Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 13

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 13
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 expanded to cover certain additional territories.

(vi) Net Reconciliation Payment
to KBI. As a result of the changes to the PMI License Agreement described in paragraphs (i) thought (iii) above, the value of such
changes was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023. On September
8, 2023, the Company received the Net Reconciliation Payment from PMPSA of $134,981 pursuant to this provision. 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. In March 2023, PMPSA announced the launch of
a product (now called VEEV NOW) under the PMI License Agreement.

7

In connection with the PMI License Agreement, we,
Bidi, and PMPSA also entered into a deed of letter to require specific performance of the duties and obligations set forth in the PMI
License Agreement if KBI is unable or fails to sublicense the intellectual property to PMPSA pursuant to the PMI License Agreement and/or
is unable or fails to perform certain of its obligations or grant the rights pursuant to the PMI License Agreement. In addition, we, Bidi,
and PMPSA entered into a guarantee, whereby we and Bidi guarantee to PMPSA up to 50% of all of KBI’s monetary obligations set forth
in the PMI License Agreement if KBI fails to perform or discharge certain of its obligations in the PMI License Agreement.

In November 2023, KBI,
Bidi and PMPSA agreed to initiate a pilot project, pursuant to which PMPSA would manufacture up to an agreed upon number of Bidi Sticks
with PMI’s own e-liquid for commercialization in Canada. Based on the results of the pilot, we and PMPSA may consider appropriate
changes or amendments to the PMI License Agreement to accommodate the manufacturing and sales of Bidi Sticks containing PMI e-liquids
in Canada. As of the date of this Report, we do not believe this pilot program is, overall, material to our business or results of operations
and have yet to determine the longer-term plan.  

On December 16, 2024, KBI and Bidi received a letter
from PM