Company: KAVL
Filing Date: 2025-03-17
Form Type: 10-Q
Source: 0001731122-25-000399
Chunk: 5

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-03-17
Form: 10-Q
Item: Item 1
Chunk 5
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 2020, the Company formed Kaival Labs,
Inc., a Delaware corporation (herein referred to as “Kaival Labs”), as a wholly owned subsidiary of the Company, for the purpose
of developing Company-branded and white-label products and services. The Company has not yet launched any Kaival-branded product, nor
has it begun to provide white label wholesale solutions for other product manufacturers. On March 11, 2022, the Company formed Kaival
Brands International, LLC, a Delaware limited liability company (herein referred to as “KBI”), as a wholly owned subsidiary
of the Company, for the purpose of entering into an international licensing agreement with Philip Morris Products S.A. (“PMPSA”),
a wholly owned affiliate of Philip Morris International Inc. (“PMI”).

On June 13, 2022, the Company’s 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 devices, to permit PMPSA to manufacture, promote, sell, and distribute such
ENDS device and newly developed devices, in international markets, outside of the United States.

International Trade Commission (ITC) claims against
the Company

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.

As a result of the ITC Complaint and