What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2026-01-29 compared with 2025-02-10 · 156 added, 544 removed, 359 unchanged (66% of the section changed)

8 unchanged sentences

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

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

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

Until October of 2024,

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

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

We are engaged in the sale, marketing

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

variety of favors.

Until October of 2024, our primary source of revenue has been the Bidi Stick as we sold our inventory on hand.

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

Reynolds Vapor Company, R.J.

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

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

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

Specifically, the ITC

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

11,925,202, which is owned by one

of the RJ Reynolds Entities.

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,

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

11,925,202, which is owned by one of the RJ Reynolds Entities.

The ITC Complaint requests the ITC grant:

(a) temporary and permanent limited exclusion orders pursuant to

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

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

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

No damages are recoverable in the proceedings before the ITC.

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

of Bidi Sticks.

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

(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.

No damages are recoverable in the proceedings before

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

the sale of Bidi Sticks.

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

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

See “Philip Morris Deed

of Licensing Agreement” below.

We have also entered into a Merger

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

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

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

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

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

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

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

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

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

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

The transactions contemplated by the Merger Agreement are described

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

See “Philip Morris

Deed of Licensing Agreement” below.

Merger and Share Exchange Agreement

On September 23, 2024, we entered into a definitive

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

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

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

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

Merger and Share Exchange

Pursuant to the Merger Agreement, the Parties will

effect a merger and share exchange involving the following transactions:

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

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

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

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

In connection with the Merger:

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

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

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

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

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

The Business Combination transactions value Pubco

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

KAVL expects that the holders of our Common

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

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

In addition, after the Closing, the holders of Delta

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

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

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

Representations and Warranties;

Pursuant to the Merger Agreement, the parties (other

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

All of the representations and warranties

of the parties will not survive Closing.

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

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

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

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

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

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

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

The covenants and agreements

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

The covenants and agreements

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

Closing Conditions

Pursuant to the Merger Agreement, the obligations

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

of the respective parties, including, without limitation:

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

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

(ii) material compliance by the Parties

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

(iii) the approval

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

(iv) the absence of any Material Adverse Effect

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

(v) the consummation of the Share Exchange;

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

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

(vi) the receipt of certain specified

regulatory or third party consents;

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

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

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

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

declared effective by the U.S.

Securities and Exchange Commission (the “SEC”);

(ix) the memorandum and articles of incorporation

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

(x) the entry into certain ancillary agreements

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

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

(xii) the Company

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

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

and (xiv) the receipt of certain closing deliverables.

of Business During the Interim Period

During the period between the execution of the Merger

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

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

(i) amending, waiving

or otherwise changing its organizational documents;

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

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

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

any other equity-based awards;

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

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

(iv) incurring

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

(v) terminating, waiving

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

than certain exceptions set forth in the Merger Agreement);

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

(vii) failing

to keep in force insurance policies or coverage;

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

specified thresholds;

(ix) mergers and acquisitions activity;

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

restructuring, recapitalization or other reorganization;

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

the voting or transfer of its equity;

(xii) hiring employees and adopting benefit plans;

entering into, amending waiving or terminating

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

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

and (xiii) authorizing or agreeing

to taking any of the foregoing actions.

The Parties covenants during the Interim Period also

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

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

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

Transactions.

Indemnification

of Directors and Officers

The parties agreed in the Merger Agreement to customary

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

provided therein.

Post-Closing Board of Directors

and Officers of Pubco

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

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

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

prior to Closing.

The Merger Agreement may be terminated time prior

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

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

(iii) by written

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

(iv) by written notice by

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

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

to Closing will not be satisfied;

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

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

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

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

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

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

which is uncured and continuing;

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

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

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

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

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

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

or prior to October 31, 2024.

