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Item 1A. Risk Factors

2025-02-10 compared with 2024-02-14 · 833 added, 746 removed, 118 unchanged (93% of the section changed)

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Consequently, no forward-looking statement can be guaranteed.

Actual future results may differ materially from those

anticipated in forward-looking statements.

We undertake no obligation to update any forward-looking statements, whether as a result of

new information, future events or otherwise.

You are advised, however, to consult any further disclosure we make in our reports filed

with the SEC.

Actual future results may differ materially from those anticipated

in forward-looking statements.

We undertake no obligation to update any forward-looking statements, whether as a result of new information,

future events or otherwise.

You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

Risks Related to the Business Combination

Completion of the Business Combination

is subject to a number of conditions and if these conditions are not satisfied or waived, such transactions will not be completed.

Kaival’s obligation

and the obligation of Delta to complete the Business Combination are subject to satisfaction or waiver of a number of conditions, including,

among others:

of the Business Combination by Kaival’s stockholders;

of injunctions or certain legal impediments;

for the listing on NASDAQ of Pubco’s ordinary shares to be issued in the Business Combination;

of the representations and warranties of each of the parties, subject to certain materiality thresholds.

There can be no assurance

that the conditions to closing set forth in the Merger Agreement will be satisfied or waived or that the Business Combination itself will

be completed.

Failure to complete the Business Combination

could negatively impact Kaival’s stock price, future business or operations.

If the Business Combination

is not completed, Kaival may be subject to a number of material risks, including the following:

may be required under certain circumstances to pay Delta a termination fee;

price of Kaival’s common stock may decline to the extent that the relevant current market price reflects a market assumption that

the Business Combination will be completed;

related to the Business Combination, such as legal, accounting, certain financial advisory and financial printing fees, must be paid even

if the Business Combination is not completed.

Further, if the Business Combination

is terminated and either company’s board of directors determines to seek another merger or business combination, there can be no

assurance that it will be able to find a partner on terms as attractive as those provided for in the Merger Agreement.

In addition, while

the Merger Agreement is in effect and subject to very narrowly defined exceptions, Kaival is prohibited from soliciting, initiating or

encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination, other

than with Delta.

The exercise of Kaival’s boards

of directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result

in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are

appropriate and in Kaival’s shareholders’ best interests.

In the period leading up to

the closing of the Business Combination, events may occur that, pursuant to the Merger Agreement, would require Kaival and/or Delta to

agree to amend the Merger Agreement, to consent to certain actions taken by Delta or Kaival, as applicable, or to waive rights that Kaival

or Delta is entitled to under the Merger Agreement.

Such events could arise because of changes in the course of Kaival’s or Delta’s

business, a request by Kaival or Delta to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or

the occurrence of other events that would have a material adverse effect on Kaival’s or Delta’s business.

In any of such circumstances,

it would be at Kaival’s or Delta’s discretion, acting through their respective board of directors, to grant consent or waive

those rights.

The existence of the financial and personal interests of the directors of Kaival described in the preceding risk factors

may result in a conflict of interest on the part of one or more of the directors between what they may believe is best for Kaival and

its stockholders and what he or they may believe is best for themselves in determining whether or not to take the requested action.

The Company will incur

significant transaction and transition costs in connection with the Business Combination.

The Company has incurred and expect to incur significant,

non-recurring costs in connection with consummating the Business Combination, including legal, accounting, consulting, investment banking

and other fees, expenses and costs.

In addition, PubCo will incur significant costs operating as a public company following the consummation

of the Business Combination and may also incur additional costs to retain key employees.

Generally, transaction expenses incurred in connection

with the Business Combination will be paid by the party incurring those expenses, and many of those expenses might not be paid until after

Accordingly, these expenses could result in Holdings having less money following the Closing to spend on other aspects of

its business, particularly if the actual expenses turn out to be higher than anticipated.

Legal proceedings in

connection with the Business Combination, the outcomes of which are uncertain, could delay or prevent the completion of the business combination.

In connection with business combination transactions

like the proposed Business Combination, it is not uncommon for lawsuits to be filed against the parties and/or their respective directors

and officers alleging, among other things, that the proxy statement/prospectus provided to shareholders contains false and misleading

statements and/or omits material information concerning the transaction.

Although no such lawsuits have yet been filed in connection with

the Business Combination, it is possible that such actions may arise and, if they do arise, to seek, among other things, injunctive relief

and an award of attorneys’ fees and expenses.

Defending such lawsuits could require us and Delta to incur significant costs and

draw the attention of our and Delta’s management teams away from the consummation of the Business Combination and the management

of their respective businesses.

Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the Business

Combination is consummated may adversely affect Pubco’s business, financial condition, results of operations and cash flows.

legal proceedings could delay or prevent the Business Combination from being consummated within the expected timeframe.

After the Business

Combination, Pubco may be exposed to unknown or contingent liabilities and may be required to take write-downs or write-offs, restructuring

and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share

It is possible that the due diligence conducted in

relation to Kaival and Delta and their respective businesses has not identified all material issues or risks associated with Kaival and

Delta or the industries in which they compete.

Furthermore, factors outside of the parties’

control could arise later.

As a result of these factors, Pubco may be exposed to liabilities and incur additional costs and expenses and

be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses.

Even if the due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner

not consistent with the parties’ preliminary risk analysis.

If any of these risks materialize, this could have a material adverse

effect on the Pubco’s financial condition and results of operations and could contribute to negative market perceptions about Pubco’s

Due to potential fluctuations

in the market value of Pubco Ordinary Shares, Kaival stockholders cannot be sure of the market value of the consideration that they will

receive in the Business Combination.

The current shareholders of Delta (the “Delta

Shareholders”) and the Kaival stockholders are expected to own, immediately following consummation of the Business Combination,

approximately 90% (inclusive of shares to be distributed to advisors) and 10% of Holdings, respectively.

Prior to the Closing, there has not been and will

not be an established public trading market for Pubco Ordinary Shares.

The market value of Pubco Ordinary Shares will reflect the combination

of Kaival and Delta under the terms of the Business Combination.

Further, the merger consideration to be received by Kaival stockholders

will not be adjusted to reflect any changes in the number of shares of Kaival common stock outstanding, the market value of Kaival common

stock or currency exchange rates.

Changes in the price of our common stock may result

from a variety of factors, including, among others, changes in our business, operations or prospects, regulatory considerations, governmental

actions, legal proceedings and general business, market, industry, political or economic conditions.

Many of these factors are beyond

As a result, the aggregate market value of the Pubco Ordinary Shares that a Kaival stockholder is entitled to receive at

the Closing could vary significantly from the value of the equivalent shares of our common stock on the date of the Merger Agreement,

the date of this report or at other times, and Kaival stockholders will neither know nor be able to calculate the value of the merger

consideration they would receive upon the Closing.

Kaival stockholders are urged to obtain current market quotations for our common stock.

Termination of the

Merger Agreement could negatively impact Kaival.

If the Business Combination is not completed for any

reason, including as a result of Kaival stockholders declining to adopt the Merger Agreement or declining to approve the proposals required

to effect the Business Combination, the ongoing business of Kaival may be adversely impacted and, without realizing any of the anticipated

benefits of completing the Business Combination, Kaival would be subject to a number of risks, including the following:

may experience negative reactions from the financial markets, including negative impacts on our stock price (including to the extent

that the current market price reflects a market assumption that the Business Combination will be completed);

will have incurred substantial expenses and will be required to pay certain costs relating to the Business Combination, whether or

not the Business Combination is completed;

the Merger Agreement restricts the conduct of our business prior to completion of the Business Combination, we may not have been

able to take certain actions during the pendency of the Business Combination that would have benefitted it as an independent company,

and the opportunity to take such actions may no longer be available.

Risks Related to Our Business and Industry

We have a present

need for additional funding, which raises questions about our ability to continue as a going concern.

We may be unable to raise capital

when needed, which would force us to delay, reduce or eliminate aspects of our business or cause our business to fail.

October 31, 2023, we had cash and cash equivalents of only approximately $0.5 million.

We believe that based on our current operating

plan, our existing cash and cash equivalents will only be sufficient to enable us to fund our operations and our debt and other obligations

for a very limited period.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity

and Capital Resources.”

we will need significant additional funds to satisfy our outstanding payables, fund our working capital, and fully implement our business

plan as we seek to grow our revenues and ultimately achieve positive cash flow and profitability.

In addition, our ability to continue

as a going concern is adversely affected by the uncertainty surrounding Bidi’s PMTA process with FDA and outcome of Bidi petition

with the 11th Circuit Court of Appeals regarding the FDA’s January 2024 MDO relating to Classic Bidi ® Stick as well

as our negative cash flows from operations, significant recurring losses and present need for additional funding.

All of these factors

raise substantial doubt regarding our ability to continue as a going concern.

is therefore a material risk that we will be unable to generate sufficient revenues to pay our expenses, and if our existing sources of

cash and cash flows are insufficient to fund our activities, we will need to raise additional funds.

Additional equity or debt financing

may not be available on acceptable terms, if at all, particularly in the current economic environment.

If adequate funds are not available,

we may be required to delay, reduce the scope of or eliminate one or more of our new products in development.

such time, if ever, we can generate substantial product revenues, we will be required to finance our cash needs through public or private

equity offerings, debt financings and corporate collaboration and licensing arrangements.

If we elect to raise additional funds by issuing

equity securities, our stockholders may experience dilution.

Debt financing, if available, may involve agreements that include covenants

limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring

Any debt financing or additional equity that we may raise may contain terms, such as liquidation and other preferences, that

are not favorable to us or our stockholders.

If we raise additional funds through collaboration and licensing arrangements with third

parties, it may be necessary to relinquish valuable rights to our technologies, research programs or product candidates or grant licenses

on terms that may not be favorable to us.

If we are unable to generate cash

flow positive operations or achieve profitability, and if we are unable to raise additional funds on commercially reasonable terms or

at all, we may be required to significantly reduce or cease our operations, declare bankruptcy or our business could fail, which could

result in the loss to investors of their investment in our securities.

We currently rely exclusively on Bidi as the

supplier of the Bidi products that we distribute.

The loss of this relationship, or any negative impacts on Bidi’s ability to manufacture

the Bidi products, would severely harm our business.

Pursuant to the A&R Distribution

Agreement between us and Bidi, Bidi has engaged us to act as the sole distributor of the ENDS products and related components, including

the BIDI® Stick, manufactured by Bidi.

Any failure by Bidi to fulfil its obligation under the A&R Distribution Agreement could

have a material adverse effect on our revenue and operating results and operating cash flows;

and could impair the strength of our brand.

In addition, because of our dependence

on Bidi as the exclusive supplier of our products, any loss of our relationship with Bidi, or any adverse change in the financial health

of Bidi that would affect its ability to perform its obligations under the A&R Distribution Agreement, would have a material adverse

effect on our revenue, operating results, and ability to run our business.

Further, Bidi is subject to supply

shortages and interruptions, long lead times, and act-of-God events such as global pandemics, weather related catastrophes, or conflict,

any of which could disrupt the operations of Bidi and have a material adverse impact on our results of operations.

We may be unable to

identify or contract with new suppliers or producers in the event of a disruption to our supply and could experience a material adverse

effect on our revenue, operating results, and ability to run our business.

If the claims against the Company and Bidi that

have been filed with the International Trade Commission are successful, the Company and Bidi could be prohibited from importing and selling

the Bidi Stick in to the United States.

On June 11, 2024, RAI Strategic Holdings, Inc., R.J.

