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 UNITED STATES

 SECURITIES AND EXCHANGE
COMMISSION

 WASHINGTON, D.C.
20549

 FORM 10-K

 (Mark One)

 ANNUAL
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended October 31, 2024

 OR

 TRANSITION
 REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the transition period from ______ to _________

 Commission File Number: 001-04641

 (Exact name of registrant as specified in its charter)

 Delaware

 83-3492907

 (State or other jurisdiction

 of incorporation or organization)

 (I.R.S. Employer Identification
 No.)

 4460 Old Dixie Highway
 Grant-Valkaria, Florida

 32949

 (Address of Principal
 Executive Offices)

 (Zip Code)

 (833) 452-4825

 Registrant's telephone number, including area
code

 Securities to be registered under Section 12(b) of
the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 Stock, par value $0.001 per share

 KAVL

 The Nasdaq Stock Market, LLC

 Securities to be registered under Section 12(g) of
the Exchange Act:

 None

 Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

 Yes
 No

 Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.

 Yes
 No

 Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.

 Yes No

 Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 Yes No

 Indicate by check mark whether the registrant is a
large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
the definitions of "large, accelerated filer," "accelerated filer," "smaller reporting company," and
"emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large,
 accelerated filer

 Accelerated
 filer

 Non-accelerated filer

 Smaller
 reporting company

 Emerging
 growth company

 If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.

 Indicate by check mark whether the registrant has
filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.

 If securities are registered pursuant to Section 12(b)
of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of
an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

 Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).

 Yes
 No

 As of April 30, 2024, the last business day of
the registrant's most recently completed second fiscal quarter, the aggregate market value of the voting common stock held by
non-affiliates of the registrant was approximately $ 5,756,022 based on the closing price per share (or $4.45), of the registrant's
common stock as reported by The NASDAQ Stock Market LLC.

 As of February 7, 2025, there were 11,542,302
 shares of the registrant's common stock, par value $0.001 per share, issued and outstanding.

 DOCUMENTS INCORPORATED BY REFERENCE

 None.

 KAIVAL BRANDS INNOVATIONS GROUP, INC.

 ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
OCTOBER 31, 2024

 PAGE

 Cautionary Statement Regarding Forward-Looking Statements

 ii

 Item 1

 Business

 Item 1A

 Risk Factors

 Item 1B

 Unresolved Staff Comments

 Item 2

 Properties

 Item 3

 Legal Proceedings

 Item 4

 Mine Safety Disclosures

 Item 5

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 7

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A

 Quantitative and Qualitative Disclosures about Market Risk

 Item 8

 Financial Statements and Supplementary Data

 Item 9

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A

 Controls and Procedures

 Item 9B

 Other Information

 Item 9C

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10

 Directors, Executive Officers and Corporate Governance

 Item 11

 Executive Compensation

 Item 12

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13

 Certain Relationships and Related Transactions, and Director Independence

 Item 14

 Principal Accounting Fees and Services

 Item 15

 Exhibits, Financial Statement Schedules

 Item 16

 Form 10-K Summary

 Signatures

 - i -

 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 Certain statements and information
included in this Annual Report on Form 10-K for the year ended October 31, 2024 (this "Report") contain or may contain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section
21 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform
Act of 1995. We generally use the words "may," "should," "believe," "expect," "intend,"
"plan," "anticipate," "likely," "estimate," "potential," "continue,"
"will," and similar expressions to identify forward-looking statements. Forward-looking statements are not statements of
historical facts, but rather reflect our current expectations concerning future events and results, including, without limitation, statements
related to:

 the Merger and Share Exchange Agreement (the "Merger Agreement") with Delta Corp Holdings Limited, a company incorporated in England and Wales (together with its successors and assigns, "Delta"), Delta Corp Holdings Limited, a Cayman Islands exempted company ("Pubco"), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco ("Merger Sub") and Delta Corp Cayman Limited (the "Sellers"), the closing of the transactions contemplated by the Merger Agreement and upon the closing of such transactions, the conduct of our continuing operations by our new management appointed by Pubco;

 our substantial reliance on, and efforts to diversify our business from, the business of our affiliate Bidi Vapor, LLC ("Bidi");

 our inability to import and sell the Bidi Stick due to a patent infringement claim filed by R.J. Reynolds Vapor Company, R.J. Reynolds Tobacco Company, and RAI Services Company with the; International Trade Commission (the "ITC") against Bidi, us, and forty (40) other respondents (the "ITC Complaint") and the ongoing investigation of the ITC in connection with the ITC Complaint;

 our ability to raise required funding in the form of debt or equity both in the near and longer term;

 our ability to obtain from, and pay for, Bidi products we distribute;

 our ability to integrate and ultimately enter into licenses for or create products relating to the intellectual property assets we acquired from GoFire, Inc. on May 30, 2023;

 the impact of the FDA's marketing denial order ("MDO") in January 2024 regarding the Classic BIDI Stick tobacco-flavored ENDS product, which has the potential to have a substantial adverse impact on our company;

 the outcome of Bidi Vapor's petition with the 11th Circuit Court of Appeals regarding the January 2024 MDO related to Classic BIDI Stick;

 our substantial reliance on our relationship with, and the results of marketing and sales activity by, Phillip Morris International, to whom we have licensed international rights to distribute Bidi products and from who we are entitled to receive royalty payments, which are currently our primary source of revenue;

 our relationships with,
 and reliance on, third party distributors and brokers to arrange for sales of our products;

 the market perception of
 Bidi products we distribute and related impacts on our reputation;

 the impact of black-market
 goods on our business;

 the demand for Bidi products
 we distribute;

 anticipated product performance,
 and our market and industry expectations;

 our ability or plans to
 diversify our product offerings;

 the impact of government
 regulation, laws or consumer preferences generally, or changes thereto, that could affect our business; and circumstances or developments
 that may make us unable to implement or realize the anticipated benefits, or that may increase the costs of, our current and planned
 business initiatives, including matters over which we have little or no control.

 Forward-looking statements, including those concerning
our expectations, involve significant risks, uncertainties and other factors, some of which are beyond our control, which may cause our
actual results, performance, or achievements, or industry results to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. See the "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation" sections contained in this Report for a listing of some
of the factors that could cause the results anticipated by our forward-looking statements to differ from actual future results. Except
as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future events, or otherwise. You are cautioned not to unduly rely
on such forward-looking statements when evaluating the information presented in this Report.

 - ii -

 Item 1. Business.

 As used in this Report, the
terms "we," "us," "our," the "Company," and "Kaival" refer to Kaival Brands
Innovations Group, Inc., a Delaware corporation, unless otherwise indicated. The term "Common Stock" means our common stock,
par value $0.001 per share.

 Unless the context specifically
requires otherwise, all historical share and per-share amounts reflected in our consolidated financial statements and other financial
information contained in this Report are presented to reflect a 1-for-21 reverse stock split of our Common Stock which became effective
for legal and accounting purposes on January 22, 2024 as if such split occurred as of the earliest period presented.

 Overview

 We are engaged in the sale, marketing and distribution of electronic nicotine
delivery system ("ENDS") products, also known as "e-cigarettes", in a variety of favors. Until October of 2024,
our primary source of revenue has been the Bidi Stick as we sold our inventory on hand. However, on June 11, 2024, RAI Strategic Holdings,
Inc., R.J. Reynolds Vapor Company, R.J. Reynolds Tobacco Company, and RAI Services Company (collectively, the "RJ Reynolds Entities")
filed a patent infringement complaint with the International Trade Commission (the "ITC") against Bidi, us, and forty (40)
other respondents (the "ITC Complaint") pursuant to Section 337 of the Tariff Act of 1930, as amended. Specifically, the ITC
Complaint alleges that one or more components or elements of the Bidi Stick infringe U.S. Patent No. 11,925,202, which is owned by one
of the RJ Reynolds Entities. 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.
Since the initiation of the ITC Complaint, we have not imported any Bidi Sticks and currently do not generate any revenue from the sale
of Bidi Sticks. Our current primary source of revenue is through an international licensing agreement with Philip Morris Products S.A.
("PMPSA"), a wholly owned affiliate of Philip Morris International Inc. ("PMI"). See "Philip Morris Deed
of Licensing Agreement" below.

 We have also entered into a Merger
and Share Exchange Agreement (the "Merger Agreement") with Delta Corp Holdings Limited, a company incorporated in England
and Wales (together with its successors and assigns, "Delta"), Delta Corp Holdings Limited, a Cayman Islands exempted company
("Pubco"), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco ("Merger Sub")
and Delta Corp Cayman Limited (the "Sellers"). If the Merger Agreement is consummated, Pubco will become our parent and all
new officers and directors will be appointed by Pubco, except that pursuant to the Merger Agreement we have the right to appoint one director
to the Pubco board of directors and we have agreed to appoint any family member of Ankitaben Patel (the widow of our former CEO, Nirajkumar
Patel) and/or Nirajkumar Patel who is qualified and identified by Bidi for this role prior to the closing of the Merger Agreement. While
we expect the transactions contemplated by the Merger Agreement to close (the "Closing") in March or April of this year, no
assurances can be made that such transactions will close by then or ever. The transactions contemplated by the Merger Agreement are described
in further detail below under "The Merger and Share Exchange Agreement."

 Merger and Share Exchange Agreement

 On September 23, 2024, we entered into a definitive
Merger and Share Exchange Agreement (the "Merger Agreement") with Delta Corp Holdings Limited, a company incorporated in England
and Wales (together with its successors and assigns, "Delta"), Delta Corp Holdings Limited, a Cayman Islands exempted company
("Pubco"), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco ("Merger Sub"),
and Delta Corp Cayman Limited (the "Seller").

 Merger and Share Exchange

 Pursuant to the Merger Agreement, the Parties will
effect a merger and share exchange involving the following transactions:

 (a)

 Pubco shall acquire all of the issued and outstanding shares of Delta from each holder of Delta shares in exchange for the issuance by Pubco of ordinary shares in the capital of Pubco (the "Share Exchange"); and

 (b)

 immediately following to the completion of the Share Exchange, Merger Sub shall merge with and into us (the "Merger"), with us continuing as the surviving entity in the Merger.;

 Upon consummation of the transactions contemplated by the Merger Agreement, including the Share Exchange and the Merger, each of us and Delta will become wholly owned subsidiaries of Pubco. The Share Exchange, the Merger and the transactions related thereto are referred to herein as, the "Business Combination."

In connection with the Merger:

 (i)

 All of our issued and outstanding shares of Series B Preferred Stock shall convert into shares of our common stock at a conversion rate of approximately 0.4 shares of our common stock for every share of our Series B Preferred Stock and be included as outstanding shares of our common stock immediately prior to the Merger;

 (ii)

 Each of our outstanding stock options, if it has not been exercised prior to the Merger, shall be cancelled, retired and/or terminated and cease to represent a right to acquire, be exchanged for or convert into our common stock;

 (iii)

 Each issued and outstanding share of our common stock immediately prior to the Merger shall automatically be converted into the right to receive one Pubco Ordinary Share (the "Merger Consideration"), following which all such shares of our common stock shall cease to be outstanding and shall automatically be canceled and shall cease to exist; and

 (iv)

 Each of our common warrants issued and outstanding immediately prior to the Merger shall be converted into one (1) Pubco ordinary warrant, and each of our pre-funded warrants issued and outstanding immediately prior to the Merger shall be converted into one (1) Pubco pre-funded warrant. Each of the Pubco ordinary warrants shall have, and be subject to, substantially the same terms and conditions set forth in our common warrants, and each of the Pubco pre-funded warrants shall have, and be subject to, substantially the same terms and conditions set forth in our pre-funded warrants, except that they shall represent the right to acquire Pubco ordinary shares in lieu of shares of our common stock.

 The Business Combination transactions value Pubco
as of the closing of the Business Combination as having an equity valuation of $301 million. KAVL expects that the holders of our Common
Stock and the holders of Delta Shares will hold approximately 10% and 90% (inclusive of shares to be distributed to advisors), respectively,
of the Pubco Ordinary Shares immediately after the closing of the Business Combination (the "Closing").

 In addition, after the Closing, the holders of Delta
Shares (inclusive of shares to be distributed to financial advisors) will be entitled to receive an earnout of an additional $30,000,000
in Pubco Ordinary Shares (based on a share price equal to $31 million divided the number of our outstanding shares immediately prior to
the Closing) based on Pubco's consolidated revenue, net income and EBITDA for the fiscal year ended December 31, 2025.

 Representations and Warranties;
Covenants

 Pursuant to the Merger Agreement, the parties (other
than Merger Sub) made customary representations and warranties for transactions of this type. All of the representations and warranties
of the parties will not survive Closing. The covenants and agreements of the Parties Sellers that by their terms are to be performed at
or after the Closing shall, in each case, survive until fully performed. In addition, the parties to the Merger Agreement agreed to be
bound by certain covenants that are customary for transactions of this type, including obligations of the parties during the period (the
"Interim Period") between the date of the execution of the Merger Agreement and the Closing to use commercially reasonable
efforts to operate their respective businesses in the ordinary course, and to refrain from taking certain specified actions without the
prior written consent of the other party, in each case, subject to certain exceptions and qualifications. The covenants and agreements
of the parties that are by their terms to be performed prior to the Closing will not survive the Closing. The covenants and agreements
of the parties that by their terms are to be performed at or after the Closing shall, in each case, survive until fully performed.

 Closing Conditions

 Pursuant to the Merger Agreement, the obligations
of the parties to consummate the Business Combination are subject to the satisfaction or waiver of certain customary closing conditions
of the respective parties, including, without limitation: (i) the representations and warranties of the Company, Delta, Pubco and Sellers
being true and correct subject to the materiality standards contained in the Merger Agreement; (ii) material compliance by the Parties
of their respective pre-closing covenants and agreements, subject to the standards contained in the Merger Agreement; (iii) the approval
by the Company's stockholders of the Business Combination and certain other matters; (iv) the absence of any Material Adverse Effect
(as defined in the Merger Agreement) with respect to Delta, Pubco or us since the effective date of the Merger Agreement that is continuing
and uncured; (v) the consummation of the Share Exchange; (vi) the expiration or termination, as applicable, of any waiting period (and
any extension thereof) applicable to the consummation of the Merger Agreement under any antitrust laws; (vi) the receipt of certain specified
regulatory or third party consents; (vii) no governmental authority of competent jurisdiction shall have enacted any law or order in effect
at the time of Closing which has the effect of making the Merger or other ancillary transactions illegal or otherwise prohibiting consummation
of the Merger or ancillary transactions (a "Legal Restraint"); (viii) the Registration Statement (as defined below) being
declared effective by the U.S. Securities and Exchange Commission (the "SEC"); (ix) the memorandum and articles of incorporation
of Pubco have been amended and restated as mutually agreed upon by Pubco, Delta and us; (x) the entry into certain ancillary agreements
as of the Closing, including a new registration rights agreement with Pubco in form and substance reasonably acceptable to us and Delta;
(xi) the approval of the listing of the Pubco Ordinary Shares on Nasdaq (or such other national securities exchange); (xii) the Company
having no indebtedness, no outstanding convertible securities other than our warrants and sufficient cash and cash equivalents to pay
its unpaid transaction expenses, (xiii) the amendment of certain engagement agreements with a financial advisor being in full force and
effect; and (xiv) the receipt of certain closing deliverables.

 The Conduct
of Business During the Interim Period

 During the period between the execution of the Merger
Agreement and the Closing ("Interim Period"), the conduct of the Company's and Delta's respective businesses will
be subject to the restrictions contained in the Merger Agreement, which include, without limitation, restrictions on: (i) amending, waiving
or otherwise changing its organizational documents; (ii) issuing, granting selling, pledging or disposing its equity securities or any
options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, or other securities,
including any securities convertible into or exchangeable for any of its equity securities or other security interests of any class and
any other equity-based awards; (iii) taking corporate actions such as stock splits, combinations, recapitalizations, subdivisions or pay
any dividends or make any other distributions on its equity or redeem, purchase or otherwise acquire any of its securities; (iv) incurring
or guaranteeing any indebtedness not made in the ordinary course of business in excess of specified thresholds; (v) terminating, waiving
or assigning any material right under any material agreement to which the Company is a party or entering into any material contract (other
than certain exceptions set forth in the Merger Agreement); (vi) establishing a new subsidiary or new line of business; (vii) failing
to keep in force insurance policies or coverage; (viii) waiving, releasing, assigning, settling or compromising litigation in excess of
specified thresholds; (ix) mergers and acquisitions activity; (x) adopting a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization; (xi) entering into any agreement, understanding or arrangement with respect to
the voting or transfer of its equity; (xii) hiring employees and adopting benefit plans; entering into, amending waiving or terminating
(other than terminations in accordance with their terms) any transaction with any related party to the Company (other than compensation
and benefits and advancement of expenses, in each case, provided in the ordinary course of business; and (xiii) authorizing or agreeing
to taking any of the foregoing actions.

 The Parties covenants during the Interim Period also
contain a customary no shop, subject to a customary fiduciary out, requirements regarding the registration statement to be filed by Pubco
with the SEC with respect to the Business Combination, and the related stockholder meeting to be held by us to approve the Merger Agreement
and the Business Combination, and certain provisions regarding any financing that may be sought by the parties in connection with the
Transactions.

 Indemnification
of Directors and Officers

 The parties agreed in the Merger Agreement to customary
exculpation, indemnification and advancement of expenses existing in favor of our specified current or former directors and officers as
provided therein.

 Post-Closing Board of Directors
and Officers of Pubco

 The board of directors of Pubco upon the Closing shall be comprised of one
individual designated by us as described above and up to six (6) individuals that are designated by Delta prior to Closing. The chief
executive officer and chief financial officer of Pubco upon Closing shall be the same individuals serving in those capacities at Delta
prior to Closing.

 Termination

 The Merger Agreement may be terminated time prior
to the Closing, including, among others, (i) by the mutual written consent of the Company and Delta, (ii) by written notice by the Company
or Delta to the other if any of the conditions to the Closing have not been satisfied or waived by February 15, 2025; (iii) by written
notice by either the Company or Delta to the other if a Legal Restraint has become final and non-appealable; (iv) by written notice by
Delta to the Company if there has been a breach by the Company of any of its representations, warranties, covenants or agreements contained
in the Merger Agreement, or if any representation or warranty of the Company becomes untrue or inaccurate, such that the related condition
to Closing will not be satisfied; (v) by written notice by the Company to Delta if there has been a breach by Delta of any of its representations,
warranties, covenants or agreements contained in the Merger Agreement, or if any representation or warranty of Delta becomes untrue or
inaccurate such that the related condition to Closing will not be satisfied; (vi) by written notice by us to Delta, if there shall have
been a Material Adverse Effect on the Delta or Pubco following the date of the Merger Agreement which is uncured and continuing; (vii)
by written notice by Delta to us, if there shall have been a Material Adverse Effect on us following the date of the Merger Agreement
which is uncured and continuing; (viii) by written notice by either the Company or Delta to the other if a special stockholder meeting
is held for the purpose of approving the Merger Agreement and Transactions and such approval is not obtained at such meeting; (ix) by
written notice by us to Delta or Delta to us, if we accept a takeover proposal or our board of directors changes its recommendation with
respect to the Merger Agreement and Transactions, in either case, pursuant to its fiduciary out rights as set forth in the Merger Agreement;
or (x) by written notice by Delta to us, if we have not delivered to Delta and Pubco duly executed copies of Voting Agreements by us and
the holders of our securities obligated thereunder representing at least a majority of the outstanding shares of Kaival common stock on
or prior to October 31, 2024.

 If the Merger Agreement is terminated by us or Delta
as a result of a willful breach of a representation, warranty or covenant by the other party, then the breaching party will pay the non-breaching
party a termination fee in the amount of $750,000 plus disbursements of all documented, out-of-pocket expenses up to $250,000. In addition,
if we or Delta terminate the Merger Agreement, as a result of our accepting a superior offer to the transactions contemplated by Business
Combination from a third party, then a termination fee of $1.3 million plus reasonable expenses up to $1 million shall be payable by us
to Delta.

 The foregoing description of the Merger Agreement
does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement filed as Exhibit
2.1 to this Current Report on Form 8-K and incorporated herein by reference. The Merger Agreement provides investors with information
regarding its terms and is not intended to provide any other factual information about the parties. Any terms not defined herein shall
have the same meaning attributed to them in the Merger Agreement.

 Voting Agreements

 Concurrently with the entry into the Merger Agreement,
the Company, Delta and Pubco entered into voting and support agreements ("Voting Agreements") with certain of our executive
officers and directors (the "Voting Support Parties"). Pursuant the Voting Agreements, the Voting Support Parties have agreed
to vote (in person or by proxy), or consent to any action by written consent or resolution with respect to, as applicable, their shares
of our Common Stock (i) in favor of, and adopt, Business Combination and the Merger Agreement, (ii) in opposition to: (A) any takeover
proposal as described in the Merger Agreement and any and all other proposals (x) for the acquisition of us, (y) that could reasonably
be expected to delay or impair our ability to consummate the Business Combination, or (z) which are in competition with or materially
inconsistent with the Merger Agreement or any related agreements; (B) other than as contemplated by the Merger Agreement, any material
change in (x) our capitalization or any amendment of our organizational documents or (y) our corporate structure or business; or (C) any
other action or proposal involving any company affiliated with us that is intended, or would reasonably be expected, to prevent, impede,
interfere with, delay, postpone or adversely affect in any material respect the Business Combination or would reasonably be expected to
result in any of the conditions to the Closing under the Merger Agreement not being fulfilled.

 Each Voting Support Party has also granted Delta (or
any designee of Delta) until the termination of the Voting Agreements, an irrevocable proxy and has appointed Delta (or any designee of
Delta) as their attorney-in-fact in respect of matters related to the Merger as specified in the Merger Agreement.

 Each Voting Support Party has also agreed that until
the termination of the Voting Agreement, subject to certain exceptions, the Voting Support Party will not, nor will it cause its Affiliates
to without the prior written consent of Pubco and Delta, (i) offer for sale, sell (including short sales), transfer, tender, pledge, encumber,
assign or otherwise dispose of (including by gift), or enter into any contract, option, derivative, hedging or other agreement or arrangement
or understanding (including any profit-sharing arrangement) with respect to, or consent to, a transfer of, any or all of our securities,
(ii) grant any proxies or powers of attorney with respect to any or all of the securities; (iii) permit to exist any lien of any nature
whatsoever (subject to certain exceptions) with respect to any or all of our securities; or (iv) take any action that would have the effect
of preventing, impeding, interfering with or adversely affecting the Voting Support Party's ability to perform its obligations under
the Voting Agreement.

 The Voting Agreements will automatically terminate
upon the earlier of (i) the mutual written consent of each of Pubco, Delta, the Company, and the Voting Support Party, (ii) the effective
time of the Merger, and (iii) the date of termination of the Merger Agreement in accordance with its terms.

 A majority of the holders of our common stock have
entered into Voting Agreements or agreements that are the same as the Voting Agreements.

