Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,”
as such term is defined in Rule 13a-15e and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President
& Chief Operating Officer and our Interim Chief Financial Officer to allow for timely decisions regarding required disclosure.
As of October 31, 2025, the end of the year covered
by this Report, we carried out an evaluation under the supervision and with the participation of members of our management, including
our President & Chief Operating Officer and our Chief Financial Officer, of the effectiveness of the design and the operation of our
disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Our management has concluded, based on their evaluation,
that the disclosure controls and procedures were not effective as of the end of the year covered by this Report due to material weaknesses
identified below.
Management’s Annual Report on Internal
Control Over Financial Reporting
Our management is responsible for establishing and
maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control
over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles. Our management assessed our internal control over financial reporting using the criteria in Internal Control –
Integrated Framework (2013 Framework), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Based on our evaluation under the framework in COSO,
our management concluded that our internal control over financial reporting was ineffective, taken as a whole, as of October 31, 2025,
based on such criteria. Material weaknesses existed in the design or operation of certain of our internal controls over financial reporting
that adversely affect our internal controls. A material weakness is a significant deficiency, or combination of deficiencies, in internal
control over financial reporting that results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements may not be prevented or detected. Management determined that there was a lack of resources to provide segregation
of duties consistent with control objectives, and a lack of a fully developed formal review process that includes multiple levels of review
over financial disclosure and reporting processes.
The weaknesses and the related risks are not uncommon
in a company of our size because of the limitations in the location, size and number of our staff. To address these material weaknesses,
and subject to the receipt of additional financing or cash flows, we have undertaken certain remediation measures to date to address the
material weaknesses described in this Report, including implementing procedures pursuant to which we can ensure proper segregation of
duties and hire additional resources to ensure appropriate review and oversight, as well as more timely formal communications processes,
more diligent review and approval of all disbursements and more timely review of all banking transactions sales orders and inventory management.
29
A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met under all potential conditions,
regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a
simple error or mistake. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
Auditor’s Report on Internal Control Over
Financial Reporting
This Report does not include an attestation report
of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was
not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide
only management’s report in this Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control
over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) that have occurred during
the fourth quarter ended October 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not Applicable.
30
PART III
Item 10. Directors, Executive Officers and Corporate
Governance.
The following table and text set
forth the names and ages of our directors and executive officers as of the date of this Report. Our board of directors (the “Board”)
is comprised of only one class of directors. Also provided herein are brief descriptions of the business experience of each director and
executive officer during the past five years (based on information supplied by them) and an indication of directorships held by each director
in other public companies subject to the reporting requirements under the Federal securities laws. During the past ten years, none of
our directors or executive officers has been involved in any legal proceedings that are material to an evaluation of the ability or integrity
of such person:
Name
Age
Position(s)
Dates in Position or Office
David Worner (1)
47
Director
March 19, 2023– Current
Mark Thoenes (2)
72
Director and Interim Chief Executive Officer
August 1, 2023– Current
Ketankumar Patel (3)
41
Director
April 24, 2024– Current
Ashesh Modi (4)
46
Director
April 24, 2024– Current
Eric Morris (5)
50
Interim Chief Financial Officer
March 7, 2024– Current
(1)
Mr. Worner serves as chair of the Audit Committee and a member of the Audit and Governance and Nominating Committee.
(2)
Mr. Thoenes was appointed to the Board effective August 1, 2023. From June 30, 2021 until August 1, 2023, he served as our Interim Chief Financial Officer. Mark Thoenes was appointed our Interim Chief Executive Officer of our company on September 12, 2024
(3)
Mr. Patel serves as Chair of the Compensation Committee and a member of the Governance and Nominating, and Audit Committees.
(4)
Mr. Modi serves as Chair of the Governance and Nominating Committees and a member of the Audit, and Compensation Committee.
(5)
Mr. Morris was appointed our Interim Chief Financial Officer of our company on March 7, 2024
David Worner, Director. Mr.