Reynolds Vapor Company,

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.

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;

and (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.

On July 17, 2024, the Company was dismissed from the ITC proceeding and is no longer a defendant in the ITC

No damages are recoverable in the proceedings before the ITC.

On November 1, 2024, Bidi stipulated to a consent order

prohibiting Bidi from selling for import, importing, or selling after importation the Bidi Stick.

The ITC entered the consent order

on December 6, 2024.

Our Business may permanently

suffer as a result of the ITC Complaint

As a result of the ITC Complaint, Bidi no longer imports the Bidi Stick and

we do not expect that we will have access to the Bidi Stick in the foreseeable future.

Since we have been unable to sell the Bidi Stick

our revenues have declined.

We may not ever be able to increase our revenues to the levels they were at when we were able to sell Bidi

Sticks, as a result our business may not financially recover in the near term.

We have a present need

for additional funding, which raises questions about our ability to continue as a going concern.

We may be unable to raise capital when

needed, which would force us to delay, reduce or eliminate aspects of our business or cause our business to fail.

As of October 31, 2024, we

had cash and cash equivalents of approximately $3.9 million.

We believe that based on our current operating plan, our existing cash

and cash equivalents will only be sufficient to enable us to fund our operations and other obligations for a very limited period.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Moreover, we will need significant

additional funds to satisfy our outstanding payables, fund our working capital, and fully implement our business plan as we seek to grow

our revenues and ultimately achieve positive cash flow and profitability.

In addition, our ability to continue as a going concern is adversely

affected by the uncertainty surrounding Bidi’s PMTA process with FDA and outcome of Bidi petition with the 11th Circuit Court of

Appeals regarding the FDA’s January 2024 MDO relating to Classic Bidi ® Stick as well as our negative cash flows from

operations, significant recurring losses and present need for additional funding.

All of these factors raise substantial doubt regarding

our ability to continue as a going concern.

There is therefore a material risk that we will be unable to generate sufficient

revenues to pay our expenses, and if our existing sources of cash and cash flows are insufficient to fund our activities, we will need

to raise additional funds.

Additional equity or debt financing may not be available on acceptable terms, if at all, particularly in the

current economic environment.

Until such time, if ever,

we can generate substantial product revenues, we will be required to finance our cash needs through public or private equity offerings,

debt financings and corporate collaboration and licensing arrangements.

If we elect to raise additional funds by issuing equity securities,

our stockholders may experience dilution.

Debt financing, if available, may involve agreements that include covenants limiting or restricting

our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

financing or additional equity that we may raise may contain terms, such as liquidation and other preferences, that are not favorable

to us or our stockholders.

If we raise additional funds through collaboration and licensing arrangements with third parties, it may be

necessary to relinquish valuable rights to our technologies, research programs or product candidates or grant licenses on terms that may

not be favorable to us.

If we are unable to generate cash flow positive operations

or achieve profitability, and if we are unable to raise additional funds on commercially reasonable terms or at all, we may be required

to significantly reduce or cease our operations, declare bankruptcy or our business could fail, which could result in the loss to investors

of their investment in our securities.

The terms of our agreements with Bidi, including

our A&R Distribution Agreement, may not always be as favorable to us as the terms that may be obtained by arms’ length negotiation.

We currently are, and we anticipate

that we will continue to be, substantially dependent on our relationships with our affiliated entities, including Bidi.

We believe that

our current arrangement with Bidi provides our business with stability and transparency.

Although we believe that the terms of the A&R

Distribution Agreement are as favorable to us as what we could have obtained in an arm’s length transaction, there can be no assurance

that this arrangement or any future agreements that we enter with Bidi, or any other affiliated entity, will be as favorable to us as

we may be able to negotiate with unaffiliated parties.

We currently are, and we anticipate that we will continue

to be, substantially dependent on our relationships with our affiliated entities, including Bidi.

We believe that our current arrangement

with Bidi provides our business with stability and transparency.

Although we believe that the terms of the A&R Distribution Agreement

are as favorable to us as what we could have obtained in an arm’s length transaction, there can be no assurance that this arrangement

or any future agreements that we enter with Bidi, or any other affiliated entity, will be as favorable to us as we may be able to negotiate

with unaffiliated parties.

We rely primarily on Bidi for access to our

key intellectual property rights, and any change in our relationship could adversely alter such rights or our access to them.

We currently have no intellectual

property rights other than the intellectual property assets we acquired in May 2023 from GoFire and our trademarks KAIVAL BRANDS and

We rely on the 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 the Bidi products.

We also indirectly rely on Bidi’s intellectual property rights related to the Bidi products, such as patents.

We have from time

to time considered, and discussed with Bidi, potential alterations to this arrangement, including a potential acquisition by us of all

or a portion of the intellectual property owned by Bidi and related to Bidi products.

Should we pursue such a transaction, it would be

a “related party transaction,” as defined by the listing rules of Nasdaq and, thus, subject to the review of the Audit Committee

of our Board (or, if deemed appropriate, a special Board committee comprised of disinterested directors).

Further, should we undertake

such a transaction, then we would become responsible to respond if a third-party challenged Bidi’s patents, or infringed upon such

rights, in which case our business could be materially adversely affected.

We outsource key sales and marketing and other

key functions to QuikfillRx, and the loss of this relationship would damage our business.

We conduct our sales and marketing

activities in close coordination with our consultant QuikfillRx.

Pursuant to our agreement with QuikfillRx (most recently amended in

November 2022), QuikfillRx provides key services to us.

We are therefore reliant on our relationship with QuikfillRx, and the loss of

that relationship for any reason would significantly damage our ability to operate our business.

We currently have no intellectual property rights

other than the intellectual property assets we acquired in May 2023 from GoFire and our trademarks KAIVAL BRANDS and KAIVAL LABS.

on the 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 the Bidi products.

We also indirectly rely

on Bidi’s intellectual property rights related to the Bidi products, such as patents.

We have from time to time considered, and

discussed with Bidi, potential alterations to this arrangement, including a potential acquisition by us of all or a portion of the intellectual

property owned by Bidi and related to Bidi products.

Should we pursue such a transaction, it would be a “related party transaction,”

as defined by the listing rules of Nasdaq and, thus, subject to the review of the Audit Committee of our Board (or, if deemed appropriate,

a special Board committee comprised of disinterested directors).

Further, should we undertake such a transaction, then we would become

responsible to respond if a third-party challenged Bidi’s patents, or infringed upon such rights, in which case our business could

be materially adversely affected.

We have a limited operating history, and our

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the ENDS industry, makes it difficult to predict our future business prospects and financial performance.

Our current business model is

relatively new, and so business and prospects may be difficult to evaluate.

Our limited operating history makes it difficult to evaluate

both our operating history and our future potential.

We have yet to demonstrate a consistent ability to generate revenue, and are still

subject to many of the risks common to early-stage companies operating in the nicotine and non-nicotine delivery system products sector,

including the uncertainty as to our ability to implement our business plan, market acceptance of business plan, under-capitalization,

cash shortages, limitations with respect to personnel, financing and other resources and uncertainty of our ability to generate revenues.

There is therefore a significant risk that our activities will not result in any material revenues or profit, and the likelihood of our

business viability and long-term prospects must be considered in light of the stage of our development.

There can be no assurance that

we will be able to fulfill our stated business strategy and plans, or that financial, technological, market, or other limitations may

force us to modify, alter, significantly delay, or significantly impede the implementation of such plans.

We have insufficient results

of operations in our current business model for investors to use to identify historical trends.

Investors should consider our prospects

considering the risk, expenses and difficulties we will encounter as an early-stage company.

Our revenue and income potential is unproven

and our business model is continually evolving.

We are therefore subject to the risk that we will be unable to address these risks, and

our inability to address these risks could lead to the failure of our business.

Our current business model is relatively new, and

so business and prospects may be difficult to evaluate.

Our limited operating history makes it difficult to evaluate both our operating

history and our future potential.

We have yet to demonstrate a consistent ability to generate revenue, and are still subject to many of

the risks common to early-stage companies operating in the nicotine and non-nicotine delivery system products sector, including the uncertainty

as to our ability to implement our business plan, market acceptance of business plan, under-capitalization, cash shortages, limitations

with respect to personnel, financing and other resources and uncertainty of our ability to generate revenues.

There is therefore a significant

risk that our activities will not result in any material revenues or profit, and the likelihood of our business viability and long-term

prospects must be considered in light of the stage of our development.

There can be no assurance that we will be able to fulfill our stated

business strategy and plans, or that financial, technological, market, or other limitations may force us to modify, alter, significantly

delay, or significantly impede the implementation of such plans.

We have insufficient results of operations in our current business model

for investors to use to identify historical trends.

Investors should consider our prospects considering the risk, expenses and difficulties

we will encounter as an early-stage company.

Our revenue and income potential is unproven and our business model is continually evolving.

We are therefore subject to the risk that we will be unable to address these risks, and our inability to address these risks could lead

to the failure of our business.

Our business is rapidly evolving and is particularly

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flavored BIDI® Sticks is denied or delayed.

The ENDS industry is relatively

new and is rapidly evolving, and the FDA has been aggressive in its oversight of the ENDS industry.

Changes in existing laws, regulations

and policies and the issuance of new laws, regulations, policies, as well as the FDA’s actions on ENDS-related PMTAs (including

Bidi’s) and any other entry barriers in relation to the ENDS industry may materially and adversely affect our ability to conduct

business and our results of operations.

Bidi was among the many companies

that received a MDO for its non-tobacco flavored BIDI ® Sticks.

The ENDS industry is relatively new and is rapidly

evolving, and the FDA has been aggressive in its oversight of the ENDS industry.

Changes in existing laws, regulations and policies and

the issuance of new laws, regulations, policies, as well as the FDA’s actions on ENDS-related PMTAs (including Bidi’s) and

any other entry barriers in relation to the ENDS industry may materially and adversely affect our ability to conduct business and our

results of operations.

Bidi was among the many companies that received a MDO for its non-tobacco flavored

BIDI ® Sticks.

On August 23, 2022, the U.S.

Court of Appeals for the Eleventh

Circuit set aside (i.e., vacated) the MDO issued to the non-tobacco flavored BIDI® Sticks and remanded Bidi’s PMTA back to

FDA for further review.

Specifically, the Court held that the MDO was “arbitrary and capricious” in violation of the Administrative

Procedure Act (“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 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 the 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 an 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.

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

In the meantime, Bidi has been

able to continue marketing and selling the non-tobacco flavored BIDI® Sticks, subject to FDA’s enforcement discretion, for

the duration of the PMTA scientific review.

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 risk of FDA enforcement is low.

However, there is a risk that Bidi’s PMTA for non-tobacco flavored

BIDI® Sticks will be denied, which would have a significant adverse affect on our business and could lead to our bankruptcy or the

failure of our business entirely.

Separately, on or about May 13,

2022, FDA placed the tobacco-flavored Classic BIDI® Stick into the final Phase III scientific review.

In March 2023, FDA issued a

deficiency letter regarding the Classic BIDI® Stick PMTA, to which Bidi submitted a timely response in June 2023.

Subsequently, on

January 22, 2024, FDA issued a MDO for the Classic BIDI® Stick, which Bidi is contesting via a petition for review with the 11 th

The January 2024 MDO regarding Classic BIDI® Stick has had an adverse impact on our business, and the outcome of Bidi’s

11 th Circuit petition is uncertain and will likely take many months or longer to resolve.

Our continuing inability to sell

Classic BIDI® Stick could continue to cause material impediments to our ability to operate our business and cause a material adverse

affect on our results of operations.