 Business Strategy

 Our current business strategy is
to consummate the Business Combination. If and when this occurs, we will be a wholly owned subsidiary of Pubco and we do not know and
have not discussed what Delta's business strategy for the Company will be in the future. If the Business Combination is not consummated,
then we will focus our revenue through PMI and by executing key internal strategic initiatives. Because of the ITC Complaint and FDA PMTA
Determinations, we do not foresee receiving any significant revenue from the sales of Bidi Sticks. If the Business Combination is not
consummated, accomplishing these financial goals will depend on a number of factors including our ability to execute these strategies.
Representative key initiatives include:

 Maximizing the core
 business:

 Continuing the growth and
 management of strategic alliances with market leaders within dense, established e-cigarette markets;

 Development of internal national account sales team to drive new revenue opportunities
and manage key strategic third-party vendors and broker alliances to maximize targeted market penetration;

 Search for high-caliber, experienced talent that creates impact and add value
to our organization quickly;

 Effective financial
 management and capital planning:

 Establishing an efficient,
 scalable organizational infrastructure to support our expected growth and diversification;

 Improving overall business
 processes to deliver greater value to our customers;

 Data-driven product
 innovation and strategic expansion:

 Investing in our core organizational
 capabilities to provide diversified, revenue generative opportunities both through our existing distribution network and beyond;

 Further development of
 internal data processes to drive growth and diversification efforts;

 Pursuing third-party licensing
 opportunities through our vaporization and inhalation-related intellectual property portfolio which we acquired from GoFire Inc.
 in May 2023;

 During 2025 and beyond, we plan on exploring strategic acquisition and collaboration
arrangements that generate revenue, positive cash flows and profitable operations in order to expand the scale of our company by capitalizing
on our traditional retail outlet and other distribution
 relationships.

 If the Business Combination
is not consummated, we will continue to align ourselves with progressive, proven, performance-based partners, which may include the development
and expansion of key financial services relationships as we seek to diversify through data-driven decisions.

 Description of Business Segments & Key Agreements

 Kaival Labs, Inc. & Kaival Brands International,
LLC.

 On August 31, 2020,
we formed Kaival Labs, Inc., a Delaware corporation (herein referred to as "Kaival Labs"), as a wholly owned subsidiary for
the purpose of developing our own branded and white-label products and services, of which none has commenced as of the date of this Report.
We have not launched any Kaival-branded products, nor have
we begun to provide white label wholesale solutions for other product manufacturers.

 On
May 30, 2023, through Kaival Labs, we acquired certain vaporization and inhalation-related intellectual property from GoFire, Inc. ("GoFire")
in exchange for equity securities for our company and contingent cash consideration. The goal of this acquisition is to diversify our
product offerings and create near and longer-term revenue opportunities in the form of potential licenses for the acquired technology
and our development of new products based on the purchased assets. In the near term, we expect to seek third-party licensing opportunities
in the cannabis, hemp/CBD, nicotine and nutraceutical markets. Longer term, we believe we can utilize the purchased assets to create
innovative and market-disruptive products, including patent protected vaporizer devices and related hardware and software applications.
No assurance can be given, however, that the GoFire assets will generate revenue for us in the future or otherwise create the value for
our company that we anticipate.

 On March 11, 2022, we formed Kaival Brands International,
LLC, a Delaware limited liability company (herein referred to as "KBI"), as a wholly owned subsidiary 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"), as described further below.

 Philip Morris Deed of Licensing Agreement

 On June 13, 2022, KBI entered into the PMI License
Agreement with PMPSA, effective as of May 13, 2022 (the "PMI Commencement Date"). Pursuant to the PMI License Agreement, KBI
granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property to make, distribute, and
sell disposable nicotine e-cigarette products based on the intellectual property in certain international markets set forth in the PMI
License Agreement (or the PMI Markets). We have the exclusive international distribution rights to products and, in order to allow KBI
to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution rights for the PMI Markets
to KBI as set forth in a Capital Contribution Agreement, dated June 10, 2022. The sublicense granted to PMPSA is exclusive in the PMI
Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products in the PMI Markets for
the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement). PMSPA will be
responsible for any regulatory filings necessary to sell products in the PMI Markets. Both KBI and PMPSA agree to work together in the
registration and maintenance of the Intellectual Property, but KBI will bear all costs and expenses to implement the registration strategy.
Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted certain rights with
respect to potential future products.

 The initial term of the PMI License Agreement is five
(5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon minimum key performance
indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically terminate at the end of
the initial license term.

 In consideration for the grant of the licensed rights,
PMPSA agreed to pay to KBI a royalty payment for the sale of each unit of product manufactured and sold. In addition, before the launch
of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed minimum royalty, equal
to a percentage of the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following
the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty payment for all
markets for each applicable twelve (12)-month period. PMPSA may require modification of certain products to be sold under the PMI Licensing
Agreement to be modified for a PMI Market. Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over sales, marketing,
product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific PMI Markets in which
to launch commercialization and determine what product types are to be promoted in each market, subject to sales and marketing plans and
annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI.

 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). These royalties
may be initially offset on a limited basis by jointly agreed upon costs such as development costs incurred for entry to specific international
markets.

 On August 12, 2023, we 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:

 (i) 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
in the product, increasing to between $0.10 to $0.20 per sale upon meeting certain sales milestones. For purposes of determining aggregate
sales threshold, all sales undertaken since commencement of the PMI Licensing Agreement will be counted.

 (ii) Elimination of Certain
Potential Royalty Adjustments. Certain potential adjustments to the royalties receivable by KBI as provided for in the PMI License
Agreement have been eliminated.

 (iii) Guaranteed Royalty.
The guaranteed royalty payment owed to KBI under the PMI License Agreement has been eliminated. Instead, royalties will be paid on a quarterly
basis going forward based on actual sales. Any unpaid guaranteed royalty has been cancelled.

 (iv) Insurance Tail Requirements.
KBI's requirement to keep certain tail insurance after the expiration or termination of the PMI Licensing Agreement was reduced
from 6 years to 2 years.

 (v) Markets. The identification
of the PMI Markets that PMI may enter has been expanded to cover certain additional territories.

 (vi) Net Reconciliation Payment
to KBI. As a result of the changes to the PMI License Agreement described in paragraphs (i) thought (iii) above, the value of such
changes was calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023. On September
8, 2023, the Company received the Net Reconciliation Payment from PMPSA of $134,981 pursuant to this provision. The KBI License Agreement
provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly
agreed costs such development costs incurred for entry to specific international markets. In March 2023, PMPSA announced the launch of
a product (now called VEEV NOW) under the PMI License Agreement.

 In connection with the PMI License Agreement, we,
Bidi, and PMPSA also entered into a deed of letter to require specific performance of the duties and obligations set forth in the PMI
License Agreement if KBI is unable or fails to sublicense the intellectual property to PMPSA pursuant to the PMI License Agreement and/or
is unable or fails to perform certain of its obligations or grant the rights pursuant to the PMI License Agreement. In addition, we, Bidi,
and PMPSA entered into a guarantee, whereby we and Bidi guarantee to PMPSA up to 50% of all of KBI's monetary obligations set forth
in the PMI License Agreement if KBI fails to perform or discharge certain of its obligations in the PMI License Agreement.

 In November 2023, KBI,
Bidi and PMPSA agreed to initiate a pilot project, pursuant to which PMPSA would manufacture up to an agreed upon number of Bidi Sticks
with PMI's own e-liquid for commercialization in Canada. Based on the results of the pilot, we and PMPSA may consider appropriate
changes or amendments to the PMI License Agreement to accommodate the manufacturing and sales of Bidi Sticks containing PMI e-liquids
in Canada. As of the date of this Report, we do not believe this pilot program is, overall, material to our business or results of operations
and have yet to determine the longer-term plan.

 On December 16, 2024, KBI and Bidi received a letter
from PMPSA that notified us of their intention to discontinue the licensing agreement of their 2ml products due to the lack of profitability
and the analysis that it would likely not turn profitable. They confirmed that this decision would not affect the commercialization activities
under the licensing agreement of the 5ml and 18ml vaping products.

 KBI License Agreements

 On June 10, 2022, Bidi entered into a License Agreement
(the "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 License 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.

 Pursuant to the License Agreement, if at any time,
KBI receives any license of PMPSA intellectual property from PMPSA or any of its affiliates in the manner contemplated by the PMI License
Agreement, KBI will grant Bidi an irrevocable sub-license of all right, title, and interest of KBI in and to that PMPSA intellectual property.
In addition, Bidi and KBI agree that any amount payable and all net royalties payable to KBI under the PMI License Agreement will be apportioned
equally between Bidi and KBI in a manner such that each will ultimately receive fifty percent (50%) thereof.

 The License Agreement contains customary representations,
warranties, covenants, and indemnification provisions.

 Bidi Vapor, LLC Distribution Agreement

 On
 March 9, 2020, we entered into an exclusive distribution agreement (the "Distribution Agreement")
with our affiliate Bidi, which Distribution Agreement was amended and restated on May 21, 2020, April 20, 2021, on June 10, 2022, and
on November 17, 2022 (collectively, the "A&R
Distribution Agreement"). Pursuant to the A&R Distribution Agreement, Bidi granted us an exclusive worldwide right to distribute
Bidi's ENDS (as more particularly set forth in the A&R Distribution Agreement) for sale and resale to both retail level customers
and non-retail level customers. Currently, the products consist solely of the " BIDI Stick, " Bidi's disposable,
tamper resistant ENDS product made with medical-grade components, a UL-certified battery and technology designed to deliver a consistent
vaping experience for adult smokers 21 and over. We had distributed products to wholesalers and retailers of ENDS products, having ceased
all direct-to-consumer sales in February 2021.

 BIDI Stick comes in a variety of flavor options
for adult cigarette smokers. We do not manufacture any of the products we resell. The BIDI Stick is manufactured by Bidi through
its contract manufacturer in China. Pursuant to the terms of the A&R Distribution Agreement, Bidi provides us with all branding, logos,
and marketing materials to use with our commercial partners in connection with our marketing and promotion of Bidi products.

 The A&R Distribution Agreement extends the previous
one-year, annual renewable term to an initial term of ten years, which automatically renews for another ten-year term if we satisfy certain
minimum purchase thresholds. The A&R Distribution Agreement also provides us with a right of first refusal in the event Bidi receives
an offer that would constitute a "change of control transaction," as well as a right of first refusal to act as the exclusive
distributor of any and all future products of Bidi that arise out of or related to ENDS and components related to ENDS, or arise out of
or related to the tobacco-derived nicotine industry.

 In connection with the
A&R Distribution Agreement, we entered into non-exclusive sub-distribution agreements, some of which were subsequently amended and
restated by the parties in order to clarify certain provisions (all such sub-distribution agreements, as amended and restated, are collectively
referred to as the "Sub-Distribution Agreements"), whereby we appointed the counterparties as non-exclusive sub-distributors.
Pursuant to the Sub-Distribution Agreements, the sub-distributors agreed to purchase for resale products in such quantities as they should
need to properly service non-retail customers within the continental United States (the "Territory"). These agreements were
terminated in the current year.

 On October 25, 2024, we entered into a letter agreement
with Bidi, pursuant to which we (i) agreed with Bidi that "Products" as defined in the A&R Distribution Agreement means
and includes (and has always meant and included) only the following items, to the exclusion of all other items and products (including,
without limitation, the Excluded Products): (a) the "Bidi Stick", which is an electronic nicotine delivery system, or "e-cigarette",
at 6% nicotine (including all available flavors) in the versions previously sold by Manufacturer to Distributor; and (b) acrylic displays
preloaded with one hundred (100) such "Bidi Sticks;" (ii) waived and fully relinquished: (a) our Right of First Offer, Right
of First Refusal, and all other rights (if any) with respect to all Future Products (whether previously introduced, or introduced hereafter,
by Manufacturer) pursuant to the Distribution Agreement; and (b) all of its rights with respect to a Bona Fide Offer pursuant to Section
4.F of the A&R Distribution Agreement; (iii) released Bidi from all claims arising out of events that occurred prior to the Effective
Date of the A&R Distribution Agreement and (iv) acknowledged the existence of that certain matter styled In the Matter of Certain
Disposable Vaporizer Devices and Components Thereof, Inv. No. 337-TA-1410 before the United States International Trade Commission, and
agreed that neither said matter not any outcome thereof or resolution resulting therefrom that affects Bidi shall constitute a breach
or other default by Bidi under the A&R Distribution Agreement

 A key third party collaborator of ours was QuikfillRx, a Florida limited
liability company which did business as "Kaival Marketing Services" to reflect its contributions to our company. QuikfillRx
provided us with certain services and support relating to sales management, website development and design, graphics, content, social
media, management and analytics, and market and other research. QuikfillRx provided these services to us pursuant to a Services Agreement,
most recently amended on November 9, 2022, which had a term ending on October 31, 2025 (subject to potential one-year extensions) and
pursuant to which QuikfillRx received monthly cash compensation and was granted certain equity compensation in the form of options. This
Agreement was terminated in February 2024.

 Other Potential Product Offerings & Opportunities

 In May 2023 we acquired 19 existing and 47 pending
patents with novel technologies related to vaporization and inhalation technologies from GoFire. The GoFire patent portfolio includes
novel technologies across extrusion dose control, product preservation, tracking and tracing usage, multiple modalities (i.e., different
methods of vaporizing) and child safety. The patents and patent applications cover territories including the United States, Australia,
Canada, China, the EPO (European Patent Organization), Israel, Japan, Mexico, New Zealand and South Korea. The portfolio also includes
a proprietary mobile device software application that is used in conjunction with certain patents in the portfolio.

 We expect to continue seeking third-party licensing opportunities in the cannabis,
hemp/CBD, nicotine, nutraceutical and pharmaceutical markets, as a means of monetizing our patents. Longer term, we believe we can utilize
the acquired patents to create innovative and market-disruptive products for its growing base of adult consumers, including patent protected
vaporizer devices and related hardware and software applications.

 As described above, we hope to generate revenue from
this acquired intellectual property via licensing and product development activities. However, there can be no assurance that we will
be able to implement this strategy.

 Concentrations

 Concentration of Purchases and Other Receivable -
Related Party:

 For the year ended
October 31, 2024, 100% of the inventories of Products, consisting solely of the BIDI Stick, were purchased from Bidi, a related
party company that is owned by KMDD Trust, in the amount of approximately $0.3 million, as compared to $12.8 million for
the year ended October 31, 2023.

 On October 31, 2024, we had a related party receivable
balance of zero. As of October 31, 2024, the related party accounts payable balance was $131,683.

 On October 31, 2023, a credit of $2,954,470 was applied
from the related-party receivable balance to the related party accounts payable balance. After this was applied, we had no related party
receivable balance. As of October 31, 2023, the related party accounts payable balance was $1,521,491. In fiscal year 2023, such inventories
accounted for 100% of the total related party accounts payable.

 Concentration of Revenues and Accounts Receivable:

 For the year ended October 31, 2024, a substantial portion of our revenues
from the sale of Products, solely consisting of the BIDI Stick, were derived from the following customers: (i) QuikTrip Corporation
generated approximately 21%, (ii) GPM Investments generated approximately 12%, and (iii) FAVS Business, LLC generated approximately 11%.

 For the year ended October 31, 2023, a substantial portion of our revenues
from the sale of Products, solely consisting of the BIDI Stick, were derived from the following customers: (i) GPM Investments generated
approximately 16%, (ii) H.T. Hackney Co generated approximately 15%, (iii) FAVS Business, LLC generated approximately 15%, (iv) C Store
Master generated approximately 14%, and (v) QuikTrip Corporation generated approximately 12%.

 Environment and Government Regulation Related
to our Operations

 Because we are only a wholesale distributor of products,
namely the BIDI Stick, we are only subject to Federal, state, and international laws pertaining to a distributor, not a manufacturer,
of ENDS products.

 Our business is dependent entirely on the resale of
products provided by Bidi; thus, there is a significant risk that our business could be materially adversely affected if Bidi, as the
manufacturer, does not properly abide by any Federal, state, or international laws that regulate ENDS products. Any lapse in production
or availability of products from Bidi would hamper our ability to operate as we would be limited in our ability to supply our customers
if our inventory ran low or ceased to exist entirely.

 As a manufacturer of ENDS products, Bidi is responsible
for abiding by and following various rules and regulations pertaining to the manufacturing of the ENDS products we sell and any lapse
in abiding by any pertinent rules and regulations may negatively impact our ability to operate. As a distributor, we are also subject
to various rules and regulations. Some of the below may not directly apply to us at this time due to the nature of our present operations.
These rules and regulations include, but are not limited to, the following:

 FDA and Related Regulations Relating to ENDS Products

 Effective August 8, 2016, the FDA's regulatory
authority under The Family Smoking Prevention and Tobacco Control Act was extended to all remaining tobacco products, including: (i) certain
"new generation" products (such as electronic cigarettes, vaporizers, and e-liquids) and their components or parts (such as
tanks, coils, and batteries); (ii) cigars and their components or parts (such as cigar tobacco); (iii) pipe tobacco; (iv) hookah products;
or (v) any other tobacco product "newly deemed" by the FDA (the "Deeming Rule"). The Deeming Rule applies to all
products made or derived from tobacco intended for human consumption but excluding accessories of tobacco products (such as lighters).
Furthermore, starting in April 2022, FDA was also granted authority to regulate products containing synthetic (non-tobacco) nicotine as
tobacco products. Specifically, the Consolidated Appropriations Act of 2022 amended the definition of a "tobacco product"
in the Food, Drug and Cosmetic Act and gave the FDA authority to regulate products containing nicotine from any source, including synthetic
nicotine.

 The Deeming Rule requires (i) United States manufactured
products be registered with the FDA and that products include ingredient listings; (ii) newly deemed products be marketed only after FDA
review and authorization, subject to FDA's compliance enforcement policy; (iii) products only make direct and implied claims of
reduced risk if the FDA authorizes after finding that scientific evidence supports the claim and that marketing the product will benefit
public health as a whole; (iv) sellers of such products refrain from distributing free samples; (v) sellers of such products implement
minimum age and identification restrictions to prevent sales to individuals under age 18 (later extended to 21); (vi) packaging of and
advertisements for products include prescribed health warnings; and (vii) sellers refrain from selling Bidi products in vending machines,
unless the machine is located in a facility that never admits youth. We, along with Bidi, must comply with these regulations. Any lapse
in compliance by us, or Bidi, could hamper our ability to operate, which would adversely affect the results of operations.

 Newly deemed tobacco products are also subject to
the other requirements of the Tobacco Control Act, such as Bidi products cannot be adulterated or misbranded. The FDA could in the future
promulgate good manufacturing practice regulations for these and our other products, which could have a material adverse impact on Bidi's
ability to, and the cost to, manufacture our products, which would adversely affect our financial condition and results of operations.

 Failure to comply with the Tobacco Control Act and
or with any FDA regulatory requirements could result in litigation, criminal convictions or significant financial penalties and could
impair our ability to market and sell our electronic and vaporizer products. At present, we are unable to predict whether the Tobacco
Control Act will impact our products to a greater degree than competitors in the industry, thus affecting our competitive position.

 As part of the "Consolidated Appropriations
Act, 2021," signed into law on December 27, 2020, Congress amended the PACT Act to apply to ENDS, which includes the BIDI Stick.
The PACT Act regulates the sale, transfer, or shipment of cigarettes, roll-your-own tobacco, smokeless tobacco, and now ENDS, for both
business-to-business transactions as well as online sales. The PACT Act imposes substantial restrictions on sellers and shippers of ENDS
products, including, but not limited to registration with the Bureau of Alcohol, Tobacco, Firearms and Explosives (or ATF), registration
with state Tobacco Tax Administrators, and monthly reporting requirements to state and local Tobacco Tax Administrators. Delivery sellers
are subject to substantial additional restrictions, including, but not limited to, compliance with state excise tax collection requirements,
licensing requirements, shipping, and packaging requirements. Companies were required to comply with PACT Act requirements beginning on
or about March 28, 2021.

 We have adopted the following compliance measures:

 We have retained a team
 of legal, tax and accounting experts to advise on state and local tax, licensing, and regulatory matters associated with the distribution
 of the BIDI Stick;

 We are appropriately licensed
 or registered in every state which requires it;

 We calculate and remit
 excise taxes where required;

 We have made a substantial
 investment in excise tax reporting and compliance software to ensure that all applicable taxes are properly calculated and remitted
 to the appropriate taxing authorities. The software is now completely integrated with our systems;

 We have registered with
 the ATF and the states into which we ship the products;

 We have implemented processes
 to ensure timely filing of all required reporting; and

 In February 2021, we ceased
 all direct-to-consumer sales.

 Federal Trade Commission

 The Federal Trade Commission (FTC) routinely requests
various industry sectors to provide information on marketing and advertising practices, and typically summarizes the aggregate information
provided by all respondents in a public report. The FTC issued what is known as an "Order to File Special Report" to a number
of vaping industry members, including Bidi, on June 2, 2022. Upon being advised of the exclusive distribution arrangement between Bidi
and our company, the FTC withdrew the request directed to Bidi on August 22, 2022, and issued a request to us on August 29, 2022. We responded
timely to the FTC request on November 30, 2022. No further requests were received from the FTC to date.

 State and Local Regulations

 As a retail seller and/or wholesale distributor of
ENDS and related products, we must follow numerous state and local regulations. Individual U.S. state laws and regulations concerning
e-cigarette and related products are also relatively new and developing. Currently, certain state laws about e-cigarette and related products
serve to define and/or tax tobacco products or e-cigarette and related products, restrict access to youth and/or retail sale, require
a license to sell such products, ban e-cigarette use in certain public spaces, and require child resistant packaging on products containing
e-liquids. In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco products. Recently, for
example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products, including e-cigarettes,
in retail locations. Thus, the non-tobacco flavored BIDI Sticks are not permitted to be sold in California retail locations. We anticipate
more states and localities will take this approach. As a distributor, we hold all required state licenses and permits, and pay all applicable
state e-cigarette and related products excise taxes. We work closely with Bidi to ensure that it is compliant with applicable manufacturer
specific state requirements, such as any warning requirements (e.g., California Proposition 65).

 Excise Taxes on Vapor Products

 Vapor products are currently subject to excise taxes
at the state and local level. Currently, approximately 31 states, plus various localities and jurisdictions, impose a tax on vapor products.
We anticipate that state and localities will likely continue to impose new excise taxes on these products and / or increase existing excise
taxes for the purpose of funding various legislative initiatives, filling revenue shortfalls, and / or to reduce consumption. In addition,
while ENDS products are not currently subject to excise tax at the federal level, legislation to impose excise taxes at the federal level
has been introduced in the past and could potentially be adopted in the future. Any future enactment of excise tax increases at the federal,
state, or local level could potentially result in lower consumption, a shift in sales to discount brands, illicit trade channels or alternatives
as consumers seek lower priced products, any of which could result in a decline of our shipment volume, revenue, and profit. We ceased
all direct-to-consumer sales in February 2021.

 International Regulations and Pertinent Information

 The World Health Organization's Framework Convention
on Tobacco Control (the "FCTC") is the first international public health treaty that establishes a global agenda to reduce
initiation of tobacco use and regulate tobacco to encourage tobacco cessation. Over 170 governments worldwide have ratified the FCTC.
The FCTC has led to increased efforts to reduce the supply and demand of tobacco products and to encourage governments to further regulate
the tobacco industry. The tobacco industry expects significant regulatory developments to take place over the next few years, driven principally
by the FCTC. Regulatory initiatives that have been proposed, introduced, or enacted include:

 the levying of substantial
 and increasing tax and duty charges;

 advertising, marketing, and sponsorship;

 advertising, marketing, and sponsorship;

 the display of larger health
 warnings, graphic health warnings, and other labeling requirements;

 restrictions on packaging
 design, including the use of colors and generic packaging;

 the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

 requirements regarding
 testing, disclosure, and performance standards for tar, nicotine, carbon monoxide, and other smoke constituents' levels;

 requirements regarding
 testing, disclosure, and use of tobacco product ingredients;

 increased restrictions
 on smoking in public and workplaces and, in some instances, in private places and outdoors;

 elimination of duty-free
 allowances for travelers; and

 encouraging litigation
 against tobacco companies.

