Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 488

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 3
Chunk 488
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A agrees to pre-pay to KBI a guaranteed
minimum royalty based on the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following
the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty payment for all
markets for each applicable twelve (12)-month period. PMPSA may require modification of certain products to be sold under the PMI Licensing
Agreement to be modified for a PMI Market. Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over sales, marketing,
product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific PMI Markets in which
to launch commercialization and determine what product types are to be promoted in each market, subject to sales and marketing plans and
annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI. Royalty revenue earned from the PMI License
Agreement is recognized in the period the sales of the Product manufactured occurs.

The PMI License Agreement contains customary representations,
warranties, covenants, and indemnification provisions; however, KBI’s liability under the PMI License Agreement is capped at the
greater of: (i) Ten Million Dollars ($10,000,000); or (ii) an amount equal to the total of the royalties due to KBI (but not yet paid)
plus the royalties (including the guaranteed royalty payment) paid to KBI pursuant to the PMI License Agreement during the immediately
preceding twelve (12) consecutive months, provided that such amount shall not exceed Thirty Million Dollars ($30,000,000).

On June 10, 2022, Bidi entered into a License Agreement
(the “KBI License Agreement”) with KBI, pursuant to which KBI has the exclusive irrevocable license to use Bidi’s licensed
intellectual property to the extent necessary for KBI to fulfill its obligations set forth in the PMI Licensing Agreement. Such irrevocable
license includes: (i) the right of KBI to grant sub-licenses to PMPSA under the PMI License Agreement for the express purposes set forth
in the PMI License Agreement, but for no other purpose; (ii) the right of KBI to grant to PMPSA the right to grant sub-sub-licenses in
the manner set forth in the PMI License Agreement, but for