If the Merger Agreement is terminated by us or Delta

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

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

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

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

The foregoing description of the Merger Agreement

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

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

The Merger Agreement provides investors with information

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

Any terms not defined herein shall

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

Voting Agreements

Concurrently with the entry into the Merger Agreement,

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

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

Pursuant the Voting Agreements, the Voting Support Parties have agreed

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

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

(A) any takeover

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

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

inconsistent with the Merger Agreement or any related agreements;

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

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

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

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

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

Each Voting Support Party has also granted Delta (or

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

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

Each Voting Support Party has also agreed that until

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

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

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

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

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

(iii) permit to exist any lien of any nature

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

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

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

the Voting Agreement.

The Voting Agreements will automatically terminate

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

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

A majority of the holders of our common stock have

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

Business Strategy

Our current business strategy is

to consummate the Business Combination.

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

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

If the Business Combination is not consummated,

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

Because of the ITC Complaint and FDA PMTA

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

If the Business Combination is not

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

Representative key initiatives include:

Maximizing the core

Continuing the growth and

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

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

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

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

to our organization quickly;

Effective financial

management and capital planning:

Establishing an efficient,

scalable organizational infrastructure to support our expected growth and diversification;

Improving overall business

processes to deliver greater value to our customers;

Data-driven product

innovation and strategic expansion:

Investing in our core organizational

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

Further development of

internal data processes to drive growth and diversification efforts;

Pursuing third-party licensing

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

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

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

on our traditional retail outlet and other distribution

relationships.

If the Business Combination

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

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

On September 23, 2024, we agreed

with Delta Corp Holdings Limited, a company incorporated in England and Wales (“Delta”) to effect a business combination between

us and Delta by entering into a Merger and Share Exchange Agreement (the “Merger Agreement”) among us, Delta, Delta Corp Holdings

Limited, a Cayman Islands exempted company (“Pubco”), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary

of Pubco (“Merger Sub”), and the shareholders of Delta.

On September 11, 2025, the Company and Delta entered

into a Business Combination Termination and Release Agreement (the “Termination Agreement”) pursuant to Section 10.1(a) of

the Merger Agreement (the “Merger Agreement’) among the Company, Delta, Delta Corp Holdings Limited, a Cayman Islands exempted

company, KAVL Merger Sub Inc.

and Delta Corp Cayman Limited.

Pursuant to the Termination Agreement, the Company

and Delta mutually terminated the Merger Agreement and all agreements between the parties that are ancillary thereto and Delta waived

any and all claims against the other party that in any way directly and/or indirectly arise out of, are based upon, or are in connection

with the Merger Agreement and any agreements ancillary thereto.

Description of Business Segments & Key Agreements

1 unchanged sentence

& Kaival Brands International,

On August 31, 2020,

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

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

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

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

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

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

The goal of this acquisition is to diversify our

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

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

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

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

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

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

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

our company that we anticipate.

On August 31, 2020, we formed Kaival Labs, Inc., a

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

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

We have not launched any

Kaival-branded products, nor have we begun to provide white label wholesale solutions for other product manufacturers.

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

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

(“GoFire”) in exchange for equity securities

for our company and contingent cash consideration.

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

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

based on the purchased assets.

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

and nutraceutical markets.

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

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

No assurance can be given, however, that

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

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

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

(vi) Net Reconciliation Payment

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

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

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

The KBI License Agreement

provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly

agreed costs such development costs incurred for entry to specific international markets.

In March 2023, PMPSA announced the launch of

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

(vi) Net Reconciliation

Payment to KBI .

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

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

The KBI License Agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty

payments, after any offsets due to jointly agreed costs such development costs incurred for entry to specific international markets.

In March 2023, PMPSA announced the launch of a product (now called VEEV NOW) under the PMI License Agreement.

In connection with the PMI License Agreement, we,

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

In November 2023, KBI,

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

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

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

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

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

and have yet to determine the longer-term plan.

In November 2023, KBI, Bidi and PMPSA agreed to initiate a pilot project,

pursuant to which PMPSA would manufacture up to an agreed upon number of Bidi Sticks with PMI’s own e-liquid for commercialization

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

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

As of the date of this Report, this pilot

program has not yet started.

