Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 67

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 67
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called VEEBA and more recently rebranded as VEEV NOW, has been custom developed and was initially distributed in Canada. VEEV NOW was
then commercially launched by PMPSA in Europe in February 2023, with additional market launches planned this year. On August 12, 2023,
we executed and entered into a Deed of Amendment No. 1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI. Pursuant to
the PMI License Amendment (which was effective on June 30, 2023), resulting in a Net Reconciliation Payment to KBI and ongoing quarterly
royalty payments.

The ability of PMPSA to generate sales of its licensed
products is important to our results of operations since we derive royalty revenue from PMPSA sales. Should our relationship with PMPSA
deteriorate or terminate, or if PMPSA is unable to generate meaningful sales of its licensed products, our business and results of operations
would be materially harmed.

38

Ability to Develop and Monetize the GoFire Intellectual Property

We purchased certain vaporizer
and inhalation-related technology 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, and while we believe this to be a transformative acquisition
for us and we are already seeking to develop and monetize the acquired assets, we can give no assurances at this time that either (i)
the patent applications we acquired will eventuate in issued patents or (ii) we will be able to enter into successful monetizing arrangements
with respect to these assets.

Nature of our Products
and Regulation

Competition in the market for e-cigarettes from illicit
sources may have an adverse effect on our overall sales volume, restricting our ability to increase selling prices and damaging our brand
equity and reputation. Illicit trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products, and locally
manufactured products on which applicable taxes or regulatory requirements are evaded, represent a significant and growing threat to the
legitimate tobacco industry, including the products we sell. Although we combat counterfeiting of our Products by engaging in certain
tactics, such as requiring all sales force personnel to randomly collect our Products from retailers in order to be tested by our quality
control team, maintaining a quality control group that is responsible for identifying counterfeit products and