 If the United States becomes a signatory to the FCTC
and/or national laws are enacted in the United States that reflect the major elements of the FCTC, our business, results of operations
and financial condition could be materially and adversely affected.

 Environmental Laws

 We may be subject to federal, state, and local environmental
laws and regulations. Compliance with these provisions has not had, nor do we expect such compliance will have any, material adverse effect
upon our capital expenditures, financial condition, or competitive position. We believe that we are not subject to any material costs
for compliance with any environmental laws.

 Intellectual Property

 As of the date of this Report, we own the trademarks
KAIVAL BRANDS and KAIVAL LABS. In addition, we purchased certain intellectual property assets of GoFire consisting of various patents,
patent applications and trademarks in exchange for equity securities of our company and certain contingent cash consideration. The purchased
assets consist of 19 existing patents and 47 pending patents with novel technologies related to vaporization and inhalation technologies.
The patents and patent applications cover the U.S. and several international territories. The purchased assets also include four registered
and two pending trademarks.

 We rely on certain intellectual property rights, including
logos, trademarks, and trade names, of Bidi that were granted to us pursuant to the A&R Distribution Agreement to be used in connection
with the marketing, advertisement, and sale of products. We also indirectly rely on Bidi's intellectual property rights related
to products, such as patents. If a third-party challenged Bidi's patents, or infringed upon such rights, our business would be materially
adversely affected.

 Employees

 As of the date of this Report we have three employees,
all of whom are full-time, including our officers. In addition to our officers, we have employees who fulfill the roles of sales staff,
information technology, and financial accounting and reporting management. All our employees are eligible to enroll, or have already enrolled,
in our medical plan.

 Emerging Growth Company

 We are an emerging growth company ("EGC"),
that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business
Startups Act of 2012 (the "JOBS Act"). The JOBS Act eases restrictions on the sale of securities and increases the number
of stockholders a company must have before becoming subject to the reporting and disclosure rules of the Securities and Exchange Commission
(the "SEC"). We have not elected to use the extended transition period for complying with new or revised accounting standards
under Section 102(b)(2) of the JOBS Act, which allows us to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies until those standards apply to private companies.

 Corporate History

 We were incorporated on September 4, 2018, in the
State of Delaware. Effective July 12, 2019, we changed our corporate name from Quick Start Holdings, Inc. to Kaival Brands Innovations
Group, Inc. The name change was affected through a parent-subsidiary short-form merger of Kaival Brands Innovations Group, Inc., our wholly-owned
Delaware subsidiary formed solely for the purpose of the name change, with and into us. We were the surviving entity.

 2018 Holding Company Reorganization

 On September 4, 2018, USSE Delaware, Inc., a Delaware
corporation ("USSE Delaware") acquired all of our then-outstanding shares of common stock, resulting in us becoming its wholly
owned subsidiary. On September 19, 2018, our wholly owned subsidiary, USSE Merger Sub, Inc., a Delaware corporation ("USSE Merger
Sub"), merged with and into USSE Delaware, our then parent, effected a reorganization (the "Holding Company Reorganization")
in accordance with the provisions set forth in Section 251(g) of the Delaware General Corporation Law ("DGCL"). USSE Delaware
was the surviving corporation and our wholly owned subsidiary. USSE Delaware also changed its name to USSE Corp. following the Holding
Company Reorganization.

 Upon completion of the Holding Company Reorganization,
by virtue of the merger, and without any action on the part of the holder thereof, each share of USSE Delaware's common stock issued
and outstanding immediately prior to the effective time of the Holding Company Reorganization was automatically converted into one validly
issued, fully paid, and non-assessable share of our Common Stock. Additionally, each share of USSE Delaware's preferred stock
issued and outstanding immediately prior to the effective time was converted into one validly issued, fully paid, and non-assessable share
of our preferred stock, having the same designations, rights, powers, and preferences, and the qualifications, limitation, and restrictions
thereof, as the corresponding share of USSE Delaware's preferred stock. Each share of our Common Stock issued and outstanding
and held by USSE Delaware immediately prior to the effective time was canceled.

 2018 Change of Control

 On October 19, 2018, we issued 500,000,000 shares
of restricted Common Stock and 400,000 shares of Convertible Series B preferred stock to GMRZ Holdings LLC, a Nevada limited liability
company ("GMRZ"), for services rendered to us. GMRZ became our controlling stockholder as a result of such issuances.
On February 6, 2019, we entered into a non-binding Share Purchase Agreement (the "Agreement") by and among GMRZ, Kaival Holdings,
LLC (formerly known as Kaival Brands Innovations Group, LLC), a Delaware limited liability company ("Kaival Holdings"), and
us, pursuant to which, on February 20, 2019, GMRZ sold 504,000,000 shares of our restricted Common Stock, representing approximately 88.06
percent of our then-issued and outstanding shares of Common Stock, to Kaival Holdings, and Kaival Holdings paid GMRZ consideration in
the amount set forth in the Agreement (the "Purchase Price"). The consummation of the transactions contemplated by the Agreement
resulted in a change in control of us, with Kaival Holdings becoming our largest controlling stockholder. The sole voting members of Kaival
Holdings were Nirajkumar Patel and Eric Mosser (former executives and directors of our company), with Mr. Patel holding voting control.
The Purchase Price was paid with personal funds of the members of Kaival Holdings.

 2020 Share Cancellation and Exchange Agreement

 On August 19, 2020, we entered into a Share Cancellation
and Exchange Agreement (the "Share Cancellation and Exchange Agreement") with our controlling stockholder, Kaival Holdings.

 Pursuant to the Share Cancellation and Exchange Agreement,
Kaival Holdings returned to us 300,000,000 shares of our Common Stock (the "Cancellation Shares"), which Cancellation Shares
were canceled and retired by us. Following such cancellation, Kaival Holdings owns 204,000,000 shares of our Common Stock.

 On August 19, 2020, we filed a Certificate of Designation
of Preferences, Rights, and Limitations of the Series A Preferred Stock (the "Series A Certificate of Designation") with the
Secretary of State of the State of Delaware, which authorized a total of 3,000,000 shares, par value $0.01 per share, of Series A Preferred
Stock (the "Series A Preferred Stock").

 In exchange for the Cancellation Shares, we issued
3,000,000 shares (the "Preferred Shares") of our newly designated Series A Preferred Stock to Kaival Holdings. The exchange
of the Cancellation Shares and the issuance of the Preferred Shares was intended to comply with Section 3(a)(9) of the Securities Act,
in that the issuance was exempt from the registration requirements of the Act because the exchange of the Cancellation Shares for the
Preferred Shares was an exchange between us, as issuer, with an existing stockholder, and no commission or other remuneration was paid
or given directly for the exchange.

 2021 Reverse Stock Split

 On July 16, 2021, we filed a Certificate of Amendment
to the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect a 1-for-12 reverse
stock split (the "Reverse Stock Split") of the shares of our Common Stock. The Reverse Stock Split was effective as of 12:01
a.m. Eastern Time on July 20, 2021. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares
of our Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest whole number. In connection
with the Reverse Stock Split, our Board approved appropriate and proportional adjustments to all outstanding securities or other rights
convertible or exercisable into shares of our Common Stock, including, without limitation, all preferred stock, warrants, options, and
other equity compensation rights. All historical share and per-share amounts reflected throughout our consolidated financial statements
and other financial information in this Report have been adjusted to reflect the Reverse Stock Split as if the split occurred as of the
earliest period presented. The par value per share of our Common Stock was not affected by the Reverse Stock Split.

 2022 Series A Preferred Shares Converted

 The authorized preferred stock of the Company consists
of 5,000,000 shares with a par value of $ 0.001 per share, of which 3,000,000 shares were designated as Series A Convertible Preferred
Stock (the "Series A Preferred Stock"). Each share of the Series A Preferred Stock was initially convertible into 100 shares
of Common Stock; however, as a result of the Reverse Stock Split, the conversion rate was adjusted such that each share of the Series
A Preferred Stock was convertible into approximately 0.3968 shares of Common Stock. On June 24, 2022, all 3,000,000 shares of Series A
Preferred Stock were converted into shares of Common Stock by Kaival Holdings, our majority stockholder. The conversion of 3,000,000 shares
of Series A Preferred Stock, at a conversion rate of 0.3968, equaled 1,190,477 shares of Common Stock. As a result, the authorized, preferred
stock of the Company consists of 5,000,000 shares with a par value of $0.001 per share, with 0 shares of preferred stock issued or outstanding
as of October 31, 2022.

 May 2023 GoFire Asset Purchase Agreement

 On May 30, 2023, we and Kaival Labs entered into an Asset Purchase Agreement
(the "GoFire APA") with GoFire. Pursuant to the terms of the GoFire APA, we, through Kaival Labs, purchased certain intellectual
property assets of GoFire consisting of various patents, patent applications and trademarks in exchange for equity securities of our company
and certain contingent cash consideration. The purchased assets consist of 19 existing patents and 47 pending patents with novel technologies
related to vaporization and inhalation technologies. The patents and patent applications cover the U.S. and several international territories.
The purchased assets also include four registered and two pending trademarks. We have determined that the acquisition of the purchased
assets does not constitute the acquisition of a "business" (as defined in Rule 11-01(d) of Regulation S-X).

 Pursuant to the terms of the GoFire APA, we paid to
GoFire, in addition to certain contingent cash consideration described below, consideration in the form of equity securities of our company
consisting of (i) an aggregate of 95,239 shares of Common Stock (the "2023 APA Shares"); (ii) 900,000 shares of newly-designated
Series B Convertible Preferred Stock, par value $0.001 per share, (the "Series B Preferred Stock" and the shares of Common
Stock underlying the Series B Preferred, the "Series B Conversion Shares"), the rights, preferences and terms of which are
set forth in a Certificate of Designation of Rights and Preferences of the Series B Preferred Stock, and (iii) a Common Stock purchase
warrant to purchase 95,239 shares of Common Stock (the "Warrant" and the shares of Common Stock underlying the Warrant, the
"Warrant Shares"). As additional consideration for the purchased assets, any cannabis-specific (meaning cannabis, hemp or
cannabinoid) royalties that are generated by Kaival Labs from or due to the purchased assets, from May 30, 2023, until January 1, 2027,
will be subject to a contingent cash payment as described in the GoFire APA and subject to the terms of the GoFire APA. 9,524 2023 APA
Shares and a Warrant for 9,524 Warrant Shares were issued to an advisor to GoFire at the closing of the GoFire APA.

 Pursuant to the GoFire APA, we are required to use
commercially reasonable efforts to register the 85,715 2023 APA Shares and 85,715 Warrants and Warrant Shares with the SEC for distribution
to GoFire's stockholders and/or public resale by such stockholders within 180 days of May 30, 2023. Such registration was declared
effective by the SEC on January 12, 2024. To our knowledge, portions of the 85,715 2023 APA Shares and 85,715 Warrants have been distributed
to the GoFire stockholders pursuant to such registration statement.

 In addition, if any
Series B Preferred Stock remains outstanding nineteen (19) months after May 30, 2023, we shall use commercially reasonable efforts to
file with the SEC subsequent registration statement registering the distribution to GoFire's stockholders and/or public resale
Series B Conversion Shares by such stockholders. If such subsequent registration statement is required, we will use our commercially
reasonable efforts to obtain effectiveness of such subsequent registration statement within nineteen (19) months of May 30, 2023, and
if we do not so register the Series B Conversion Shares within nineteen (19) months of May 30, 2023, we will issue to GoFire or its designee
an additional ten percent (10%) of all of the Series B Conversion Shares underlying the then-outstanding shares of Series B Preferred
Stock. To satisfy this obligation we will provide GoFire with an additional 10% of our shares of common stock issued to them upon
the conversion of the Series B Preferred Stock at the closing of the Business Combination.

 All of the securities issued as consideration for
the GoFire purchased assets were subject to a lock-up agreement that terminated on November 26, 2023.

 2024 Reverse Stock Split

 On
January 22, 2024, the
Company filed a Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware to affect a 1-for-21 reverse stock split (the "2024 Reverse Stock Split") of the shares
of the Common Stock. The 2024 Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market. No fractional shares
were issued in connection with the 2024 Reverse Stock Split. Any fractional shares of the Company's Common Stock that would have
otherwise resulted from the 2024 Reverse Stock Split were rounded up to the nearest whole number. In connection with the 2024 Reverse
Stock Split, the Board approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or
exercisable into shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity
compensation rights. All historical share and per-share amounts reflected throughout the accompanying consolidated financial statements
in this Report have been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period
 presented. The par value per share of the Common
Stock was not affected by the 2024 Reverse Stock Split.

 Bidi Debt Exchange Agreement

 On October 25, 2024 we entered the Debt Exchange Agreement
with Bidi pursuant to which we satisfied an outstanding debt of $1,275,000 we owed to Bidi under the A&R Distribution Agreement by
the issuance of 1,400,144 shares of our common stock to Bidi.

 Item 1A. Risk Factors.

 Our business and an investment
in our company is speculative and subject to significant risks. We caution you that the following important factors, among
others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf
in filings with the SEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements
contained in this Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions
we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining
future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may differ materially from those anticipated
in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

 Risks Related to the Business Combination

 Completion of the Business Combination
is subject to a number of conditions and if these conditions are not satisfied or waived, such transactions will not be completed.

 Kaival's obligation
and the obligation of Delta to complete the Business Combination are subject to satisfaction or waiver of a number of conditions, including,
among others:

 approval
of the Business Combination by Kaival's stockholders;

 absence
of injunctions or certain legal impediments;

 approval
for the listing on NASDAQ of Pubco's ordinary shares to be issued in the Business Combination; and

 accuracy
of the representations and warranties of each of the parties, subject to certain materiality thresholds.

 There can be no assurance
that the conditions to closing set forth in the Merger Agreement will be satisfied or waived or that the Business Combination itself will
be completed.

 Failure to complete the Business Combination
could negatively impact Kaival's stock price, future business or operations.

 If the Business Combination
is not completed, Kaival may be subject to a number of material risks, including the following:

 Kaival
may be required under certain circumstances to pay Delta a termination fee;

 the
price of Kaival's common stock may decline to the extent that the relevant current market price reflects a market assumption that
the Business Combination will be completed; and

 costs
related to the Business Combination, such as legal, accounting, certain financial advisory and financial printing fees, must be paid even
if the Business Combination is not completed.

 Further, if the Business Combination
is terminated and either company's board of directors determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner on terms as attractive as those provided for in the Merger Agreement. In addition, while
the Merger Agreement is in effect and subject to very narrowly defined exceptions, Kaival is prohibited from soliciting, initiating or
encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination, other
than with Delta.

 The exercise of Kaival's boards
of directors' and officers' discretion in agreeing to changes or waivers in the terms of the Business Combination may result
in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are
appropriate and in Kaival's shareholders' best interests.

 In the period leading up to
the closing of the Business Combination, events may occur that, pursuant to the Merger Agreement, would require Kaival and/or Delta to
agree to amend the Merger Agreement, to consent to certain actions taken by Delta or Kaival, as applicable, or to waive rights that Kaival
or Delta is entitled to under the Merger Agreement. Such events could arise because of changes in the course of Kaival's or Delta's
business, a request by Kaival or Delta to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or
the occurrence of other events that would have a material adverse effect on Kaival's or Delta's business. In any of such circumstances,
it would be at Kaival's or Delta's discretion, acting through their respective board of directors, to grant consent or waive
those rights. The existence of the financial and personal interests of the directors of Kaival described in the preceding risk factors
may result in a conflict of interest on the part of one or more of the directors between what they may believe is best for Kaival and
its stockholders and what he or they may believe is best for themselves in determining whether or not to take the requested action.

 The Company will incur
significant transaction and transition costs in connection with the Business Combination.

 The Company has incurred and expect to incur significant,
non-recurring costs in connection with consummating the Business Combination, including legal, accounting, consulting, investment banking
and other fees, expenses and costs. In addition, PubCo will incur significant costs operating as a public company following the consummation
of the Business Combination and may also incur additional costs to retain key employees. Generally, transaction expenses incurred in connection
with the Business Combination will be paid by the party incurring those expenses, and many of those expenses might not be paid until after
the Closing. Accordingly, these expenses could result in Holdings having less money following the Closing to spend on other aspects of
its business, particularly if the actual expenses turn out to be higher than anticipated.

 Legal proceedings in
connection with the Business Combination, the outcomes of which are uncertain, could delay or prevent the completion of the business combination.

 In connection with business combination transactions
like the proposed Business Combination, it is not uncommon for lawsuits to be filed against the parties and/or their respective directors
and officers alleging, among other things, that the proxy statement/prospectus provided to shareholders contains false and misleading
statements and/or omits material information concerning the transaction. Although no such lawsuits have yet been filed in connection with
the Business Combination, it is possible that such actions may arise and, if they do arise, to seek, among other things, injunctive relief
and an award of attorneys' fees and expenses. Defending such lawsuits could require us and Delta to incur significant costs and
draw the attention of our and Delta's management teams away from the consummation of the Business Combination and the management
of their respective businesses. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the Business
Combination is consummated may adversely affect Pubco's business, financial condition, results of operations and cash flows. Such
legal proceedings could delay or prevent the Business Combination from being consummated within the expected timeframe.

 After the Business
Combination, Pubco may be exposed to unknown or contingent liabilities and may be required to take write-downs or write-offs, restructuring
and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share
price.

 It is possible that the due diligence conducted in
relation to Kaival and Delta and their respective businesses has not identified all material issues or risks associated with Kaival and
Delta or the industries in which they compete.

 Furthermore, factors outside of the parties'
control could arise later. As a result of these factors, Pubco may be exposed to liabilities and incur additional costs and expenses and
be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses.
Even if the due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner
not consistent with the parties' preliminary risk analysis. If any of these risks materialize, this could have a material adverse
effect on the Pubco's financial condition and results of operations and could contribute to negative market perceptions about Pubco's
securities.

 Due to potential fluctuations
in the market value of Pubco Ordinary Shares, Kaival stockholders cannot be sure of the market value of the consideration that they will
receive in the Business Combination.

 The current shareholders of Delta (the "Delta
Shareholders") and the Kaival stockholders are expected to own, immediately following consummation of the Business Combination,
approximately 90% (inclusive of shares to be distributed to advisors) and 10% of Holdings, respectively.

 Prior to the Closing, there has not been and will
not be an established public trading market for Pubco Ordinary Shares. The market value of Pubco Ordinary Shares will reflect the combination
of Kaival and Delta under the terms of the Business Combination. Further, the merger consideration to be received by Kaival stockholders
will not be adjusted to reflect any changes in the number of shares of Kaival common stock outstanding, the market value of Kaival common
stock or currency exchange rates.

 Changes in the price of our common stock may result
from a variety of factors, including, among others, changes in our business, operations or prospects, regulatory considerations, governmental
actions, legal proceedings and general business, market, industry, political or economic conditions. Many of these factors are beyond
our control. As a result, the aggregate market value of the Pubco Ordinary Shares that a Kaival stockholder is entitled to receive at
the Closing could vary significantly from the value of the equivalent shares of our common stock on the date of the Merger Agreement,
the date of this report or at other times, and Kaival stockholders will neither know nor be able to calculate the value of the merger
consideration they would receive upon the Closing. Kaival stockholders are urged to obtain current market quotations for our common stock.

 Termination of the
Merger Agreement could negatively impact Kaival.

 If the Business Combination is not completed for any
reason, including as a result of Kaival stockholders declining to adopt the Merger Agreement or declining to approve the proposals required
to effect the Business Combination, the ongoing business of Kaival may be adversely impacted and, without realizing any of the anticipated
benefits of completing the Business Combination, Kaival would be subject to a number of risks, including the following:

 we
 may experience negative reactions from the financial markets, including negative impacts on our stock price (including to the extent
 that the current market price reflects a market assumption that the Business Combination will be completed);

 we
 will have incurred substantial expenses and will be required to pay certain costs relating to the Business Combination, whether or
 not the Business Combination is completed; and

 since
 the Merger Agreement restricts the conduct of our business prior to completion of the Business Combination, we may not have been
 able to take certain actions during the pendency of the Business Combination that would have benefitted it as an independent company,
 and the opportunity to take such actions may no longer be available.

 Risks Related to Our Business and Industry

 If the claims against the Company and Bidi that
have been filed with the International Trade Commission are successful, the Company and Bidi could be prohibited from importing and selling
the Bidi Stick in to the United States.

 On June 11, 2024, RAI Strategic Holdings, Inc., R.J. Reynolds Vapor Company,
R.J. Reynolds Tobacco Company, and RAI Services Company (collectively, the "RJ Reynolds Entities") filed a patent infringement
complaint with the International Trade Commission (the "ITC") against Bidi, us, and forty (40) other respondents (the "ITC
Complaint") pursuant to Section 337 of the Tariff Act of 1930, as amended. Specifically, the ITC Complaint alleges that one or more
components or elements of the Bidi Stick infringe U.S. Patent No. 11,925,202, which is owned by one of the RJ Reynolds Entities. 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. On July 17, 2024, the Company was dismissed from the ITC proceeding and is no longer a defendant in the ITC
proceeding. No damages are recoverable in the proceedings before the ITC. On November 1, 2024, Bidi stipulated to a consent order
prohibiting Bidi from selling for import, importing, or selling after importation the Bidi Stick. The ITC entered the consent order
on December 6, 2024.

 Our Business may permanently
suffer as a result of the ITC Complaint

 As a result of the ITC Complaint, Bidi no longer imports the Bidi Stick and
we do not expect that we will have access to the Bidi Stick in the foreseeable future. Since we have been unable to sell the Bidi Stick
our revenues have declined. We may not ever be able to increase our revenues to the levels they were at when we were able to sell Bidi
Sticks, as a result our business may not financially recover in the near term.

 We have a present need
for additional funding, which raises questions about our ability to continue as a going concern. We may be unable to raise capital when
needed, which would force us to delay, reduce or eliminate aspects of our business or cause our business to fail.

 As of October 31, 2024, we
had cash and cash equivalents of approximately $3.9 million. We believe that based on our current operating plan, our existing cash
and cash equivalents will only be sufficient to enable us to fund our operations and other obligations for a very limited period. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

 Moreover, we will need significant
additional funds to satisfy our outstanding payables, fund our working capital, and fully implement our business plan as we seek to grow
our revenues and ultimately achieve positive cash flow and profitability. In addition, our ability to continue as a going concern is adversely
affected by the uncertainty surrounding Bidi's PMTA process with FDA and outcome of Bidi petition with the 11th Circuit Court of
Appeals regarding the FDA's January 2024 MDO relating to Classic Bidi Stick as well as our negative cash flows from
operations, significant recurring losses and present need for additional funding. All of these factors raise substantial doubt regarding
our ability to continue as a going concern.

 There is therefore a material risk that we will be unable to generate sufficient
revenues to pay our expenses, and if our existing sources of cash and cash flows are insufficient to fund our activities, we will need
to raise additional funds. Additional equity or debt financing may not be available on acceptable terms, if at all, particularly in the
current economic environment.

 Until such time, if ever,
we can generate substantial product revenues, we will be required to finance our cash needs through public or private equity offerings,
debt financings and corporate collaboration and licensing arrangements. If we elect to raise additional funds by issuing equity securities,
our stockholders may experience dilution. Debt financing, if available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt
financing or additional equity that we may raise may contain terms, such as liquidation and other preferences, that are not favorable
to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be
necessary to relinquish valuable rights to our technologies, research programs or product candidates or grant licenses on terms that may
not be favorable to us.