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

22 unchanged sentences

Bidi Vapor, LLC Distribution Agreement

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

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

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

Distribution Agreement”).

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

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

and non-retail level customers.

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

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

vaping experience for adult smokers 21 and over.

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

all direct-to-consumer sales in February 2021.

On March 9, 2020, we entered into an exclusive distribution

agreement (the “Distribution Agreement”) with our affiliate Bidi, which Distribution Agreement was amended and restated on

May 21, 2020, April 20, 2021, on June 10, 2022, and on November 17, 2022 (collectively, the “A&R Distribution Agreement”).

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

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

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

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

for adult smokers 21 and over.

We had distributed products to wholesalers and retailers of ENDS products, having ceased all direct-to-consumer

sales in February 2021.

BIDI® Stick comes in a variety of flavor options

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or related to the tobacco-derived nicotine industry.

In connection with the

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

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

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

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

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

These agreements were

terminated in the current year.

In connection with the A&R Distribution Agreement,

we entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and restated by the parties in order

to clarify certain provisions (all such sub-distribution agreements, as amended and restated, are collectively referred to as the “Sub-Distribution

Agreements”), whereby we appointed the counterparties as non-exclusive sub-distributors.

Pursuant to the Sub-Distribution Agreements,

the sub-distributors agreed to purchase for resale products in such quantities as they should need to properly service non-retail customers

within the continental United States (the “Territory”).

These agreements were terminated in the current year.

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

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

(a) our Right of First Offer, Right

(a) our Right of First Offer,

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

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

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

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

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

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

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

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

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

Agreement was terminated in February 2024.

A key third party collaborator of ours was QuikfillRx,

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

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

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

QuikfillRx provided these services to us pursuant to a

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

extensions) and pursuant to which QuikfillRx received monthly cash compensation and was granted certain equity compensation in the form

This Agreement was terminated in February 2024.

Other Potential Product Offerings & Opportunities

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

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

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

Longer term, we believe we can utilize

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

vaporizer devices and related hardware and software applications.

We expect to continue seeking third-party licensing

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

term, we believe we can utilize the acquired patents to create innovative and market-disruptive products for its growing base of adult

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

As described above, we hope to generate revenue from

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Related Party:

For the year ended

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

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

the year ended October 31, 2023.

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

There were no purchases of inventory from Bidi for

the year ended October 31, 2025 and no amounts owed to Bidi for inventory purchases as of October 31, 2025.

For the year ended October 31, 2024, 100% of the inventories

of Products, consisting solely of the BIDI® Stick, were purchased from Bidi, a related party company that is owned by KMDD Trust,

in the amount of approximately $0.3 million.

As of October 31, 2025, we had a related party receivable

balance of zero.

As of October 31, 2025, the related party accounts payable balance was $50,000.

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

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

After this was applied, we had no related party

receivable balance.

As of October 31, 2024, we had a related party receivable

balance of zero.

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

In fiscal year 2023, such inventories

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

Concentration of Revenues and Accounts Receivable:

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

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

(i) QuikTrip Corporation

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

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

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

(i) GPM Investments generated

approximately 16%, (ii) H.T.

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

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

No revenue concentration from the sale of Products

existed for the year ended October 31, 2025.

For the year ended October 31, 2024, a substantial

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

(i) QuikTrip Corporation generated approximately 21%, (ii) GPM Investments generated approximately 12%, and (iii) FAVS Business, LLC generated

approximately 11%.

No accounts receivable concentration from the sale

of Products existed as of October 31, 2025.

QuikTrip Corporation, with an outstanding balance

of approximately $205 accounted for 100% of the total accounts receivable from customers, as of October 31, 2024.

Environment and Government Regulation Related

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

FDA and Related Regulations Relating to ENDS Products

Effective August 8, 2016, the FDA’s regulatory

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

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

tanks, coils, and batteries);

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

(iii) pipe tobacco;

(iv) hookah products;

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

The Deeming Rule applies to all

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

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

tobacco products.