David Worner began his career in public accounting and is currently the Chief Executive Officer of GrowthPath Partners, a transactional
accounting and advisory firm which he founded in July 2021. From August 2012 to June 2021, Mr. Worner served as a partner at NOW CFO,
a national finance and accounting consulting firm. Prior to his time at NOW CFO, Mr. Worner worked as a Controller at Covario, an independent
provider of search marketing agency services, from August 2010 until August 2012. Prior to his time at Covario, from September 2006 to
August 2012, he worked as an Accounting Manager for Securities and Exchange Commission Reporting and SOX Management for NTN Buzztime,
a company that produces interactive entertainment across different platforms. Mr. Worner received a bachelor’s degree in accounting
from the University of New Orleans in 2005.
Mark Thoenes, Director and Interim
Chief Executive Officer . Mr. Mark Thoenes, has more than 35 years of diverse financial and operational leadership to our company.
From June 30, 2021 to August 1, 2023, he served as our Interim Chief Financial Officer on a consulting basis. He has been a licensed Certified
Public Accountant since 1984 and began his career with Ernst & Young Global Limited. From 2000 to 2010, Mr. Thoenes served as the
Executive Vice President/Chief Financial Officer of Rentrak Corporation (“Rentrak”), a publicly traded company listed on Nasdaq
and headquartered in Portland, Oregon. Founded in 1977, Rentrak went public in 1986, and remained a public company until it was acquired
by comScore, Inc. in 2016, after Mr. Thoenes left Rentrak. For the past eleven years, Mr. Thoenes has been the President of MLT Consulting
Services, LLC, a full-service business/financial consulting firm.
31
Ketankumar Patel, Director:
In 2017, Mr. Patel founded liquor franchise company called In and Out Liquors. Through that business, he developed a thorough understanding
of how to manage and sell high-value, age-restricted products. Mr. Patel is a graduate of APC College of Pharmacy, Chikhali, Maharastra,
India. After obtaining his degree in 2005, Mr. Patel moved to the United States in 2006. We believe that Mr. Patel is qualified to serve
on our board of directors due to his background in our industry and the business of age-restricted products.
Ashesh Modi, Director: Since
2017, Mr. Modi, has been a pharmacist at Publix. Since 2016, Mr. Modi has also held a realtor license and has managed multi-million-dollar
deals, earning accolades such as being named a top 1% Realtor by Lokation Real Estate in 2022. He also served as President of the Indian
Association of the Space Coast in Florida in 2017 -2018. After earning a Bachelor of Pharmacy degree from A R College of Pharmacy at Sardar
Patel University in India, he came to USA in 2002 where he attended Master’s in Public Health from the University of Oklahoma. We
believe that Mr. Modi is qualified to serve on our board of directors due to his background in our industry.
Eric Morris, Interim Chief Financial
Officer. Mr. Morris has served as our Interim Chief Financial Officer since March 2024. Prior to this position he was our Controller
from April 2023 to March 2024. He has been a licensed Certified Public Accountant since 2006. From Sept 2017 to April 2023, he worked
as a fractional accounting consultant at a privately held company with a diverse group of clients. Prior to his time as a consultant,
from December 2010 to August 2017, he was the Controller at a privately held Parking Meter Company. Mr. Morris received a bachelor’s
degree in accounting from Linfield University in 2000. We believe that Mr. Morris is qualified to serve as our Interim Chief Financial
Officer because of his prior and current management experience, as well as his business experience
Family Relationships
There are no family relationships
among any of our directors or executive officers.
Involvement in Certain Legal Proceedings
During the last ten years, none
of or officers, directors or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K,
other than as otherwise disclosed in this Report.
Arrangements
Other than with respect to the
Series B Director as described under “Description of Capital Stock-–-Preferred Stock—Series B Preferred Stock—Series
B Director”, there are no arrangements or understandings between an executive officer or director and any other person pursuant
to which he was selected as an executive officer or director.
Directors and Executive Officers Qualifications
Although we have not formally established
any specific minimum qualifications that must be met by each of our officers, we generally evaluate the following qualities: educational
background, diversity of professional experience, including whether the person is a current or was a former chief executive officer or
chief financial officer of a public company or the head of a division of a prominent international organization, knowledge of our business,
integrity, professional reputation, independence, wisdom, and ability to represent the best interests of our stockholders.