Court of Appeals for the Eleventh Circuit set aside (i.e., vacated) the MDO

issued to the non-tobacco flavored BIDI® Sticks and remanded Bidi’s PMTA back to FDA for further review.

However, there is a risk that Bidi’s PMTA for non-tobacco flavored BIDI® Sticks will be

denied, which would have a significant adverse effect on our business and could lead to our bankruptcy or the failure of our business

Separately, on or about May 13, 2022, FDA placed the

tobacco-flavored Classic BIDI® Stick into the final Phase III scientific review.

In March 2023, FDA issued a deficiency letter regarding

the Classic BIDI® Stick PMTA, to which Bidi submitted a timely response in June 2023.

Subsequently, on January 22, 2024, FDA issued

a MDO for the Classic BIDI® Stick.

On January 26, 2024, Bidi filed a petition for review of the MDO with the 11 th Circuit

Court of Appeals, followed by a motion to stay the MDO.

Bidi is arguing, among other things, that the MDO was arbitrary and capricious

in violation of the Administrative Procedure Act.

On February 2, 2024, Bidi filed a Time Sensitive Motion for a Stay Pending Review, which

the court denied on February 18, 2024.

The case is now proceeding on the merits, with Bidi’s opening merits brief filed on April

FDA filed its response brief on June 7, 2024, and Bidi filed its reply brief on July 29, 2024.

The 11 th Circuit has

indicated that the oral argument will be held in April 2025.

The Company cannot provide any assurances as to the timing or outcome.

the MDO is ultimately remanded by the 11 th Circuit, the Classic BIDI® Stick is considered an adulterated tobacco product

the continued marketing and distribution of which is prohibited.

If it is determined or perceived that the usage

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affect our business, financial condition, and results of operations.

Negative publicity on the health

consequences of ENDS products or other similar devices may also adversely affect the usage of ENDS products.

For example, the FDA and

the United States Centers for Disease Control and Prevention (“CDC”) issued a joint statement on August 30, 2019, linking

a number of cases of respiratory illnesses to ENDS product use.

On November 8, 2019, the CDC announced that it had preliminarily linked

cases of severe respiratory illness to the presence of Vitamin E acetate, which was found in certain Tetrahydrocannabinol (THC)-containing

ENDS cartridges for non-electronic nicotine delivery systems (non-ENDS) products that may have been obtained illegally.

However, evidence

is not sufficient to rule out the contribution of other chemicals of concern, including chemicals in either THC or non-THC products (THC

is the principal psychoactive constituent of cannabis) .

In January 2020,

after further research, the FDA and CDC recommended against the use of THC-containing ENDS products, especially those from unofficial

sources, and that the underage, pregnant women and adults who do not currently use tobacco products should not start using ENDS products.

On February 25, 2020, the CDC issued a final update, stating that the number of cases of severe respiratory illnesses had declined to

single digits as of February 9, 2020.

The CDC also reconfirmed that (i) Vitamin E acetate, which was found in some THC-containing ENDS

cartridges for non-ENDS ENDS products that were mostly obtained illegally, was strongly linked to and indicated to be the primary cause

of the severe respiratory illnesses, and (ii) THC-containing ENDS products from informal sources were linked to most cases of severe respiratory

Furthermore, there have been recent claims that users of ENDS products may suffer a greater risk of more serious COVID-19 complications.

However, it remains unclear whether the exposure to toxic chemicals through ENDS product usage will increase the risk of COVID-19.

Research regarding the actual

causes of these illnesses is still ongoing.

If ENDS product usage is determined or perceived to pose long-term health risks or to be

linked to illnesses, the usage of ENDS products may significantly decline, which would have a material adverse effect on our business,

financial condition, and results of operations.

Although we currently do not offer products containing THC, any perceived correlation

between THC and Vitamin E acetate may adversely affect the public’s perception of ENDS products in general, regardless of whether

such products contain THC and/or Vitamin E.

Negative publicity on the health consequences of ENDS

products or other similar devices may also adversely affect the usage of ENDS products.

For example, the FDA and the United States Centers

for Disease Control and Prevention (“CDC”) issued a joint statement on August 30, 2019, linking a number of cases of respiratory

illnesses to ENDS product use.

On November 8, 2019, the CDC announced that it had preliminarily linked cases of severe respiratory illness

to the presence of Vitamin E acetate, which was found in certain Tetrahydrocannabinol (THC)-containing ENDS cartridges for non-electronic

nicotine delivery systems (non-ENDS) products that may have been obtained illegally.

However, evidence is not sufficient to rule out the

contribution of other chemicals of concern, including chemicals in either THC or non-THC products (THC is the

principal psychoactive constituent of cannabis) .

In January 2020, after further research, the FDA and CDC recommended against the

use of THC-containing ENDS products, especially those from unofficial sources, and that the underage, pregnant women and adults who do

not currently use tobacco products should not start using ENDS products.

On February 25, 2020, the CDC issued a final update, stating

that the number of cases of severe respiratory illnesses had declined to single digits as of February 9, 2020.

The CDC also reconfirmed

that (i) Vitamin E acetate, which was found in some THC-containing ENDS cartridges for non-ENDS ENDS products that were mostly obtained

illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) THC-containing ENDS

products from informal sources were linked to most cases of severe respiratory illnesses.

Furthermore, there have been recent claims that

users of ENDS products may suffer a greater risk of more serious COVID-19 complications.

However, it remains unclear whether the exposure

to toxic chemicals through ENDS product usage will increase the risk of COVID-19.

Research regarding the actual causes of these illnesses

is still ongoing.

If ENDS product usage is determined or perceived to pose long-term health risks or to be linked to illnesses, the usage

of ENDS products may significantly decline, which would have a material adverse effect on our business, financial condition, and results

of operations.

Although we currently do not offer products containing THC, any perceived correlation between THC and Vitamin E acetate

may adversely affect the public’s perception of ENDS products in general, regardless of whether such products contain THC and/or

We do not expect the assets acquired from GoFire

will generate immediate revenue for us, and we may never be able to develop these assets into revenue generating products.

We purchased a certain vaporizer

and inhalation-related patent portfolio from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence

We do not expect that the acquired assets will generate immediate revenue for us.

While we will seek to monetize the acquired

intellectual property, including through third-party licensing opportunities, we can give no assurances at this time that either (i) the

patent applications we acquired will result in issued patents or (ii) we will be able to successfully monetize these assets.

to capitalize on our GoFire assets would materially impair our strategy of diversifying our product offerings, leaving us even more reliant

on the products we distribute for Bidi.

We purchased a certain vaporizer and inhalation-related

patent portfolio from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence on Bidi.

We do not expect

that the acquired assets will generate immediate revenue for us.

While we will seek to monetize the acquired intellectual property, including

through third-party licensing opportunities, we can give no assurances at this time that either (i) the patent applications we acquired

will result in issued patents or (ii) we will be able to successfully monetize these assets.

Our failure to capitalize on our GoFire assets

would materially impair our strategy of diversifying our product offerings, leaving us even more reliant on the products we distribute

We may not be successful in maintaining the

consumer brand recognition and loyalty of our products and face intense competition and may fail to compete effectively.

We compete in a market that relies

on innovation and the ability to react to evolving consumer preferences and, thus, are subject to significant competition in the ENDS

market, and larger tobacco industry and compete against companies in such market and industry that have access to significant resources

in terms of technology, relationships with suppliers and distributors and access to cash flow and financial markets.

Consumer perceptions of the overall

safety of tobacco, nicotine, cannabis, and hemp/CBD-related products is likely to continue to shift, and our success depends, in part,

on our ability to anticipate these shifting tastes and the rapidity with which the markets in which we compete will evolve in response

to these changes on a timely and affordable basis.

If we are unable to respond effectively and efficiently to changing consumer preferences,

the demand for our products may decline, which could have a material adverse effect on our business, results of operations, and financial

Regulations may be enacted in

the future, particularly considering increasing restrictions on the form and content of marketing of tobacco products, that would make

it more difficult to appeal to our consumers or to leverage existing recognition of the Bidi brand, or other brands that we own or license

in the future.

Furthermore, even if we can continue to distinguish our products, there can be no assurance that the sales, marketing,

and distribution efforts of our competitors will not be successful in persuading consumers of our products to switch to their products.

Many of our competitors have greater access to resources than we do, which better positions them to conduct market research in relation

to branding strategies or to launch costly marketing campaigns.

Any loss of consumer brand loyalty to our products or reduction of our

ability to effectively brand our products in a recognizable way will have a material effect on our ability to continue to sell our products

and maintain our market share, which could have a material adverse effect on our business, results of operations, and financial condition.

The competitive environment and

our competitive position are also significantly influenced by economic conditions, the state of consumer confidence, competitors’

introduction of low-priced products or innovative products, higher taxes, higher absolute prices, and larger gaps between price categories

and product regulation that diminishes the consumer’s ability to differentiate tobacco products.

Due to the impact of these factors,

as well as higher state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly

price competitive.

As we seek to adapt to the price competitive environment, our competitors that are better capitalized may be able

to sustain price discounts for long periods of time by spreading the loss across their expansive portfolios, with which we are not positioned

“Big tobacco” has

also established its presence in the ENDS market and has begun to make investments in the alternative space.

There can be no assurance

that our products will be able to compete successfully against these companies or any of our other competitors, some of which have far

greater resources, capital, experience, market penetration, sales and distribution channels than do we.

We compete in a market that relies on innovation and

the ability to react to evolving consumer preferences and, thus, are subject to significant competition in the ENDS market, and larger

tobacco industry and compete against companies in such market and industry that have access to significant resources in terms of technology,

relationships with suppliers and distributors and access to cash flow and financial markets.

Consumer perceptions of the overall safety of tobacco,

nicotine, cannabis, and hemp/CBD-related products is likely to continue to shift, and our success depends, in part, on our ability to

anticipate these shifting tastes and the rapidity with which the markets in which we compete will evolve in response to these changes

on a timely and affordable basis.

If we are unable to respond effectively and efficiently to changing consumer preferences, the demand

for our products may decline, which could have a material adverse effect on our business, results of operations, and financial condition.

Regulations may be enacted in the future, particularly

considering increasing restrictions on the form and content of marketing of tobacco products, that would make it more difficult to appeal

to our consumers or to leverage existing recognition of the Bidi brand, or other brands that we own or license in the future.

even if we can continue to distinguish our products, there can be no assurance that the sales, marketing, and distribution efforts of

our competitors will not be successful in persuading consumers of our products to switch to their products.

Many of our competitors have

greater access to resources than we do, which better positions them to conduct market research in relation to branding strategies or to

launch costly marketing campaigns.

Any loss of consumer brand loyalty to our products or reduction of our ability to effectively brand

our products in a recognizable way will have a material effect on our ability to continue to sell our products and maintain our market

share, which could have a material adverse effect on our business, results of operations, and financial condition.

The competitive environment and our competitive position

are also significantly influenced by economic conditions, the state of consumer confidence, competitors’ introduction of low-priced

products or innovative products, higher taxes, higher absolute prices, and larger gaps between price categories and product regulation

that diminishes the consumer’s ability to differentiate tobacco products.

Due to the impact of these factors, as well as higher

state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly price competitive.

As we seek to adapt to the price competitive environment, our competitors that are better capitalized may be able to sustain price discounts

for long periods of time by spreading the loss across their expansive portfolios, with which we are not positioned to compete.

“Big tobacco” has also established its

presence in the ENDS market and has begun to make investments in the alternative space.

