ability to operate.

As a distributor, we are also subject

to various rules and regulations.

Some of the below may not directly apply to us at this time due to the nature of our present operations.

These rules and regulations include, but are not limited to, the following:

FDA and Related Regulations Relating to ENDS Products

Effective August 8, 2016, the

FDA’s regulatory authority under The Family Smoking Prevention and Tobacco Control Act was extended to all remaining tobacco products,

(i) certain “new generation” products (such as electronic cigarettes, vaporizers, and e-liquids) and their components

or parts (such as tanks, coils, and batteries);

Effective August 8, 2016, the FDA’s regulatory

authority under The Family Smoking Prevention and Tobacco Control Act was extended to all remaining tobacco products, including:

“new generation” products (such as electronic cigarettes, vaporizers, and e-liquids) and their components or parts (such as

tanks, coils, and batteries);

(ii) cigars and their components or parts (such as cigar tobacco);

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or (v) any other tobacco product “newly deemed” by the FDA (the “Deeming Rule”).

Rule applies to all products made or derived from tobacco intended for human consumption but excluding accessories of tobacco products

(such as lighters).

Furthermore, starting in April 2022, FDA was also granted authority to regulate products containing synthetic (non-tobacco)

nicotine as tobacco products.

The Deeming Rule applies to all

products made or derived from tobacco intended for human consumption but excluding accessories of tobacco products (such as lighters).

Furthermore, starting in April 2022, FDA was also granted authority to regulate products containing synthetic (non-tobacco) nicotine as

tobacco products.

Specifically, the Consolidated Appropriations Act of 2022 amended the definition of a “tobacco product”

in the Food, Drug and Cosmetic Act and gave the FDA authority to regulate products containing nicotine from any source, including synthetic

The Deeming Rule requires (i)

United States manufactured products be registered with the FDA and that products include ingredient listings;

(ii) newly deemed products

be marketed only after FDA review and authorization, subject to FDA’s compliance enforcement policy;

(iii) products only make direct

and implied claims of reduced risk if the FDA authorizes after finding that scientific evidence supports the claim and that marketing

the product will benefit public health as a whole;

The Deeming Rule requires (i) United States manufactured

products be registered with the FDA and that products include ingredient listings;

(ii) newly deemed products be marketed only after FDA

review and authorization, subject to FDA’s compliance enforcement policy;

(iii) products only make direct and implied claims of

reduced risk if the FDA authorizes after finding that scientific evidence supports the claim and that marketing the product will benefit

public health as a whole;

(iv) sellers of such products refrain from distributing free samples;

of such products implement minimum age and identification restrictions to prevent sales to individuals under age 18 (later extended to

(vi) packaging of and advertisements for products include prescribed health warnings;

and (vii) sellers refrain from selling Bidi

products in vending machines, unless the machine is located in a facility that never admits youth.

We, along with Bidi, must comply with

these regulations.

Any lapse in compliance by us, or Bidi, could hamper our ability to operate, which would adversely affect the results

of operations.

Newly deemed tobacco products

are also subject to the other requirements of the Tobacco Control Act, such as Bidi products cannot be adulterated or misbranded.

FDA could in the future promulgate good manufacturing practice regulations for these and our other products, which could have a material

adverse impact on Bidi’s ability to, and the cost to, manufacture our products, which would adversely affect our financial condition

and results of operations.

Failure to comply with the Tobacco

Control Act and or with any FDA regulatory requirements could result in litigation, criminal convictions or significant financial penalties

and could impair our ability to market and sell our electronic and vaporizer products.

At present, we are unable to predict whether the

Tobacco Control Act will impact our products to a greater degree than competitors in the industry, thus affecting our competitive position.

As part of the “Consolidated

Appropriations Act, 2021,” signed into law on December 27, 2020, Congress amended the PACT Act to apply to ENDS, which includes

the BIDI® Stick.

The PACT Act regulates the sale, transfer, or shipment of cigarettes, roll-your-own tobacco, smokeless tobacco,

and now ENDS, for both business-to-business transactions as well as online sales.

The PACT Act imposes substantial restrictions on sellers

and shippers of ENDS products, including, but not limited to registration with the Bureau of Alcohol, Tobacco, Firearms and Explosives

(or ATF), registration with state Tobacco Tax Administrators, and monthly reporting requirements to state and local Tobacco Tax Administrators.

Delivery sellers are subject to substantial additional restrictions, including, but not limited to, compliance with state excise tax

collection requirements, licensing requirements, shipping, and packaging requirements.

Companies were required to comply with PACT Act

requirements beginning on or about March 28, 2021.