The Governance and Nominating Committee
of the Board prepares policies regarding director qualification requirements and the process for identifying and evaluating director candidates
for adoption by our Board. The above-mentioned attributes, along with the leadership skills and other experiences of our officers and
Board members described above, provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of stockholder
value appreciation through organic and acquisition growth.
32
Director Independence
Under Nasdaq standards, a director
is not “independent” unless the Board affirmatively determines that he or she does not have a direct or indirect material
relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line tests for independence set forth
by the Nasdaq rules. Our Board has undertaken a review of its composition, the composition of its committees and the independence of our
directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent
judgment in carrying out his responsibilities. Based on these standards, the Board has determined that Messrs. Worner, Patel, and Modi
are “independent” directors within the meaning of listing rules of the Nasdaq Stock Market.
All the members of the Audit, Compensation
and Governance and Nominating Committees were also independent during our fiscal year ended October 31, 2025. In making determinations
regarding director independence, our Board considered the relationships that each non-employee director has with us and all other facts
and circumstances our Board deemed relevant in determining their independence, including the director’s beneficial ownership of
our Common Stock and the relationships of our non-employee directors with certain of our significant stockholders.
Meetings of the Board and Board Committees
Our Board has an Audit Committee,
a Compensation Committee and Governance and Nominating Committee. The entire Board met 16 times, including telephonic meetings, during
fiscal year 2025. All directors attended at least 75% of our Board meetings held during the time each director served on our Board.
Audit Committee. The
Audit Committee currently consists of David Worner (Chair), Ketankumar Patel and Ashesh Modi. The Audit Committee met 4 times during
fiscal 2025. The meetings included discussions with management and with our independent registered public accounting firm to discuss our
interim and annual financial statements, and the effectiveness of our financial and accounting functions and organization. The Audit Committee
acts pursuant to a written charter adopted by our Board.
The purpose of the Audit Committee
is to represent and assist the Board in its general oversight of our accounting and financial reporting processes, audits of our financial
statements, and our internal control and audit functions. Management is responsible for (a) the preparation, presentation, and integrity
of our financial statements; (b) accounting and financial reporting principles; and (c) our internal controls and procedures designed
to promote compliance with accounting standards and applicable laws and regulations. Our independent registered public accounting firm
is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing
standards.
Our Board has determined that the
Audit Committee is comprised entirely of independent members as defined under applicable SEC rules and the Nasdaq Rules. Our Board has
determined that Mr. Worner, the Chair of the Audit Committee, is an “audit committee financial expert” as defined under SEC
rules.
Compensation Committee. The
Compensation Committee currently consists of Ketankumar Patel (Chair), David Worner and Ashesh Modi. The Compensation Committee met 2
times during fiscal 2025. The Compensation Committee acts pursuant to a written charter adopted by our Board.
The purpose of the Compensation
Committee is to discharge the responsibilities of the Board relating to compensation of our executives, to produce an annual report on
executive compensation for inclusion in our annual proxy statement, and to oversee and advise the Board on the adoption of policies that
govern our compensation programs, including stock and benefit plans.
The Compensation Committee is responsible
for determining executive compensation, including approving recommendations regarding equity awards for all of our executive officers,
setting base salary amounts, and fixing compensation levels. This includes reviewing and making recommendations to our Board regarding
corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating, at least annually, the Chief Executive Officer’s
performance in light of these goals and objectives, and reviewing and making recommendations to our Board regarding the Chief Executive
Officer’s compensation level based on such an evaluation.
33
The Compensation Committee also
annually reviews director compensation to ensure non-employee directors are adequately compensated for the time expended in fulfilling
their duties to us, as well as the skill-level required by us of members of our Board. After the Compensation Committee completes their
annual review, they make recommendations to our Board regarding director compensation. The Compensation Committee is authorized to engage
compensation consultants, if they deem necessary, to assist with the Compensation Committee’s responsibilities related to our executive
compensation program and the director compensation program.
Governance and Nominating
Committee. The Governance and Nominating Committee currently consists of Ashesh Modi (Chair), David Worner and Ketankumar Patel.
The Governance and Nominating Committee did not meet as such during fiscal 2025. The Governance and Nominating Committee acts pursuant
to a written charter adopted by our Board.