There can be no assurance that our products will

be able to compete successfully against these companies or any of our other competitors, some of which have far greater resources, capital,

experience, market penetration, sales and distribution channels than do we.

Our distribution efforts rely in part on our

ability to leverage relationships with large retailers and national chains.

Our distribution efforts rely

in part on our ability to leverage relationships with large retailers and national chains to sell and promote our products, which is

dependent upon the strength of the Bidi brand name and, in the future, any brand names that we may own or license, and our salesforce

effectiveness.

To maintain these relationships, we must continue to supply products that will bring steady business to these retailers

and national chains.

We may not be able to sustain these relationships or establish other relationships with such entities, which could

have a material adverse effect on our ability to execute our branding strategies, our ability to access the end-user markets with our

products, or our ability to maintain our relationships with the manufacturer and sub-distributors of our products.

For example, if we

are unable to meet benchmarking provisions in certain of our contracts or if we are unable to maintain and leverage our retail relationships

on a scale sufficient to make us an attractive distributor, it would have a material adverse effect on our ability to act as sole distributor

for Bidi, and on our business, results of operations and financial condition.

In addition, there are factors

beyond our control that may prevent us from leveraging existing relationships, such as industry consolidation.

If we are unable to develop

and sustain relationships with large retailers and national chains or are unable to leverage those relationships due to factors such

as a decline in the role of brick-and-mortar retailers in the North American economy, our capacity to maintain and grow brand and product

recognition and increase sales volume will be significantly undermined.

In such an event, we may ultimately be forced to pursue and rely

on local and more fragmented sales channels, which will have a material adverse effect on our business, results of operations and financial

Our distribution efforts rely in part on our ability

to leverage relationships with large retailers and national chains to sell and promote our products, which is dependent upon the strength

of the Bidi brand name and, in the future, any brand names that we may own or license, and our salesforce effectiveness.

To maintain these

relationships, we must continue to supply products that will bring steady business to these retailers and national chains.

be able to sustain these relationships or establish other relationships with such entities, which could have a material adverse effect

on our ability to execute our branding strategies, our ability to access the end-user markets with our products, or our ability to maintain

our relationships with the manufacturer and sub-distributors of our products.

For example, if we are unable to meet benchmarking provisions

in certain of our contracts or if we are unable to maintain and leverage our retail relationships on a scale sufficient to make us an

attractive distributor, it would have a material adverse effect on our ability to act as sole distributor for Bidi, and on our business,

results of operations and financial condition.

In addition, there are factors beyond our control

that may prevent us from leveraging existing relationships, such as industry consolidation.

If we are unable to develop and sustain relationships

with large retailers and national chains or are unable to leverage those relationships due to factors such as a decline in the role of

brick-and-mortar retailers in the North American economy, our capacity to maintain and grow brand and product recognition and increase

sales volume will be significantly undermined.

In such an event, we may ultimately be forced to pursue and rely on local and more fragmented

sales channels, which will have a material adverse effect on our business, results of operations and financial condition.

Competition from illicit sources may have an

adverse effect on our overall sales volume, restricting the ability to increase selling prices and damaging brand equity.

trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products, and locally manufactured products on which

applicable taxes or regulatory requirements are evaded, represent a significant and growing threat to the legitimate tobacco industry

and significant, and unfair, competition that we are faced with.

Moreover, factors such as increasing tax regimes, regulatory restrictions,

and compliance requirements are encouraging more consumers to switch to

illegal, cheaper tobacco-related products, and providing greater rewards for smugglers.

All of these factors based on illicit trade has

had and may continue to have an adverse effect on our overall sales volume, may restrict the ability to increase selling prices, damage

our brand equity, and may lead to commoditization of our products.

If we are unable to manage the risks posed by illicit competition,

our results of operation and overall business may suffer.

Illicit trade and tobacco trafficking in the form

of counterfeit products, smuggled genuine products, and locally manufactured products on which applicable taxes or regulatory requirements

are evaded, represent a significant and growing threat to the legitimate tobacco industry and significant, and unfair, competition that

we are faced with.

Moreover, factors such as increasing tax regimes, regulatory restrictions, and compliance requirements are encouraging

more consumers to switch to illegal, cheaper tobacco-related products, and providing greater rewards for smugglers.

All of these factors

based on illicit trade have had and may continue to have an adverse effect on our overall sales volume, may restrict the ability to increase

selling prices, damage our brand equity, and may lead to commoditization of our products.

If we are unable to manage the risks posed by

illicit competition, our results of operation and overall business may suffer.

Our products are regulated by the FDA, which has broad regulatory

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jurisdictions.

Tobacco products, premium cigarette

papers, and tubes have long been subject to substantial federal, state, and local excise taxes.

Such taxes have frequently been increased

or proposed to be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage.

Since 1986, smokeless products have been subject to federal excise tax.

Federally, smokeless products are taxed by weight (in pounds

or fractional parts thereof) manufactured or imported.

Any increases in tobacco-related taxes may materially adversely affect the demand

for our products.

The market for ENDS products is subject to

a great deal of uncertainty and is still evolving.

ENDS products, having recently

been introduced to market over the past 10 to 15 years, are at a relatively early stage of development, and represent core components

of a market that is evolving rapidly, highly regulated, and characterized by a number of market participants.

Rapid growth in the use

of, and interest in, ENDS products is recent, and may not continue on a lasting basis.

The demand and market acceptance for these products

is subject to a high level of uncertainty.

Therefore, we are subject to all the business risks associated with a new enterprise in an

evolving market.

For example, ENDS products that

are non-tobacco flavored continue to face the threat of prohibition at the local level, as many state and local authorities and attorneys

general push for bans or request the FDA to deny a PMTA for flavored ENDS.

To date, at least four states have banned the sale of flavored

ENDS (e.g., New York, New Jersey, Rhode Island, and Massachusetts), with several more considering similar bans (e.g., Maryland, California,

and Connecticut).

As the September 9, 2021, PMTA review deadline has now passed, the FDA has implemented a de facto ban of non-tobacco

flavored ENDS by denying over 99% of pending applications, while issuing zero marketing authorizations for non-tobacco flavored ENDS.

If flavors are ultimately prohibited

to be sold by Bidi in the United States, the use of ENDS products may decline significantly, which may materially and adversely affect

our business, financial condition, and results of operations.

Continued evolution, uncertainty, and the resulting increased risk of failure

of our new and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market

share and on our business, results of operations and financial condition.

Some of our product offerings through Bidi

are subject to developing and unpredictable regulation.

Our products are sold through

our distribution network and may be subject to uncertain and evolving federal, state, and local regulations, including hemp, non-THC

cannabidiol (CBD) and other non-tobacco consumable products.

Enforcement initiatives by those authorities are therefore unpredictable

and impossible to anticipate.

We anticipate that all levels of government, which have not already done so, are likely to seek in some

way to regulate these products, but the type, timing, and impact of such regulations remains uncertain.

These regulations include or

could include restrictions including prohibitions on certain form factors, such as smokable hemp products, or age restrictions.

26, 2023, The FDA announced that it would not initiate rulemaking to regulate CBD as a dietary food ingredient.

Rather, after careful

review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD

products with the regulatory oversight needed to manage risks.

The FDA further indicated that it is prepared to work with Congress on

Accordingly, we cannot give any assurance that such actions would not have a material adverse effect on this emerging business.

Significant increases in state

and local regulation of our products have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

The Prevent All Cigarette Trafficking (or PACT) Act, which went into effect in June 2010, amended the Jenkins Act and initially only

applied to the sales of cigarettes, roll-your-own tobacco, and smokeless tobacco.

Specifically, the PACT Act regulates the sale, transfer,

or shipment of these products for both business-to-business transactions as well as “delivery sales,” which are defined as

any sale of cigarettes, roll-your-own tobacco, or smokeless tobacco where the consumer orders the product remotely and prohibits such

deliveries through the U.S.

Tobacco products, premium cigarette papers, and tubes

have long been subject to substantial federal, state, and local excise taxes.

Such taxes have frequently been increased or proposed to

be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage.

smokeless products have been subject to federal excise tax.

Federally, smokeless products are taxed by weight (in pounds or fractional

parts thereof) manufactured or imported.

Any increases in tobacco-related taxes may materially adversely affect the demand for our products.

The market for ENDS products is subject to a

great deal of uncertainty and is still evolving.

ENDS products, having recently been introduced to

market over the past 10 to 15 years, are at a relatively early stage of development, and represent core components of a market that is

evolving rapidly, highly regulated, and characterized by a number of market participants.

Rapid growth in the use of, and interest in,

ENDS products is recent, and may not continue on a lasting basis.

The demand and market acceptance for these products is subject to a

high level of uncertainty.

Therefore, we are subject to all the business risks associated with a new enterprise in an evolving market.

For example, ENDS products that are non-tobacco flavored

continue to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans

or request the FDA to deny a PMTA for flavored ENDS.

To date, at least nine states, including the District of Columbia, have banned the

sale of flavored ENDS (e.g., California, Massachusetts, Illinois, New Jersey, New York, Rhode Island, and Utah), with several more considering

similar bans (e.g., Maryland and Connecticut).

As the September 9, 2021, PMTA review deadline has now passed, the FDA has implemented

a de facto ban of non-tobacco flavored ENDS by denying over 99% of pending applications, while issuing marketing authorizations for only

two non-tobacco flavored (menthol) ENDS.

If flavors are ultimately prohibited to be sold by

Bidi in the United States, the use of ENDS products may decline significantly, which may materially and adversely affect our business,

financial condition, and results of operations.

Continued evolution, uncertainty, and the resulting increased risk of failure of our new

and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market share and

on our business, results of operations and financial condition.

Some of our product offerings through Bidi are

subject to developing and unpredictable regulation.

Our products are sold through our distribution network

and may be subject to uncertain and evolving federal, state, and local regulations, including hemp, non-THC cannabidiol (CBD) and other

non-tobacco consumable products.

Enforcement initiatives by those authorities are therefore unpredictable and impossible to anticipate.

We anticipate that all levels of government, which have not already done so, are likely to seek in some way to regulate these products,

but the type, timing, and impact of such regulations remains uncertain.

These regulations include or could include restrictions including

prohibitions on certain form factors, such as smokable hemp products, or age restrictions.

On January 26, 2023, The FDA announced that

it would not initiate rulemaking to regulate CBD as a dietary food ingredient.

Rather, after careful review, the FDA has concluded that

a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight

needed to manage risks.

The FDA further indicated that it is prepared to work with Congress on this matter.

Accordingly, we cannot give

any assurance that such actions would not have a material adverse effect on this emerging business.

Significant increases in state and local regulation

of our products have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions.

All Cigarette Trafficking (or PACT) Act, which went into effect in June 2010, amended the Jenkins Act and initially only applied to the

sales of cigarettes, roll-your-own tobacco, and smokeless tobacco.

Specifically, the PACT Act regulates the sale, transfer, or shipment

of these products for both business-to-business transactions as well as “delivery sales,” which are defined as any sale of

cigarettes, roll-your-own tobacco, or smokeless tobacco where the consumer orders the product remotely and prohibits such deliveries through

Postal Service (or USPS), except in certain circumstances ( e.g., business-to-business deliveries).