We have adopted the following

compliance measures:

(v) sellers of such products implement

minimum age and identification restrictions to prevent sales to individuals under age 18 (later extended to 21);

(vi) packaging of and

advertisements for products include prescribed health warnings;

and (vii) sellers refrain from selling Bidi products in vending machines,

unless the machine is located in a facility that never admits youth.

We, along with Bidi, must comply with these regulations.

in compliance by us, or Bidi, could hamper our ability to operate, which would adversely affect the results of operations.

Newly deemed tobacco products are also subject to

the other requirements of the Tobacco Control Act, such as Bidi products cannot be adulterated or misbranded.

The FDA could in the future

promulgate good manufacturing practice regulations for these and our other products, which could have a material adverse impact on Bidi’s

ability to, and the cost to, manufacture our products, which would adversely affect our financial condition and results of operations.

Failure to comply with the Tobacco Control Act and

or with any FDA regulatory requirements could result in litigation, criminal convictions or significant financial penalties and could

impair our ability to market and sell our electronic and vaporizer products.

At present, we are unable to predict whether the Tobacco

Control Act will impact our products to a greater degree than competitors in the industry, thus affecting our competitive position.

As part of the “Consolidated Appropriations

Act, 2021,” signed into law on December 27, 2020, Congress amended the PACT Act to apply to ENDS, which includes the BIDI® Stick.

The PACT Act regulates the sale, transfer, or shipment of cigarettes, roll-your-own tobacco, smokeless tobacco, and now ENDS, for both

business-to-business transactions as well as online sales.

The PACT Act imposes substantial restrictions on sellers and shippers of ENDS

products, including, but not limited to registration with the Bureau of Alcohol, Tobacco, Firearms and Explosives (or ATF), registration

with state Tobacco Tax Administrators, and monthly reporting requirements to state and local Tobacco Tax Administrators.

Delivery sellers

are subject to substantial additional restrictions, including, but not limited to, compliance with state excise tax collection requirements,

licensing requirements, shipping, and packaging requirements.

Companies were required to comply with PACT Act requirements beginning on

or about March 28, 2021.

We have adopted the following compliance measures:

We have retained a team

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Federal Trade Commission

Federal Trade Commission (FTC) routinely requests various industry sectors to provide information on marketing and advertising practices,

and typically summarizes the aggregate information provided by all respondents in a public report.

The FTC issued what is known as an

“Order to File Special Report” to a number of vaping industry members, including Bidi, on June 2, 2022.

Upon being advised

of the exclusive distribution arrangement between Bidi and our company, the FTC withdrew the request directed to Bidi on August 22, 2022,

and issued a request to us on August 29, 2022.

We responded timely to the FTC request on November 30, 2022.

The Federal Trade Commission (FTC) routinely requests

various industry sectors to provide information on marketing and advertising practices, and typically summarizes the aggregate information

provided by all respondents in a public report.

The FTC issued what is known as an “Order to File Special Report” to a number

of vaping industry members, including Bidi, on June 2, 2022.

Upon being advised of the exclusive distribution arrangement between Bidi

and our company, the FTC withdrew the request directed to Bidi on August 22, 2022, and issued a request to us on August 29, 2022.

timely to the FTC request on November 30, 2022.

No further requests were received from the FTC to date.

State and Local Regulations

As a retail seller and/or wholesale

distributor of ENDS and related products, we must follow several state and local regulations.

As a retail seller and/or wholesale distributor of

ENDS and related products, we must follow numerous state and local regulations.

Individual U.S.

state laws and regulations

concerning e-cigarette and related products are also relatively new and developing.

Currently, certain state laws about e-cigarette and

related products serve to define and/or tax tobacco products or e-cigarette and related products, restrict access to youth and/or retail

sale, require a license to sell such products, ban e-cigarette use in certain public spaces, and require child resistant packaging on

products containing e-liquids.

state laws and regulations concerning

e-cigarette and related products are also relatively new and developing.

Currently, certain state laws about e-cigarette and related products

serve to define and/or tax tobacco products or e-cigarette and related products, restrict access to youth and/or retail sale, require

a license to sell such products, ban e-cigarette use in certain public spaces, and require child resistant packaging on products containing

In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco products.

Recently, for example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products, including

e-cigarettes, in retail locations.

Thus, the non-tobacco flavored BIDI® Sticks are not permitted to be sold in California retail

We anticipate more states and localities will take this approach.

As a distributor, we hold all required state licenses and

permits, and pay all applicable state e-cigarette and related products excise taxes.

We work closely with Bidi to ensure that it is compliant

with applicable manufacturer specific state requirements, such as any warning requirements (e.g., California Proposition 65).

Recently, for

example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products, including e-cigarettes,

in retail locations.

Thus, the non-tobacco flavored BIDI® Sticks are not permitted to be sold in California retail locations.

We anticipate

more states and localities will take this approach.