The purpose of the Governance and
Nominating Committee is to determine the slate of director nominees for election to our Board, to identify and recommend candidates to
fill Board vacancies occurring between annual stockholder meetings, to review our policies and programs that relate to matters of corporate
responsibility, including public issues of significance to our company and our stockholders, and any other related matters required by
the federal securities laws.
The Governance and Nominating Committee
determines the qualifications, qualities, skills, and other expertise required to be a director and to develop, and recommend to our Board
for its approval, criteria to be considered in selecting nominees for director. The Nominating Committee and our Board believe that at
this time, it is unnecessary to adopt criteria for the selection of directors. Instead, the Nominating Committee and our Board believe
that the desirable background of a new individual member of our Board may change over time and that a thoughtful, thorough selection process
is more important than adopting criteria for directors.
The Governance and Nominating Committee
will also identify, recruit, and screen candidates for our Board, consistent with criteria approved by our Board. The Nominating Committee
and our Board are fully open to utilizing whatever methodology is efficient in identifying new, qualified directors when needed, including
industry contacts of our directors or professional search firms. The Governance and Nominating Committee also considers any director candidates
recommended by our stockholders pursuant to the procedures described in this Proxy Statement and any nominations of director candidates
validly made by stockholders in accordance with applicable laws, rules, and regulations, and the provisions of our charter documents.
There were no fees paid or due
to third parties in fiscal 2024 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees.
Code of Ethics
On March 17, 2021, our Board adopted
a Code of Ethics and Business Conduct, that applies to all directors, senior officers, and employees of the Company (the “Code of
Ethics”). The Code of Ethics was adopted to enhance and clarify our personnel’s understanding of our standards of ethical
business practices, promote awareness of ethical issues that may be encountered in carrying out an employee’s or director’s
responsibilities, and sets forth how to address ethical issues that may arise. A copy of the Code of Ethics is available on our corporate
website at https://ir.kaivalbrands.com/governance/governance-documents/default.aspx.
Insider Trading Policy
In March 2023, we adopted an insider trading policy
governing the purchase, sale, and/or other dispositions of our securities by our directors, officers, and employees, to promote compliance
with insider trading laws, rules and regulations, and applicable Nasdaq listing standards applicable to us. Our insider trading policy,
among other things, prohibits our directors, officers, and employees from holding our securities in a margin account or pledging our securities
as collateral for a loan. In addition, our insider trading policy prohibits employees, officers, and directors from engaging in put or
call options, short selling, or similar hedging activities involving our stock.
34
Compensation Committee Interlocks and Insider Participation
None of our executive officers
currently serve, or have served during the last year, as a member of the board of directors or compensation committee of any entity, other
than us, that has one or more executive officers serving as a member of our Board.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all
compensation awarded to, earned by, or paid to our named executive officers, which is defined herein as (i) all individuals serving or
having served as our principal executive officer or officers during the year ended October 31, 2025, (ii) each of our two other most highly
compensated executive officers who were serving as executive officers at the end of the year ended October 31, 2025, and (iii) any individuals
for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the fiscal
year ended October 31, 2025.
Name and principal position
Fiscal Year Ended October 31,
Salary ($)
Bonus ($)
Stock Awards ($)
Option Awards ($) (1)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings ($)
Total ($)
Nirajkumar Patel, Former Interim CEO , Chief Science & Regulatory Officer and Director (2)
2024
241,499
0
0
0
0
0
241,499
2025
0
0
0
0
0
0
0
Eric Mosser, former CEO, President, and Director (3)
2024
129,549
0
0
0
0
0
129,549
2025
0
0
0
0
0
0
0
Mark Thoenes, Interim CEO and Director
2024
74,583 (6)
0
0
0
0
0
74,583
2025
300,000
0
589,000
0
0
0
889,000
Thomas Metzler, Former CFO (4)
2024
83,112
0
0
0
0
0
83,112
2025
0
0
0
0
0
0
0
Stephen Sheriff, Former COO (5)
2024
88,352
0
0
0
0
0
88,352
2025
0
0
0
0
0
0
0
Eric Morris, Interim CFO
2024
168,960
1,500
0
0
0
0
170,460
2025
234,276
23,000
731,500
0
0
0
988,776
(1)
Reflects the fair value of stock awards during the years in accordance with FASB ASC 718, Compensation–- Stock Compensation, using actual forfeitures that were immaterial. For valuation assumptions related to the 2023 option awards, refer to Note 2, “ Share-Based Compensation ,” to the accompanying audited consolidated financial statements for the year ended October 31, 2024.
