Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 668

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 5
Chunk 668
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alty 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 no other purpose; and (iii) certain branding rights to the extent (but only
to the extent) necessary to permit KBI to perform its obligations to PMPSA as set forth in the PMI License Agreement.

On August 12, 2023, the Company executed and entered
into a Deed of Amendment No. 1 (the “PMI License Amendment”) with PMPSA, Bidi and KBI. Pursuant to the PMI License Amendment
(which has an effective date of June 30, 2023), the following material changes have been made to the PMI License Agreement:

1. Royalty Rate. The royalty paid
by PMPSA to KBI will no longer be based on sales price of the Product being sold, but rather on the volume of liquid contained within
Product being sold. The royalty will be on a sliding scale of between $0.08 to $0.16 per sale based on the volume of liquid contained