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

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

The Deeming Rule requires (i) United States manufactured

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

(ii) newly deemed products be marketed only after FDA

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

(iii) products only make direct and implied claims of

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

public health as a whole;

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

(v) sellers of such products implement

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

(vi) packaging of and

advertisements for products include prescribed health warnings;

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

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

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

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

Newly deemed tobacco products are also subject to

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

The FDA could in the future

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

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

Failure to comply with the Tobacco Control Act and

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

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

At present, we are unable to predict whether the Tobacco

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

As part of the “Consolidated Appropriations

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

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

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

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

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

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

Delivery sellers

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

licensing requirements, shipping, and packaging requirements.

Companies were required to comply with PACT Act requirements beginning on

or about March 28, 2021.

We have adopted the following compliance measures:

We have retained a team

of legal, tax and accounting experts to advise on state and local tax, licensing, and regulatory matters associated with the distribution

of the BIDI ® Stick;

We are appropriately licensed

or registered in every state which requires it;

We calculate and remit

excise taxes where required;

We have made a substantial

investment in excise tax reporting and compliance software to ensure that all applicable taxes are properly calculated and remitted

to the appropriate taxing authorities.

The software is now completely integrated with our systems;

We have registered with

the ATF and the states into which we ship the products;

We have implemented processes

to ensure timely filing of all required reporting;

In February 2021, we ceased

all direct-to-consumer sales.

Federal Trade Commission

The Federal Trade Commission (FTC) routinely requests

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

provided by all respondents in a public report.

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

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

Upon being advised of the exclusive distribution arrangement between Bidi

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

timely to the FTC request on November 30, 2022.

No further requests were received from the FTC to date.

State and Local Regulations

As a retail seller and/or wholesale distributor of

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

Individual U.S.

state laws and regulations concerning

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

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

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

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

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

Recently, for

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

in retail locations.

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

We anticipate

more states and localities will take this approach.

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

state e-cigarette and related products excise taxes.

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

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

Excise Taxes on Vapor Products

Vapor products are currently subject to excise taxes

at the state and local level.

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

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

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

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

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

Any future enactment of excise tax increases at the federal,

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

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

all direct-to-consumer sales in February 2021.

International Regulations and Pertinent Information

The World Health Organization’s Framework Convention

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

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

Over 170 governments worldwide have ratified the FCTC.

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

the tobacco industry.

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

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

the levying of substantial

and increasing tax and duty charges;

restrictions or bans on

advertising, marketing, and sponsorship;

restrictions or bans on

advertising, marketing, and sponsorship;

the display of larger health

warnings, graphic health warnings, and other labeling requirements;

restrictions on packaging

design, including the use of colors and generic packaging;

restrictions or bans on

the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

requirements regarding

testing, disclosure, and performance standards for tar, nicotine, carbon monoxide, and other smoke constituents’ levels;

requirements regarding

testing, disclosure, and use of tobacco product ingredients;

increased restrictions

on smoking in public and workplaces and, in some instances, in private places and outdoors;

elimination of duty-free

allowances for travelers;

encouraging litigation

against tobacco companies.

If the United States becomes a signatory to the FCTC

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

and financial condition could be materially and adversely affected.

Environmental Laws

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adversely affected.

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

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

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

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

information technology, and financial accounting and reporting management.

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

in our medical plan.

In addition to our two officers, we have two employees who fulfill roles

in business development, information technology, and financial accounting and reporting management.

All our employees are eligible to

enroll, or have already enrolled, in our medical plan.

Emerging Growth Company

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

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

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

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

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May 2023 GoFire Asset Purchase Agreement

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

(the “GoFire APA”) with GoFire.

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

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

and certain contingent cash consideration.

The purchased assets consist of 19 existing patents and 47 pending patents with novel technologies

related to vaporization and inhalation technologies.