 If we are unable to generate cash flow positive operations
or achieve profitability, and if we are unable to raise additional funds on commercially reasonable terms or at all, we may be required
to significantly reduce or cease our operations, declare bankruptcy or our business could fail, which could result in the loss to investors
of their investment in our securities.

 The terms of our agreements with Bidi, including
our A&R Distribution Agreement, may not always be as favorable to us as the terms that may be obtained by arms' length negotiation.

 We currently are, and we anticipate that we will continue
to be, substantially dependent on our relationships with our affiliated entities, including Bidi. We believe that our current arrangement
with Bidi provides our business with stability and transparency. Although we believe that the terms of the A&R Distribution Agreement
are as favorable to us as what we could have obtained in an arm's length transaction, there can be no assurance that this arrangement
or any future agreements that we enter with Bidi, or any other affiliated entity, will be as favorable to us as we may be able to negotiate
with unaffiliated parties.

 We rely primarily on Bidi for access to our
key intellectual property rights, and any change in our relationship could adversely alter such rights or our access to them.

 We currently have no intellectual property rights
other than the intellectual property assets we acquired in May 2023 from GoFire and our trademarks KAIVAL BRANDS and KAIVAL LABS. We rely
on the intellectual property rights, including logos, trademarks, and trade names, of Bidi that were granted to us pursuant to the A&R
Distribution Agreement to be used in connection with the marketing, advertisement, and sale of the Bidi products. We also indirectly rely
on Bidi's intellectual property rights related to the Bidi products, such as patents. We have from time to time considered, and
discussed with Bidi, potential alterations to this arrangement, including a potential acquisition by us of all or a portion of the intellectual
property owned by Bidi and related to Bidi products. Should we pursue such a transaction, it would be a "related party transaction,"
as defined by the listing rules of Nasdaq and, thus, subject to the review of the Audit Committee of our Board (or, if deemed appropriate,
a special Board committee comprised of disinterested directors). Further, should we undertake such a transaction, then we would become
responsible to respond if a third-party challenged Bidi's patents, or infringed upon such rights, in which case our business could
be materially adversely affected.

 We have a limited operating history, and our
historical operating and financial results may not be indicative of future performance, which, along with the relative early stage of
the ENDS industry, makes it difficult to predict our future business prospects and financial performance.

 Our current business model is relatively new, and
so business and prospects may be difficult to evaluate. Our limited operating history makes it difficult to evaluate both our operating
history and our future potential. We have yet to demonstrate a consistent ability to generate revenue, and are still subject to many of
the risks common to early-stage companies operating in the nicotine and non-nicotine delivery system products sector, including the uncertainty
as to our ability to implement our business plan, market acceptance of business plan, under-capitalization, cash shortages, limitations
with respect to personnel, financing and other resources and uncertainty of our ability to generate revenues. There is therefore a significant
risk that our activities will not result in any material revenues or profit, and the likelihood of our business viability and long-term
prospects must be considered in light of the stage of our development. There can be no assurance that we will be able to fulfill our stated
business strategy and plans, or that financial, technological, market, or other limitations may force us to modify, alter, significantly
delay, or significantly impede the implementation of such plans. We have insufficient results of operations in our current business model
for investors to use to identify historical trends. Investors should consider our prospects considering the risk, expenses and difficulties
we will encounter as an early-stage company. Our revenue and income potential is unproven and our business model is continually evolving.
We are therefore subject to the risk that we will be unable to address these risks, and our inability to address these risks could lead
to the failure of our business.

 Our business is rapidly evolving and is particularly
at risk given the FDA's January 2024 MDO for Classic BIDI Stick or in the event that Bidi's pending PMTA for non-tobacco
flavored BIDI Sticks is denied or delayed.

 The ENDS industry is relatively new and is rapidly
evolving, and the FDA has been aggressive in its oversight of the ENDS industry. Changes in existing laws, regulations and policies and
the issuance of new laws, regulations, policies, as well as the FDA's actions on ENDS-related PMTAs (including Bidi's) and
any other entry barriers in relation to the ENDS industry may materially and adversely affect our ability to conduct business and our
results of operations.

 Bidi was among the many companies that received a MDO for its non-tobacco flavored
BIDI Sticks. On August 23, 2022, the U.S. Court of Appeals for the Eleventh Circuit set aside (i.e., vacated) the MDO
issued to the non-tobacco flavored BIDI Sticks and remanded Bidi's PMTA back to FDA for further review.

 However, there is a risk that Bidi's PMTA for non-tobacco flavored BIDI Sticks will be
denied, which would have a significant adverse effect on our business and could lead to our bankruptcy or the failure of our business
entirely.

 Separately, on or about May 13, 2022, FDA placed the
tobacco-flavored Classic BIDI Stick into the final Phase III scientific review. In March 2023, FDA issued a deficiency letter regarding
the Classic BIDI Stick PMTA, to which Bidi submitted a timely response in June 2023. Subsequently, on January 22, 2024, FDA issued
a MDO for the Classic BIDI Stick. On January 26, 2024, Bidi filed a petition for review of the MDO with the 11 th Circuit
Court of Appeals, followed by a motion to stay the MDO. Bidi is arguing, among other things, that the MDO was arbitrary and capricious
in violation of the Administrative Procedure Act. On February 2, 2024, Bidi filed a Time Sensitive Motion for a Stay Pending Review, which
the court denied on February 18, 2024. The case is now proceeding on the merits, with Bidi's opening merits brief filed on April
15, 2024. FDA filed its response brief on June 7, 2024, and Bidi filed its reply brief on July 29, 2024. The 11 th Circuit has
indicated that the oral argument will be held in April 2025. The Company cannot provide any assurances as to the timing or outcome. Unless
the MDO is ultimately remanded by the 11 th Circuit, the Classic BIDI Stick is considered an adulterated tobacco product
the continued marketing and distribution of which is prohibited.

 If it is determined or perceived that the usage
of ENDS products poses long-term health risks, the use of ENDS products may decline significantly, which may materially and adversely
affect our business, financial condition, and results of operations.

 Negative publicity on the health consequences of ENDS
products or other similar devices may also adversely affect the usage of ENDS products. For example, the FDA and the United States Centers
for Disease Control and Prevention ("CDC") issued a joint statement on August 30, 2019, linking a number of cases of respiratory
illnesses to ENDS product use. On November 8, 2019, the CDC announced that it had preliminarily linked cases of severe respiratory illness
to the presence of Vitamin E acetate, which was found in certain Tetrahydrocannabinol (THC)-containing ENDS cartridges for non-electronic
nicotine delivery systems (non-ENDS) products that may have been obtained illegally. However, evidence is not sufficient to rule out the
contribution of other chemicals of concern, including chemicals in either THC or non-THC products (THC is the
principal psychoactive constituent of cannabis). In January 2020, after further research, the FDA and CDC recommended against the
use of THC-containing ENDS products, especially those from unofficial sources, and that the underage, pregnant women and adults who do
not currently use tobacco products should not start using ENDS products. On February 25, 2020, the CDC issued a final update, stating
that the number of cases of severe respiratory illnesses had declined to single digits as of February 9, 2020. The CDC also reconfirmed
that (i) Vitamin E acetate, which was found in some THC-containing ENDS cartridges for non-ENDS ENDS products that were mostly obtained
illegally, was strongly linked to and indicated to be the primary cause of the severe respiratory illnesses, and (ii) THC-containing ENDS
products from informal sources were linked to most cases of severe respiratory illnesses. Furthermore, there have been recent claims that
users of ENDS products may suffer a greater risk of more serious COVID-19 complications. However, it remains unclear whether the exposure
to toxic chemicals through ENDS product usage will increase the risk of COVID-19.

 Research regarding the actual causes of these illnesses
is still ongoing. If ENDS product usage is determined or perceived to pose long-term health risks or to be linked to illnesses, the usage
of ENDS products may significantly decline, which would have a material adverse effect on our business, financial condition, and results
of operations. Although we currently do not offer products containing THC, any perceived correlation between THC and Vitamin E acetate
may adversely affect the public's perception of ENDS products in general, regardless of whether such products contain THC and/or
Vitamin E.

 We do not expect the assets acquired from GoFire
will generate immediate revenue for us, and we may never be able to develop these assets into revenue generating products.

 We purchased a certain vaporizer and inhalation-related
patent portfolio from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence on Bidi. We do not expect
that the acquired assets will generate immediate revenue for us. While we will seek to monetize the acquired intellectual property, including
through third-party licensing opportunities, we can give no assurances at this time that either (i) the patent applications we acquired
will result in issued patents or (ii) we will be able to successfully monetize these assets. Our failure to capitalize on our GoFire assets
would materially impair our strategy of diversifying our product offerings, leaving us even more reliant on the products we distribute
for Bidi.

 We may not be successful in maintaining the
consumer brand recognition and loyalty of our products and face intense competition and may fail to compete effectively.

 We compete in a market that relies on innovation and
the ability to react to evolving consumer preferences and, thus, are subject to significant competition in the ENDS market, and larger
tobacco industry and compete against companies in such market and industry that have access to significant resources in terms of technology,
relationships with suppliers and distributors and access to cash flow and financial markets.

 Consumer perceptions of the overall safety of tobacco,
nicotine, cannabis, and hemp/CBD-related products is likely to continue to shift, and our success depends, in part, on our ability to
anticipate these shifting tastes and the rapidity with which the markets in which we compete will evolve in response to these changes
on a timely and affordable basis. If we are unable to respond effectively and efficiently to changing consumer preferences, the demand
for our products may decline, which could have a material adverse effect on our business, results of operations, and financial condition.

 Regulations may be enacted in the future, particularly
considering increasing restrictions on the form and content of marketing of tobacco products, that would make it more difficult to appeal
to our consumers or to leverage existing recognition of the Bidi brand, or other brands that we own or license in the future. Furthermore,
even if we can continue to distinguish our products, there can be no assurance that the sales, marketing, and distribution efforts of
our competitors will not be successful in persuading consumers of our products to switch to their products. Many of our competitors have
greater access to resources than we do, which better positions them to conduct market research in relation to branding strategies or to
launch costly marketing campaigns. Any loss of consumer brand loyalty to our products or reduction of our ability to effectively brand
our products in a recognizable way will have a material effect on our ability to continue to sell our products and maintain our market
share, which could have a material adverse effect on our business, results of operations, and financial condition.

 The competitive environment and our competitive position
are also significantly influenced by economic conditions, the state of consumer confidence, competitors' introduction of low-priced
products or innovative products, higher taxes, higher absolute prices, and larger gaps between price categories and product regulation
that diminishes the consumer's ability to differentiate tobacco products. Due to the impact of these factors, as well as higher
state and local excise taxes and the market share of deep discount brands, the tobacco industry has become increasingly price competitive.
As we seek to adapt to the price competitive environment, our competitors that are better capitalized may be able to sustain price discounts
for long periods of time by spreading the loss across their expansive portfolios, with which we are not positioned to compete.

 "Big tobacco" has also established its
presence in the ENDS market and has begun to make investments in the alternative space. There can be no assurance that our products will
be able to compete successfully against these companies or any of our other competitors, some of which have far greater resources, capital,
experience, market penetration, sales and distribution channels than do we.

 Our distribution efforts rely in part on our
ability to leverage relationships with large retailers and national chains.

 Our distribution efforts rely in part on our ability
to leverage relationships with large retailers and national chains to sell and promote our products, which is dependent upon the strength
of the Bidi brand name and, in the future, any brand names that we may own or license, and our salesforce effectiveness. To maintain these
relationships, we must continue to supply products that will bring steady business to these retailers and national chains. We may not
be able to sustain these relationships or establish other relationships with such entities, which could have a material adverse effect
on our ability to execute our branding strategies, our ability to access the end-user markets with our products, or our ability to maintain
our relationships with the manufacturer and sub-distributors of our products. For example, if we are unable to meet benchmarking provisions
in certain of our contracts or if we are unable to maintain and leverage our retail relationships on a scale sufficient to make us an
attractive distributor, it would have a material adverse effect on our ability to act as sole distributor for Bidi, and on our business,
results of operations and financial condition.

 In addition, there are factors beyond our control
that may prevent us from leveraging existing relationships, such as industry consolidation. If we are unable to develop and sustain relationships
with large retailers and national chains or are unable to leverage those relationships due to factors such as a decline in the role of
brick-and-mortar retailers in the North American economy, our capacity to maintain and grow brand and product recognition and increase
sales volume will be significantly undermined. In such an event, we may ultimately be forced to pursue and rely on local and more fragmented
sales channels, which will have a material adverse effect on our business, results of operations and financial condition.

 Competition from illicit sources may have an
adverse effect on our overall sales volume, restricting the ability to increase selling prices and damaging brand equity.

 Illicit trade and tobacco trafficking in the form
of counterfeit products, smuggled genuine products, and locally manufactured products on which applicable taxes or regulatory requirements
are evaded, represent a significant and growing threat to the legitimate tobacco industry and significant, and unfair, competition that
we are faced with. Moreover, factors such as increasing tax regimes, regulatory restrictions, and compliance requirements are encouraging
more consumers to switch to illegal, cheaper tobacco-related products, and providing greater rewards for smugglers. All of these factors
based on illicit trade have had and may continue to have an adverse effect on our overall sales volume, may restrict the ability to increase
selling prices, damage our brand equity, and may lead to commoditization of our products. If we are unable to manage the risks posed by
illicit competition, our results of operation and overall business may suffer.

 Our products are regulated by the FDA, which has broad regulatory
powers. Increases in tobacco-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous
jurisdictions.

 Tobacco products, premium cigarette papers, and tubes
have long been subject to substantial federal, state, and local excise taxes. Such taxes have frequently been increased or proposed to
be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage. Since 1986,
smokeless products have been subject to federal excise tax. Federally, smokeless products are taxed by weight (in pounds or fractional
parts thereof) manufactured or imported. Any increases in tobacco-related taxes may materially adversely affect the demand for our products.

 The market for ENDS products is subject to a
great deal of uncertainty and is still evolving.

 ENDS products, having recently been introduced to
market over the past 10 to 15 years, are at a relatively early stage of development, and represent core components of a market that is
evolving rapidly, highly regulated, and characterized by a number of market participants. Rapid growth in the use of, and interest in,
ENDS products is recent, and may not continue on a lasting basis. The demand and market acceptance for these products is subject to a
high level of uncertainty. Therefore, we are subject to all the business risks associated with a new enterprise in an evolving market.

 For example, ENDS products that are non-tobacco flavored
continue to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans
or request the FDA to deny a PMTA for flavored ENDS. To date, at least nine states, including the District of Columbia, have banned the
sale of flavored ENDS (e.g., California, Massachusetts, Illinois, New Jersey, New York, Rhode Island, and Utah), with several more considering
similar bans (e.g., Maryland and Connecticut). As the September 9, 2021, PMTA review deadline has now passed, the FDA has implemented
a de facto ban of non-tobacco flavored ENDS by denying over 99% of pending applications, while issuing marketing authorizations for only
two non-tobacco flavored (menthol) ENDS.

 If flavors are ultimately prohibited to be sold by
Bidi in the United States, the use of ENDS products may decline significantly, which may materially and adversely affect our business,
financial condition, and results of operations. Continued evolution, uncertainty, and the resulting increased risk of failure of our new
and existing product offerings in this market could have a material adverse effect on our ability to build and maintain market share and
on our business, results of operations and financial condition.

 Some of our product offerings through Bidi are
subject to developing and unpredictable regulation.

 Our products are sold through our distribution network
and may be subject to uncertain and evolving federal, state, and local regulations, including hemp, non-THC cannabidiol (CBD) and other
non-tobacco consumable products. Enforcement initiatives by those authorities are therefore unpredictable and impossible to anticipate.
We anticipate that all levels of government, which have not already done so, are likely to seek in some way to regulate these products,
but the type, timing, and impact of such regulations remains uncertain. These regulations include or could include restrictions including
prohibitions on certain form factors, such as smokable hemp products, or age restrictions. On January 26, 2023, The FDA announced that
it would not initiate rulemaking to regulate CBD as a dietary food ingredient. Rather, after careful review, the FDA has concluded that
a new regulatory pathway for CBD is needed that balances individuals' desire for access to CBD products with the regulatory oversight
needed to manage risks. The FDA further indicated that it is prepared to work with Congress on this matter. Accordingly, we cannot give
any assurance that such actions would not have a material adverse effect on this emerging business.

 Significant increases in state and local regulation
of our products have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions. The Prevent
All Cigarette Trafficking (or PACT) Act, which went into effect in June 2010, amended the Jenkins Act and initially only applied to the
sales of cigarettes, roll-your-own tobacco, and smokeless tobacco. Specifically, the PACT Act regulates the sale, transfer, or shipment
of these products for both business-to-business transactions as well as "delivery sales," which are defined as any sale of
cigarettes, roll-your-own tobacco, or smokeless tobacco where the consumer orders the product remotely and prohibits such deliveries through
the U.S. Postal Service (or USPS), except in certain circumstances ( e.g., business-to-business deliveries).

 Under the enactment of the Preventing Online Sales
of E-Cigarettes to Children Act (part of the larger 2021 Consolidated Appropriations Act), effective March 27, 2021, the definition of
"cigarettes" in the PACT Act was amended to include ENDS, which is defined as "any electronic device that, through an
aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device," including "an
e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid,
part, or accessory of a device described above, without regard to whether the component, liquid, part, or accessory is sold separately
from the device." As such, delivery sales of the BIDI Stick are subject to the PACT Act.

 The PACT Act requires all sellers to register with
the ATF, as well as the tobacco tax administrators of the states into which a shipment is made or in which an advertisement or offer is
disseminated. Delivery sellers who ship cigarettes (including ENDS) or smokeless tobacco to consumers are further required to label packages
as containing tobacco, verify the age, and identity of the customer at purchase, use a delivery method (other than through the USPS) that
checks ID and obtains adult customer signature at delivery, and maintain records of delivery sales for a period of four years after the
date of sale, among other things. Delivery sellers are also required to file a monthly report with the state tobacco tax administrator
and any other local or tribal entity that taxes the sale of the products. Such reports must include the name and address of the persons
delivering and receiving the shipment and the brand and quantity of the "cigarettes" that were shipped. These requirements
apply to all sales, including sales to consumers and sales between businesses.

 In addition to the de facto FDA flavor ban that has
resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tobacco flavored continue to face the threat
of prohibition at the local level, as many state and local authorities and attorneys general push for bans or request the FDA to deny
PMTAs for flavored ENDS. To date, at least nine states, including the District of Columbia, have banned the sale of flavored ENDS (e.g.,
California, Massachusetts, Illinois, New Jersey, New York, Rhode Island, and Utah), with several more considering similar bans (e.g.,
Maryland and Connecticut)

 Our supply to our wholesalers and retailers
is dependent on the demands of their customers who are sensitive to increased sales taxes and economic conditions affecting their disposable
income.

 Consumer purchases of tobacco products are historically
affected by economic conditions, such as changes in employment, salary and wage levels, the availability of consumer credit, inflation,
interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic conditions. Discretionary
consumer purchases, such as the BIDI Stick, may decline during recessionary periods or at other times when disposable
income is lower, and taxes may be higher.

 We may be subject to increasing international
control and regulation.

 The FCTC is the first international public health
treaty that establishes a global agenda to reduce initiation of tobacco use and regulate tobacco to encourage tobacco cessation. Over
170 governments worldwide have ratified the FCTC. The FCTC has led to increased efforts to reduce the supply and demand of tobacco products
and to encourage governments to further regulate the tobacco industry. The tobacco industry expects significant regulatory developments
to take place over the next few years, driven principally by the FCTC. Regulatory initiatives that have been proposed, introduced or enacted
include:

 the levying of substantial
 and increasing tax and duty charges;

 advertising, marketing and sponsorship;

 the display of larger health
 warnings, graphic health warnings and other labeling requirements;

 restrictions on packaging
 design, including the use of colors and generic packaging;

 the display of tobacco product packaging at the point of sale, and restrictions or bans on cigarette vending machines;

 requirements regarding
 testing, disclosure and performance standards for tar, nicotine, carbon monoxide and other smoke constituents levels;

 requirements regarding
 testing, disclosure and use of tobacco product ingredients;

 increased restrictions
 on smoking in public and workplaces and, in some instances, in private places and outdoors;

 elimination of duty-free
 allowances for travelers; and

 encouraging litigation
 against tobacco companies.

 Our business may be damaged by events outside
of our own or Bidi's control, such as the impact of epidemics, political changes, or natural disasters.

 Our business could be adversely affected by the effects
of epidemics, political changes, wars or natural disasters. World economies and capital markets have been adversely impacted by COVID-19
and its variants, the Ukraine-Russia conflict, the recent eruption of hostilities in Israel and Gaza and political instability in the
United States and elsewhere. The lasting impacts of these matters on the United States and broader global economy, including supply chain
disruption, may have a significant continuing negative effect on our company and may continue to materially impact our company, our ability
to conduct business, our financial condition and results of operations.

 Reliance on information technology means a significant
disruption could affect our communications and operations.

 We increasingly rely on information technology systems
for our internal communications, controls, reporting and relations with customers and suppliers, and information technology is becoming
a significantly important tool for our sales staff. In addition, our reliance on information technology exposes us to cyber-security risks,
which could have a material adverse effect on our ability to compete. Security and privacy breaches may expose us to liability and cause
us to lose customers or may disrupt our relationships and ongoing transactions with other entities with whom we contract throughout our
network. The failure of our information systems to function as intended, or the penetration by outside parties' intent on disrupting
business processes, could result in significant costs, loss of revenue, assets or personal or other sensitive data and reputational harm.

 Security and privacy breaches may expose us
to liability and cause us to lose customers.

 Federal and state laws require us to safeguard our
wholesalers', retailers', and consumers' financial information, including credit information. Although we have established
security procedures to protect against identity theft and the theft of our customers' financial information, our security and testing
measures may not prevent security breaches. We cannot guarantee that a future breach will not result in material liability or otherwise
harm to our business. In the event of any such breach, we may be required to notify governmental authorities or consumers under breach
disclosure laws, indemnify consumers, or other third parties for losses resulting from the breach, and expend resources investigating
and remediating any vulnerabilities that contributed to the occurrence of the breach. We rely on third-party technology to safeguard the
security of sensitive information in our possession. Advances in computer capabilities, new discoveries in the field of cryptography and
quantum computing, inadequate facility security or other developments may result in a compromise or breach of the technology used by us
to protect customer data. Any compromise of our security, even a security breach that does not result in a material liability could harm
our reputation and, therefore, our business and financial condition. In addition, a party who can circumvent our security measures or
exploit inadequacies in our security measures, could, among other effects, misappropriate proprietary information, cause interruptions
in our operations or expose customers and other entities with which we interact to computer viruses or other disruptions. Actual or perceived
vulnerabilities may lead to claims against us. Any insurance coverage that we obtain to cover such risks may be insufficient to cover
all claims or losses. To the extent the measures we have taken prove to be insufficient or inadequate, we may become subject to litigation
or administrative sanctions, which could result in significant fines, penalties or damages and harm to our reputation.

 We may fail to manage our growth.

 In our early years we had opportunities to grow significantly in a short
amount of time and we intended to continue that growth in the future. However, our future growth has been placed on hold with additional
constraints and demand for our resources, and we cannot be sure we will be able to manage an acceptable growth effectively as we did in
our early years. If we are unable to manage our growth while expanding the distribution of our products and increasing profit margins,
or if new systems that we implement to assist in managing our growth do not produce the expected benefits, our business, financial position,
results of operations and cash flows could be adversely affected. We may not be able to support, financially or otherwise, future growth,
or hire, train, motivate and manage the required personnel. Our failure to manage growth effectively could also limit our ability to achieve
our goals as they relate to streamlined sales, marketing and distribution operations and the ability to achieve certain financial metrics.