(2)
Mr. Nirajkumar Patel resigned from the Company on September 7, 2024, upon his passing.
(3)
Mr. Mosser resigned from the Company on March 8, 2024.
(4)
Mr. Metzler resigned from the Company on February 20, 2024.
(5)
Mr. Sheriff resigned from the Company on February 22, 2024.
(6)
Consulting fees pursuant to the Consulting Agreement (as defined below). See “Narrative Discussion” for additional information.
35
Narrative Discussion
The following is a narrative discussion
of the material information that we believe is necessary to understand disclosed in the foregoing Summary Compensation Table. The following
narrative disclosure is separated into sections, with a separate section for each of our named executive officers.
Nirajkumar Patel
During the fiscal year ended October
31, 2024, we paid a base salary of approximately $241,499 to Nirajkumar Patel, our former CEO, Chief Science & Regulatory Officer.
Eric Mosser
During the fiscal year ended October
31, 2025, we paid a base salary of approximately zero to Eric Mosser, our former CEO, compared to a base salary of approximately $129,549
for the fiscal year ended October 31, 2024.
Mark Thoenes
During the fiscal year ended October
31, 2025, we paid a base salary of approximately $300,000 to Mark Thoenes, our Interim CEO, compared to a base salary
of approximately $74,583 for the fiscal year ended October 31, 2024.
We issued the following stock compensation
to Mr. Thoenes during fiscal years 2024 and 2025:
Vesting and/or Issuance Date
Number of Shares of our Common Stock
Price Per Share
Aggregate Value
1/6/2025
620,000
0.95
589,000
4/23/2024
10,000
3.84
38,400
Thomas Meztler
During the fiscal year ended October
31, 2025, we paid a base salary of approximately zero to Thomas Meztler, our former CFO, compared to a base salary of approximately $83,112
for the fiscal year ended October 31, 2024.
Stephen Sheriff
During the fiscal year ended October
31, 2025, we paid a base salary of approximately zero to Stephen Sheriff, our former COO, compared to a base salary of approximately $88,352
for the fiscal year ended October 31, 2024.
Eric Morris
During the fiscal year ended October
31, 2025, we paid a base salary of approximately $213,000 to Eric Morris, our Interim CFO, compared to a base salary
of approximately $168,960 for the fiscal year ended October 31, 2024.
Vesting and/or Issuance Date
Number of Shares of our Common Stock
Price Per Share
Aggregate Value
1/6/2025
770,000
0.95
731,500
36
Potential Payments Upon Termination or Change-of-Control
Other than the stock options mentioned
above in “Outstanding Equity Awards at Fiscal Year-End”, none of our named executive officers are entitled to any payments
upon termination or change-of-control.
Retirement or Similar Benefit Plans
There are no arrangements or plans
in which we provide retirement or similar benefits for our named executive officers.
Director Compensation
In fiscal year 2025, we compensated
our independent directors as follows:
Name of Director
Fees Earned
or Paid in
Cash
Equity
Awards
Total
David Worner
50,000
494,000
544,000
Mark Thoenes
50,000
589,000
639,000
Ashesh Modi
50,000
494,000
544,000
Ketankumar Patel
50,000
494,000
544,000
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
Securities Authorized for Issuance Under Equity Compensation Plans
In January 2025, the Company
issued 2,950,000 shares of common stock to the Directors and Officers of the Company to complete the merger acquisition deal with Delta.
In December 2025, the Company canceled 2,950,000 shares of common stock due to the termination of the merger agreement with Delta.
Stock Option Plans
On May 28, 2020, our Board adopted
the Incentive Plan. The following is a summary of the principal features of the Incentive Plan. The summary of the Incentive Plan does
not purport to be complete and is qualified in its entirety by reference to the full text of the Incentive Plan.