Under the enactment of the Preventing

Online Sales of E-Cigarettes to Children Act (part of the larger 2021 Consolidated Appropriations Act), effective March 27, 2021, the

definition of “cigarettes” in the PACT Act was amended to include ENDS, which is defined as “any electronic device

that, through an aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device,”

including “an e-cigarette;

Under the enactment of the Preventing Online Sales

of E-Cigarettes to Children Act (part of the larger 2021 Consolidated Appropriations Act), effective March 27, 2021, the definition of

“cigarettes” in the PACT Act was amended to include ENDS, which is defined as “any electronic device that, through an

aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device,” including “an

an advanced refillable personal vaporizer;

an electronic pipe;

and any component, liquid, part, or accessory of a device described above, without regard to whether the component, liquid, part, or

accessory is sold separately from the device.” As such, delivery sales of the BIDI ® Stick are subject to the PACT

The PACT Act requires all sellers

to register with the ATF, as well as the tobacco tax administrators of the states into which a shipment is made or in which an advertisement

or offer is disseminated.

Delivery sellers who ship cigarettes (including ENDS) or smokeless tobacco to consumers are further required

to label packages as containing tobacco, verify the age, and identity of the customer at purchase, use a delivery method (other than

through the USPS) that checks ID and obtains adult customer signature at delivery, and maintain records of delivery sales for a period

of four years after the date of sale, among other things.

Delivery sellers are also required to file a monthly report with the state

tobacco tax administrator and any other local or tribal entity that taxes the sale of the products.

Such reports must include the name

and address of the persons delivering and receiving the shipment and the brand and quantity of the “cigarettes” that were

These requirements apply to all sales, including sales to consumers and sales between businesses.

In addition to the de facto FDA

flavor ban that has resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tobacco flavored continue

to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans or request

the FDA to deny PMTAs for flavored ENDS.

To date, at least four states have banned the sale of flavored ENDS (e.g., New York, New Jersey,

Rhode Island, and Massachusetts), with several more considering similar bans (e.g., Maryland, California, and Connecticut).

and any component, liquid,

part, or accessory of a device described above, without regard to whether the component, liquid, part, or accessory is sold separately

from the device.” As such, delivery sales of the BIDI ® Stick are subject to the PACT Act.

The PACT Act requires all sellers to register with

the ATF, as well as the tobacco tax administrators of the states into which a shipment is made or in which an advertisement or offer is

disseminated.

Delivery sellers who ship cigarettes (including ENDS) or smokeless tobacco to consumers are further required to label packages

as containing tobacco, verify the age, and identity of the customer at purchase, use a delivery method (other than through the USPS) that

checks ID and obtains adult customer signature at delivery, and maintain records of delivery sales for a period of four years after the

date of sale, among other things.

Delivery sellers are also required to file a monthly report with the state tobacco tax administrator

and any other local or tribal entity that taxes the sale of the products.

Such reports must include the name and address of the persons

delivering and receiving the shipment and the brand and quantity of the “cigarettes” that were shipped.

These requirements

apply to all sales, including sales to consumers and sales between businesses.

In addition to the de facto FDA flavor ban that has

resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tobacco flavored continue to face the threat

of prohibition at the local level, as many state and local authorities and attorneys general push for bans or request the FDA to deny

PMTAs for flavored ENDS.

To date, at least nine states, including the District of Columbia, have banned the sale of flavored ENDS (e.g.,

California, Massachusetts, Illinois, New Jersey, New York, Rhode Island, and Utah), with several more considering similar bans (e.g.,

Maryland and Connecticut)

Our supply to our wholesalers and retailers

is dependent on the demands of their customers who are sensitive to increased sales taxes and economic conditions affecting their disposable

Consumer purchases of tobacco

products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of

consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic

Discretionary consumer purchases, such as the BIDI ® Stick, may decline during recessionary periods or at other

times when disposable income is lower, and taxes may be higher.

Consumer purchases of tobacco products are historically

affected by economic conditions, such as changes in employment, salary and wage levels, the availability of consumer credit, inflation,

interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic conditions.

Discretionary

consumer purchases, such as the BIDI ® Stick, may decline during recessionary periods or at other times when disposable

income is lower, and taxes may be higher.

We may be subject to increasing international

control and regulation.

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 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.

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 by the FCTC.

Regulatory initiatives that have been proposed, introduced or

enacted include:

Regulatory initiatives that have been proposed, introduced or enacted

the levying of substantial

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of our own or Bidi’s control, such as the impact of epidemics, political changes, or natural disasters.

Our business could be adversely

affected by the effects of epidemics, political changes, wars or natural disasters.

World economies and capital markets have been adversely

impacted by COVID-19 and its variants, the Ukraine-Russia conflict, the recent eruption of hostilities in Israel and Gaza and political

instability in the United States and elsewhere.

The lasting impacts of these matters on the United States and broader global economy,

including supply chain disruption, may have a significant continuing negative effect on our company and may continue to materially impact

our company, our ability to conduct business, our financial condition and results of operations.

Reliance on information technology means a

significant disruption could affect our communications and operations.

We increasingly rely on information

technology systems for our internal communications, controls, reporting and relations with customers and suppliers, and information technology

is becoming a significantly important tool for our sales staff.

In addition, our reliance on information technology exposes us to cyber-security

risks, which could have a material adverse effect on our ability to compete.

Security and privacy breaches may expose us to liability

and cause us to lose customers or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout

Our business could be adversely affected by the effects

of epidemics, political changes, wars or natural disasters.

World economies and capital markets have been adversely impacted by COVID-19

and its variants, the Ukraine-Russia conflict, the recent eruption of hostilities in Israel and Gaza and political instability in the

United States and elsewhere.

The lasting impacts of these matters on the United States and broader global economy, including supply chain

disruption, may have a significant continuing negative effect on our company and may continue to materially impact our company, our ability

to conduct business, our financial condition and results of operations.

Reliance on information technology means a significant

disruption could affect our communications and operations.

We increasingly rely on information technology systems

for our internal communications, controls, reporting and relations with customers and suppliers, and information technology is becoming

a significantly important tool for our sales staff.

In addition, our reliance on information technology exposes us to cyber-security risks,

which could have a material adverse effect on our ability to compete.

Security and privacy breaches may expose us to liability and cause

us to lose customers or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout our

The failure of our information systems to function as intended, or the penetration by outside parties’ intent on disrupting

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to liability and cause us to lose customers.

Federal and state laws require

us to safeguard our wholesalers’, retailers’, and consumers’ financial information, including credit information.

we have established security procedures to protect against identity theft and the theft of our customers’ financial information,

our security and testing measures may not prevent security breaches.

We cannot guarantee that a future breach will not result in material

liability or otherwise harm to our business.

In the event of any such breach, we may be required to notify governmental authorities or

consumers under breach disclosure laws, indemnify consumers, or other third parties for losses resulting from the breach, and expend

resources investigating and remediating any vulnerabilities that contributed to the occurrence of the breach.

We rely on third-party

technology to safeguard the security of sensitive information in our possession.

Advances in computer capabilities, new discoveries in

the field of cryptography, inadequate facility security or other developments may result in a compromise or breach of the technology

used by us to protect customer data.

Any compromise of our security, even a security breach that does not result in a material liability

could harm our reputation and, therefore, our business and financial condition.

In addition, a party who can circumvent our security

measures or exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information, cause

interruptions in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions.

Actual or perceived vulnerabilities may lead to claims against us.

Any insurance coverage that we obtain to cover such risks may be insufficient

to cover all claims or losses.

To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject

to litigation or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

Federal and state laws require us to safeguard our

wholesalers’, retailers’, and consumers’ financial information, including credit information.

Although we have established

security procedures to protect against identity theft and the theft of our customers’ financial information, our security and testing

measures may not prevent security breaches.

We cannot guarantee that a future breach will not result in material liability or otherwise

harm to our business.

In the event of any such breach, we may be required to notify governmental authorities or consumers under breach

disclosure laws, indemnify consumers, or other third parties for losses resulting from the breach, and expend resources investigating

and remediating any vulnerabilities that contributed to the occurrence of the breach.

We rely on third-party technology to safeguard the

security of sensitive information in our possession.

Advances in computer capabilities, new discoveries in the field of cryptography and

quantum computing, inadequate facility security or other developments may result in a compromise or breach of the technology used by us

to protect customer data.

Any compromise of our security, even a security breach that does not result in a material liability could harm

our reputation and, therefore, our business and financial condition.

In addition, a party who can circumvent our security measures or

exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information, cause interruptions

in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions.

Actual or perceived

vulnerabilities may lead to claims against us.

Any insurance coverage that we obtain to cover such risks may be insufficient to cover

all claims or losses.

To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation

or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

We may fail to manage our growth.

We have grown significantly in

a short amount of time and intend to continue to grow in the future.

However, any future growth will place additional demands on our

resources, and we cannot be sure we will be able to manage our growth effectively.

If we are unable to manage our growth while expanding

the distribution of our products and increasing profit margins, or if new systems that we implement to assist in managing our growth

do not produce the expected benefits, our business, financial position, results of operations and cash flows could be adversely affected.

We may not be able to support, financially or otherwise, future growth, or hire, train, motivate and manage the required personnel.

failure to manage growth effectively could also limit our ability to achieve our goals as they relate to streamlined sales, marketing

and distribution operations and the ability to achieve certain financial metrics.

In our early years we had opportunities to grow significantly in a short

amount of time and we intended to continue that growth in the future.

However, our future growth has been placed on hold with additional

constraints and demand for our resources, and we cannot be sure we will be able to manage an acceptable growth effectively as we did in

our early years.

If we are unable to manage our growth while expanding the distribution of our products and increasing profit margins,

or if new systems that we implement to assist in managing our growth do not produce the expected benefits, our business, financial position,

results of operations and cash flows could be adversely affected.

We may not be able to support, financially or otherwise, future growth,

or hire, train, motivate and manage the required personnel.

Our failure to manage growth effectively could also limit our ability to achieve

our goals as they relate to streamlined sales, marketing and distribution operations and the ability to achieve certain financial metrics.

We are subject to fluctuations in our results

that make it difficult to track trends and develop strategies in the short term.

In response to competitor actions

and pricing pressures, we have engaged in significant use of promotional and sales incentives.

We regularly review the results of our

promotional spending activities and adjust our promotional spending programs to maintain our competitive position as well as to confirm

compliance with our adult-focused marketing policies.

Accordingly, unit sales volume and sales promotion costs in any period are not

necessarily indicative of sales and costs that may be realized in subsequent periods.

Additionally, promotional activity significantly

increases net sales in the month in which it is initiated, and net sales are adversely impacted in the month after a promotion.

based upon the timing of our marketing and promotional initiatives, we have and may continue to experience significant variability in

our results, which could affect our ability to formulate strategies that allow us to maintain our market presence across volatile periods.

If our fluctuations obscure our ability to track important trends in our key markets, it may have a material adverse effect on our business,

results of operations and financial condition.

In response to competitor actions and pricing pressures,

we have engaged in significant use of promotional and sales incentives.

We regularly review the results of our promotional spending activities

and adjust our promotional spending programs to maintain our competitive position as well as to confirm compliance with our adult-focused

marketing policies.

Accordingly, unit sales volume and sales promotion costs in any period are not necessarily indicative of sales and

costs that may be realized in subsequent periods.

Additionally, promotional activity significantly increases net sales in the month in

which it is initiated, and net sales are adversely impacted in the month after a promotion.

Accordingly, based upon the timing of our

marketing and promotional initiatives, we have and may continue to experience significant variability in our results, which could affect

our ability to formulate strategies that allow us to maintain our market presence across volatile periods.

If our fluctuations obscure

our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations

and financial condition.

and global economic conditions

could negatively impact our business, prospects, results of operations, financial condition or cash flows.

