Company: KAVL
Filing Date: 2025-09-16
Form Type: 10-Q
Source: 0001731122-25-001266
Chunk: 63

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-09-16
Form: 10-Q
Item: Item 2
Chunk 63
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) 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. Although Bidi
disputes the patent infringement claims set forth in the ITC Complaint by the RJ Reynolds Entities, in December 2024 Bidi entered into
a consent order agreeing to cease all importation and distribution of the Bidi Stick until the RJ Reynolds Entities’ patent expires
in October 2026. In November 2024, the ITC Administrative Law Judge (ALJ) denied temporary relief to the Reynolds Entities and the case
proceeded on the merits. A trial was held in April 2025.The initial determination (ID) from the ALJ was issued on August 29, 2025. The
ALJ found that violation of §337 based on infringement of U.S. Patent No. 11,925,202 by the respondents, and that both the technical
and economic prongs of domestic industry were satisfied. The ID will now be reviewed by the Commission for final approval, with respondents
and complainants expected to file additional briefs. The Commission target deadline is December 29, 2025, subject to potential extensions.
 The asserted patent expires in October 2026 as would any exclusion order that the ITC enters as a result of the ITC Complaint, as
well as the Bidi consent order.

1

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 market (or regulatory assessment). The PMI License Agreement grants
to PMPSA a license of certain intellectual property rights relating to Bidi’s ENDS device, known as the BIDI® Stick in the United
States, as well as potentially newly developed