Background . The purpose
of the Incentive Plan is to enhance stockholder value by linking the compensation of our employees, officers, directors, and consultants
to increases in the price of our Common Stock and the achievement of other performance objectives and to encourage ownership in the Company
by key personnel whose long-term employment is considered essential to our continued progress and success. The Incentive Plan is also
intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees and directors to act in stockholders’
interest and share in our success. The various types of incentive awards that may be provided under the Incentive Plan are intended to
enable us to respond to changes in compensation practices, tax laws, accounting regulations, and the size and diversity of its business.
We will not offer incentive stock options under the Incentive Plan. All our employees, officers, directors, and consultants will be eligible
to be granted awards under the Incentive Plan.
The Incentive Plan will be administered
by our Board. All awards made under the Incentive Plan will be subject to the recommendations and approvals of our Board.
Stock Subject to the Incentive
Plan . Subject to the terms of the Incentive Plan, the maximum aggregate number of shares of our Common Stock that may be subject to
or delivered under awards granted pursuant to the Incentive Plan is 4,761,905 shares. Shares subject to awards that have been canceled,
expired, settled in cash, or not issued or forfeited for any reason (in whole or in part) will not reduce the aggregate number of shares
that may be subject to or delivered under awards granted under the Incentive Plan and be available for future awards granted under the
Incentive Plan.
Eligibility . We may grant
awards under the Incentive Plan to employees, officers, directors, and consultants.
37
Types of Awards . The Incentive
Plan provides for options not qualifying as “incentive” stock options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, stock appreciation rights, shares of restricted stock, and other stock-based awards.
Award Limitation . Non-employee
directors may not be granted awards in excess of the 200,000 shares of our Common Stock in any calendar year.
Term and Amendments . Unless
terminated by our Board, the Incentive Plan will continue to remain effective until no further awards may be granted, and all awards granted
under the Incentive Plan are no longer outstanding. Our Board may at any time, and from time to time, amend the Incentive Plan; provided
that no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the Incentive Plan
without the holder’s consent.
Security Ownership of Certain Beneficial Owners
and Management
Common Stock
The following table lists the beneficial
ownership of the Kaival Common Stock as of January 26, 2026, by (i) each named executive officer, (ii) each director, and (iii) all of
Kaival’s current directors and executive officers as a group. Percentage outstanding is based on shares of Kaival Common
Stock outstanding as of January 26, 2026.
Beneficial ownership is
determined in accordance with the rules of the SEC and, thus, represents voting or investment power with respect to the 13,535,402
shares of Kaival Common Stock outstanding as of January 26, 2026. In computing the number and percentage of shares
beneficially owned by a person, shares that may be acquired by such person within 60 days of January 26, 2026 are
counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other
person. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of
our common stock owned by them, except to the extent such power may be shared with a spouse.
Number of
Shares of Kaival
Common Stock
Beneficially
Percentage of
Name
Owned(2)
Class(2)
Eric Morris(3)
7,211
0.1 %
David Worner(4)
15,952
0.1 %
Mark Thoenes(5)
19,604
0.1 %
Ashesh Modi(6)
6,000
0.0 %
Ketankumar Patel(7)
6,000
0.0 %
Current Executive Officers and Directors as a Group (5 Persons)
54,767
0.3 %
* Less than 1.0%
(2) Applicable percentage of ownership
is based on 13,535,402 shares of common stock outstanding as of January 26, 2026.
38
Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Shares of common stock that are currently exercisable within 60 days of January 20, 2026, are deemed to be beneficially owned by the
person holding such securities for the purpose of computing the percentage of ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any person.
(3) Eric Morris serves as our Interim Chief Financial Officer. Includes approximately
6,020 shares of our common stock and 1,191 shares of our common stock issuable upon the exercise of vested options.
(4) David Worner serves as a member
of our board. Includes approximately 15,952 shares of our common stock issuable upon the exercise of vested options.
(5) Mark Thoenes serves as a member of our board. Includes approximately 80 shares
of our common stock and 19,524 shares of our common stock issuable upon the exercise of vested options.
(6) Includes 6,000 shares underlying
vested options.
(7) Includes 6,000 shares underlying
vested options.