 We are subject to fluctuations in our results
that make it difficult to track trends and develop strategies in the short term.

 In response to competitor actions and pricing pressures,
we have engaged in significant use of promotional and sales incentives. We regularly review the results of our promotional spending activities
and adjust our promotional spending programs to maintain our competitive position as well as to confirm compliance with our adult-focused
marketing policies. Accordingly, unit sales volume and sales promotion costs in any period are not necessarily indicative of sales and
costs that may be realized in subsequent periods. Additionally, promotional activity significantly increases net sales in the month in
which it is initiated, and net sales are adversely impacted in the month after a promotion. Accordingly, based upon the timing of our
marketing and promotional initiatives, we have and may continue to experience significant variability in our results, which could affect
our ability to formulate strategies that allow us to maintain our market presence across volatile periods. If our fluctuations obscure
our ability to track important trends in our key markets, it may have a material adverse effect on our business, results of operations
and financial condition.

 Adverse U.S. and global economic conditions
could negatively impact our business, prospects, results of operations, financial condition or cash flows.

 Our business and operations are sensitive to global
economic conditions. These conditions include interest rates, energy costs, inflation, recession, fluctuations in debt and equity capital
markets, and the general condition of the United States and world economies, including as a result of the effect of the COVID-19 pandemic.
A material decline in the economic conditions affecting consumers, which cause a reduction in disposable income for the average consumer,
may change consumption patterns, and may result in a reduction in spending on our product offerings or a switch to cheaper products or
products obtained through illicit channels. As such, demand for our products may be particularly sensitive to economic conditions such
as inflation, recession, high energy costs, unemployment, changes in interest rates and money supply, changes in the political environment,
the ultimate effect on the economy of the COVID-19 pandemic and other factors beyond our control, any combination of which could result
in a material adverse effect on our business, results of operations, and financial condition.

 The departure of key management personnel and
the failure to attract and retain talent could adversely affect our operations.

 Our success depends upon the continued
contributions of our senior executive management, especially our Interim Chief Executive Officer, Mark Thoenes, our Interim Chief
Financial Officer, Eric Morris If one or more of our executive officers are unable or unwilling to continue in their current
positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and
retain new executive officers. If any of our executive officers join a competitor or forms a competing company, we may lose some or
all of our customers. Finally, we do not maintain "key person" life insurance on any of our executive officers. Because
of these factors, the loss of the services of any of these key persons could adversely affect our business, financial condition, and
results of operations.

 Our insurance may be insufficient to cover losses that may occur
as a result of our operations.

 We currently maintain directors' and officers'
liability insurance and property and general liability insurance. This insurance or other insurance we may elect to obtain may not be
or remain available to us or be obtainable by us at commercially reasonable rates, and the amount of our coverage may not be adequate
to cover any liability we incur. Future increases in insurance costs, coupled with the increase in deductibles, will result in higher
operating costs and increased risk. If we were to incur substantial liability and such damages were not covered by insurance or were in
excess of policy limits, or if we were to incur such liability at a time when we were not able to obtain liability insurance, our business,
results of operations and financial condition could be materially adversely affected.

 Risks Related to Our Securities

 Our Restated Certificate of Incorporation, as
amended (our "Certificate of Incorporation"), and our Bylaws (our "Bylaws"), as well as the DGCL and certain regulations,
could discourage or prohibit acquisition bids or merger proposals, which may adversely affect the market price of our Common Stock.

 Provisions of our Certificate of Incorporation and
Bylaws and the DGCL may discourage, delay or prevent a merger, acquisition, or other change in control that stockholders may consider
favorable, including transactions in which our stockholders might otherwise receive a premium for their shares of our Common Stock. These
provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

 In addition, Section 203 of the DGCL prohibits a publicly-held
Delaware corporation from engaging in a business combination with an interested stockholder, which generally refers to a person which
together with its affiliates owns, or within the last three years has owned, 15 percent or more of our voting stock, for a period of three
years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved
in a prescribed manner.

 The existence of the foregoing provisions and anti-takeover
measures could limit the price that investors might be willing to pay in the future for shares of Common Stock. They could also deter
potential acquirers of our company, thereby reducing the likelihood that our stockholders could receive a premium for their Common Stock
in an acquisition.

 For so long as any shares of Series B Preferred
Stock remain outstanding, the majority holders of the Series B Preferred Stock are entitled to designate one individual to be nominated
to serve as a director on our board of directors.

 For so long as any shares of Series B Preferred Stock
remain outstanding, the majority holders of the Series B Preferred Stock (or the Majority Holders) will be entitled to designate one (1)
individual to be nominated to serve as a director (who we refer to as the Series B Preferred Director) on our board of directors (or the
Board). At each annual meeting of the stockholders of our company, or at any special meeting called for the purpose of electing directors,
the Board shall nominate such designee for election. Unless the Board shall have received from the Majority Holders a written designation
by March 1 of each calendar year of an individual other than the then-sitting Series B Preferred Director, the Board shall nominate the
then-sitting Series B Preferred Director for re-election to the Board. The Series B Preferred Director is subject to any board of directors-related
provisions that may be contained in our Certificate of Incorporation or Bylaws. The Majority Holders, voting as a single class at a meeting
called for such purpose (or by written consent signed by the Majority Holders in lieu of such a meeting), have the sole right to remove
the Series B Preferred Director from the Board. Any vacancy created by the removal, resignation or death of a Series B Preferred Director
may solely be filled by the Majority Holders, voting as a single class, at a meeting called for such purpose (or by written consent signed
by the Majority Holders in lieu of such a meeting). The Series B Preferred Director shall be entitled to receive similar compensation,
benefits, reimbursement (including of reasonable travel expenses), indemnification and insurance coverage for his or her service as a
director of our company as the other non-employee directors of on the Board. As of the date of this Report, the seat on our Board designated
for the Series B Preferred Director is vacant due to Mr. Cassidy's resignation from the Board on January 25, 2024. As a result of
their Board appointment right, the Majority Holders could have a disproportionate impact on our governance and operations, which could
have an adverse effect on our company.

 The Series B Preferred Stock ranks senior to
our Common Stock.

 The Series B Preferred Stock ranks, with respect to
dividend rights, rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs
of our company, and redemption rights, senior to the Common Stock and each other class or series of securities now existing or hereafter
authorized classified or reclassified, the terms of which do not expressly provide that such class or series ranks on a parity basis with
or senior to the Series B Preferred Stock as to dividend rights, rights on the distribution of assets on any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of our company, and redemption rights.

 Future offerings of debt or equity securities
may rank senior to our Common Stock.

 We have a present need for additional capital, and
we will likely continue to seek to raise new funding from time to time through the issuance of debt or equity securities. Our Board of
Directors has the ability, without further approval of our stockholders, to issue debt or equity securities in the future, in addition
to the Series B Preferred Stock, ranking senior to our Common Stock or otherwise incur additional indebtedness, it is possible that these
securities or indebtedness will be governed by an indenture or other instrument containing covenants restricting our operating flexibility
and limiting our ability to pay dividends to stockholders. Additionally, any convertible or exchangeable securities that we issue in the
future may have rights, preferences, and privileges, including with respect to dividends, more favorable than those of our Common Stock
and may result in dilution (perhaps significant) to our stockholders. Because our decision to issue debt or equity securities in any future
offering or otherwise incur indebtedness will depend on market conditions and other factors beyond our control, we cannot predict or estimate
the amount, timing, or nature of our future offerings or financings, any of which could reduce the market price of our Common Stock and
dilute its value.

 We may issue additional classes or series of
preferred stock whose terms could adversely affect the voting power or value of our commons stock.

 Our Certificate of Incorporation authorizes us to
issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designations, preferences,
limitations, and relative rights, including preferences over our Common Stock respecting dividends and distributions, as our Board may
determine. The terms of one or more additional classes or series of preferred stock could adversely impact the voting power or value of
our Common Stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events
or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or
dividend or liquidation preferences we might assign to holders of preferred stock could affect the residual value of our Common Stock.

 The market price for our Common Stock is volatile
and has and will fluctuate.

 The market price for shares of our Common Stock may
be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including the following:
(i) action by the FDA with respect to Bidi's PMTAs or regulatory action by FDA generally against Bidi, our company or our industry,
(ii) actual or anticipated fluctuations in our quarterly financial results; (iii) recommendations by securities research analysts; (iv)
changes in the economic performance or market valuations of other issuers that investors deem comparable to ours; (v) addition or departure
of our executive officers or members of our Board and other key personnel; (vi) release or expiration of lock-up or other transfer restrictions
on outstanding shares of Common Stock; (vii) sales or perceived sales of additional shares of our Common Stock; (viii) the liquidity of
our Common Stock or lack thereof; (ix) significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital
commitments by or involving us or our competitors; and (x) news reports relating to trends, concerns, technological or competitive developments,
regulatory changes, and other related issues in our industry or target markets. Financial markets often experience significant price and
volume fluctuations that affect the market prices of equity securities of public entities and that are, in many cases, unrelated to the
operating performance, underlying asset values or prospects of such entities. Accordingly, the market price of our shares of Common Stock
may decline even if our operating results, underlying asset values or prospects have not changed.

 Our Common Stock is listed on the Nasdaq but
there can be no assurance that we will be able to comply with the continued listing standards of Nasdaq in the future, particularly since
we are presently experiencing a Nasdaq continuing listing deficiency.

 Although our Common Stock is listed on Nasdaq, we
cannot assure you that we will be able to comply with the standards that we are required to meet in order to maintain a listing of our
Common Stock on Nasdaq in the future. Nasdaq listing rules require us to maintain certain closing bid price, stockholders' equity,
and other financial metric criteria, as well as certain corporate governance requirements, for our Common Stock to continue trading on
Nasdaq. If we fail to comply with the continued listing standards, our Common Stock could be delisted.

 We
 have been subject to Nasdaq listing deficiency issues in the past.

 There can be no assurances given that we will be able
to cure any listing deficiencies related to our company. A failure to maintain listing on Nasdaq could have a material adverse effect
on the liquidity and price of our Common Stock.

 Future sales of shares of our Common Stock by
our controlling shareholders or by our officers and directors may negatively impact the market price for our Common Stock.

 Subject to
compliance with applicable securities laws, our controlling shareholders
Kaival Holdings and Bidi Vapor as well as our directors and officers and their affiliates may sell some or all of their shares of
our Common Stock in the future. No prediction can be made as to the effect, if any, such future sales of shares of our Common Stock
may have on the market price of the shares of our Common Stock prevailing from time to time. However, the future sale of a
substantial number of shares of our Common Stock by our directors and officers and their affiliates, or the perception that such
sales could occur, could adversely affect prevailing market prices for our shares of our Common Stock.

 The concentration of ownership by Kaival Holdings and Bidi Vapor and our officers
and directors may result in conflicts of interest and may prevent other stockholders from influencing significant corporate decisions
and depress our stock price.

 Based
 on the number of shares outstanding as
of as of the date of this Report, Kaival Holdings and Bidi Vapor, our affiliated majority stockholder, together with our officers and
directors, beneficially own a combined total of approximately 51.6% percent
of our outstanding Common Stock, including shares of our Common Stock subject to stock options that are currently exercisable or are exercisable
and that vest within 60 days as of the date of this prospects. If our controlling stockholders, together with these officers and directors
act together, they will be able to exert a significant degree of influence over our management and affairs and control matters requiring
stockholder approval, including the election of directors and approval of mergers, business combinations, or other significant transactions.
For example, Kaival Holdings, together with our officers and directors, could cause us to enter into transactions or agreements that we
would not otherwise consider or might not be in the best interests of our minority stockholders. Similarly, this concentration of ownership
may have the effect of delaying or preventing a change in control of our company otherwise favored by our other stockholders. This, in
turn, could have a negative effect on the market price of our Common Stock. It could also prevent our stockholders from realizing a premium
over the market price for their shares of our Common Stock. The concentration of ownership also may contribute to the low trading volume
and volatility of our Common Stock. Moreover, any such conflicts of interest may not be easy to resolve and could impair our ability to
operate our business.

 Our Common Stock may become the target of a "short squeeze."

 Beginning in 2021, the securities of several companies
have increasingly experienced significant and extreme volatility in stock price due to short sellers of shares of Common Stock and buy-and-hold
decisions of longer investors, resulting in what is sometimes described as a "short squeeze." Short squeezes have caused extreme
volatility in those companies and in the market and have led to the price per share of those companies trading at a significantly inflated
rate that is disconnected from the underlying value of the company. Sharp rises in a company's stock price may force traders in
a short position to buy stock to avoid even greater losses. Many investors who have purchased shares in those companies at an inflated
rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest
in those stocks has abated. We may be a target of a short squeeze, and investors may lose a significant portion or all their investment
if they purchase our shares at a rate that is significantly disconnected from our underlying value.

 If securities or industry analysts fail to continue
publishing research about our business, if they change their recommendations adversely or if our results of operations do not meet their
expectations, our stock price and trading volume could decline.

 The trading market for our Common Stock will be influenced
by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease
coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could
cause our stock price or trading volume to decline. In addition, it is likely that in some future period our operating results will be
below the expectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our Common Stock, or
if our results of operations do not meet their expectations, our stock price could decline.

 We do not currently pay dividends on our shares
of Common Stock and have no intention of paying dividends on shares of our Common Stock for the foreseeable future.

 No dividends on the shares of our Common Stock have
been paid by us to date. We do not intend to declare or pay any cash dividends in the foreseeable future. Payment of any future dividends
will be at the discretion of our Board, after considering a multitude of factors appropriate in the circumstances, including our operating
results, financial condition, and current and anticipated cash needs. In addition, the terms of any future debt or credit facility may
preclude us from paying any dividends unless certain consents are obtained, and certain conditions are met. There is no assurance that
future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. Unless
our Board decides to pay dividends, our stockholders will be required to look at appreciation of our Common Stock to realize a gain on
their investment. There can be no assurance that this appreciation will occur.

 For as long as we are an "emerging growth
company" we intend to take advantage of reduced disclosure and governance requirements applicable to emerging growth companies,
which could result in our Common Stock being less attractive to investors and could make it more difficult for us to raise capital as
and when we need it.

 We are an "emerging growth company," as
defined in the JOBS Act, and we have taken advantage, and intend to continue to take advantage, of certain exemptions from various reporting
requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"),
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the
requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved.

 Investors may find our Common Stock less attractive
because we rely on these exemptions, which could contribute to a less active trading market for our Common Stock or volatility in our
share price. In addition, we may be less attractive to investors, and it may be difficult for us to raise additional capital when we need
it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting
is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial
condition and results of operations may be materially and adversely affected.

 We may take advantage of these reporting exemptions
until we are no longer an emerging growth company.

 We have identified material weaknesses in our
system of internal controls over financial reporting and, if we cannot remediate these material weaknesses, we may not be able to accurately
report our financial condition, results of operations, or cash flows, which may adversely affect investor confidence in us and, as a result,
the value of our Common Stock.

 A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement
of annual or interim financial statements will not be prevented or detected on a timely basis. Section 404 of Sarbanes-Oxley also generally
requires an attestation from our independent registered public accounting firm on the effectiveness of our system of internal controls
over financial reporting. However, if we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of
the exemption permitting us not to comply with the independent registered public accounting firm attestation requirement.

 Our management has identified, and we have disclosed,
certain material weaknesses in our system of internal controls over financial reporting as of our fiscal year ended October 31, 2024.
Specifically, our management has found that our internal control system over financial reporting was ineffective as of October 31, 2024,
based on a determination that there was a lack of sufficient resources to provide adequate segregation of duties consistent with control
objectives, the lack of sufficient and consistent real time remote communications, and the lack of a fully developed formal review process
that includes multiple levels of review over financial disclosure and reporting processes.

 To address these material weaknesses, and subject
to the receipt of additional financing or cash flows, we have undertaken, and intend to continue to undertake, remediation measures to
address such material weaknesses, including implementing prevent and detect internal control procedures pursuant to which we can ensure
segregation of duties and hire additional resources to ensure appropriate review and oversight.

 Our compliance with Section 404 of Sarbanes-Oxley
will require that we incur substantial accounting expenses and spend significant management efforts. We may not be able to complete our
evaluation, testing, and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or
more material weaknesses in our internal control over financial reporting, we will be unable to assert that our system of internal control
over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in
our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely
inhibit our ability to accurately report our financial condition, results of operations, or cash flows. This may expose us, including
individual executives, to potential liability which could significantly affect our business.

 We cannot assure you that we will, in the future,
identify areas requiring improvement in our system of internal controls over financial reporting. We cannot assure you that the measures
we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls
over our financial process and reporting in the future as we continue to grow. If we are unable to establish appropriate internal financial
reporting controls and procedures, if we are unable to conclude that our system of internal controls over financial reporting is effective,
or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our system
of internal controls over financial reporting once that firm begins its audits of our systems of internal controls over financial reporting,
it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating
results, cause investors to lose confidence in the accuracy and completeness of our financial reports, the market price of our common
shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities. Failure
to remedy any material weakness in our system of internal controls over financial reporting, or to implement or maintain other effective
internal control systems required of public companies, could also restrict our future access to the capital markets.

 Our disclosure controls and procedures may not
prevent or detect all errors or acts of fraud.

 Our disclosure controls and procedures are designed
to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated
and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms
of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of October 31, 2024,
our Interim Chief Executive Officer and our Interim Chief Financial Officer concluded that the disclosure controls and procedures were
not effective as of such date due to material weaknesses in internal controls identified above.

 These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.
Accordingly, because of the inherent limitations in our internal controls system, misstatements, or insufficient disclosures due to error
or fraud may occur and not be detected.

 We have incurred, and will continue to incur,
increased costs as a result of operating as a public company, and our management has been required, and will continue to be required,
to devote substantial time to new compliance initiatives.

 As a public company, we have incurred and are continuing
to incur significant legal, accounting, and other expenses and these expenses may increase even more after we are no longer an "emerging
growth company" and "smaller reporting company." We are subject to the reporting requirements of the Exchange Act and
the rules adopted, and to be adopted, by the SEC. Our management and other personnel devote a substantial amount of time to these compliance
initiatives.

 Moreover, these rules and regulations have substantially
increased our legal and financial compliance costs and made some activities more time-consuming and costly. The increased costs can result
in our reporting a net loss. These rules and regulations may make it more difficult and more expensive for us to maintain sufficient directors'
and officers' liability insurance coverage. We cannot predict or estimate the amount or timing of additional costs we may continue
to incur to respond to these requirements. The ongoing impact of these requirements could also make it more difficult for us to attract
and retain qualified people to serve on our Board, our Board committees, or as executive officers.

 Item 1B. Unresolved Staff Comments.

 None.

 ITEM 1C. Cybersecurity

 Cybersecurity Risk Management and Strategy

 Our company recognizes the critical importance of
cybersecurity in our digital operations and has established a risk management program to address both internal and external cybersecurity
threats. We acknowledge the challenges posed by the evolving nature of cyber threats and the limitations in fully mitigating these risks.
We have not observed any significant impacts from known cybersecurity threats or previous incidents on our operational, strategic, or
financial aspects. Nevertheless, given the unpredictable nature of cyber threats, we cannot assure complete immunity against potential
future impacts.

 The likelihood of cybersecurity incidents is influenced
by frequency risk factors. External factors include market trends in cybercrime, technological advancements in hacking methods, and geopolitical
developments. Internal factors are shaped by our policies, the effectiveness of employee training, and robustness of system updates and
maintenance procedures. External cybersecurity incidents events may include and are not limited to service disruptions due to email borne
threat activities, ransomware, or denial of service attacks against us or our suppliers, while internal events may comprise of internal
threats, subcontractors, or governance failures among other events.

 Cybersecurity incident response plans are regularly
updated to include structured processes encompassing identification, containment, eradication, recovery, and post-incident review. Continuous
monitoring of systems and networks allows for the detection and response to potential cybersecurity threats. Response capabilities are
regularly reviewed to align with the evolving cyber threat landscape and processes are fully integrated into our broader risk management
system.

 Criteria used to determine the materiality of an incident
includes, but is not limited to, evaluating the scope, nature, type, systems, data, operational impact, and pervasiveness of the incident.
This approach involves continuous oversight and improvement based on evolving cyber threats. Materiality also considers both quantitative
and qualitative factors in determining impact.

 Third-party engagement processes include risk evaluation
across various domains such as cybersecurity, data privacy, supply chain, and regulatory compliance. We are committed to transparently
disclosing material and unauthorized cybersecurity incidents involving third-party service providers, considering factors like operational
technology system damages, information breaches, and interconnected attacks exploiting vulnerabilities.

 Cybersecurity Governance

 Our Board of Directors plays a pivotal role in overseeing
the organization's preparedness for cyber threats. This involves a comprehensive understanding of our risk profile and ensuring appropriate
cybersecurity controls are in place.

 Item 2. Properties.

 On June 10, 2022, we entered into a Lease Agreement
(the "2022 Lease") with Just Pick, LLC (a related party) 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. Just Pick, LLC is considered a related party as it is owned and controlled by KDMM Trust I, which is also the sole
voting member of Kaival Holdings. Kaival Holdings is the largest shareholder of Kaival. We believe our office space is sufficient to meet
our current needs. We must pay the Just Pick lease base rent equal to $17,777 per month during the first year of the lease term. Thereafter,
the monthly base rent will be increased annually with a monthly base rent of $18,666 in the second year, $19,554 in the third year, $20,443
in the fourth year, $22,221 in the fifth year, $23,999 in the sixth year, and one twelfth (1/12 th) of the market annual rent
for the seventh through eleventh years, if appliable. In addition to the base rent, we must pay Just Pick one hundred percent (100%) of
operating expenses, insurance costs, and taxes for each calendar year during the lease term.

 Item 3. Legal Proceedings.

 From time to time, we may become party to litigation
or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal
proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition, or results
of operations. To the best of our knowledge, no adverse legal activity is anticipated or threatened.

 While we are not a party to the legal or regulatory proceedings involving Bidi
described in Item 1 – Business – FDA PMTA and MDO Determinations, Related Court Actions and the Impact on Our Business, the
outcome of those or related proceedings could have a material adverse impact on our ability to operate our business given our reliance
on Bidi.

 Item 4. Mine Safety Disclosures.

 Not applicable.

 Item 5. Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities.

 Market Information

 On July 20, 2021, our Common Stock began trading on
the Nasdaq Capital Market under the trading symbol "KAVL." On February 6, 2025, the last reported sales price of our Common
Stock was $1.35.

 Holders

 As of February 6,
2025, we had approximately 287 record holders of our Common
Stock.

 Dividends

 We do not currently pay dividends on our shares of
Common Stock and have no intention of paying dividends on shares of our Common Stock for the foreseeable future.