As a distributor, we hold all required state licenses and permits, and pay all applicable

state e-cigarette and related products excise taxes.

We work closely with Bidi to ensure that it is compliant with applicable manufacturer

specific state requirements, such as any warning requirements (e.g., California Proposition 65).

Excise Taxes on Vapor Products

Vapor products are currently subject

to excise taxes at the state and local level.

Currently, approximately 31 states, plus various localities and jurisdictions, impose a

tax on vapor products.

We anticipate that state and localities will likely continue to impose new excise taxes on these products and

/ or increase existing excise taxes for the purpose of funding various legislative initiatives, filling revenue shortfalls, and / or

to reduce consumption.

In addition, while ENDS products are not currently subject to excise tax at the federal level, legislation to

impose excise taxes at the federal level has been introduced in the past and could potentially be adopted in the future.

Any future enactment

of excise tax increases at the federal, state, or local level could potentially result in lower consumption, a shift in sales to discount

brands, illicit trade channels or alternatives as consumers seek lower priced products, any of which could result in a decline of our

shipment volume, revenue, and profit.

We ceased all direct-to-consumer sales in February 2021.

Vapor products are currently subject to excise taxes

at the state and local level.

Currently, approximately 31 states, plus various localities and jurisdictions, impose a tax on vapor products.

We anticipate that state and localities will likely continue to impose new excise taxes on these products and / or increase existing excise

taxes for the purpose of funding various legislative initiatives, filling revenue shortfalls, and / or to reduce consumption.

while ENDS products are not currently subject to excise tax at the federal level, legislation to impose excise taxes at the federal level

has been introduced in the past and could potentially be adopted in the future.

Any future enactment of excise tax increases at the federal,

state, or local level could potentially result in lower consumption, a shift in sales to discount brands, illicit trade channels or alternatives

as consumers seek lower priced products, any of which could result in a decline of our shipment volume, revenue, and profit.

all direct-to-consumer sales in February 2021.

International Regulations and Pertinent Information

The World Health Organization’s

Framework Convention on Tobacco Control (the “FCTC”) is the first international public health treaty that establishes a global

agenda to reduce initiation of tobacco use and regulate tobacco to encourage tobacco cessation.

Over 170 governments worldwide have ratified

The FCTC has led to increased efforts to reduce the supply and demand of tobacco products and to encourage governments to further

regulate the tobacco industry.

The tobacco industry expects significant regulatory developments to take place over the next few years,

driven principally by the FCTC.

The World Health Organization’s Framework Convention

on Tobacco Control (the “FCTC”) is the first international public health treaty that establishes a global agenda to reduce

initiation of tobacco use and regulate tobacco to encourage tobacco cessation.

Over 170 governments worldwide have ratified the FCTC.

The FCTC has led to increased efforts to reduce the supply and demand of tobacco products and to encourage governments to further regulate

the tobacco industry.

The tobacco industry expects significant regulatory developments to take place over the next few years, driven principally

Regulatory initiatives that have been proposed, introduced, or enacted include:

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against tobacco companies.

If the United States becomes a

signatory to the FCTC and/or national laws are enacted in the United States that reflect the major elements of the FCTC, our business,

results of operations and financial condition could be materially and adversely affected.

If the United States becomes a signatory to the FCTC

and/or national laws are enacted in the United States that reflect the major elements of the FCTC, our business, results of operations

and financial condition could be materially and adversely affected.

Environmental Laws

We may be subject to federal,

state, and local environmental laws and regulations.

Compliance with these provisions has not had, nor do we expect such compliance will

have any, material adverse effect upon our capital expenditures, financial condition, or competitive position.

We believe that we are

not subject to any material costs for compliance with any environmental laws.

Because we solely distribute Bidi’s

products, which comprises all our business operations, Bidi’s competitors in the ENDS industry are indirect competitors of ours.

Many of these competitors in the ENDS industry are better capitalized than we are and have access to greater resources, financial, and

We believe that our ability, and Bidi’s ability, to effectively compete in the industry and acquire a strong market

position is, and will continue to be, in large part due to the growing recognition of the Bidi brand name, the perceived quality of each

of our products, and the ongoing efforts of our sales, marketing, and distribution teams.

Through Bidi, we compete against, just to name

a few, what we refer to as “big tobacco” companies, including Altria Group, Inc.

(formerly Philip Morris);

British American

Tobacco p.l.c.

(formerly Reynolds);

Swedish Match;

Swisher International;

and manufacturers including U.K.

based Imperial Brands, PLC,

NJOY, and Logic Technology.

“Big tobacco” has substantially greater resources, and a customer base that has historically

demonstrated loyalty to their brands, which can pose a significant hurdle to competitors operating in the same, or similar, industries.

Competition in the ENDS industry

is based upon not only brand quality and positioning but also on price, packaging, promotion, and retail availability and visibility.