Our business and operations are

sensitive to global economic conditions.

These conditions include interest rates, energy costs, inflation, recession, fluctuations in

debt and equity capital markets, and the general condition of the United States and world economies, including as a result of the effect

of the COVID-19 pandemic.

A material decline in the economic conditions affecting consumers, which cause a reduction in disposable income

for the average consumer, may change consumption patterns, and may result in a reduction in spending on our product offerings or a switch

to cheaper products or products obtained through illicit channels.

As such, demand for our products may be particularly sensitive to

economic conditions such as inflation, recession, high energy costs, unemployment, changes in interest rates and money supply, changes

in the political environment, the ultimate effect on the economy of the COVID-19 pandemic and other factors beyond our control, any combination

of which could result in a material adverse effect on our business, results of operations, and financial condition.

Our business and operations are sensitive to global

economic conditions.

These conditions include interest rates, energy costs, inflation, recession, fluctuations in debt and equity capital

markets, and the general condition of the United States and world economies, including as a result of the effect of the COVID-19 pandemic.

A material decline in the economic conditions affecting consumers, which cause a reduction in disposable income for the average consumer,

may change consumption patterns, and may result in a reduction in spending on our product offerings or a switch to cheaper products or

products obtained through illicit channels.

As such, demand for our products may be particularly sensitive to economic conditions such

as inflation, recession, high energy costs, unemployment, changes in interest rates and money supply, changes in the political environment,

the ultimate effect on the economy of the COVID-19 pandemic and other factors beyond our control, any combination of which could result

in a material adverse effect on our business, results of operations, and financial condition.

The departure of key management personnel and

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Our success depends upon the continued

contributions of our senior management, especially our Executive Chairman and Interim Chief Executive Officer and President, Barry Hopkins,

our Chief Financial Officer, Treasurer and Secretary, Thomas Metzler, our Chief Operating Officer, Stephen Sheriff and our Chief Science

& Regulatory Officer, Nirajkumar Patel.

If one or more of our executive officers are unable or unwilling to continue in their present

contributions of our senior executive management, especially our Interim Chief Executive Officer, Mark Thoenes, our Interim Chief

Financial Officer, Eric Morris If one or more of our executive officers are unable or unwilling to continue in their current

positions, we may not be able to replace them readily, if at all.

Additionally, we may incur additional expenses to recruit and retain

new executive officers.

If any of our executive officers join a competitor or forms a competing company, we may lose some or all of our

Additionally, we may incur additional expenses to recruit and

retain new executive officers.

If any of our executive officers join a competitor or forms a competing company, we may lose some or

all of our customers.

Finally, we do not maintain “key person” life insurance on any of our executive officers.

Because of these factors,

the loss of the services of any of these key persons could adversely affect our business, financial condition, and results of operations.

of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and

results of operations.

Our insurance may be insufficient to cover losses that may occur

as a result of our operations.

We currently maintain directors’

and officers’ liability insurance and property and general liability insurance.

This insurance or other insurance we may elect

to obtain may not be or remain available to us or be obtainable by us at commercially reasonable rates, and the amount of our coverage

may not be adequate to cover any liability we incur.

Future increases in insurance costs, coupled with the increase in deductibles, will

result in higher operating costs and increased risk.

If we were to incur substantial liability and such damages were not covered by insurance

or were in excess of policy limits, or if we were to incur such liability at a time when we were not able to obtain liability insurance,

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

We currently maintain directors’ and officers’

liability insurance and property and general liability insurance.

This insurance or other insurance we may elect to obtain may not be

or remain available to us or be obtainable by us at commercially reasonable rates, and the amount of our coverage may not be adequate

to cover any liability we incur.

Future increases in insurance costs, coupled with the increase in deductibles, will result in higher

operating costs and increased risk.

If we were to incur substantial liability and such damages were not covered by insurance or were in

excess of policy limits, or if we were to incur such liability at a time when we were not able to obtain liability insurance, our business,

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

Risks Related to Our Securities

Our Restated Certificate of Incorporation,

as amended (our “Certificate of Incorporation”), and our Bylaws (our “Bylaws”), as well as the DGCL and certain

regulations, could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our Common

Provisions of our Certificate

of Incorporation and Bylaws and the DGCL may discourage, delay or prevent a merger, acquisition, or other change in control that stockholders

may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares of our Common

These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

In addition, Section 203 of the

DGCL prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, which generally

refers to a person which together with its affiliates owns, or within the last three years has owned, 15 percent or more of our voting

stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the

business combination is approved in a prescribed manner.

The existence of the foregoing

provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of Common

They could also deter potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive

a premium for their Common Stock in an acquisition.

Our Restated Certificate of Incorporation, as

amended (our “Certificate of Incorporation”), and our Bylaws (our “Bylaws”), as well as the DGCL and certain regulations,

could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our Common Stock.

Provisions of our Certificate of Incorporation and

Bylaws and the DGCL may discourage, delay or prevent a merger, acquisition, or other change in control that stockholders may consider

favorable, including transactions in which our stockholders might otherwise receive a premium for their shares of our Common Stock.

provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

In addition, Section 203 of the DGCL prohibits a publicly-held

Delaware corporation from engaging in a business combination with an interested stockholder, which generally refers to a person which

together with its affiliates owns, or within the last three years has owned, 15 percent or more of our voting stock, for a period of three

years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved

in a prescribed manner.

The existence of the foregoing provisions and anti-takeover

measures could limit the price that investors might be willing to pay in the future for shares of Common Stock.

They could also deter

potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive a premium for their Common Stock

in an acquisition.

For so long as any shares of Series B Preferred

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to serve as a director on our board of directors.

For so long as any shares of Series B Preferred Stock remain outstanding, the

majority holders of the Series B Preferred Stock (or the Majority Holders) will be entitled to designate one (1) individual to be nominated

to serve as a director (who we refer to as the Series B Preferred Director) on our board of directors (or the Board).

At each annual meeting

of the stockholders of our company, or at any special meeting called for the purpose of electing directors, the Board shall nominate such

designee for election.

Unless the Board shall have received from the Majority Holders a written designation by March 1 of each calendar

year of an individual other than the then-sitting Series B Preferred Director, the Board shall nominate the then-sitting Series B Preferred

Director for re-election to the Board.

The Series B Preferred Director is subject to any board of directors-related provisions that may

be contained in our Certificate of Incorporation or Bylaws.

The Majority Holders, voting as a single class at a meeting called for such

purpose (or by written consent signed by the Majority Holders in lieu of such a meeting), have the sole right to remove the Series B Preferred

Director from the Board.

Any vacancy created by the removal, resignation or death of a Series B Preferred Director may solely be filled

by the Majority Holders, voting as a single class, at a meeting called for such purpose (or by written consent signed by the Majority

Holders in lieu of such a meeting).

The Series B Preferred Director shall be entitled to receive similar compensation, benefits, reimbursement

(including of reasonable travel expenses), indemnification and insurance coverage for his or her service as a director of our company

as the other non-employee directors of on the Board.

The initial Series B Preferred Director is Mr.

As of the date of

this Report, the seat on our Board designated for the Series B Preferred Director is vacant due to Mr.

Cassidy’s resignation from

the Board on January 25, 2024.

As a result of their Board appointment right, the Majority Holders could have a disproportionate impact

on our governance and operations, which could have an adverse effect on our company.

For so long as any shares of Series B Preferred Stock

remain outstanding, the majority holders of the Series B Preferred Stock (or the Majority Holders) will be entitled to designate one (1)

individual to be nominated to serve as a director (who we refer to as the Series B Preferred Director) on our board of directors (or the

At each annual meeting of the stockholders of our company, or at any special meeting called for the purpose of electing directors,

the Board shall nominate such designee for election.

Unless the Board shall have received from the Majority Holders a written designation

by March 1 of each calendar year of an individual other than the then-sitting Series B Preferred Director, the Board shall nominate the

then-sitting Series B Preferred Director for re-election to the Board.

The Series B Preferred Director is subject to any board of directors-related

provisions that may be contained in our Certificate of Incorporation or Bylaws.

The Majority Holders, voting as a single class at a meeting

called for such purpose (or by written consent signed by the Majority Holders in lieu of such a meeting), have the sole right to remove

the Series B Preferred Director from the Board.

Any vacancy created by the removal, resignation or death of a Series B Preferred Director

may solely be filled by the Majority Holders, voting as a single class, at a meeting called for such purpose (or by written consent signed

by the Majority Holders in lieu of such a meeting).

The Series B Preferred Director shall be entitled to receive similar compensation,

benefits, reimbursement (including of reasonable travel expenses), indemnification and insurance coverage for his or her service as a

director of our company as the other non-employee directors of on the Board.

As of the date of this Report, the seat on our Board designated

for the Series B Preferred Director is vacant due to Mr.

Cassidy’s resignation from the Board on January 25, 2024.

As a result of

their Board appointment right, the Majority Holders could have a disproportionate impact on our governance and operations, which could

have an adverse effect on our company.

The Series B Preferred Stock ranks senior to

our Common Stock.

The Series B Preferred Stock ranks,

with respect to dividend rights, rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding

up of the affairs of our company, and redemption rights, senior to the Common Stock and each other class or series of securities now

existing or hereafter authorized classified or reclassified, the terms of which do not expressly provide that such class or series ranks

on a parity basis with or senior to the Series B Preferred Stock as to dividend rights, rights on the distribution of assets on any voluntary

or involuntary liquidation, dissolution or winding up of the affairs of our company, and redemption rights.

The Series B Preferred Stock ranks, with respect to

dividend rights, rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs

of our company, and redemption rights, senior to the Common Stock and each other class or series of securities now existing or hereafter

authorized classified or reclassified, the terms of which do not expressly provide that such class or series ranks on a parity basis with

or senior to the Series B Preferred Stock as to dividend rights, rights on the distribution of assets on any voluntary or involuntary

liquidation, dissolution or winding up of the affairs of our company, and redemption rights.

Future offerings of debt or equity securities

may rank senior to our Common Stock.

We have a present need for additional

capital, and we will likely continue to seek to raise new funding from time to time through the issuance of debt or equity securities.

Our Board of Directors has the ability, without further approval of our stockholders, to issue debt or equity securities in the future,

in addition to the Series B Preferred Stock, ranking senior to our Common Stock or otherwise incur additional indebtedness, it is possible

that these securities or indebtedness will be governed by an indenture or other instrument containing covenants restricting our operating

flexibility and limiting our ability to pay dividends to stockholders.

Additionally, any convertible or exchangeable securities that

we issue in the future may have rights, preferences, and privileges, including with respect to dividends, more favorable than those of

our Common Stock and may result in dilution (perhaps significant) to our stockholders.

Because our decision to issue debt or equity securities

in any future offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot

predict or estimate the amount, timing, or nature of our future offerings or financings, any of which could reduce the market price of

our Common Stock and dilute its value.

We have a present need for additional capital, and

we will likely continue to seek to raise new funding from time to time through the issuance of debt or equity securities.

Directors has the ability, without further approval of our stockholders, to issue debt or equity securities in the future, in addition

to the Series B Preferred Stock, ranking senior to our Common Stock or otherwise incur additional indebtedness, it is possible that these

securities or indebtedness will be governed by an indenture or other instrument containing covenants restricting our operating flexibility

and limiting our ability to pay dividends to stockholders.

Additionally, any convertible or exchangeable securities that we issue in the

future may have rights, preferences, and privileges, including with respect to dividends, more favorable than those of our Common Stock

and may result in dilution (perhaps significant) to our stockholders.