 Recent Sales of Unregistered Securities; Uses of Proceeds from Registered
Securities

 Our
 authorized Common Stock consists of 1,000,000,000 shares with a par value
of $0.001 per share. There were 8,517,302 shares of Common Stock issued and outstanding as of October 31, 2024 as compared to 2,793,386
shares of the Common Stock issued and outstanding as of October 31, 2023.

issued 1,400,144 shares of Common stock to Bidi Vapor LLC pursuant to a debt exchange agreement dated October 25, 2024. Pursuant to such
issuance, Bidi Vapor LLC and the Company agreed that the outstanding account payable of $1,275,000 would be repaid in full and extinguished.

issued 1,746,500 shares of common stock in connection with the June 2024 Public Offering.

issued 2,174,456 shares of common stock from exercises of pre-funded warrants.

issued 52,949 shares of common stock for rounding of shares related to the Reverse Split.

issued 16,667 shares of common stock to a FINRA member broker-dealer in connection with the termination of its relationship with such
broker dealer. The fair value was $62,000 based on the closing price of the common stock on the termination date and recorded as stock-based
compensation.

issued 333,200 shares of common stock from exercises of warrants.

 During the year ended October 31, 2023, we issued
95,239 shares of Common Stock as consideration for the acquisition of intellectual property assets from GoFire. We also issued 4,381 shares
of Common Stock as compensation for advisory services rendered in connection with the GoFire APA. We also issued 19,048 shares of Common Stock as part of a loan transaction with AJB investments.

 Series B Convertible Preferred Stock

 We issued 900,000
shares of the Series B Preferred Stock as consideration for the acquisition of intellectual property assets from GoFire in May 2023.
The Series B Preferred Stock carries no voting rights except: (i) with respect to the ability of the holders of a majority of the
then outstanding Series B Preferred Stock (the "Majority Holders"), to nominate a director to our board of directors,
and (ii) that the vote of the Majority Holders is necessary for effecting any amendment to the Company's Certificate of
Incorporation or Certificate of Designation that affects the Series B Preferred Stock. The Series B Preferred Stock is redeemable at
our option at a redemption price of $15 per share, subject to potential downward adjustments based on the trading price of the
Common Stock. Subject to additional 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 our 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 May 30, 2023 and payable on the eighteen-month anniversary of May 30, 2023. 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 number of shares of Series B Preferred Stock on each of the 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 convertible preferred shareholders.

 Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.

 This management's Discussion and Analysis
of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on
our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the audited
Financial Statements and notes thereto for the year ended October 31, 2024, included under Item 8 – Financial Statements and Supplementary
Data in this Report. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements
of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking
statements. Please also see the cautionary language at the beginning of this Report regarding forward-looking statements.

 Overview

 We
are engaged in the sale, marketing and distribution of electronic nicotine delivery system ("ENDS") products, also known
as "e-cigarettes", in a variety of favors. Until October of 2024, our primary source of revenue has been the Bidi Stick as
we sold our inventory on hand. However, on June 11, 2024, RAI Strategic Holdings, Inc., R.J. Reynolds Vapor Company, R.J. Reynolds Tobacco
Company, and RAI Services Company (collectively, the "RJ Reynolds Entities") filed a patent infringement complaint with the
International Trade Commission (the "ITC") against Bidi, us, and forty (40) other respondents (the "ITC Complaint")
pursuant to Section 337 of the Tariff Act of 1930, as amended. Specifically, the ITC Complaint alleges that one or more components or
elements of the Bidi Stick infringe U.S. Patent No. 11,925,202, which is owned by one of the RJ Reynolds Entities. 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. Since the initiation of the ITC Complaint,
we have not imported any Bidi Sticks and currently do not generate any revenue from the sale of Bidi Sticks. Our
current primary source of revenue is through an international licensing agreement with Philip Morris Products S.A. ("PMPSA"),
a wholly owned affiliate of Philip Morris International Inc. ("PMI"). See "Item 1 Business--Philip Morris Deed of
Licensing Agreement"

 We
have also entered into a Merger and Share Exchange Agreement (the "Merger Agreement") with Delta Corp Holdings Limited, a
company incorporated in England and Wales (together with its successors and assigns, "Delta"), Delta Corp Holdings Limited,
a Cayman Islands exempted company ("Pubco"), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of
Pubco ("Merger Sub") and Delta Corp Cayman Limited (the "Sellers"). If the Merger Agreement is consummated, Pubco
will become our parent and all new officers and directors will be appointed by Pubco, except that pursuant to the Merger Agreement we
have the right to appoint one director to the Pubco board of directors and we have agreed to appoint any family member of Ankitaben Patel
(the widow of our former CEO, Nirajkumar Patel) and/or Nirajkumar Patel who is qualified and identified by Bidi for this role prior to
the closing of the Merger Agreement. While we expect the transactions contemplated by the Merger Agreement to close (the "Closing")
in March or April of this year, no assurances can be made that such transactions will close by then or ever. The transactions contemplated
by the Merger Agreement are described in further detail below under " Item 1 Business--The Merger and Share Exchange Agreement."

 Material Items, Trends
and Risks Impacting Our Business

 We believe that the following items and trends may
be useful in better understanding the results of our operations.

 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.
Bidi disputes the patent infringement claims set forth in the ITC Complaint by the RJ Reynolds Entities and plans to vigorously defend
the ITC Investigation. A Commission determination regarding temporary relief is expected in October or December 2024. A final Commission
determination on permanent relief is not expected until late 2025 or early 2026. The asserted patent expires in October 2026 as would
any exclusion order that the ITC enters as a result of the ITC Complaint.

 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 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.

 On July 25, 2022, we announced the launch of PMPSA's
custom-branded self-contained e-vapor product, pursuant to the licensing agreement. The product, a self-contained e-vapor device initially
called VEEBA and more recently rebranded as VEEV NOW, has been custom developed and was initially distributed in Canada. VEEV NOW was
then commercially launched by PMPSA in Europe in February 2023, with additional market launches planned this year. On August 12, 2023,
we 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 was effective on June 30, 2023), resulting in a Net Reconciliation Payment to KBI and ongoing quarterly
royalty payments.

 The ability of PMPSA to generate sales of its licensed
products is important to our results of operations since we derive royalty revenue from PMPSA sales. Should our relationship with PMPSA
deteriorate or terminate, or if PMPSA is unable to generate meaningful sales of its licensed products, our business and results of operations
would be materially harmed.

 Ability to Develop and Monetize the GoFire Intellectual Property

 We purchased certain vaporizer
and inhalation-related technology from GoFire in May 2023 with the goal of diversifying our business and lessening our dependence on BIDI.
We do not expect that the acquired assets will generate immediate revenue for us, and while we believe this to be a transformative acquisition
for us and we are already seeking to develop and monetize the acquired assets, we can give no assurances at this time that either (i)
the patent applications we acquired will eventuate in issued patents or (ii) we will be able to enter into successful monetizing arrangements
with respect to these assets.

 Nature of our Products
and Regulation

 Competition in the market for e-cigarettes from illicit
sources may have an adverse effect on our overall sales volume, restricting our ability to increase selling prices and damaging our brand
equity and reputation. Illicit trade and tobacco trafficking in the form of counterfeit products, smuggled genuine products, and locally
manufactured products on which applicable taxes or regulatory requirements are evaded, represent a significant and growing threat to the
legitimate tobacco industry, including the products we sell. Although we combat counterfeiting of our Products by engaging in certain
tactics, such as requiring all sales force personnel to randomly collect our Products from retailers in order to be tested by our quality
control team, maintaining a quality control group that is responsible for identifying counterfeit products and surveillance of retailers
we suspect are selling counterfeit Products through our own secret shopper force, no assurance can be given that we will be able to detect
or stop sales of all counterfeit products. In addition, while we may bring suits against retailers and distributors that sell certain
counterfeit products, no assurance can be given that we will be successful in any such suits or that such suits will be successful in
stopping other retailers or distributors from selling.

 Counterfeit Products

 Our Products (included in
this context any products that we may develop from the GoFire Purchased Assets) are and will be heavily regulated by the FDA, which has
broad regulatory powers. The market for ENDS products is subject to a great deal of uncertainty and is still evolving. ENDS products,
having recently been introduced to market over the past 10 to 15 years, are at a relatively early stage of development, and represent
core components of a market that is evolving rapidly, highly regulated, and characterized by a number of market participants. Rapid growth
in the use of, and interest in, ENDS products is recent, and may not continue on a lasting basis. With respect to the GoFire Purchase
Assets, the underlying technology touches on hemp/cannabis, nutraceutical and healthcare applications in addition to nicotine, all of
which are heavily regulated by the FDA and other federal and state agencies. The demand and market acceptance for all of these products
is subject to a high level of uncertainty. Therefore, we are subject to all the business risks associated with a new enterprise in an
evolving market.

 Some of our Product offerings
through Bidi are subject to developing and unpredictable regulation. Our Products are sold through our distribution network and may be
subject to uncertain and evolving federal, state, and local regulations, including hemp, non-THC cannabidiol (CBD) and other non-tobacco
consumable products. Enforcement initiatives by those authorities are therefore unpredictable and impossible to anticipate. We anticipate
that all levels of government, which have not already done so, are likely to seek in some way to regulate these products, but the type,
timing, and impact of such regulations remains uncertain. With respect to CBD in particular, on January 26, 2023, the FDA announced that
it would not initiate rulemaking to regulate CBD as a dietary food ingredient. Rather, after careful review, the FDA has concluded that
a new regulatory pathway for CBD is needed and has further indicated that it is prepared to work with Congress to create a new regulatory
pathway for CBD through legislation.

 In addition to the de facto
FDA flavor ban that has resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tobacco flavored continue
to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans or request
the FDA to deny PMTAs for flavored ENDS. In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco
products. Recently, for example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products,
including e-cigarettes, in retail locations. Thus, the non-tobacco flavored BIDI Sticks are not permitted to be sold in California
retail locations. We anticipate more states and localities will take this approach. Several other states and localities have banned flavored
ENDS, including Washington, D.C., New York (and New York City), New Jersey, Rhode Island, Illinois (and Chicago), Utah and Massachusetts,
with several more considering similar bans (e.g., Maryland and Connecticut).

 Ability
to Meet Demand for our Products

 We believe that the
matters described under "FDA PMTA Determinations, 11 th Circuit Decision and Impact on Our Business" could have
decreased demand for our Products and would likely have negative opportunities to distribution channels for us through which we could
sell our Products. However, an unlikely increase in demand for the Products would require us to raise cash and/or obtain financing in
order to purchase Products from Bidi for resale in the marketplace. As a result, we are faced with the risk that such cash or financing
will not be available in sufficient amounts or on terms acceptable to us (or at all) to meet the market demand for the Products. Our
inability to fulfill this demand will damage our reputation and could materially impact our ability to increase sales of the Products
which, in turn, would adversely impact our results of operations.

 Inflation

 Consumer purchases of tobacco
products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of
consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic
conditions. The U.S. has been experiencing an environment of material inflation in recent quarters, and this condition may impact discretionary
consumer purchases, such as the BIDI Stick. Demand for our products may also decline during recessionary periods or at other times
when disposable income is lower, and taxes may be higher.

 Supply
Chain

 The spread of COVID-19 throughout
the world as well as increasing tensions with China over the past several years has created global economic uncertainty, which may cause
partners, suppliers, and potential customers to closely monitor their costs and reduce activities. Any of the foregoing could materially
adversely affect the supply chain for Bidi and our Products, and any supply chain distribution for the Products could have a material
adverse effect on our results of operations.

 Going Concern

 Our financial statements are prepared in accordance
with U.S. GAAP applicable to a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal
course of business within one year after the date the consolidated financial statements are issued.

 In accordance with Financial Accounting Standards
Board (or FASB), Accounting Standards Update (or ASU) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic
205-40), our management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about
our ability to continue as a going concern within one year after the date that the financial statements are issued.

 As shown in the accompanying consolidated
financial statements, we have incurred recurring
losses and negative cash flows from operations. We will need significant additional funds to satisfy our outstanding payables, fund our
working capital, and fully implement our business plan. In addition,
our ability to continue as a going concern is adversely affected by the uncertainty surrounding Bidi's PMTA process with FDA and
outcome of Bidi's petition with the 11th Circuit Court of Appeals regarding the FDA's January 2024 MDO relating to Classic
Bidi Stick as well as the uncertainty in the Company's ability to continue to sell the Bidi Stick given the patent
infringements claim filed by RJ Reynolds. All of these factors raise substantial doubt regarding our ability to continue as a going
concern.

 Our management plans
to continue developing strategies on similar or expanded operations of our business to help our ability to determine where our business
will be viable going forward. Until such time, if ever,
we can generate substantial product revenues, management plans to finance our cash needs through public or private equity offerings or
debt financing.

 However, there is no assurance that we will be able
to raise additional capital, generate revenues or achieve profitability due to the factors listed above as well as the regulation and
public perception of ENDS products and the various other risks we face. The accompanying consolidated financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of these or other risks or uncertainties.

 Liquidity and Capital Resources

 We believe we will not generate sufficient revenue
to support our operations for at least twelve months. As of October 31, 2024, we had working capital of approximately $3.0 million and
total cash of approximately $3.9 million. As discussed above, this condition and other factors raise substantial doubt regarding our ability
to continue as a going concern.

 We intend to generally
rely on cash from operations and equity and debt offerings to the extent necessary and available, to satisfy our liquidity needs. There
are several factors that could result in the need to raise additional funds, including a decline in revenue, a lack of anticipated sales
growth, and increased costs. Our efforts are directed
toward generating positive cash flow and, ultimately, profitability. As our efforts during our fiscal 2024 and since have not generated
positive cash flows, we will need to raise additional capital. Should capital not be available to us at reasonable terms, other actions
will become necessary, including implementing cost control measures and additional efforts to generate sales.
We may also be required to take more strategic actions such as exploring strategic options for the sale of our company, the creation
of joint ventures or strategic alliances under which we will pursue business opportunities, or other alternatives. We believe we have,
or have access to, the financial resources to weather the impacts of the FDA's PMTA process and Bidi's receipt of MDOs from
the FDA in 2021 and 2024, which are subject to additional FDA action and ongoing court proceedings, respectively. However, we will require
further financing for the next twelve months, given our operating results.

 Cash Flows:

 Net cash flows used in operations was approximately
$0.7 million for fiscal year ended 2024, compared to cash flow used in operations of approximately $3.0 million for fiscal year ended
2023. The decrease in cash flows used in operations for the fiscal year ended 2024 compared to the fiscal year ended 2023 was primarily
due to changes in Other receivable – related party, Accounts receivable, Income tax receivable, and Accounts
payable – related party (such related party being our affiliate, Bidi, as described further below under Results of Operations).

 Net cash flows used in investing activities was zero
for the fiscal year ended 2024, compared to approximately $0.3 million cash flow used in investing activities for the fiscal year ended
2023. The cash used in investing activities for the fiscal year ended 2023 consisted of cash used for the purchase of warehouse equipment
and used for the transaction acquisition costs associated with the purchase of the GoFire, intellectual property.

 Net cash flows provided by financing activities was
approximately $4.1 million for the fiscal year ended 2024, compared to approximately $0.1 million provided by financing activities for
the fiscal year ended 2023. The cash provided by financing activities for the fiscal year ended 2024 consisted primarily from the issuance
of common shares, warrants, pre-funded warrants, and proceeds from short-term financing.

 Results of Operations

 Fiscal year ended October 31, 2024, compared
to fiscal year ended October 31, 2023

 Revenues:

 Revenues for fiscal
year ended 2024 were approximately $6.9 million, compared to approximately $13.1 million in fiscal year ended 2023. Revenues decreased
in fiscal year ended 2024, primarily due to sales pressure related to the MDO received in January 2024, which resulted in the decrease
 in the number of sticks sold to customers.

 Cost of Revenue, Net and Gross Profit (Loss):

 Gross profit in fiscal year ended 2024 was approximately
$2.6 million, compared to approximately $2.6 million for fiscal year ended 2023. Total cost of revenue was approximately $4.3 million
for fiscal year ended 2024, compared to approximately $10.5 million for fiscal year ended 2023. The slight increase in gross profit volume
is primarily driven by the decrease in cost of revenue.

 Operating Expenses:

 Total operating expenses were approximately $8.3 million
for fiscal year ended 2024, compared to approximately $13.2 million for fiscal year ended 2023. For the fiscal year ended 2024, operating
expenses consisted primarily of advertising and promotion fees of approximately $0.7 million, stock option compensation expense of approximately
$0.1 million, professional fees of approximately $2.9 million, salaries and wages of $1.8 million, and all other general and administrative
expenses of approximately $2.8 million. In fiscal year ended 2023, operating expenses consisted primarily of advertising and
promotion fees of approximately $2.5 million, stock option compensation expense of approximately $3.2 million, professional fees of approximately
$2.7 million, salaries and wages of $2.0 million, and all other general and administrative expenses of approximately $2.8 million.

 Income Taxes:

 We have Federal net operating loss ("NOL")
carryforwards of approximately $29.8 million and state NOL carryforwards of approximately $0.4 million. With the changes instituted by
the CARES Act, the Federal NOLs have an indefinite life and will not expire. Our federal and state tax returns for the 2022 and 2023 tax
years generally remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the deferred
tax asset if, based on the weight of the evidence, it is more likely than not that some portion or all the deferred tax assets will not
be realized. Management determined that a valuation allowance of approximately $8.7 million for the year ended on October 31, 2024, was
necessary to reduce the deferred tax asset to the amount that will more likely than not be realized.

 Please refer to Note 10, Income Tax, in the Notes
to the Consolidated Financial Statements in this Report for additional information related to our income taxes.

 Net Loss:

 Net loss for fiscal year ended 2024 was approximately
$(6.7) million, or $(1.62) basic and diluted net loss per share, compared to a net loss of approximately $(11.1) million, or $(4.13) basic
and diluted net loss per share, for fiscal year 2023. The decrease in net loss for the fiscal year 2024, as compared to net loss in fiscal
year 2023, is attributable to the revenues and expenses factors noted above. Weighted-average Common Stock outstanding were 4,313,900
on October 31, 2024, as compared to 2,721,080 on October 31, 2023. The increase in the weighted-average shares in fiscal year 2024 was
primarily attributable to the issuance of 5,723,916 shares of Common Stock.

 Concentrations:

 Financial instruments, which potentially subject
us to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue.

 Concentration of Purchases and Accounts Payable-
Related Party:

 For
 the year ended October 31, 2024, 100% of the inventories of products, consisting solely of
 the BIDI Stick, were purchased from Bidi, a related party, in the amount
 of $0.3 million, as compared to $12.8 million for the year ended October 31, 2023.

 As of October 31, 2024, we had no related party receivable
balance. As of October 31, 2024, there was $131,683 of related party accounts payable. On October 31, 2023, a credit of $3.0 million
was applied from the related-party receivable balance to the related party accounts payable balance. After this was applied, we had no
related party receivable balance as of October 31, 2023. As of October 31, 2023, the related party accounts payable balance related to
purchases of inventories was $1.5 million.

 Concentration of Revenues and Accounts Receivable:

 For the fiscal year 2024, (i) approximately 21% of the revenue from the sale
of Products, solely consisting of the BIDI Stick, was generated from QuikTrip Corporation in the amount of approximately
$1.2 million, (ii) approximately 12% from GPM Investments in the amount of $0.7 million, and (iii) approximately 11% from FAVS Business,
LLC in the amount of $0.7 million. For the fiscal year 2023, (i) approximately 16% of the revenue from the sale of Products, solely consisting
of the BIDI Stick, was generated from GPM Investments, LLC in the amount of approximately $2.0 million, (ii) approximately
15% from H.T. Hackney Co in the amount of $1.8 million, (iii) approximately 15% from FAVS Business, LLC in the amount of $1.8 million,
(iv) approximately 14% from C Store Master in the amount of $1.8 million, and (v) approximately 12% from QuikTrip Corporation in the amount
of $1.5 million.

 QuikTrip
 Corporation with an outstanding balance of approximately $205 accounted for 100% of the
 total accounts receivable from customers, as of October 31, 2024. FAVS Business
 LLC with an outstanding balance of approximately $302,000, C Store Master with an outstanding
 balance of approximately $301,000, and QuikTrip Corporation with an outstanding balance of
 approximately $165,000 accounted for approximately 35%, 35%, and 19% of the total accounts
 receivable from customers, respectively, as of October 31, 2023.

 Cash and cash equivalents

 We consider all highly liquid investments with an
original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents on October 31, 2024, or
October 31, 2023. Cash as of October 31, 2024, and October 31, 2023, was $3.9 million and $0.5 million, respectively.

 Critical Accounting Policies and Estimates

 Our financial statements are prepared in accordance
with generally accepted accounting principles in the United States, ("GAAP"). The preparation of the consolidated financial
statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts
of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis,
including, but not limited to, estimates related to allowance for doubtful accounts, and income tax provisions. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results could differ from those estimates.

 We believe that the assumptions associated with our
revenue recognition have the greatest potential impact on our financial statements. Therefore, we consider this to be our only critical
accounting policy and we do not consider any of our estimates to be critical accounting estimates.

 However, we consider Revenue Recognition the most
critical accounting policy for the Company that could create a material misevaluation of Product Revenue if not adhered to and implemented
successfully. Under ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), we recognize revenue when
a customer obtains control of promised goods, in an amount that reflects the consideration that we expect to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (1) identify
the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate
the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance
obligation. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled
to in exchange for the goods it transfers to the customer.

 Revenue Recognition Policy

 Products Revenue

 We generate product revenue from the sale
of our products to non-retail customers. We recognize revenue at a point in time based on management's evaluation of when performance
obligations under the terms of a contract with the customer are satisfied and control of the products has been transferred to the customer.
In most situations, transfer of control is considered complete when the products have been shipped to the customer. However, when we enter
a consignment agreement with a new customer, once we ship and deliver the requested amount of the products the customer ordered to its distribution center for its retail sales location, we retain ownership of the delivered products until they
are delivered to their retail stores. When the products are sold in the stores and the funds, as stated in the consignment agreement,
are remitted to us, then we record the revenues in our financial records. We determined that a customer obtains control of the product
upon shipment when title of such product and risk of loss transfer to the customer. Our shipping and handling costs are fulfillment costs,
and such amounts are classified as part of cost of sales. The advance payment is not considered a significant financing component
because the period between when we transfer a promised good to a customer and when the customer pays for that good is short. We offer
credit sales arrangements to non-retail (or wholesale) customers and monitor the collectability of each credit sale routinely.

 Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.

 We qualify as a smaller reporting company, as defined
by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

 Item 8. Financial Statements and Supplementary
Data.

 KAIVAL BRANDS INNOVATIONS GROUP, INC.

 CONSOLIDATED FINANCIAL STATEMENTS

 INDEX TO FINANCIAL STATEMENTS

 Pages

 Report of Independent Registered Public Accounting Firm (PCAOB ID: 206)

 Consolidated Balance Sheets

 Consolidated Statements of Operations

 Consolidated Statements of Changes in Stockholders' Equity

 Consolidated Statements of Cash Flows

 Notes to Consolidated Financial Statements

 F- 1

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

 To the Shareholders and Board of Directors of

 Opinion on the Financial Statements

 We have audited the accompanying consolidated
balance sheets of Kaival Brands Innovations Group, Inc. and its subsidiaries (collectively, the "Company") as of October 31,
2024 and 2023, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years
then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of October 31, 2024 and 2023, and the results
of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.

 Going Concern Matter

 The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company
has suffered recurring losses and negative cash flows from operations which raised substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 /s/ MaloneBailey, LLP

 www.malonebailey.com

 We have served as the Company's auditor since
2018.