The patents and patent applications cover the U.S.

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

Asset Purchase Agreement (the “GoFire APA”) with GoFire.

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

purchased certain intellectual property assets of GoFire consisting of various patents, patent applications and trademarks in exchange

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

The purchased assets consist of 19 existing patents and

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

The patents and patent applications cover

and several international territories.

The purchased assets also include four registered and two pending trademarks.

We have determined that the acquisition of the purchased

assets does not constitute the acquisition of a “business” (as defined in Rule 11-01(d) of Regulation S-X).

determined that the acquisition of the purchased assets does not constitute the acquisition of a “business” (as defined in

Rule 11-01(d) of Regulation S-X).

Pursuant to the terms of the GoFire APA, we paid to

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to the GoFire stockholders pursuant to such registration statement.

In addition, if any

Series B Preferred Stock remains outstanding nineteen (19) months after May 30, 2023, we shall use commercially reasonable efforts to

file with the SEC subsequent registration statement registering the distribution to GoFire’s stockholders and/or public resale

Series B Conversion Shares by such stockholders.

If such subsequent registration statement is required, we will use our commercially

reasonable efforts to obtain effectiveness of such subsequent registration statement within nineteen (19) months of May 30, 2023, and

if we do not so register the Series B Conversion Shares within nineteen (19) months of May 30, 2023, we will issue to GoFire or its designee

an additional ten percent (10%) of all of the Series B Conversion Shares underlying the then-outstanding shares of Series B Preferred

To satisfy this obligation we will provide GoFire with an additional 10% of our shares of common stock issued to them upon

the conversion of the Series B Preferred Stock at the closing of the Business Combination.

In addition, if any Series B Preferred Stock remains

outstanding nineteen (19) months after May 30, 2023, we shall use commercially reasonable efforts to file with the SEC subsequent registration

statement registering the distribution to GoFire’s stockholders and/or public resale Series B Conversion Shares by such stockholders.

If such subsequent registration statement is required, we will use our commercially reasonable efforts to obtain effectiveness of such

subsequent registration statement within nineteen (19) months of May 30, 2023, and if we do not so register the Series B Conversion Shares

within nineteen (19) months of May 30, 2023, we will issue to GoFire or its designee an additional ten percent (10%) of all of the Series

B Conversion Shares underlying the then-outstanding shares of Series B Preferred Stock.

To satisfy this obligation we will provide

GoFire with an additional 10% of our shares of common stock issued to them upon the conversion of the Series B Preferred Stock at the

closing of the Business Combination.

All of the securities issued as consideration for

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2024 Reverse Stock Split

January 22, 2024 , the

Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary

of State of the State of Delaware to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares

of the Common Stock.

The 2024 Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market.

No fractional shares

were issued in connection with the 2024 Reverse Stock Split.

Any fractional shares of the Company’s Common Stock that would have

otherwise resulted from the 2024 Reverse Stock Split were rounded up to the nearest whole number.

In connection with the 2024 Reverse

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

exercisable into shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity

compensation rights.

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

in this Report have been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period

On January 22, 2024, the Company filed a Certificate

of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware

to affect a 1-for-21 reverse stock split (the “2024 Reverse Stock Split”) of the shares of the Common Stock.

The 2024 Reverse

Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market.

No fractional shares were issued in connection with the 2024

Reverse Stock Split.

Any fractional shares of the Company’s Common Stock that would have otherwise resulted from the 2024 Reverse

Stock Split were rounded up to the nearest whole number.

In connection with the 2024 Reverse Stock Split, the Board approved appropriate

and proportional adjustments to all outstanding securities or other rights convertible or exercisable into shares of the Common Stock,

including, without limitation, all preferred stock, warrants, options, and other equity compensation rights.

All historical share and

per-share amounts reflected throughout the accompanying consolidated financial statements in this Report have been retroactively adjusted

to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented.

The par value per share of the Common

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business