Because our decision to issue debt or equity securities in any future

offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot predict or estimate

the amount, timing, or nature of our future offerings or financings, any of which could reduce the market price of our Common Stock and

dilute its value.

We may issue additional classes or series of

preferred stock whose terms could adversely affect the voting power or value of our commons stock.

Our Certificate of Incorporation

authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations,

preferences, limitations, and relative rights, including preferences over our Common Stock respecting dividends and distributions, as

our Board may determine.

The terms of one or more additional classes or series of preferred stock could adversely impact the voting power

or value of our Common Stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors

in all events or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption

rights or dividend or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our Common

Our Certificate of Incorporation authorizes us to

issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences,

limitations, and relative rights, including preferences over our Common Stock respecting dividends and distributions, as our Board may

The terms of one or more additional classes or series of preferred stock could adversely impact the voting power or value of

our Common Stock.

For example, we might grant holders of preferred stock the right to elect some number of our directors in all events

or on the happening of specified events or the right to veto specified transactions.

Similarly, the repurchase or redemption rights or

dividend or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our Common Stock.

The market price for our Common Stock is volatile

and has and will fluctuate.

The market price for shares of our Common Stock may be volatile and subject

to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:

(i) action by the

FDA with respect to Bidi’s PMTAs or regulatory action by FDA generally against Bidi, our company or our industry, (ii) actual or

anticipated fluctuations in our quarterly financial results;

The market price for shares of our Common Stock may

be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:

(i) action by the FDA with respect to Bidi’s PMTAs or regulatory action by FDA generally against Bidi, our company or our industry,

(ii) actual or anticipated fluctuations in our quarterly financial results;

(iii) recommendations by securities research analysts;

(iv) changes in the

economic performance or market valuations of other issuers that investors deem comparable to ours;

(v) addition or departure of our executive

officers or members of our Board and other key personnel;

(vi) release or expiration of lock-up or other transfer restrictions on outstanding

shares of Common Stock;

changes in the economic performance or market valuations of other issuers that investors deem comparable to ours;

(v) addition or departure

of our executive officers or members of our Board and other key personnel;

(vi) release or expiration of lock-up or other transfer restrictions

on outstanding shares of Common Stock;

(vii) sales or perceived sales of additional shares of our Common Stock;

(viii) the liquidity of our Common Stock

or lack thereof;

(ix) significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments

by or involving us or our competitors;

and (x) news reports relating to trends, concerns, technological or competitive developments, regulatory

changes, and other related issues in our industry or target markets.

Financial markets often experience significant price and volume fluctuations

that affect the market prices of equity securities of public entities and that are, in many cases, unrelated to the operating performance,

underlying asset values or prospects of such entities.

Accordingly, the market price of our shares of Common Stock may decline even if

our operating results, underlying asset values or prospects have not changed.

(viii) the liquidity of

our Common Stock or lack thereof;

(ix) significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital

commitments by or involving us or our competitors;

and (x) news reports relating to trends, concerns, technological or competitive developments,

regulatory changes, and other related issues in our industry or target markets.

Financial markets often experience significant price and

volume fluctuations that affect the market prices of equity securities of public entities and that are, in many cases, unrelated to the

operating performance, underlying asset values or prospects of such entities.

Accordingly, the market price of our shares of Common Stock

may decline even if our operating results, underlying asset values or prospects have not changed.

Our Common Stock is listed on the Nasdaq but

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we are presently experiencing a Nasdaq continuing listing deficiency.

Although our Common Stock is listed

on Nasdaq, we cannot assure you that we will be able to comply with the standards that we are required to meet in order to maintain a

listing of our Common Stock on Nasdaq in the future.

Nasdaq listing rules require us to maintain certain closing bid price, stockholders’

equity, and other financial metric criteria, as well as certain corporate governance requirements, for our Common Stock to continue trading

Although our Common Stock is listed on Nasdaq, we

cannot assure you that we will be able to comply with the standards that we are required to meet in order to maintain a listing of our

Common Stock on Nasdaq in the future.

Nasdaq listing rules require us to maintain certain closing bid price, stockholders’ equity,

and other financial metric criteria, as well as certain corporate governance requirements, for our Common Stock to continue trading on

If we fail to comply with the continued listing standards, our Common Stock could be delisted.

We have been subject to Nasdaq

listing deficiency issues in the past.

On January 26, 2022, Nasdaq notified us that we were not in compliance with the requirement to

maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”),

because the closing bid price of our Common Stock was below $1.00 per share for 30 consecutive business days.

While this listing deficiency

was cured, on January 30, 2023, Nasdaq again notified us that we were not in compliance with the Bid Price Rule given that our Common

Stock had traded at below $1.00 for 30 consecutive business days.

While we regard compliance with the Bid Price Rule as of February

8, 2024 as a result of our January 2024 reverse stock split, we remain subject to the risk that our Common Stock price could again fall

below $1.00 and we may again become subject to delisting for failure to comply with the Bid Price Rule.

Moreover, on November 7, 2023,

we received written notice from Nasdaq stating that we failed to hold an annual meeting of shareholders within twelve (12) months after

our fiscal year ended on October 31, 2022, as required by Nasdaq Listing Rule 5620(a) (or the Annual Meeting Listing Rule).

a plan of compliance to Nasdaq and have been granted until April 29, 2024 to hold our annual meeting.

There can be no assurances given

that we will be able to cure any listing deficiencies related to our company.

A failure to maintain listing on Nasdaq could have a material

adverse effect on the liquidity and price of our Common Stock.

Future sales of shares of our Common Stock

by our controlling shareholder or by our officers and directors may negatively impact the market price for our Common Stock.

Subject to compliance with applicable

securities laws, our controlling shareholder Kaival Holdings as well as our directors and officers and their affiliates may sell some

or all of their shares of our Common Stock in the future.

No prediction can be made as to the effect, if any, such future sales of shares

of our Common Stock may have on the market price of the shares of our Common Stock prevailing from time to time.

However, the future

sale of a substantial number of shares of our Common Stock by our directors and officers and their affiliates, or the perception that

such sales could occur, could adversely affect prevailing market prices for our shares of our Common Stock.

The concentration of ownership by Kaival Holdings

and our officers and directors may result in conflicts of interest and may prevent other stockholders from influencing significant corporate

decisions and depress our stock price.

Based on the number of shares

outstanding as of as of the date of this Report, Kaival Holdings, our affiliated majority stockholder, together with our officers and

directors, beneficially own a combined total of approximately 68,64% percent of our outstanding Common Stock, including shares of our

Common Stock subject to stock options that are currently exercisable or are exercisable and that vest within 60 days as of the date of

this prospects.

If our controlling stockholder, together with these officers and directors act together, they will be able to exert a

significant degree of influence over our management and affairs and control matters requiring stockholder approval, including the election

of directors and approval of mergers, business combinations, or other significant transactions.

In particular, the interests of Kaival

Holdings (which is controlled by Nirajkumar Patel, our Chief Science and Regulatory Officer and director) may not always coincide with

our interests or the interests of other stockholders, which could cause Mr.

Patel to become subject to conflicts of interests which may

not be resolved in favor of our minority stockholders.

Patel also controls Bidi, our principal commercial partner, as well as the

entity that is the landlord of our principal officer and warehouse, all of which creates the potential for conflicts of interest for Mr.

For example, Kaival Holdings, together with our officers and directors, could cause us to enter into transactions or agreements

that we would not otherwise consider or might not be in the best interests of our minority stockholders.

Similarly, this concentration

of ownership may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders.

This, in turn, could have a negative effect on the market price of our Common Stock.

It could also prevent our stockholders from realizing

a premium over the market price for their shares of our Common Stock.

The concentration of ownership also may contribute to the low trading

volume and volatility of our Common Stock.

Moreover, any such conflicts of interests may not be easy to resolve and could impair our ability

to operate our business.

have been subject to Nasdaq listing deficiency issues in the past.

There can be no assurances given that we will be able

to cure any listing deficiencies related to our company.

A failure to maintain listing on Nasdaq could have a material adverse effect

on the liquidity and price of our Common Stock.

Future sales of shares of our Common Stock by

our controlling shareholders or by our officers and directors may negatively impact the market price for our Common Stock.

compliance with applicable securities laws, our controlling shareholders

Kaival Holdings and Bidi Vapor as well as our directors and officers and their affiliates may sell some or all of their shares of

our Common Stock in the future.

No prediction can be made as to the effect, if any, such future sales of shares of our Common Stock

may have on the market price of the shares of our Common Stock prevailing from time to time.

However, the future sale of a

substantial number of shares of our Common Stock by our directors and officers and their affiliates, or the perception that such

sales could occur, could adversely affect prevailing market prices for our shares of our Common Stock.

The concentration of ownership by Kaival Holdings and Bidi Vapor and our officers

and directors may result in conflicts of interest and may prevent other stockholders from influencing significant corporate decisions

and depress our stock price.

on the number of shares outstanding as

of as of the date of this Report, Kaival Holdings and Bidi Vapor, our affiliated majority stockholder, together with our officers and

directors, beneficially own a combined total of approximately 51.6% percent

of our outstanding Common Stock, including shares of our Common Stock subject to stock options that are currently exercisable or are exercisable

and that vest within 60 days as of the date of this prospects.

If our controlling stockholders, together with these officers and directors

act together, they will be able to exert a significant degree of influence over our management and affairs and control matters requiring

stockholder approval, including the election of directors and approval of mergers, business combinations, or other significant transactions.

For example, Kaival Holdings, together with our officers and directors, could cause us to enter into transactions or agreements that we

would not otherwise consider or might not be in the best interests of our minority stockholders.

Similarly, this concentration of ownership

may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders.

turn, could have a negative effect on the market price of our Common Stock.

It could also prevent our stockholders from realizing a premium

over the market price for their shares of our Common Stock.

The concentration of ownership also may contribute to the low trading volume

and volatility of our Common Stock.

Moreover, any such conflicts of interest may not be easy to resolve and could impair our ability to

operate our business.

Our Common Stock may become the target of a “short squeeze.”

Beginning in 2021, the securities

of several companies have increasingly experienced significant and extreme volatility in stock price due to short sellers of shares of

Common Stock and buy-and-hold decisions of longer investors, resulting in what is sometimes described as a “short squeeze.”

Short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies

trading at a significantly inflated rate that is disconnected from the underlying value of the company.

Sharp rises in a company’s

stock price may force traders in a short position to buy stock to avoid even greater losses.

Many investors who have purchased shares

in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share

has declined steadily as interest in those stocks has abated.

We may be a target of a short squeeze, and investors may lose a significant

portion or all their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.

If securities or industry analysts fail to

continue publishing research about our business, if they change their recommendations adversely or if our results of operations do not

meet their expectations, our stock price and trading volume could decline.

The trading market for our Common

Stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.

more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial

markets, which in turn could cause our stock price or trading volume to decline.

In addition, it is likely that in some future period

our operating results will be below the expectations of securities analysts or investors.

If one or more of the analysts who cover us

downgrade our Common Stock, or if our results of operations do not meet their expectations, our stock price could decline.

Beginning in 2021, the securities of several companies

have increasingly experienced significant and extreme volatility in stock price due to short sellers of shares of Common Stock and buy-and-hold

decisions of longer investors, resulting in what is sometimes described as a “short squeeze.” Short squeezes have caused extreme

volatility in those companies and in the market and have led to the price per share of those companies trading at a significantly inflated

rate that is disconnected from the underlying value of the company.