Given the decreasing prevalence and public acceptance of cigarette consumption, the “big tobacco” companies continue to demonstrate

an increased interest and participation in other/additional tobacco industries/markets.

As such, we consider the “big tobacco”

companies to be our primary competitors now, but it is our belief that we have the capability to compete successfully.

We may be subject to federal, state, and local environmental

laws and regulations.

Compliance with these provisions has not had, nor do we expect such compliance will have any, material adverse effect

upon our capital expenditures, financial condition, or competitive position.

We believe that we are not subject to any material costs

for compliance with any environmental laws.

Intellectual Property

As of the date of this Report, we own the trademarks KAIVAL BRANDS and KAIVAL

In addition, we purchased certain intellectual property assets of GoFire consisting of various patents, patent applications and

trademarks in exchange for equity securities of our company and certain contingent cash consideration.

The purchased assets consist of

19 existing patents and 47 pending patents with novel technologies related to vaporization and inhalation technologies.

The patents and

patent applications cover the U.S.

As of the date of this Report, we own the trademarks

KAIVAL BRANDS and KAIVAL LABS.

In addition, we purchased certain intellectual property assets of GoFire consisting of various patents,

patent applications and trademarks in exchange for equity securities of our company and certain contingent cash consideration.

The purchased

assets consist of 19 existing patents and 47 pending patents with novel technologies related to vaporization and inhalation technologies.

The patents and patent applications cover the U.S.

and several international territories.

The purchased assets also include four registered and two pending

We rely on certain intellectual

property rights, including logos, trademarks, and trade names, of Bidi that were granted to us pursuant to the A&R Distribution Agreement

to be used in connection with the marketing, advertisement, and sale of products.

We also indirectly rely on Bidi’s intellectual

property rights related to products, such as patents.

If a third-party challenged Bidi’s patents, or infringed upon such rights,

our business would be materially adversely affected.

As of the date of this Report we have eighteen employees, all of whom are

full-time, including our officers.

In addition to our officers, we have employees who fulfill the roles of sales staff, information technology,

web development, warehouse staff, and financial accounting and reporting management.

All our employees are eligible to enroll, or have

already enrolled, in our medical plan.

The purchased assets also include four registered

and two pending trademarks.

We rely on certain intellectual property rights, including

logos, trademarks, and trade names, of Bidi that were granted to us pursuant to the A&R Distribution Agreement to be used in connection

with the marketing, advertisement, and sale of products.

We also indirectly rely on Bidi’s intellectual property rights related

to products, such as patents.

If a third-party challenged Bidi’s patents, or infringed upon such rights, our business would be materially

adversely affected.

As of the date of this Report we have three employees,

all of whom are full-time, including our officers.

In addition to our officers, we have employees who fulfill the roles of sales staff,

information technology, and financial accounting and reporting management.

All our employees are eligible to enroll, or have already enrolled,

in our medical plan.

Emerging Growth Company

We are an emerging growth company

(“EGC”), that is exempt from certain financial disclosure and governance requirements for up to five years as defined in

the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

The JOBS Act eases restrictions on the sale of securities

and increases the number of stockholders a company must have before becoming subject to the reporting and disclosure rules of the Securities

and Exchange Commission (the “SEC”).

We have not elected to use the extended transition period for complying with new or

revised accounting standards under Section 102(b)(2) of the JOBS Act, which allows us to delay the adoption of new or revised accounting

standards that have different effective dates for public and private companies until those standards apply to private companies.

We are an emerging growth company (“EGC”),

that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business

Startups Act of 2012 (the “JOBS Act”).

The JOBS Act eases restrictions on the sale of securities and increases the number

of stockholders a company must have before becoming subject to the reporting and disclosure rules of the Securities and Exchange Commission

We have not elected to use the extended transition period for complying with new or revised accounting standards

under Section 102(b)(2) of the JOBS Act, which allows us to delay the adoption of new or revised accounting standards that have different

effective dates for public and private companies until those standards apply to private companies.

Corporate History

We were incorporated on September

4, 2018, in the State of Delaware.

We were incorporated on September 4, 2018, in the

State of Delaware.

Effective July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc.

to Kaival Brands

Innovations Group, Inc.

The name change was affected through a parent-subsidiary short-form merger of Kaival Brands Innovations Group,

Inc., our wholly-owned Delaware subsidiary formed solely for the purpose of the name change, with and into us.

We were the surviving

to Kaival Brands Innovations

The name change was affected through a parent-subsidiary short-form merger of Kaival Brands Innovations Group, Inc., our wholly-owned

Delaware subsidiary formed solely for the purpose of the name change, with and into us.

We were the surviving entity.