 Houston, Texas

 February 7, 2025

 F- 2

 Consolidated Balance Sheets

 October
31, 2024

 October
31, 2023

 ASSETS

 CURRENT
ASSETS

 Cash

 $

 3,902,300

 $

 533,659

 Accounts
receivable, net

 263,571

 1,869,276

 Inventories,
net

 —

 4,071,824

 Prepaid
expenses

 344,312

 430,668

 Total current
assets

 4,510,183

 6,905,427

 Fixed assets,
net

 2,146

 2,842

 Intangible
assets, net

 10,681,911

 11,468,309

 Right
of use asset - operating lease

 810,036

 1,008,428

 TOTAL
ASSETS

 $

 16,004,276

 $

 19,385,006

 LIABILITIES
AND STOCKHOLDERS' EQUITY

 CURRENT
LIABILITIES

 Accounts
payable

 $

 57,496

 $

 374,332

 Accounts
payable - related party

 131,683

 2,474,817

 Loans payable,
net

 207,616

 799,471

 Accrued
expenses

 925,601

 736,194

 Customer
refund due

 —

 392,406

 Operating
lease obligation - short term

 203,937

 184,568

 Total current
liabilities

 1,526,333

 4,961,788

 LONG TERM
LIABILITIES

 Operating
lease obligation, net of current portion

 662,271

 866,207

 TOTAL
LIABILITIES

 2,188,604

 5,827,995

 Commitments
and Contingencies (Note 11)

 STOCKHOLDERS'
EQUITY

 Preferred
stock; 5,000,000 shares authorized

 Series
A Convertible Preferred stock ($ 0.001 par value, 3,000,000 shares authorized, none issued and outstanding as of October 31, 2024 and
October 31, 2023)

 —

 —

 Series B Convertible
Preferred stock ($ 0.001 par value, 900,000 shares authorized, 900,000 issued and outstanding as of October 31, 2024 and October 31, 2023)

 Common stock ($.001
 par value, 1,000,000,000 shares authorized, 8,517,302 and 2,793,386 shares issued and outstanding as of October 31, 2024 and October
31, 2023, respectively)

 8,517

 2,793

 Additional
paid-in capital

 51,269,485

 44,317,266

 Accumulated
deficit

 ( 37,463,230

)

 ( 30,763,948

)

 TOTAL
STOCKHOLDERS' EQUITY

 13,815,672

 13,557,011

 TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY

 $

 16,004,276

 $

 19,385,006

 The accompanying notes are an integral part of these
consolidated financial statements.

 F- 3

 Consolidated Statements of Operations

 For the Years Ended October 31,

 2024

 2023

 Revenues

 Revenues, net

 $

 5,882,597

 $

 12,395,134

 Revenues - related party

 5,950

 10,828

 Royalty revenue

 1,040,759

 780,929

 Excise tax on products

 ( 42,641

)

 ( 99,873

)

 Total revenues, net

 6,886,665

 13,087,018

 Cost of revenues

 Cost of revenue - related party

 4,281,171

 10,512,423

 Total cost of revenue

 4,281,171

 10,512,423

 Gross profit

 2,605,494

 2,574,595

 Operating expenses

 Advertising and promotion

 686,292

 2,450,721

 General and administrative expenses

 7,628,050

 10,787,775

 Total operating expenses

 8,314,342

 13,238,496

 Other expense

 Loss on extinguishment of debt

 ( 98,432

)

 —

 Loss on settlement of payables

 ( 142,786

)

 —

 Interest expense, net

 ( 729,558

)

 ( 466,523

)

 Total other expense

 ( 970,776

)

 ( 466,523

)

 Loss before income taxes provision

 ( 6,679,624

)

 ( 11,130,424

)

 Provision for income taxes

 2,348

 Net loss

 $

 ( 6,699,282

)

 $

 ( 11,132,772

)

 Preferred stock dividend

 ( 270,000

)

 ( 112,500

)

 Net loss attributable to common shareholders

 $

 ( 6,969,282

)

 $

 ( 11,245,272

)

 Net loss per common share - basic and diluted

 $

 ( 1.62

)

 $

 ( 4.13

)

 Weighted average number of common shares outstanding - basic and diluted

 4,313,900

 2,721,080

 The accompanying notes are an integral part of these
consolidated financial statements.

 F- 4

 Kaival
 Brands Innovations Group, Inc.

 Consolidated
 Statements of Changes in Stockholders' Equity

 For
 the years ended October 31, 2024, and 2023

 Convertible Preferred Shares (Series B)

 Par Value Convertible Preferred Shares (Series B)

 Common Shares

 Par Value Common Shares

 Additional Paid-in Capital

 Accumulated Deficit

 Total

 Balances, October 31, 2022

 —

 $

 —

 2,674,718

 $

 2,675

 $

 29,429,281

 $

 ( 19,631,176

)

 $

 9,800,780

 Common shares issued for purchase of intangible assets

 —

 —

 95,239

 1,119,705

 —

 1,119,800

 Preferred series B shares issued for purchase of intangible assets

 900,000

 —

 —

 9,047,080

 —

 9,047,980

 Stock warrants issued for purchase of intangible assets

 —

 —

 —

 —

 1,264,396

 —

 1,264,396

 Common shares issued for services

 —

 —

 4,381

 51,506

 —

 51,510

 Common shares issued for loan

 —

 —

 19,048

 130,459

 130,478

 Stock option expense, net of forfeitures

 —

 —

 —

 —

 3,168,430

 —

 3,168,430

 Stock warrant expense

 —

 —

 —

 —

 218,909

 —

 218,909

 Preferred stock dividend

 —

 —

 —

 —

 ( 112,500

)

 ( 112,500

)

 Net loss

 —

 —

 —

 —

 —

 ( 11,132,772

)

 ( 11,132,772

)

 Balances, October 31, 2023

 900,000

 $

 2,793,386

 $

 2,793

 $

 44,317,266

 $

 ( 30,763,948

)

 $

 13,557,011

 Rounding shares issued for reverse split

 —

 —

 52,949

 ( 53

)

 —

 —

 Common shares issued for services

 —

 —

 16,667

 61,983

 —

 62,000

 Issuance of common shares, warrants, and pre-funded warrants, net of issuance costs

 —

 —

 1,746,500

 1,747

 5,250,980

 —

 5,252,727

 Exercises of pre-funded warrants

 —

 —

 2,174,456

 2,174

 ( 724

)

 —

 1,450

 Exercises of warrants

 —

 —

 333,200

 385,413

 —

 385,746

 Common shares issued to settle related party accounts payable

 —

 —

 1,400,144

 1,400

 1,416,386

 —

 1,417,786

 Preferred stock dividend

 —

 —

 —

 —

 ( 270,000

)

 —

 ( 270,000

)

 Stock option expense, net of forfeitures

 —

 —

 —

 —

 108,234

 —

 108,234

 Net loss

 —

 —

 —

 —

 —

 ( 6,699,282

)

 ( 6,699,282

)

 Balances, October 31, 2024

 900,000

 $

 8,517,302

 $

 8,517

 $

 51,269,485

 $

 ( 37,463,230

)

 $

 13,815,672

 The accompanying notes are an integral part of these
consolidated financial statements.

 F- 5

 Consolidated Statements of Cash Flows

 For the Year Ended

 For the Year Ended

 October 31, 2024

 October 31, 2023

 CASH FLOWS FROM OPERATING ACTIVITIES

 Net loss

 $

 ( 6,699,282

)

 $

 ( 11,132,772

)

 Adjustments to reconcile net loss to net cash used in operating activities:

 Stock based compensation

 62,000

 —

 Stock options expense

 108,234

 3,168,430

 Stock warrant expense

 —

 218,909

 Depreciation and amortization

 787,094

 328,304

 Amortization of debt discount

 214,095

 463,160

 Loss on extinguishment of debt

 98,432

 —

 Bad debt expense

 27,995

 47,727

 ROU operating lease expense

 198,392

 190,541

 Inventory reserve

 —

 381,512

 Write-off of inventory

 61,927

 105,057

 Loss on settlement of payables

 142,786

 —

 Changes in current assets and liabilities:

 Accounts receivable

 1,577,710

 ( 1,342,397

)

 Other receivable - related party

 —

 3,704,132

 Prepaid expenses

 561,837

 325,739

 Inventory

 4,009,897

 ( 3,318,668

)

 Income tax receivable

 —

 1,607,302

 Accounts payable

 ( 316,836

)

 334,309

 Accounts payable - related party

 ( 1,068,134

)

 2,474,817

 Accrued expenses

 138,194

 ( 475,463

)

 Deferred revenue

 —

 ( 235,274

)

 Customer deposits

 —

 ( 44,973

)

 Customer refunds due

 ( 392,406

)

 392,406

 Operating lease obligations

 ( 184,567

)

 ( 166,052

)

 Net cash used in operating activities

 ( 672,632

)

 ( 2,973,254

)

 CASH FLOWS FROM INVESTING ACTIVITIES

 Cash paid for equipment

 —

 ( 3,480

)

 Transaction acquisition costs

 —

 ( 312,289

)

 Net cash used in investing activities

 —

 ( 315,769

)

 CASH FLOWS FROM FINANCING ACTIVITIES

 Proceeds from loans payable

 1,106,731

 1,272,980

 Payments on loans payable

 ( 2,486,594

)

 ( 1,136,191

)

 Payments on loans payable - related party

 ( 218,787

)

 Proceeds from the issuance of common stock, warrants, and pre-funded warrants

 5,997,720

 —

 Payments for issuance costs

 ( 744,993

)

 —

 Proceeds from exercises of pre-funded warrants

 1,450

 —

 Proceeds from exercises of warrants

 385,746

 —

 Net cash provided by financing activities

 4,041,273

 136,789

 Net change in cash

 3,368,641

 ( 3,152,234

)

 Beginning cash balance

 533,659

 3,685,893

 Ending cash balance

 $

 3,902,300

 $

 533,659

 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 Interest paid

 $

 562,402

 $

 3,363

 Income taxes paid

 $

 —

 $

 —

 NON-CASH TRANSACTIONS

 Preferred stock dividend

 $

 270,000

 $

 112,500

 Cashless exercise of pre-funded warrants

 $

 $

 —

 Insurance financed by third party

 $

 475,481

 $

 330,000

 Franchise fees paid by related party

 $

 218,787

 $

 —

 Common shares issued to settle related party accounts payable

 $

 1,417,786

 Common shares issued for acquisition of intangible assets

 $

 —

 $

 1,119,800

 Common shares issued for services-transaction cost

 $

 —

 $

 51,510

 Series B preferred stock shares issued for acquisition of intangible assets

 $

 —

 $

 9,047,980

 Stock warrants issued for acquisition of intangible assets

 $

 —

 $

 1,264,396

 Common stock issued for note payable financing

 $

 —

 $

 130,478

 The accompanying notes are an
integral part of these consolidated financial statements.

 F- 6

 KAIVAL BRANDS INNOVATIONS GROUP, INC.

 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 Note 1 – Organization and Description of Business

 Kaival Brands Innovations Group, Inc. (the "Company,"
the "Registrant," "we," "us," or "our"), formerly known as Quick Start Holdings, Inc.,
was incorporated on September 4, 2018, in the State of Delaware.

 Description of Business

 On March 9, 2020, the Company entered into an exclusive
distribution agreement (the "Distribution Agreement") of certain electronic nicotine delivery systems ("ENDS")
and related components (the "Products") with Bidi Vapor, LLC, a Florida limited liability company ("Bidi"). The
Distribution Agreement was amended and restated on May 21, 2020, again on April 20, 2021, again on June 10, 2022,
 and again on November 17, 2022 (collectively the "A&R Distribution Agreement"), in order to clarify some of the
provisions and memorialize the Company's current business relationship with Bidi. Pursuant to the A&R Distribution Agreement,
Bidi granted the Company an exclusive worldwide right to distribute the Products for sale and resale to non-retail level customers. Currently,
the Products consist primarily of the "Bidi Stick."

 On August 31, 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.

 Product Offerings

 Pursuant to the A&R Distribution Agreement, the
Company sells and resells electronic nicotine delivery systems, which it may refer to herein as "ENDS Products", or "e-cigarettes",
to non-retail level customers. The sole Product the Company resells is the "BIDI Stick," a disposable,
tamper-resistant ENDS product that comes in a variety of flavor options for adult cigarette smokers. The Company does not manufacture
any of the Products it resells. The BIDI Stick is manufactured by Bidi, who uses a contract manufacturer in China. Pursuant
to the terms of the A&R Distribution Agreement, Bidi provides the Company with all branding, logos, and marketing materials to be
utilized by the Company in connection with its marketing and promotion of the Products.

 Impact of the FDA PMTA Decision and Subsequent
Court Actions

 In September 2021, in connection with the Bidi's
Premarket Tobacco Product Application ("PMTA") process, the U.S. Food and Drug Administration's ("FDA")
effectively "banned" flavored ENDS by denying nearly all then-pending PMTAs for such products. Following the issuance of Marketing
Denial Orders ("MDO"), manufacturers are required to stop selling non-tobacco flavored ENDS products.

 Bidi, along with nearly every other company in the
ENDS industry, received a MDO for its non-tobacco flavored ENDS products. With respect to Bidi, the MDO covered all non-tobacco flavored
BIDI Sticks, including its Arctic (menthol) BIDI Stick. As a result, beginning in September 2021, Bidi pursued multiple avenues
to challenge the MDO. First, on September 21, 2021, separate from the judicial appeal of the MDO in its entirety, Bidi filed a 21 C.F.R.
§ 10.75 internal FDA supervisory review request specifically of the decision to include the Arctic (menthol) BIDI Stick in the
MDO. In May 2022, the FDA issued a determination that it views the Arctic BIDI Stick as a non-tobacco flavored ENDS product, and
not strictly a menthol flavored product.

 F- 7

 On September 29, 2021, Bidi petitioned the U.S. Court
of Appeals for the Eleventh Circuit (the "11 th Circuit") to review the FDA's denial of the comprehensive
PMTAs for its non-tobacco flavored BIDI Stick ENDS, arguing that it was arbitrary and capricious under the Administrative Procedure
Act ("APA"), as well as ultra vires, for the FDA not to conduct any scientific review of Bidi's comprehensive applications,
as required by the Tobacco Control Act ("TCA"), to determine whether the BIDI Sticks are "appropriate for the protection
of the public health". Bidi further argued that the FDA violated due process and the APA by failing to provide fair notice of the
FDA's new requirement for ENDS companies to conduct long-term comparative smoking cessation studies for their flavored products,
and that the FDA should have gone through the notice and comment rulemaking process for this requirement.

 On October 14, 2021, Bidi requested that the FDA re-review
the MDO and reconsider its position that Bidi did not include certain scientific data in its applications sufficient to allow the PMTAs
to proceed to scientific review. In light of this request, on October 22, 2021, pursuant to 21 C.F.R. § 10.35(a), the FDA issued
an administrative stay of Bidi's MDO pending its re-review, permitting the Company to continue sales. Subsequently, the FDA decided
not to rescind the MDO and lifted its administrative stay on December 17, 2021. Following the lifting of the FDA's administrative
stay, Bidi filed a renewed motion to stay the MDO with the 11 th Circuit. On February 1, 2022, the appellate court granted Bidi's
motion to stay (i.e., put on hold) the MDO, again allowing the Company to continue sales pending the litigation on the merits. Oral arguments
in the merits-based proceeding were held on May 17, 2022.

 On August 23, 2022, the U.S. Court of Appeals for
the Eleventh Circuit set aside the MDO issued to the non-tobacco flavored BIDI Sticks and remanded Bidi's back to the FDA for
further review. Specifically, the Court held that the MDO was "arbitrary and capricious" in violation of the Administrative
Procedure Act ("APA") because FDA failed to consider the relevant evidence before it, specifically Bidi's aggressive
and comprehensive marketing and sales-access-restrictions plans designed to prevent youth appeal and access.

 The FDA did not appeal to the 11 th Circuit's decision. The
FDA had until October 7, 2022 (45 days from the August 23, 2022, decision) to either request a panel rehearing or a rehearing "en
banc" (a review by the entire 11 th Circuit, not just the 3-judge panel that issued the decision), and until November
21, 2022 (90 days after the decision) to seek review of the decision by the U.S. Supreme Court. No request for a rehearing was filed,
and no petition for a writ of certiorari was made to the Supreme Court. On July 29, 2024, Bidi received a Recission of Marketing Denial
letter from FDA formally rescinding the MDO for the non-tobacco flavored BIDI Stick PMTAs and putting those applications back into
the review process. The Company is able to market and sell the non-tobacco flavored BIDI Sticks, subject to the FDA's enforcement
discretion, for the duration of the PMTA scientific review.

 Separately, on or about May 13, 2022, the FDA placed
the tobacco-flavored Classic BIDI Stick into the final Phase III scientific review. In March 2023, FDA issued a deficiency letter
regarding the Classic BIDI Stick PMTA, to which Bidi submitted in June 2023. Subsequently, on January 22, 2024, FDA issued a MDO
for the Classic BIDI Stick. On January 26, 2024, Bidi filed a petition for review of the MDO with the 11 th Circuit Court
of Appeals, followed by a motion to stay the MDO. Bidi is arguing, among other things, that the MDO was arbitrary and capricious in violation
of the Administrative Procedure Act. On February 2, 2024, Bidi filed a Time Sensitive Motion for a Stay Pending Review, which the court
denied on February 18, 2024. The case is now proceeding on the merits, with Bidi's opening merits brief filed on April 15, 2024.
FDA filed its response brief on June 7, 2024, and Bidi filed its reply brief on July 29, 2024. The 11 th Circuit has indicated
that the oral argument will be held in April 2025. The Company cannot provide any assurance as to the timing or outcome. Unless the MDO
is ultimately remanded by the 11 th Circuit, the Classic BIDI Stick is considered an adulterated tobacco product, the continued
marketing and distribution of which is prohibited.

 F- 8

 Risks and Uncertainties

 The FDA has indicated
that it is prioritizing enforcement of unauthorized ENDS against companies (1) that never submitted PMTAs, (2) whose PMTAs have been
refused acceptance or filing by the FDA, (3) whose PMTAs remain subject to MDOs, and (4) that are continuing to market unauthorized synthetic
nicotine products after the July 13, 2022, cutoff. Subject to FDA's enforcement discretion, until the scientific review process
is complete on each of Bidi's PMTA's, the Company views the risk of FDA enforcement against Bidi as low and is no longer
marketing the Classic BIDI Stick per the MDO. The Company anticipates FDA will move forward with a review of Bidi's PMTA
on remand, as directed by the Court; however, the Company cannot provide any assurances as to the timing or outcome.

 Merger and Share Exchange Agreement

 On September 23, 2024,
we agreed with Delta Delta Corp Holdings Limited, a company incorporated in England and Wales ("Delta") to effect a business
combination between us and Delta by entering into
a Merger and Share Exchange Agreement (the "Merger Agreement") among us, Delta, Delta Corp Holdings Limited, a Cayman Islands
exempted company ("Pubco"), KAVL Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Pubco ("Merger
Sub"), and the shareholders of Delta. Pursuant to the Merger Agreement, we
will effect a merger and share exchange involving the following transactions:

 (a)

 Pubco
 shall acquire all of the issued and outstanding shares of Delta from each holder of Delta shares in exchange for the issuance by
 Pubco of ordinary shares in the capital of Pubco (the "Share Exchange"); and

 (b)

 immediately
 following to the completion of the Share Exchange, Merger Sub shall merge with and into us (the "Merger"), with us continuing
 as the surviving entity in the Merger.;

 Upon consummation of the transactions contemplated by the
Merger Agreement, including the Share Exchange and the Merger, each of us and Delta will become wholly owned subsidiaries of Pubco.

 Note 2 – Basis of Presentation and Significant
Accounting Policies

 Principles of Consolidation

 The consolidated financial statements include the
financial statements of the Company's wholly-owned subsidiaries, Kaival Labs and KBI. Intercompany transactions are eliminated.

 Basis of Presentation

 This summary of significant accounting policies is
presented to assist in understanding the Company's consolidated financial statements. These accounting policies conform to accounting
principles, generally accepted in the United States of America ("GAAP") and have been consistently applied in the preparation
of the consolidated financial statements.

 Use of Estimates

 The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading
have been included. Actual results could differ from those estimates.

 Cash

 The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of October
31, 2024, and October 31, 2023.

 The Federal Deposit Insurance Corporation ("FDIC")
insures deposits according to the ownership category in which the funds are insured and how the accounts are titled. The standard deposit
insurance coverage limit is $ 250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash of $ 3,652,300
 and $ 252,586 as of October 31, 2024, and October 31, 2023, respectively.

 Advertising and Promotion

 All advertising, promotion and marketing expenses,
including commissions, are expensed when incurred.

 Accounts Receivable and Reserve for Credit Losses

 Accounts receivable pertain to contracts with customers
who are granted credit by the Company in the ordinary course of business and are recorded at the invoiced amount. Accounts receivable
does not bear interest. Accounts receivable presented on the consolidated balance sheet are adjusted for any write-offs and net of allowance
for credit losses. The Company's reserve for credit losses is developed by using relevant available information including historical
collection and loss experience, current economic conditions, prevailing economic conditions, supportable forecasted economic conditions
and evaluations of customer balances. Once a receivable is deemed uncollectible after collection efforts have been exhausted, it is written
off against the reserve for credit losses. The Company closely monitors the credit quality of its customers and does not generally require
collateral or other security on receivables. The reserve for credit losses is measured on a collective basis when similar risk characteristics
exist.

 F- 9

 Based
upon management's assessment of the accounts receivable aging and the customers' payment history, the Company has determined
that no reserve for credit losses is required as of October 31, 2024 and October 31, 2023.

 On January 22, 2024, the FDA issued an MDO on Bidi
Vapor's "Classic" BIDI Stick PMTA, which Bidi is currently appealing before the 11 th Circuit Court
of Appeals. The Company evaluated the impact of this MDO to the financial statements and recorded an estimated accrual for potential customer
returns of the "Classic" products of $ 46,775 and $ 113,243 as of October 31, 2024, and October 31, 2023, respectively,
which is included in accrued expenses in the consolidated balance sheets.

 Credit Risk

 Financial instruments, which are potentially subject
to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue. The
Company performs periodic credit evaluations of its customers and generally does not require collateral on trade receivables. Historically,
the Company has not experienced significant credit losses.

 Inventories

 All product inventory is purchased from a related
party, Bidi. Inventories are stated at the lower of cost and net realizable value. Cost includes all costs of purchase and other costs
incurred in bringing the inventories to their present location and condition. The Company determines cost based on the first-in, first-out
("FIFO") method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale. During fiscal year 2024 and 2023, the Company recognized inventory write
offs of $ 61,927 and $ 105,057, respectively, related to short-coded Bidi sticks that were no longer saleable.

 On January 22, 2024, the FDA issued an MDO on Bidi
Vapor's "Classic" BIDI Stick PMTA, which Bidi is currently appealing before the 11 th Circuit Court
of Appeals. The Company evaluated the impact of this MDO to the financial statements and recognized a full reserve for all remaining "Classic"
products on hand amounting to $ 313,654 and $ 381,512 as of October 31, 2024, and October 31, 2023, respectively.

 Leases

 The Company determines if a contract contains a lease
at commencement of the arrangement based on whether it has the right to obtain substantially all of the economic benefits from the use
of an identified asset and whether it has the right to direct the use of an identified asset in exchange for consideration, which relates
to an asset which the Company does not own. Right-of-use ("ROU") assets represent the Company's right to use an underlying
asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.
The Company recognizes lease liabilities at the present value of the future lease payments and a corresponding ROU asset at the lease
commencement date. The interest rate used to determine the present value of the future lease payments is the rate implicit in the lease
unless that rate cannot be readily determined. When the interest rate implicit in the lease is not readily determinable, the interest
rate used to determine the present value of the future lease payments is the Company's Incremental Borrowing Rate ("IBR").
The IBR is a hypothetical rate based on the Company's understanding of what its credit rating would be to borrow and resulting interest
the Company would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized
basis. Periods covered by the Company's option to extend or terminate the lease are included in the lease term when it is reasonably
certain that the Company will exercise its option to extend or not exercise its option to terminate, as applicable.