Item 13. Certain Relationships and Related Party Transactions
Since the beginning of our fiscal
year, we have entered into or participated in the following transactions with related persons:
Revenue
During the year ended October 31, 2025, the Company
recognized revenue of zero from three companies owned by Nirajkumar Patel, former Chief Executive Officer and director of the Company
and/or his wife.
Purchases and Accounts Payable
The KBI License Agreement provides that KBI shall
pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development
costs incurred for entry to specific international markets. During the year ended October 31, 2025, the Company paid license fees of approximately
$266,215 to Bidi. As of October 31, 2025, the Company had accounts payable to Bidi of $50,000 for license fees.
Leased Office Space and Storage Space
We capitalize all leased assets
pursuant to ASU 2016-02, Leases (Topic 842) (“Topic 842”), which requires lessees to recognize right-of-use (“ROU”)
assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer
than 12 months and classified as either financing or operating leases. We exclude short-term leases having initial terms of 12 months
or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. On
June 10, 2022, we entered into the 2022 Lease with Just Pick for approximately 21,332 rentable square feet combined in our principal
office building and warehouse, together with all improvements thereon. Just Pick is considered a related party because our former Chief
Executive Officer and director, Mr. Nirajkumar Patel, owns and controls Just Pick. On January 7, 2026, the Company executed
a settlement agreement with Just Pick where both parties agreed to no further payments remaining for the office lease liability.
39
Policies and Procedures for Related Party Transactions
We follow ASC 850, Related Party
Disclosures, for the identification of related parties and disclosure of related party transactions. When and if we contemplate entering
into a transaction in which any executive officer, director, nominee, or any family member of the foregoing would have a direct or indirect
interest, regardless of the amount involved, the terms of such transaction are presented to our board of directors (other than any interested
director, if possible) for approval and documented in the board minutes.
Item 14. Principal Accounting Fees and Services.
Below is the aggregate amount of
fees billed for professional services rendered by Malone Bailey, LLP, our principal accountants with respect to our fiscal year ended
October 31, 2025, and October 31, 2024.
2025
2024
Audit and review fees
$ 225,364
$ 227,120
Audit-related fees
—
—
Tax fees
—
—
All other fees
111,840
154,198
Total
$ 337,204
$ 381,318
Pre-Approval Policies and Procedures
All audit fees are approved by
the Audit Committee of our Board. The Audit Committee reviews, and in its sole discretion, pre-approves, our independent auditors’
annual engagement letter, including proposed fess and all audit and non-audit services provided by the independent auditors. Accordingly,
all services described under “Audit Fees,” “Audit-related Fees,” “All Other Fees,” and “Tax
Fees,” as applicable, were pre-approved by our Audit Committee. The Audit Committee may not engage independent auditors to perform
the non-audit services prohibited by law or regulations.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
a) Financial Statements
1. Our financial statements are listed in
the index under Item 8 of this document; and
2. All financial statement schedules are
omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b) Exhibits required by Item 601 of Regulation S-K.
Exhibit No.
Exhibit Description
3.1
Restated Certificate of Incorporation, which was filed as Exhibit 3.1 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on March 25, 2019, and is incorporated herein by reference thereto.
3.2
Bylaws, which were filed as Exhibit 3.2 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on February 19, 2019, and are incorporated herein by reference thereto.
3.3
Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on June 20, 2019, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.
3.4
Certificate of Correction, as filed with the Secretary of State of the State of Delaware on July 15, 2019, which was filed as Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.
3.5
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective July 20, 2021, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2021, and is incorporated herein by reference thereto.
3.6
Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock, dated May 30, 2023, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.
3.7
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective January 22, 2024, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2024, and is incorporated herein by reference thereto.
4.1
Description of Securities*
4.2
Form of senior indenture, filed as Exhibit 4.4 to our Registration Statement on Form S-3 filed with the Securities and Exchange Commission on July 30, 2021, and is incorporated herein by reference thereto.
4.3
Form of Warrant, filed as Exhibit 4.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto.
4.4
Warrant Agency Agreement, dated as of September 29, 2021, by and between Kaival Brands Innovations Group, Inc. and VStock Transfer, LLC, as warrant agent, filed as Exhibit 4.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto.