2018 Holding Company Reorganization

On September 4, 2018, USSE Delaware,

Inc., a Delaware corporation (“USSE Delaware”) acquired all of our then-outstanding shares of common stock, resulting in

us becoming its wholly owned subsidiary.

On September 19, 2018, our wholly owned subsidiary, USSE Merger Sub, Inc., a Delaware corporation

(“USSE Merger Sub”), merged with and into USSE Delaware, our then parent, effected a reorganization (the “Holding Company

Reorganization”) in accordance with the provisions set forth in Section 251(g) of the Delaware General Corporation Law (“DGCL”).

USSE Delaware was the surviving corporation and our wholly owned subsidiary.

On September 4, 2018, USSE Delaware, Inc., a Delaware

corporation (“USSE Delaware”) acquired all of our then-outstanding shares of common stock, resulting in us becoming its wholly

owned subsidiary.

On September 19, 2018, our wholly owned subsidiary, USSE Merger Sub, Inc., a Delaware corporation (“USSE Merger

Sub”), merged with and into USSE Delaware, our then parent, effected a reorganization (the “Holding Company Reorganization”)

in accordance with the provisions set forth in Section 251(g) of the Delaware General Corporation Law (“DGCL”).

USSE Delaware

was the surviving corporation and our wholly owned subsidiary.

USSE Delaware also changed its name to USSE Corp.

the Holding Company Reorganization.

Upon completion of the Holding

Company Reorganization, by virtue of the merger, and without any action on the part of the holder thereof, each share of USSE Delaware’s

common stock issued and outstanding immediately prior to the effective time of the Holding Company Reorganization was automatically converted

into one validly issued, fully paid, and non-assessable share of our Common Stock.

Additionally, each share of USSE Delaware’s

preferred stock issued and outstanding immediately prior to the effective time was converted into one validly issued, fully paid, and

non-assessable share of our preferred stock, having the same designations, rights, powers, and preferences, and the qualifications, limitation,

and restrictions thereof, as the corresponding share of USSE Delaware’s preferred stock.

Each share of our Common Stock issued

and outstanding and held by USSE Delaware immediately prior to the effective time was canceled.

following the Holding

Company Reorganization.

Upon completion of the Holding Company Reorganization,

by virtue of the merger, and without any action on the part of the holder thereof, each share of USSE Delaware’s common stock issued

and outstanding immediately prior to the effective time of the Holding Company Reorganization was automatically converted into one validly

issued, fully paid, and non-assessable share of our Common Stock.

Additionally, each share of USSE Delaware’s preferred stock

issued and outstanding immediately prior to the effective time was converted into one validly issued, fully paid, and non-assessable share

of our preferred stock, having the same designations, rights, powers, and preferences, and the qualifications, limitation, and restrictions

thereof, as the corresponding share of USSE Delaware’s preferred stock.

Each share of our Common Stock issued and outstanding

and held by USSE Delaware immediately prior to the effective time was canceled.

2018 Change of Control

On October 19, 2018, we issued 500,000,000 shares of restricted Common Stock

and 400,000 shares of Convertible Series B preferred stock to GMRZ Holdings LLC, a Nevada limited liability company (“GMRZ”),

for services rendered to us.

On October 19, 2018, we issued 500,000,000 shares

of restricted Common Stock and 400,000 shares of Convertible Series B preferred stock to GMRZ Holdings LLC, a Nevada limited liability

company (“GMRZ”), for services rendered to us.

GMRZ became our controlling stockholder as a result of such issuances.

On February 6, 2019, we entered

into a non-binding Share Purchase Agreement (the “Agreement”) by and among GMRZ, Kaival Holdings, LLC (formerly known as Kaival

Brands Innovations Group, LLC), a Delaware limited liability company (“Kaival Holdings”), and us, pursuant to which, on February

20, 2019, GMRZ sold 504,000,000 shares of our restricted Common Stock, representing approximately 88.06 percent of our then-issued and

outstanding shares of Common Stock, to Kaival Holdings, and Kaival Holdings paid GMRZ consideration in the amount set forth in the Agreement

(the “Purchase Price”).

The consummation of the transactions contemplated by the Agreement resulted in a change in control

of us, with Kaival Holdings becoming our largest controlling stockholder.

The sole voting members

of Kaival Holdings are Nirajkumar Patel and Eric Mosser (a former executive and director of our company), with Mr.

holding voting control.

On February 6, 2019, we entered into a non-binding Share Purchase Agreement (the “Agreement”) by and among GMRZ, Kaival Holdings,

LLC (formerly known as Kaival Brands Innovations Group, LLC), a Delaware limited liability company (“Kaival Holdings”), and

us, pursuant to which, on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted Common Stock, representing approximately 88.06

percent of our then-issued and outstanding shares of Common Stock, to Kaival Holdings, and Kaival Holdings paid GMRZ consideration in

the amount set forth in the Agreement (the “Purchase Price”).

