Blog: KAIVAL BRANDS INNOVATIONS GROUP, INC. : Entry into a Material Definitive Agreement, Regulation FD Disclosure, Financial Statements and Exhibits (form 8-K) – Marketscreener.com

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

Third Amended and Restated Distribution Agreement

On June 10, 2022, Kaival Brands Innovations Group, Inc., a Delaware corporation
(the “Company”), entered into a Third Amended and Restated Exclusive
Distribution Agreement (the “Third A&R Distribution Agreement”) with Bidi Vapor,
LLC, a Florida limited liability company (“Bidi”), which amended and restated
the Second Amended and Restated Exclusive Distribution Agreement, dated April
20, 2021 (the “Second A&R Distribution Agreement”), which amended and restated
the Amended and Restated Exclusive Distribution Agreement, dated May 21, 2020
(the “First A&R Distribution Agreement”), which amended and restated the
Exclusive Distribution Agreement, dated March 9, 2020 (the “Original
Distribution Agreement” and, together with the Third A&R Distribution Agreement,
the Second A&R Distribution Agreement, and the First A&R Distribution Agreement,
the “Distribution Agreement”).

The purpose of the Third A&R Distribution Agreement is to modify various terms
and provisions to reflect the terms of the PMI Licensing Agreement (as defined
below) and also modify the terms between the Company and Bidi. Pursuant to the
Third A&R Distribution Agreement, Bidi granted the Company, and its designees,
an exclusive right to distribute electronic and non-electronic nicotine delivery
systems and related components (other than certain excluded products, the
“Products”) for sale and resale to both retail level customers and non-retail
level customers worldwide, subject to a carve-out for, and exclusion, of the PMI
Markets (as defined below). The Company will pay Bidi $2.90 for each Bidi Stick
purchased for the remainder of 2022. Beginning in 2023 and each year thereafter,
the Company and Bidi will negotiate a price per unit in good faith. If they
cannot agree on a price, then the parties will utilize a third-party consultant
to determine a price per unit.

In addition, the Company has the exclusive right of first refusal of any and all
future Bidi products that: (a) arise out of or relate to electronic nicotine
delivery systems and related components to electronic nicotine delivery systems
(including any variations thereto (e.g., pods)); or (b) arise out of or relate
to the nicotine industry, but will exclude oral-based nicotine pouches,
e-cigarettes that produce a non-nicotine containing aerosol, and nicotine
e-cigarettes authorized for as medicinal or pharmaceutical products that do not
have the look and feel of the Bidi Stick. For the avoidance of doubt, future
products include all flavors and variants of a product, but only such products
as are, or are to be, distributed for commercial sale. Bidi and the Company
agree to engage in good faith negotiations regarding the terms and conditions of
future products to be sold, including but not limited to pricing and minimum
purchase thresholds, pursuant to which the Company will have the exclusive right
to distribute the future products. The minimum purchase thresholds will not
apply to any Product until Bidi receives a Marketing Grant Order from the Food
and Drug Administration for a specific Product or type of flavored nicotine
Product. If the minimum purchase threshold requirement is not met by less than
fifty percent (50%) for a calendar year, then the Distribution Agreement’s
exclusivity provisions will remain in effect and the Company will have a twelve
(12) month cure period. If the minimum purchase thresholds requirement is not
cured within the twelve (12) month cure period, or, if the minimum purchase
threshold requirement is not met by more than fifty percent (50%) for a calendar
year, then the Company will lose its exclusive distribution rights. The
Company’s obligation to meet a minimum purchase threshold will be reduced for
shipping delays, force majeure, enforcement actions, product defects, or Bidi’s
inability to fulfill purchase orders.

Pursuant to the Distribution Agreement, the Company will promote, market, sell,
and distribute the Products. Bidi will provide the Company with all branding,
logos, and marketing materials to be used in connection with the promotion and
marketing of the Products. The Company will perform the marketing and promotion
of the Products at its own expense and will be responsible for all expenses
incurred by it in connection with its obligations under the Distribution
Agreement, including the salaries or other compensation for its personnel, costs
and expenses associated with establishing and maintaining its sales organization
and offices, and marketing, advertising, and promotion expenses. The Company is
also responsible for the warehousing and storage of the Products, and,
contemporaneous with the execution of the Distribution Agreement entered into
the Lease (as defined below) to fulfill this obligation.

Further, the Distribution Agreement outlines the terms and conditions for
submitting purchase orders for Bidi products. Product prices and minimum order
requirements are set during the fourth quarter of the subsequent year by an
agreement between Bidi and the Company. The Company is responsible to pay all
shipping carrier invoices and assumes title and risk of loss upon the delivery
of the products at their destination. However, Bidi may refuse, cancel, or delay
any shipment of the products when the Company is delinquent in any payment for
more than thirty (30) calendar days, or when the Company is in material breach
of its obligations.