41
4.5
Common Stock Purchase Warrant issued to GoFire, Inc on May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.
10.1
Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated March 31, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2020, and is incorporated herein by reference thereto.
10.2
First Amendment to Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated June 2, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.
10.3
Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated April 3, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2020, and is incorporated herein by reference thereto. (1)
10.4
Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated April 11, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 13, 2020, and is incorporated herein by reference thereto. (1)
10.5
Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated May 21, 2020, which was filed as Exhibit 10.6 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)
10.6
Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated May 25, 2020, which was filed as Exhibit 10.7 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)
10.7
Share Cancellation and Exchange Agreement, by and between the Company and Kaival Holdings, LLC, dated August 19, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto.
10.8
Amended and Restated 2020 Stock and Incentive Compensation Plan, which was filed as an annex to our Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 4, 2022 and is incorporated herein by reference thereto.
10.8
Lease Agreement by and between Kaival Brands Innovations Group, Inc., and Just Pick, LLC, dated July 15, 2020, which was filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 14, 2020, and is incorporated herein by reference thereto.
10.9
Consulting Agreement, by and between Kaival Brands Innovations Group, Inc. and Russell Quick, dated March 16, 2021, which was filed as Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021, and is incorporated herein by reference thereto.
10.10
Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021, which was filed as Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021 and is incorporated herein by reference thereto.
10.11
Lease Agreement by and between the Company and Just Pick, LLC, dated June 10, 2022, which was filed as Exhibit 10.24 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto.
42
10.12
Deed of Licensing Agreement by and between Kaival Brands International, LLC and Philip Morris Products S.A., dated as of June 13, 2022, which was filed as Exhibit 10.26 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto. (1) +
10.13
Fourth Amendment to Service Agreement, dated November 9, 2022 between the Company and QuikfillRx, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto. +
10.14
Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto.
10.15
Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto.
10.16
Asset Purchase Agreement by and among Kaival Brands Innovations Group, Inc., Kaival Labs, Inc., and GoFire, Inc., dated May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.
10.17
Deed of Amendment to Deed of License Agreement, executed and entered into by the Company on August 12, 2023, by and among Philip Morris Products S.A., Kaival Brands International, LLC, Bidi Vapor, LLC and the Company. which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 19, 2023, and is incorporated herein by reference thereto.*+
10.18
Amended and Restated Board of Directors Compensation Agreement with Ashesh Modi which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.
10.19
Amended and Restated Board of Directors Compensation Agreement with Ketankumar Patel which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.
10.20
Amended and Restated Board of Directors Compensation Agreement with David Worner which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.
10.21
Amended and Restated Board of Directors Compensation Agreement with Mark Thoenesl which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.
19.1
Amended and Restated Insider Trading Policy*
21.1
List of Subsidiaries*
23.1
Consent of Independent Registered Public Accounting Firm*
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31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
97.1
Compensation Clawback Policy*
101.INS
XBRL Instance Document*
101.SCH
XBRL Taxonomy Extension Schema Document*
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*
101.PRE
XBRL Taxonomy Presentation Linkbase Document*
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*
*Filed herewith.
+ + Certain portions of this exhibit (indicated
by “[***]”) have been omitted pursuant to Regulation S-K, Item 601(b)(10).as the Company has determined they are both
not material and are of the type that the Company treats as private or confidential.
(1)
Schedules and Exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any Schedule or Exhibit so furnished.
Item 16. Form 10-K Summary.
None.
44
SIGNATURES
Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Kaival Brands Innovations Group, Inc.
By:
/s/ Mark Thoenes
Mark Thoenes
Interim Chief Executive
Dated: January 28, 2026
Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By:
/s/ Mark Thoenes
Mark Thoenes
Interim Chief Executive Officer, Director
Dated: January 28, 2026
By:
/s/ Eric Morris
Eric Morris
Interim Chief Financial Officer
Dated: January 28, 2026
By:
/s/ David Worner
David Worner
Director
Dated: January 28, 2026
By:
/s/ Kentankumar Patel
Kentankumar Patel
Director
Dated: January 28, 2026
By:
/s/ Ashesh Modi
Ashesh Modi
Director
Dated: January 28, 2026
45