The consummation of the transactions contemplated by the Agreement

resulted in a change in control of us, with Kaival Holdings becoming our largest controlling stockholder.

The sole voting members of Kaival

Holdings were Nirajkumar Patel and Eric Mosser (former executives and directors of our company), with Mr.

Patel holding voting control.

The Purchase Price was paid with personal funds of the members of Kaival Holdings.

2020 Share Cancellation and

Exchange Agreement

On August 19, 2020, we entered

into a Share Cancellation and Exchange Agreement (the “Share Cancellation and Exchange Agreement”) with our controlling stockholder,

Kaival Holdings.

Pursuant to the Share Cancellation

and Exchange Agreement, Kaival Holdings returned to us 300,000,000 shares of our Common Stock (the “Cancellation Shares”),

which Cancellation Shares were canceled and retired by us.

Following such cancellation, Kaival Holdings owns 204,000,000 shares of our

Common Stock.

On August 19, 2020, we filed a

Certificate of Designation of Preferences, Rights, and Limitations of the Series A Preferred Stock (the “Series A Certificate of

Designation”) with the Secretary of State of the State of Delaware, which authorized a total of 3,000,000 shares, par value $0.01

per share, of Series A Preferred Stock (the “Series A Preferred Stock”).

In exchange for the Cancellation

Shares, we issued 3,000,000 shares (the “Preferred Shares”) of our newly designated Series A Preferred Stock to Kaival Holdings.

The exchange of the Cancellation Shares and the issuance of the Preferred Shares was intended to comply with Section 3(a)(9) of the Securities

Act, in that the issuance was exempt from the registration requirements of the Act because the exchange of the Cancellation Shares for

the Preferred Shares was an exchange between us, as issuer, with an existing stockholder, and no commission or other remuneration was

paid or given directly for the exchange.

2020 Share Cancellation and Exchange Agreement

On August 19, 2020, we entered into a Share Cancellation

and Exchange Agreement (the “Share Cancellation and Exchange Agreement”) with our controlling stockholder, Kaival Holdings.

Pursuant to the Share Cancellation and Exchange Agreement,

Kaival Holdings returned to us 300,000,000 shares of our Common Stock (the “Cancellation Shares”), which Cancellation Shares

were canceled and retired by us.

Following such cancellation, Kaival Holdings owns 204,000,000 shares of our Common Stock.

On August 19, 2020, we filed a Certificate of Designation

of Preferences, Rights, and Limitations of the Series A Preferred Stock (the “Series A Certificate of Designation”) with the

Secretary of State of the State of Delaware, which authorized a total of 3,000,000 shares, par value $0.01 per share, of Series A Preferred

Stock (the “Series A Preferred Stock”).

In exchange for the Cancellation Shares, we issued

3,000,000 shares (the “Preferred Shares”) of our newly designated Series A Preferred Stock to Kaival Holdings.

of the Cancellation Shares and the issuance of the Preferred Shares was intended to comply with Section 3(a)(9) of the Securities Act,

in that the issuance was exempt from the registration requirements of the Act because the exchange of the Cancellation Shares for the

Preferred Shares was an exchange between us, as issuer, with an existing stockholder, and no commission or other remuneration was paid

or given directly for the exchange.

2021 Reverse Stock Split

On July 16, 2021, we filed a Certificate

of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect

a 1-for-12 reverse stock split (the “Reverse Stock Split”) of the shares of our Common Stock.

The Reverse Stock Split was

effective as of 12:01 a.m.

On July 16, 2021, we filed a Certificate of Amendment

to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect a 1-for-12 reverse

stock split (the “Reverse Stock Split”) of the shares of our Common Stock.

The Reverse Stock Split was effective as of 12:01

Eastern Time on July 20, 2021.

No fractional shares were issued in connection with the Reverse Stock Split.

Any fractional shares of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest

whole number.

In connection with the Reverse Stock Split, our Board approved appropriate and proportional adjustments to all outstanding

securities or other rights convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock,

warrants, options, and other equity compensation rights.

All historical share and per-share amounts reflected throughout our consolidated

financial statements and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split

occurred as of the earliest period presented.

Any fractional shares

of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest whole number.

In connection

with the Reverse Stock Split, our Board approved appropriate and proportional adjustments to all outstanding securities or other rights

convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock, warrants, options, and

other equity compensation rights.

All historical share and per-share amounts reflected throughout our consolidated financial statements

and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the

earliest period presented.

The par value per share of our Common Stock was not affected by the Reverse Stock Split.

2022 Series A Preferred Shares

The authorized preferred stock

of the Company consists of 5,000,000 shares with a par value of $ 0.001 per share, of which 3,000,000 shares were designated as Series

A Convertible Preferred Stock (the “Series A Preferred Stock”).