Sharp rises in a company’s stock price may force traders in

a short position to buy stock to avoid even greater losses.

Many investors who have purchased shares in those companies at an inflated

rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest

in those stocks has abated.

We may be a target of a short squeeze, and investors may lose a significant portion or all their investment

if they purchase our shares at a rate that is significantly disconnected from our underlying value.

If securities or industry analysts fail to continue

publishing research about our business, if they change their recommendations adversely or if our results of operations do not meet their

expectations, our stock price and trading volume could decline.

The trading market for our Common Stock will be influenced

by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease

coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could

cause our stock price or trading volume to decline.

In addition, it is likely that in some future period our operating results will be

below the expectations of securities analysts or investors.

If one or more of the analysts who cover us downgrade our Common Stock, or

if our results of operations do not meet their expectations, our stock price could decline.

We do not currently pay dividends on our shares

of Common Stock and have no intention of paying dividends on shares of our Common Stock for the foreseeable future.

No dividends on the shares of

our Common Stock have been paid by us to date.

No dividends on the shares of our Common Stock have

been paid by us to date.

We do not intend to declare or pay any cash dividends in the foreseeable future.

of any future dividends will be at the discretion of our Board, after considering a multitude of factors appropriate in the circumstances,

including our operating results, financial condition, and current and anticipated cash needs.

In addition, the terms of any future debt

or credit facility may preclude us from paying any dividends unless certain consents are obtained, and certain conditions are met.

is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any

such dividend.

Unless our Board decides to pay dividends, our stockholders will be required to look at appreciation of our Common Stock

to realize a gain on their investment.

Payment of any future dividends

will be at the discretion of our Board, after considering a multitude of factors appropriate in the circumstances, including our operating

results, financial condition, and current and anticipated cash needs.

In addition, the terms of any future debt or credit facility may

preclude us from paying any dividends unless certain consents are obtained, and certain conditions are met.

There is no assurance that

future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

our Board decides to pay dividends, our stockholders will be required to look at appreciation of our Common Stock to realize a gain on

their investment.

There can be no assurance that this appreciation will occur.

3 unchanged sentences

and when we need it.

We are an “emerging growth

company,” as defined in the JOBS Act, and we have taken advantage, and intend to continue to take advantage, of certain exemptions

from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but

not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002

(“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,

and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any

golden parachute payments not previously approved.

Investors may find our Common

Stock less attractive because we rely on these exemptions, which could contribute to a less active trading market for our Common Stock

or volatility in our share price.

In addition, we may be less attractive to investors, and it may be difficult for us to raise additional

capital when we need it.

Investors may be unable to compare our business with other companies in our industry if they believe that our

financial accounting is not as transparent as other companies in our industry.

If we are unable to raise additional capital as and when

we need it, our financial condition and results of operations may be materially and adversely affected.

We may take advantage of these

reporting exemptions until we are no longer an emerging growth company.

We are an “emerging growth company,” as

defined in the JOBS Act, and we have taken advantage, and intend to continue to take advantage, of certain exemptions from various reporting

requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being

required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”),

reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the

requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments

not previously approved.

Investors may find our Common Stock less attractive

because we rely on these exemptions, which could contribute to a less active trading market for our Common Stock or volatility in our

In addition, we may be less attractive to investors, and it may be difficult for us to raise additional capital when we need

Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting

is not as transparent as other companies in our industry.

If we are unable to raise additional capital as and when we need it, our financial

condition and results of operations may be materially and adversely affected.

We may take advantage of these reporting exemptions

until we are no longer an emerging growth company.

We have identified material weaknesses in our

system of internal controls over financial reporting and, if we cannot remediate these material weaknesses, we may not be able to accurately

report our financial condition, results of operations, or cash flows, which may adversely affect investor confidence in us and, as a

result, the value of our Common Stock.

A material weakness is a deficiency,

or combination of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that

a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Section 404 of

Sarbanes-Oxley also generally requires an attestation from our independent registered public accounting firm on the effectiveness of

our system of internal controls over financial reporting.

However, if we remain an emerging growth company as defined in the JOBS Act,

we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation

Our management has identified,

and we have disclosed, certain material weaknesses in our system of internal controls over financial reporting as of our fiscal year

ended October 31, 2023.

Specifically, our management has found that our internal control system over financial reporting was ineffective

as of October 31, 2023, based on a determination that there was a lack of sufficient resources to provide adequate segregation of duties

consistent with control objectives, the lack of sufficient and consistent real time remote communications, and the lack of a fully developed

formal review process that includes multiple levels of review over financial disclosure and reporting processes.

To address these material weaknesses,

and subject to the receipt of additional financing or cash flows, we have undertaken, and intend to continue to undertake, remediation

measures to address such material weaknesses, including implementing prevent and detect internal control procedures pursuant to which

we can ensure segregation of duties and hire additional resources to ensure appropriate review and oversight.

Our compliance with Section 404

of Sarbanes-Oxley will require that we incur substantial accounting expenses and spend significant management efforts.

We may not be

able to complete our evaluation, testing, and any required remediation in a timely fashion.

During the evaluation and testing process,

if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our

system of internal control over financial reporting is effective.

We cannot assure you that there will not be material weaknesses or

significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain internal control over

financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations, or cash flows.

This may expose us, including individual executives, to potential liability which could significantly affect our business.

We cannot assure you that we will,

in the future, identify areas requiring improvement in our system of internal controls over financial reporting.

We cannot assure you

that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain

adequate controls over our financial process and reporting in the future as we continue to grow.

If we are unable to establish appropriate

internal financial reporting controls and procedures, if we are unable to conclude that our system of internal controls over financial

reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant

deficiency in our system of internal controls over financial reporting once that firm begins its audits of our systems of internal controls

over financial reporting, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements,

harm our operating results, cause investors to lose confidence in the accuracy and completeness of our financial reports, the market

price of our common shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory

Failure to remedy any material weakness in our system of internal controls over financial reporting, or to implement or

maintain other effective internal control systems required of public companies, could also restrict our future access to the capital

Our disclosure controls and procedures may

not prevent or detect all errors or acts of fraud.

Our disclosure controls and procedures

are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act

is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the

rules and forms of the SEC.

We believe that any disclosure controls and procedures or internal controls and procedures, no matter how

well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

As of October 31, 2023, our Chief Executive Officer and our Chief Financial Officer concluded that the disclosure controls and procedures

were not effective as of such date due to material weaknesses in internal controls identified above.

These inherent limitations include

the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes.

Additionally,

controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override

of the controls.

Accordingly, because of the inherent limitations in our internal controls system, misstatements, or insufficient disclosures

due to error or fraud may occur and not be detected.

report our financial condition, results of operations, or cash flows, which may adversely affect investor confidence in us and, as a result,

the value of our Common Stock.

A material weakness is a deficiency, or combination

of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement

of annual or interim financial statements will not be prevented or detected on a timely basis.

Section 404 of Sarbanes-Oxley also generally

requires an attestation from our independent registered public accounting firm on the effectiveness of our system of internal controls

over financial reporting.

However, if we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of

the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement.

Our management has identified, and we have disclosed,

certain material weaknesses in our system of internal controls over financial reporting as of our fiscal year ended October 31, 2024.

Specifically, our management has found that our internal control system over financial reporting was ineffective as of October 31, 2024,

based on a determination that there was a lack of sufficient resources to provide adequate segregation of duties consistent with control

objectives, the lack of sufficient and consistent real time remote communications, and the lack of a fully developed formal review process

that includes multiple levels of review over financial disclosure and reporting processes.

To address these material weaknesses, and subject

to the receipt of additional financing or cash flows, we have undertaken, and intend to continue to undertake, remediation measures to

address such material weaknesses, including implementing prevent and detect internal control procedures pursuant to which we can ensure

segregation of duties and hire additional resources to ensure appropriate review and oversight.

Our compliance with Section 404 of Sarbanes-Oxley

will require that we incur substantial accounting expenses and spend significant management efforts.

We may not be able to complete our

evaluation, testing, and any required remediation in a timely fashion.

During the evaluation and testing process, if we identify one or

more material weaknesses in our internal control over financial reporting, we will be unable to assert that our system of internal control

over financial reporting is effective.

We cannot assure you that there will not be material weaknesses or significant deficiencies in

our internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely

inhibit our ability to accurately report our financial condition, results of operations, or cash flows.

This may expose us, including

individual executives, to potential liability which could significantly affect our business.

We cannot assure you that we will, in the future,

identify areas requiring improvement in our system of internal controls over financial reporting.

We cannot assure you that the measures

we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls

over our financial process and reporting in the future as we continue to grow.

If we are unable to establish appropriate internal financial

reporting controls and procedures, if we are unable to conclude that our system of internal controls over financial reporting is effective,

or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our system

of internal controls over financial reporting once that firm begins its audits of our systems of internal controls over financial reporting,

it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating

results, cause investors to lose confidence in the accuracy and completeness of our financial reports, the market price of our common

shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities.

to remedy any material weakness in our system of internal controls over financial reporting, or to implement or maintain other effective

internal control systems required of public companies, could also restrict our future access to the capital markets.

Our disclosure controls and procedures may not

prevent or detect all errors or acts of fraud.

Our disclosure controls and procedures are designed

to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated

and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms

We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and

operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

As of October 31, 2024,

our Interim Chief Executive Officer and our Interim Chief Financial Officer concluded that the disclosure controls and procedures were

not effective as of such date due to material weaknesses in internal controls identified above.

These inherent limitations include the realities that

judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes.

Additionally, controls

can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our internal controls system, misstatements, or insufficient disclosures due to error

or fraud may occur and not be detected.

We have incurred, and will continue to incur,

1 unchanged sentence

to devote substantial time to new compliance initiatives.

As a public company, we have incurred

and are continuing to incur significant legal, accounting, and other expenses and these expenses may increase even more after we are

no longer an “emerging growth company” and “smaller reporting company.” We are subject to the reporting requirements

of the Exchange Act and the rules adopted, and to be adopted, by the SEC.

Our management and other personnel devote a substantial amount

of time to these compliance initiatives.

Moreover, these rules and regulations

have substantially increased our legal and financial compliance costs and made some activities more time-consuming and costly.

The increased

costs can result in our reporting a net loss.

These rules and regulations may make it more difficult and more expensive for us to maintain

sufficient directors’ and officers’ liability insurance coverage.

We cannot predict or estimate the amount or timing of additional

costs we may continue to incur to respond to these requirements.

The ongoing impact of these requirements could also make it more difficult

for us to attract and retain qualified people to serve on our Board, our Board committees, or as executive officers.

Unresolved Staff Comments.

As a public company, we have incurred and are continuing

to incur significant legal, accounting, and other expenses and these expenses may increase even more after we are no longer an “emerging

growth company” and “smaller reporting company.” We are subject to the reporting requirements of the Exchange Act and

the rules adopted, and to be adopted, by the SEC.

Our management and other personnel devote a substantial amount of time to these compliance

Moreover, these rules and regulations have substantially

increased our legal and financial compliance costs and made some activities more time-consuming and costly.

The increased costs can result

in our reporting a net loss.

These rules and regulations may make it more difficult and more expensive for us to maintain sufficient directors’

and officers’ liability insurance coverage.

We cannot predict or estimate the amount or timing of additional costs we may continue

to incur to respond to these requirements.

The ongoing impact of these requirements could also make it more difficult for us to attract

and retain qualified people to serve on our Board, our Board committees, or as executive officers.

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 1A. Risk Factors