Pursuant to the Distribution Agreement, Bidi granted to the Company a revocable,
sublicensable, non-transferable, non-exclusive, limited license to use Bidi’s
logos, trademarks, and trade names, together with all branding and marketing
materials created by or on behalf of Bidi in connection with the Products, and
the domain http://www.bidivapor.com (the “Intellectual Property”), solely in connection
with the marketing, advertisement, and sale of the Products. The Intellectual
Property will remain the sole and exclusive property of Bidi, as applicable, and
the license will immediately terminate upon the expiration or termination of the
Distribution Agreement. Bidi also granted the Company a non-exclusive,
royalty-free license to use Bidi’s logos, trademarks, and trade names (“Bidi’s
Marks”) on the Company’s web sites and marketing materials. Bidi’s Marks will
remain the sole and exclusive property of Bidi and Bidi’s license will
immediately terminate upon the expiration or termination of the Distribution
Agreement.

The Distribution Agreement has a term of ten years and automatically renews for
a successive ten-year term, unless earlier terminated pursuant to the
Distribution Agreement. Either party is entitled to terminate the Distribution
Agreement at any time in the event of material breach by the other party that
remains uncured after thirty (30) calendar days following written notice
thereof. In such event, termination is effective immediately and automatically
upon the expiration of the applicable notice period, without further notice or
action by either party. Either party may terminate the Distribution Agreement
and any outstanding purchase orders immediately, at its option, upon written
notice if the other party (i) becomes or is declared insolvent or bankrupt, (ii)
is the subject of a voluntary or involuntary bankruptcy or other proceeding
related to its liquidation or solvency, which proceeding is not dismissed within
sixty (60) calendar days after its filing, (iii) ceases to do business in the
normal course, or (iv) makes an assignment for the benefit of creditors.

Bidi is considered a related party to the Company because the Company’s Chief
Executive Officer and director, Mr. Nirajkumar Patel, owns and controls Bidi.
Mr. Patel is also a beneficial owner of the entity that is the Company’s largest
controlling stockholder. Thus, the Company and Bidi are under common control.
The Company’s Audit Committee of the board of directors reviewed the terms of
the Third A&R Distribution Agreement and approved the Company entering into the
agreement.

The above description of the Third A&R Distribution Agreement does not purport
to be complete and is qualified in its entirety by the full text of such
Agreement, which the Company intends to file as an exhibit to its Quarterly
Report on Form 10-Q for the quarter ended April 30, 2022. The delay will provide
the parties time to redact certain information set forth in the Third A&R
Distribution Agreement, which the parties were unable to do given the close
proximity of the execution date of the Third A&R Distribution Agreement and the
filing of this Current Report on Form 8-K (this “Current Report”).



Lease Agreement


On June 10, 2022, the Company entered into a Lease Agreement (the “Lease”) with
Just Pick, LLC (the “Landlord”) for approximately 21,332 rentable square feet
combined in the office building and warehouse located at 4460 Old Dixie Highway,
Grant Valkaria, Florida 32949 (the “Premises”), together with all improvements
thereon. The Landlord is considered a related party to the Company because the
Company’s Chief Executive Officer and director, Mr. Nirajkumar Patel, owns and
controls the Landlord. Mr. Patel is also a beneficial owner of the entity that
is the Company’s largest controlling stockholder. Thus, the Company and the
Landlord are under common control. The Company’s Audit Committee of the board of
directors reviewed the terms of the Lease and approved the Company entering into
the agreement.

The anticipated commencement date of the Lease is June 10, 2022 (the
“Commencement Date”). The term of the Lease is one (1) year (the “Lease Term”),
with one automatic renewal period for a five-year term. The Company, in its sole
. . .

ITEM 7.01 REGULATION FD DISCLOSURE

On June 13, 2022, the Company issued a press release announcing its entry into
the agreements as described above under Item 1.01. A copy of the press release
is attached as Exhibit 99.1 to this Current Report.

The information in Exhibit 99.1 shall not be deemed as “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of such Section, nor shall it be deemed incorporated by
reference in any filing by the Company under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, regardless of any
general incorporation language in such filing, unless expressly incorporated by
specific reference in such filing.



                           FORWARD LOOKING STATEMENTS


This Current Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks, uncertainties,
and assumptions that are difficult to predict. All statements other than
statements of historical fact contained in this Current Report, including
statements regarding future events, our future financial performance, business
strategy, and plans and objectives of management for future operations, are
forward-looking statements. We have attempted to identify forward-looking
statements by terminology including “anticipates,” “believes,” “can,”
“continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,”
“potential,” “predicts,” or “should,” or the negative of these terms or other
comparable terminology. The forward-looking statements made herein are based on
the Company’s current expectations. Actual results could differ materially from
those described or implied by such forward-looking statements as a result of
various important factors, including, without limitation, its limited operating
history, competitive factors in the Company’s industry and market, and other
general economic conditions. The forward-looking statements made herein are
based on the Company’s current expectations, assumptions, and projections, which
could provide to be incorrect. The forward-looking statements made herein speak
only as of the date of this Current Report and the Company undertakes no
obligation to update publicly such forward-looking statements to reflect
subsequent events or circumstances, except as otherwise required by law.

ITEM 9.01 FINANCIAL STATEMENTS



(d) Exhibits



Exhibit Number Description of Exhibit
99.1             Press Release dated June 13, 2022.
104            Cover Page Interactive Data File (embedded within the Inline XBRL
               document).

© Edgar Online, source Glimpses

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