Each share of the Series A Preferred Stock was initially convertible

into 100 shares of Common Stock;

however, as a result of the Reverse Stock Split, the conversion rate was adjusted such that each share

of the Series A Preferred Stock was convertible into approximately 0.3968 shares of Common Stock.

On June 24, 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.

May 2023 GoFire Asset Purchase

On May 30, 2023, we and Kaival

Labs entered into an Asset Purchase Agreement (the “GoFire APA”) with GoFire.

to the terms of the GoFire APA, we, through Kaival Labs, purchased certain intellectual property assets of GoFire consisting of various

patents, patent applications and trademarks in exchange for equity securities of our company and certain contingent cash consideration.

The purchased assets consist of 12 existing patents and 46 pending patents with novel technologies related to vaporization and inhalation

technologies.

2022 Series A Preferred Shares Converted

The authorized preferred stock of the Company consists

of 5,000,000 shares with a par value of $ 0.001 per share, of which 3,000,000 shares were designated as Series A Convertible Preferred

Stock (the “Series A Preferred Stock”).

Each share of the Series A Preferred Stock was initially convertible into 100 shares

of Common Stock;

however, as a result of the Reverse Stock Split, the conversion rate was adjusted such that each share of the Series

A Preferred Stock was convertible into approximately 0.3968 shares of Common Stock.

On June 24, 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.

May 2023 GoFire Asset Purchase Agreement

On May 30, 2023, we and Kaival Labs entered into an Asset Purchase Agreement

(the “GoFire APA”) with GoFire.

Pursuant to the terms of the GoFire APA, we, through Kaival Labs, purchased certain intellectual

property assets of GoFire consisting of various patents, patent applications and trademarks in exchange for equity securities of our company

and certain contingent cash consideration.

The purchased assets consist of 19 existing patents and 47 pending patents with novel technologies

related to vaporization and inhalation technologies.

The patents and patent applications cover the U.S.

and several international territories.

The purchased assets also include

four registered and two pending trademarks.

We have determined that the acquisition of the purchased assets does not constitute the acquisition

of a “business” (as defined in Rule 11-01(d) of Regulation S-X).

Pursuant to the terms of the GoFire APA, we paid to GoFire, in addition to certain

contingent cash consideration described below, consideration in the form of equity securities of our company consisting of (i) an aggregate

of 95,239 shares of Common Stock (the “2023 APA Shares”);

(ii) 900,000 shares of newly-designated Series B Convertible

Preferred Stock, par value $0.001 per share, (the “Series B Preferred Stock” and the shares of Common Stock underlying the

Series B Preferred, the “Series B Conversion Shares”), the rights, preferences and terms of which are set forth in a Certificate

of Designation of Rights and Preferences of the Series B Preferred Stock, and (iii) a Common Stock purchase warrant to purchase 95,239

shares of Common Stock (the “Warrant” and the shares of Common Stock underlying the Warrant, the “Warrant Shares”).

As additional consideration for the purchased assets, any cannabis-specific (meaning cannabis, hemp or cannabinoid) royalties that are

generated by Kaival Labs from or due to the purchased assets, from May 30, 2023, until January 1, 2027, will be subject to a contingent

cash payment as described in the GoFire APA and subject to the terms of the GoFire APA.

9,524 2023 APA Shares and a Warrant for 9,524

Warrant Shares were issued to an advisor to GoFire at the closing of the GoFire APA.

Pursuant to the GoFire APA, we

are required to use commercially reasonable efforts to register the 85,715 2023 APA Shares and 85,715 Warrants and Warrant Shares with

the SEC for distribution to GoFire’s stockholders and/or public resale by such stockholders within 180 days of May 30, 2023.

registration was declared effective by the SEC on January 12, 2024.

To our knowledge, portions of the 85,715 2023 APA Shares and 85,715

Warrants have been distributed to the GoFire stockholders pursuant to such registration statement.

In addition, if any Series B Preferred

Stock remains outstanding nineteen (19) months after May 30, 2023, we shall use commercially reasonable efforts to file with the SEC subsequent

registration statement registering the distribution to GoFire’s stockholders and/or public resale Series B Conversion Shares by

such stockholders.

If such subsequent registration statement is required, we will use our commercially reasonable efforts to obtain effectiveness

of such subsequent registration statement within nineteen (19) months of May 30, 2023, and if we do not so register the Series B Conversion

Shares within nineteen (19) months of May 30, 2023, we will issue to GoFire or its designee an additional ten percent (10%) of all of

the Series B Conversion Shares underlying the then-outstanding shares of Series B Preferred Stock.

All of the securities issued as

consideration for the GoFire purchased assets were subject to a lock-up agreement that terminated on November 26, 2023.

