Company: KAVL
Filing Date: 2025-06-10
Form Type: 10-Q
Source: 0001731122-25-000842
Chunk: 28

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-06-10
Form: 10-Q
Item: Item 1
Chunk 28
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 limitations in the GoFire APA,
the Series B Preferred Stock holds seniority over the Common Stock and each other class of series of securities now existing or hereafter
authorized with respect to dividend rights, the distribution of assets upon liquidation, and dissolution and redemption rights. Upon a
liquidation and winding up of the Company, the holders of Series B Preferred Stock are entitled to a liquidation preference of $15 per
share (the “Liquidation Preference”), though the redemption may be adjusted downward based on the trading price of the Common
Stock at the time of liquidation. The holders of Series B Preferred Stock are entitled to receive a dividend equal to 2% of the Liquidation
Preference, accruing from the Closing Date and payable on the eighteen-month anniversary of the Closing Date. Amounts payable in respect
of the Series B Dividend shall begin to accrue on a daily basis, be cumulative from and including the Original Issue Date, whether or
not the Corporation has funds legally available for such dividends or such dividends are declared, shall compound on each six month anniversary
of the Original Issue Date and shall be payable in arrears on the 18-month anniversary of the Original Issue Date. No preemptive rights
are granted to the holders of Series B Preferred Stock. The Majority Holders have the ability to cause a voluntary conversion of the Series
B Preferred Stock into Common Stock at a conversion rate of 0.3968 shares of Common Stock per share of Series B Preferred Stock which
may only occur on or after the following dates 18-month, 24 month, 36 month, 48 month, and 60 month anniversary of the original issuance
date; and only up to 180,000 shares of Series B Preferred Stock on each of these dates. All shares of Series B Preferred Stock will automatically
convert to Common Stock upon the occurrence of a Change of Control (as defined in the GoFire APA). On December 3, 2024, the Company paid
accrued dividends of $405,000 to Series B shareholders. As of April 30, 2025, the Company had zero accrued dividend payable to Series
B shareholders and no further dividends will be accrued or paid.

Pursuant to the GoFire APA, the Company is required
to use commercially reasonable efforts to register the APA Shares and Warrant Shares with the SEC for distribution to GoFire’s stockholders
and/or public resale by such stockholders within 180 days of the Closing Date. In addition,