Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 911

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 8
Chunk 911
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 January 2024 MDO relating to Classic Bidi®
Stick as well as the uncertainty in the Company’s ability to continue to sell the Bidi Stick given the patent infringement claim
filed by RJ Reynolds.

Our management plans
to continue   developing strategies on similar or expanded
operations of our business to help our ability to determine where our business will be viable going forward. Until
such time, if ever, we can generate substantial product revenues, management plans to finance our cash needs through public or private
equity offerings or debt financing.

However,
there is no assurance that the Company will be able to raise additional capital, generate revenues or achieve profitability due to
the factors listed above as well as the regulation and public perception of ENDS products and the various other risks faced by the
Company.

The accompanying consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of these or other risks or uncertainties.

    F-16

Note 4 –Acquisition of GoFire Assets

On May 30, 2023
(the “Closing Date”), the Company and Kaival Labs entered into an Asset Purchase Agreement (the “GoFire
APA”) with GoFire, Inc. (“GoFire”) to purchase certain intellectual property assets of GoFire consisting of
various patents concerning electronic vaporizers and related technologies (the “Purchased Assets”) in exchange for
equity securities of the Company and certain contingent cash consideration. The Company participated in this transaction with the
intent to diversify its product offerings and create both near and long-term revenue opportunities. The Purchased Assets consist of
19 existing and 47 pending   patents with novel
technologies related to vaporization and inhalation.

Pursuant to the terms of the GoFire APA, the Company
paid to GoFire, in addition to certain contingent cash consideration described below, consideration in the form of equity securities of
the Company consisting of (i) an aggregate of 95,239 shares of Common Stock (the “APA Shares”); (ii) 900,000 shares of
newly-designated Series B Convertible Preferred Stock, par value $0.001 per share, (the “Series B Preferred Stock” and the
shares of Common Stock underlying the Series B Preferred, the “Series B Conversion Shares”), the rights, preferences and terms
of which are set forth in a Certificate of Design