Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 161

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1A
Chunk 161
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 further research, the FDA and CDC recommended against the
use of THC-containing ENDS products, especially those from unofficial sources, and that the underage, pregnant women and adults who do
not currently use tobacco products should not start using ENDS products. On February 25, 2020, the CDC issued a final update, stating
that the number of cases of severe respiratory illnesses had declined to single digits as of February 9, 2020. The CDC also reconfirmed
that (i) Vitamin E acetate, which was found in some THC-containing ENDS cartridges for non-ENDS ENDS products that were mostly obtained
illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) THC-containing ENDS
products from informal sources were linked to most cases of severe respiratory illnesses. Furthermore, there have been recent claims that
users of ENDS products may suffer a greater risk of more serious COVID-19 complications. However, it remains unclear whether the exposure
to toxic chemicals through ENDS product usage will increase the risk of COVID-19.

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Research regarding the actual causes of these illnesses
is still ongoing. If ENDS product usage is determined or perceived to pose long-term health risks or to be linked to illnesses, the usage
of ENDS products may significantly decline, which would have a material adverse effect on our business, financial condition, and results
of operations. Although we currently do not offer products containing THC, any perceived correlation between THC and Vitamin E acetate
may adversely affect the public’s perception of ENDS products in general, regardless of whether such products contain THC and/or
Vitamin E.

We do not expect the assets acquired from GoFire
will generate immediate revenue for us, and we may never be able to develop these assets into revenue generating products. 

We purchased a certain vaporizer and inhalation-related
patent portfolio from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence on Bidi. We do not expect
that the acquired assets will generate immediate revenue for us. While we will seek to monetize the acquired intellectual property, including
through third-party licensing opportunities, we can give no assurances at this time that either (i) the patent applications we acquired
will result in issued patents or (ii) we will be able to successfully monetize these assets. Our failure to capitalize on our GoFire assets
would materially impair our strategy of diversifying our product offerings