Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 187

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1A
Chunk 187
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 role prior to
the closing of the Merger Agreement. While we expect the transactions contemplated by the Merger Agreement to close (the “Closing”)
in March or April of this year, no assurances can be made that such transactions will close by then or ever. The transactions contemplated
by the Merger Agreement are described in further detail below under “Item 1 Business--The Merger and Share Exchange Agreement.”

Material Items, Trends
and Risks Impacting Our Business  

We believe that the following items and trends may
be useful in better understanding the results of our operations.

On June 11, 2024, the RJ Reynolds Entities filed the
ITC Complaint. The ITC Complaint requests the ITC grant: (a) temporary and permanent limited exclusion orders pursuant to Section 337(e)
of the Tariff Act of 1930, as amended, which would prohibit the importation of the Bidi Stick in the United States; and (b) issue temporary
and permanent cease and desist orders pursuant to 337(f) of the Tariff Act of 1930, as amended, which would prohibit the sale and distribution
of the Bidi Stick in the United States. No damages are recoverable in the proceedings before the ITC. If the Company or Bidi is prohibited
from importing the Bidi Stick, then our business, operations, financial results, and reputation would be significantly adversely impacted.
Bidi disputes the patent infringement claims set forth in the ITC Complaint by the RJ Reynolds Entities and plans to vigorously defend
the ITC Investigation. A Commission determination regarding temporary relief is expected in October or December 2024. A final Commission
determination on permanent relief is not expected until late 2025 or early 2026. The asserted patent expires in October 2026 as would
any exclusion order that the ITC enters as a result of the ITC Complaint.

As a result of the ITC Complaint and other factors
we do not expect any significant revenue from the sale of Bidi Sticks in the foreseeable future. Our primary source of revenue is from
KBI from royalties from PMI under the PMI License Agreement.

PMI Licensing Agreement and International Distribution

On June 13, 2022, we, through our wholly owned subsidiary,
KBI, entered into the PMI License Agreement with PMPSA, a wholly owned affiliate of PMI, for the development and distribution of ENDS
products in certain markets outside of the United States, subject to