2024 Reverse Stock Split

On January 22, 2024, we filed

a Certificate of Amendment to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware

to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares of our Common Stock.

The 2024 Reverse

Stock Split became effective on January 25, 2024 on the Nasdaq Stock Market.

No fractional shares were issued in connection with the 2024

The purchased assets also include four registered and two pending trademarks.

We have determined that the acquisition of the purchased

assets does not constitute the acquisition of a “business” (as defined in Rule 11-01(d) of Regulation S-X).

Pursuant to the terms of the GoFire APA, we paid to

GoFire, in addition to certain contingent cash consideration described below, consideration in the form of equity securities of our company

consisting of (i) an aggregate of 95,239 shares of Common Stock (the “2023 APA Shares”);

(ii) 900,000 shares of newly-designated

Series B Convertible Preferred Stock, par value $0.001 per share, (the “Series B Preferred Stock” and the shares of Common

Stock underlying the Series B Preferred, the “Series B Conversion Shares”), the rights, preferences and terms of which are

set forth in a Certificate of Designation of Rights and Preferences of the Series B Preferred Stock, and (iii) a Common Stock purchase

warrant to purchase 95,239 shares of Common Stock (the “Warrant” and the shares of Common Stock underlying the Warrant, the

“Warrant Shares”).

As additional consideration for the purchased assets, any cannabis-specific (meaning cannabis, hemp or

cannabinoid) royalties that are generated by Kaival Labs from or due to the purchased assets, from May 30, 2023, until January 1, 2027,

will be subject to a contingent cash payment as described in the GoFire APA and subject to the terms of the GoFire APA.

9,524 2023 APA

Shares and a Warrant for 9,524 Warrant Shares were issued to an advisor to GoFire at the closing of the GoFire APA.

Pursuant to the GoFire APA, we are required to use

commercially reasonable efforts to register the 85,715 2023 APA Shares and 85,715 Warrants and Warrant Shares with the SEC for distribution

to GoFire’s stockholders and/or public resale by such stockholders within 180 days of May 30, 2023.

Such registration was declared

effective by the SEC on January 12, 2024.

To our knowledge, portions of the 85,715 2023 APA Shares and 85,715 Warrants have been distributed

to the GoFire stockholders pursuant to such registration statement.

In addition, if any

Series B Preferred Stock remains outstanding nineteen (19) months after May 30, 2023, we shall use commercially reasonable efforts to

file with the SEC subsequent registration statement registering the distribution to GoFire’s stockholders and/or public resale

Series B Conversion Shares by such stockholders.

If such subsequent registration statement is required, we will use our commercially

reasonable efforts to obtain effectiveness of such subsequent registration statement within nineteen (19) months of May 30, 2023, and

if we do not so register the Series B Conversion Shares within nineteen (19) months of May 30, 2023, we will issue to GoFire or its designee

an additional ten percent (10%) of all of the Series B Conversion Shares underlying the then-outstanding shares of Series B Preferred

To satisfy this obligation we will provide GoFire with an additional 10% of our shares of common stock issued to them upon

the conversion of the Series B Preferred Stock at the closing of the Business Combination.

All of the securities issued as consideration for

the GoFire purchased assets were subject to a lock-up agreement that terminated on November 26, 2023.

2024 Reverse Stock Split

Any fractional shares of our Common Stock that would have otherwise resulted from the 2024 Reverse Stock Split were

rounded up to the nearest whole number.

In connection with the 2024 Reverse Stock Split, our Board approved appropriate and proportional

adjustments to all outstanding securities or other rights convertible or exercisable into shares of our Common Stock, including, without

limitation, all preferred stock, warrants, options, and other equity compensation rights.

The par value per share of our Common Stock

was not affected by the 2024 Reverse Stock Split.

January 22, 2024 , the

Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary

of State of the State of Delaware to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares

of the Common Stock.

The 2024 Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market.

No fractional shares

were issued in connection with the 2024 Reverse Stock Split.

Any fractional shares of the Company’s Common Stock that would have

otherwise resulted from the 2024 Reverse Stock Split were rounded up to the nearest whole number.

In connection with the 2024 Reverse

Stock Split, the Board approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or

exercisable into shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity

compensation rights.

All historical share and per-share amounts reflected throughout the accompanying consolidated financial statements

in this Report have been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period

The par value per share of the Common

Stock was not affected by the 2024 Reverse Stock Split.

Bidi Debt Exchange Agreement

On October 25, 2024 we entered the Debt Exchange Agreement

with Bidi pursuant to which we satisfied an outstanding debt of $1,275,000 we owed to Bidi under the A&R Distribution Agreement by

the issuance of 1,400,144 shares of our common stock to Bidi.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business