 F- 10

 Lease payments may be fixed or variable; however,
only fixed payments or in-substance fixed payments are included in the Company's lease liability calculation. Variable lease payments
may include costs such as common area maintenance, utilities, real estate taxes or other costs. Variable lease payments are recognized
in operating expenses in the period in which the obligations for those payments are incurred. The Company records rent expense for its
operating lease, which has escalating rent payments, on a straight-line basis over the lease term. The Company does not have any financing
leases.

 The Company made a policy election not to separate
non-lease components from lease components for all its leases; therefore, it accounts for lease and non-lease components as a single lease
component. The Company also elected the short-term lease recognition exemption for all leases that qualify, such that leases with a term
of 12 months or less are not recognized on the balance sheet.

 Impairment of Long-Lived Assets

 The Company reviews its long-lived assets, which include
definite-lived intangibles, long-lived fixed assets and lease right-of-use assets, for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. Factors that could trigger an impairment review include significant under-performance
relative to expected historical or projected future operating results, significant changes in the manner of the Company's use of
the acquired assets or the strategy for the Company's overall business or significant negative industry or economic trends. If this
evaluation indicates that the value of the long-lived asset may be impaired, the Company makes an assessment of the recoverability of
the net carrying value of the asset over its remaining useful life. If this assessment indicates that the long-lived asset is not recoverable,
based on the estimated undiscounted future cash flows of the technology over the remaining useful life, the Company reduces the net carrying
value of the related asset to fair value and may adjust the remaining useful life. An impairment analysis is subjective and assumptions
regarding future growth rates and operating expense levels can have a significant impact on the expected future cash flows and impairment
analysis.

 No impairment of long-lived assets was identified for the years ended October 31, 2024
and 2023, respectively.

 Revenue Recognition

 The Company recognizes revenue in accordance with
ASC Topic 606, "Revenue from Contracts with Customers" ("ASC 606"). The Company recognizes revenue when a customer
obtains control of promised goods, in an amount that reflects the consideration that the Company expects to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1)
identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies
a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the
consideration it is entitled to in exchange for the goods it transfers to the customer. Under ASC 606, disaggregated revenue from contracts
with customers depicts the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

 Deferred Revenue

 The Company accepts partial payments for orders from
wholesale customers, which it holds as deposits or deferred revenue, until the Company has received full payment and orders are shipped
to the customer. Revenue for these orders is recognized at the time of shipment to the customer. As of October 31, 2024, and October 31,
2023, the Company has no amounts in deposits from customers.

 Customer Refunds

 In the normal course of business, the Company issues
credits for product returns and certain customer incentives related to rebates, discounts and promotions. When such credits exceed amounts
receivable from customers, the Company recognizes such excess amounts as customer refunds which will be applied against future product
purchases. As of October 31, 2024, and October 31, 2023, the Company had zero 0 and $ 392,406 refunds due to various customers, respectively.

 F- 11

 Products Revenue

 The Company generates products revenue from the sale
of the Products (as defined above) to non-retail customers. The Company recognizes revenue at a point in time based on management's
evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the Products has
been transferred to the customer. In most situations, transfer of control is considered complete when the products have been shipped to
the customer. The Company determined that a customer obtains control of the Product upon shipment when title of such product and risk
of loss transfer to the customer. However, when the Company enters a consignment agreement with a new customer, once it ships and delivers
the requested amount of ordered Products to its distribution center for its retail sales locations, the Company retains ownership of the
delivered Products until they are delivered to the actual retail stores (as opposed to the Company's consignment customer). The
Company's shipping and handling costs are fulfillment costs, and such amounts are classified as part of cost of sales. The Company
offers credit sales arrangements to non-retail (or wholesale) customers and monitors the collectability of each credit sale routinely.

 Revenue is measured by the transaction price, which
is defined as the amount of consideration expected to be received in exchange for providing goods to customers. The transaction price
is adjusted for estimates of known or expected variable consideration, which includes refunds and returns as well as incentive offers
and promotional discounts on current orders. Estimates for sales returns are based on, among other things, an assessment of historical
trends, information from customers, and anticipated returns related to current sales activity. These estimates are established in the
period of sale and reduce revenue in the period of the sale. Variable consideration related to incentive offers and promotional programs
are recorded as a reduction to revenue based on amounts the Company expects to collect. Estimates are regularly updated, and the impact
of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities
ordered are established at the time an order is placed and incentives have very short-term durations.

 Amounts billed and due from customers are short term
in nature and are classified as receivable since payments are unconditional and only the passage of time related to credit terms is required
before payments are due. The Company does not grant payment financing terms greater than one year. Payments received in advance of revenue
recognition are recorded as deferred revenue, as noted above.

 Royalty Revenue

 On June 13, 2022, KBI entered into the PMI License
Agreement with PMPSA, effective as of May 13, 2022 (the "PMI Commencement Date"). Pursuant to the PMI License Agreement, KBI
granted PMPSA an exclusive irrevocable license to use its technology, documentation, and intellectual property to make, distribute, and
sell disposable nicotine e-cigarettes Products based on the intellectual property in certain international markets set forth in the PMI
License Agreement (the "PMI Markets"). The Company has the exclusive international distribution rights to the Products and,
in order to allow KBI to fulfill its obligations set forth in the PMI License Agreement, has contributed the international distribution
rights for the PMI Markets to KBI as set forth in a Capital Contribution Agreement, dated June 10, 2022. The sublicense granted to PMPSA
is exclusive in the PMI Markets and neither KBI nor any of its affiliates can sell, promote, use, or distribute any competing products
in the PMI Markets for the duration of the term of the PMI License Agreement and any Sell-Out Period (as defined in the PMI License Agreement).
PMSPA will be responsible for any regulatory filings necessary to sell the Products in the PMI Markets. Both KBI and PMPSA agree to work
together in the registration and maintenance of the Intellectual Property, but KBI will bear all cost and expense to implement the registration
strategy. Finally, PMPSA has agreed to potential future development services with KBI in the PMI Markets and has been granted certain
rights with respect to potential future products.

 The initial term of the PMI License Agreement is five
(5) years and automatically renews for an additional five-year period unless PMPSA has failed to meet the agreed upon minimum key performance
indicators set forth in the PMI License Agreement, in which case the PMI License Agreement will automatically terminate at the end of
the initial license term.

 F- 12

 In consideration for the grant of the licensed rights,
PMPSA agreed to pay to KBI a royalty equal to a percentage of the base price of the first sale of each unit of Product manufactured. In
addition, before the launch of the first product in a market and each anniversary of such launch, PMPSA agrees to pre-pay to KBI a guaranteed
minimum royalty based on the estimated royalties payable by PMPSA to KBI in relation to all markets in the twelve (12)-month period following
the first launch or each successive anniversary of the first launch, subject to an aggregate maximum guaranteed royalty payment for all
markets for each applicable twelve (12)-month period. PMPSA may require modification of certain products to be sold under the PMI Licensing
Agreement to be modified for a PMI Market. Pursuant to the PMI Licensing Agreement, PMPSA has absolute discretion over sales, marketing,
product branding and packaging pertaining to sales in the PMI Markets, as well as the right to select the specific PMI Markets in which
to launch commercialization and determine what product types are to be promoted in each market, subject to sales and marketing plans and
annual business plans set by PMPSA and certain expansion criteria agreed between PMPSA and KBI. Royalty 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
in the Product, increasing to between $0.10 to $0.20 per sale upon meeting certain sales milestones. For purposes of determining aggregate
sales threshold, all sales undertaken since commencement of the PMI Licensing Agreement will be counted.

 2. Elimination of Certain Potential
Royalty Adjustments. Certain potential adjustments to the royalties receivable by KBI as provided for in the PMI License Agreement have
been eliminated.

 3. Guaranteed Royalty. The guaranteed
royalty payment owed to KBI under the PMI License Agreement has been eliminated. Instead, royalties will be paid on a quarterly basis
going-forward based on actual sales. Any unpaid guaranteed royalty has been cancelled.

 4. Insurance Tail Requirements.
KBI's requirement to keep certain tail insurance after the expiration or termination of the PMI Licensing Agreement was reduced
from 6 years to 2 years.

 5. Markets. The identification
of the PMI Markets that PMI may enter has been expanded to cover certain additional territories.

 6. Net Reconciliation Payment to
KBI. As a result of the changes to the PMI License Agreement described in paragraphs 1 through 3 above, the value of such changes was
calculated and reconciled as of the date of commencement of the PMI Licensing Agreement through June 30, 2023. On September 8, 2023, the
Company received the Net Reconciliation Payment from PMPSA of $ 134,981 pursuant to this provision.

 F- 13

 The KBI License Agreement provides that KBI shall
pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed costs such development
costs incurred for entry to specific international markets. During the year ended October 31, 2024, the Company paid license fees of
approximately $ 220,000 to Bidi. As of October 31, 2024 and 2023, $ 131,683
 and zero,
respectively, of license fees are owed to Bidi.

 As of October 31, 2024, amounts receivable from PMPSA
in connection with the PMI license agreement pertaining to royalties totaled $ 263,367. As of October 31, 2023, amounts receivable from
PMPSA in connection with the PMI License Agreement totaled $ 1,002,196 of which $ 289,672 and $ 712,524 pertain to royalties
and reimbursement of certain non-recurring engineering costs, respectively.

 Net Loss Per Share

 Basic net loss per share
is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the
period, without consideration of potential common stock equivalents.

 Diluted net loss per share
is calculated by dividing net loss available to common stockholders by the weighted average number of common stock outstanding plus common
share equivalents from conversion of dilutive stock options and warrants using the treasury method and preferred stock using the if-converted
method, except when antidilutive. In the event of a net loss, the effects of all potentially dilutive shares are excluded from the diluted
net loss per share calculation as their inclusion would be antidilutive.

 As
of October 31, 2024, and 2023, there were 5,944,276 and 691,654, respectively, units of common stock equivalents that consists of options
and warrants units, as well as 357,120 shares issuable upon preferred stock conversions, that were excluded from the current and prior
period diluted loss per share calculation as their effect is anti-dilutive.

 Concentration of Revenues and Accounts Receivable

 For the year then ended October 31, 2024, (i) 21%
or $ 1,236,491 of the revenue from the sale of Products, solely consisting of the BIDI Stick, was generated from QuikTrip Corporation,
(ii) 12% or $ 678,562 was generated from GPM Investments, LLC, and (iii) 11% or $ 655,583 was generated from FAVS Business, LLC. On May
2, 2024, QuikTrip Corporation terminated its consignment arrangement with the Company.

 For the year then ended October 31, 2023, (i) 16%
or $ 1,986,970 of the revenue from the sale of Products, solely consisting of the BIDI Stick, was generated from GPM Investments,
LLC, (ii) 15% or $ 1,842,511 was generated from H.T. Hackney Co, (iii) 15% or $ 1,817,310 was generated from FAVS Business, LLC, (iv) 14%
or $ 1,759,563 was generated from C Store Master, and (v) approximately 12% or $ 1,501,439 was generated from QuikTrip Corporation.

 QuikTrip Corporation with an outstanding balance of
$ 205 accounted for 100 % of the total accounts receivable from customers as of October 31, 2024.

 FAVS Business LLC with an outstanding balance of $ 302,400,
C Store Master with an outstanding balance of $ 300,590, and QuikTrip Corporation with an outstanding balance of $ 164,987 accounted for
approximately 35 %, 35 %, and 19 % of the total accounts receivable from customers, respectively, as of October 31, 2023.

 Share-Based Compensation

 The Company measures the cost of services received
in exchange for an award of equity instruments (share-based payments, referred to herein as "SBP") based on the grant-date
fair value of the award. That cost is recognized over the period during which a recipient is required to provide service in exchange for
the SBP award—the requisite service period (vesting period). For SBP awards subject to performance conditions, compensation is not
recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated using the
Black-Scholes-Merton option-pricing model.

 The fair value of each option granted during the years
then ended October 31, 2024, and October 31, 2023, was estimated on the date of grant using the Black-Scholes-Merton option-pricing model
with the weighted average assumptions in the following table:

 Schedule of weighted average assumptions

 As of October

 As of October

 31, 2024

 31, 2023

 Expected dividend yield

 %

 %

 Expected option term (years)

 5.5 – 7

 6.25 – 10

 Expected volatility

 214.72 - 225.52

 %

 270.98 – 286.91

 %

 Risk-free interest rate

 3.78 - 4.63

 %

 3.47 - 4.34

 %

 F- 14

 The expected term of options granted represents the
period of time that options granted are expected to be outstanding. The expected volatility was based on the volatility in the trading
of the Company's common stock. The risk-free interest rate used is based on the published U.S. Department of Treasury interest rates
in effect at the time of stock option grant for zero coupon U.S. Treasury notes with maturities approximating each grant's expected
term. Forfeitures and cancellations are recorded as they occur.

 Income Tax

 Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the
recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities
are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and
tax credits that are available to offset future federal income taxes. The Company believes that its income tax filing positions and deductions
will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company's
financial condition, results of operations, or cash flow.

 The Company has Federal net operating loss ("NOL")
carryforwards, consisting of total deferred tax assets, totaling approximately $ 29.8 million and state NOL carryforwards, consisting of
total deferred tax liabilities, totaling approximately $ 0.3 million. With the changes instituted by the CARES Act, the Federal NOLs have
an indefinite life and will not expire. The Company's federal and state tax returns for the 2021, 2022, and 2023 tax years generally
remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the deferred tax asset
if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
After consideration of all the evidence, both positive and negative, management has determined that a valuation allowance of $ 8,703,742
 for the year ended on October 31, 2024, and a valuation allowance of $ 7,319,289 for the year ended on October 31, 2023 were necessary
to reduce the total net deferred tax asset to the amount that will more likely than not be realized pursuant to ASC 740 for those fiscal
years.

 Fair Value of Financial Instruments

 The Company's balance sheet includes certain
financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively
short period of time between the origination of these instruments and their expected realization.

 ASC 820, Fair Value Measurements and Disclosures
 ("ASC 820"), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about
market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy
are described below:

 Level
 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets
 or liabilities.

 Level
 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
 or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar
 assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability
 (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or
 other means.

 Level
 3 – Inputs that are both significant to the fair value measurement and unobservable.

 F- 15

 Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of October 31, 2024 and 2023. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of
these instruments. These financial instruments include cash, accounts receivable, accounts payable, accrued expenses and
loans payable. As of October 31, 2024, and 2023, the Company did not have any financial assets or liabilities measured
and recorded at fair value on a recurring basis.

 Recent Accounting Pronouncements – Not
Yet Adopted

 In December 2023, the Financial Accounting Standards
Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740) - Improvements
to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 requires additional disclosures reconciling the rates of different
categories of income tax (i.e. federal, state, foreign, etc.) and a disaggregation of taxes paid and refunded. ASU 2023-09 is effective
for fiscal years beginning after December 15, 2024, and for interim periods in fiscal years beginning after December 15, 2025, although
early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on its income tax disclosures.

 In November 2023, the FASB issued ASU 2023-07, "Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which is intended to improve reportable segment disclosure
requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors
to better understand an entity's overall performance and assess potential future cash flows. The guidance is effective for fiscal
years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption
permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. The Company is continuing
to evaluate the impact of adopting this new guidance but does not expect it to have a material impact on the Company's financial
statements.

 Note 3 – Going Concern

 The accompanying consolidated financial statements
of the Company are prepared in accordance with U.S. GAAP applicable to a going concern, which contemplates realization of assets and the
satisfaction of liabilities in the normal course of business within one year after the date the consolidated financial statements are
issued. In accordance with FASB, ASU No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40),
the Company's management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt
about the Company's ability to continue as a going concern within one year after the date that the accompanying consolidated financial
statements are issued.

 The
Company has incurred recurring losses and negative cash flows from operations for the years ended October 31, 2024 and 2023. The Company
will need significant additional funds to satisfy its
outstanding payables, fund its working capital, and fully implement its business plan. In addition, the Company's ability to continue
as a going concern is adversely affected by the uncertainty surrounding Bidi's PMTA process with FDA and outcome of Bidi's
petition with the 11th Circuit Court of Appeals regarding the FDA's January 2024 MDO relating to Classic Bidi
Stick as well as the uncertainty in the Company's ability to continue to sell the Bidi Stick given the patent infringement claim
filed by RJ Reynolds.

 Our management plans
to continue developing strategies on similar or expanded
operations of our business to help our ability to determine where our business will be viable going forward. Until
such time, if ever, we can generate substantial product revenues, management plans to finance our cash needs through public or private
equity offerings or debt financing.

 However,
there is no assurance that the Company will be able to raise additional capital, generate revenues or achieve profitability due to
the factors listed above as well as the regulation and public perception of ENDS products and the various other risks faced by the
Company.

 The accompanying consolidated financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of these or other risks or uncertainties.

 F- 16

 Note 4 – Acquisition of GoFire Assets

 On May 30, 2023
(the "Closing Date"), the Company and Kaival Labs entered into an Asset Purchase Agreement (the "GoFire
APA") with GoFire, Inc. ("GoFire") to purchase certain intellectual property assets of GoFire consisting of
various patents concerning electronic vaporizers and related technologies (the "Purchased Assets") in exchange for
equity securities of the Company and certain contingent cash consideration. The Company participated in this transaction with the
intent to diversify its product offerings and create both near and long-term revenue opportunities. The Purchased Assets consist of
19 existing and 47 pending patents with novel
technologies related to vaporization and inhalation.

 Pursuant to the terms of the GoFire APA, the Company
paid to GoFire, in addition to certain contingent cash consideration described below, consideration in the form of equity securities of
the Company consisting of (i) an aggregate of 95,239 shares of Common Stock (the "APA Shares") (ii) 900,000 shares of
newly-designated Series B Convertible Preferred Stock, par value $ 0.001 per share, (the "Series B Preferred Stock" and the
shares of Common Stock underlying the Series B Preferred, the "Series B Conversion Shares"), the rights, preferences and terms
of which are set forth in a Certificate of Designation of Rights and Preferences of the Series B Preferred Stock (the "Certificate
of Designation"), and (iii) a common stock purchase warrant to purchase 95,239 shares of Common Stock (the "Warrant"
and the shares of Common Stock underlying the Warrant, the "Warrant Shares"). As additional consideration for the Purchased
Assets, any cannabis-specific (meaning cannabis, hemp or cannabinoid) royalties that are generated by Kaival Labs from or due to the Purchased
Assets, from the Closing Date until January 1, 2027, will be subject to a contingent cash payment ("CCP"). Prior to the earlier
of: (i) the Company achieving less than or equal to $15,000,000 in aggregate gross cannabis-specific royalties from any Kaival Labs licensing
agreements, and (ii)

January 1, 2027, the Company shall pay GoFire a CCP equal to 50% of the aggregate gross cannabis-specific royalties generated by the
Purchased Assets. After the earlier of: (i) the Company achieving greater than $15,000,000 in aggregate gross cannabis-specific royalties,
and (ii) January 1, 2027, the Company shall pay GoFire a CCP equal to 10% of the aggregate gross cannabis-specific royalties generated
by the Purchased Assets until January 1, 2027. 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, if any Series B Preferred Stock remains outstanding nineteen (19) months
after the Closing Date, the Company shall use commercially reasonable efforts to file with the SEC a subsequent registration statement
registering the distribution to GoFire's stockholders and/or public resale Series B Conversion Shares by such stockholders. If
such subsequent registration statement is required, the Company will use its commercially reasonable efforts to obtain effectiveness
of such subsequent registration statement within nineteen (19) months of the Closing Date, and if the Company does not so register the
Series B Conversion Shares within nineteen (19) months of the Closing Date, the Company will issue to GoFire or its designee an additional
ten percent (10%) of all of the Series B Conversion Shares underlying the then outstanding shares of Series B Preferred Stock. All of
the securities issued as consideration for the Purchased Assets are subject to a lock-up agreement that terminates one hundred eighty
(180) days from the Closing Date.

 The Company has determined that the acquisition
of the Purchased Assets constitutes an asset acquisition and has recorded the assets under a cost accumulation model. Assets
acquired and liabilities assumed are recognized at cost, which is the consideration the acquirer transferred to the seller, as well
as direct transaction costs, on the acquisition date. The cost of the acquisition is then allocated to the assets acquired based on
their relative fair values. The cost of acquisition does not include any contingent consideration related to contingent cash
payments as those obligations are contingent in future amount of royalties and will be recognized when the contingency is resolved,
and the consideration is paid or becomes payable. Goodwill is not recognized in an asset acquisition. The Purchased Assets have been
recorded at a cost of $11,795,975 and are included in Intangible Assets in the consolidated balance sheet.

 The consideration paid for the GoFire APA was as follows
(see Note 5):

 Schedule of consideration paid

 $

 1,119,800

 Series B Preferred Stock

 9,047,980

 Common Stock Warrants

 1,059,523

 Transaction Costs

 568,672

 Total consideration

 $

 11,795,975

 F- 17

 The fair value of the Common Stock is based on the
publicly traded share price as of the acquisition date and represents a Level 1 measurement.

 The fair value of the Series B Preferred Stock and
Common Stock Warrants were determined using the Black-Scholes Option Pricing model. The fair value measurements are based on significant
unobservable inputs, including management estimates and assumptions, and thus represent Level 3 measurements.

 Note 5 – Intangible Assets

 The Company's intangible assets include patents
and technology that were acquired pursuant to the GoFire APA. The cost and accumulated amortization of the intangible assets amounted
to $ 11,795,975 and $ 1,114,064 as of October 31, 2024, respectively and $ 11,795,975 and $ 327,666 as of October 31, 2023, respectively.
Amortizable patents and technology have a useful life of 15.0 years with a weighted average remaining useful life of 13.7 years and 14.6
 years as of October 31, 2024 and October 31, 2023, respectively.

 The Company recognized an amortization expense of
$ 786,398 and $ 327,666 for the years then ended October 31, 2024 and 2023, respectively. Amortization expense is included under general
and administrative expenses in the consolidated statements of operations.

 Future amortization expense of intangible assets is as follows:

 Schedule of future amortization expense of intangible assets

 Year ending October
 31, 2025

 $

 Year ending October 31, 2026

 Year ending October 31, 2027

 Year ending October 31, 2028

 Year ending October 31, 2029

 Thereafter

 6,749,921

 Total

 $
 10,681,911

 Note 6 – Loans Payable

 Insurance Loans

 On May 10, 2024, the Company obtained two insurance
loans. The first loan is a nine-month loan from First Insurance Bank to finance the annual D&O insurance, with the principal amount
of $ 381,077 and subject to an effective interest rate of 7.45 %. The second loan is a nine-month loan from IPFS Corporation to finance
the annual D&O insurance, with the principal amount of $ 94,404 and subject to an effective interest rate of 11.15 %. As of October
31, 2024, the outstanding balance of the Insurance loans amounted to $ 207,616.

 On May 20, 2023, the Company obtained a
nine-month loan from Westfield Bank to finance the annual D&O insurance. The principal amount was $ 342,001
and subject to an effective interest rate of 7.79 %.
As of October 31, 2024, and October 31, 2023, the remaining balance was zero 0 and
$ 152,000,
respectively.

 Loan Agreements

 On May 9, 2023, the Company entered into two loan
agreements which are collateralized by all assets of the Company until the loans are repaid in full. As illustrated in the following table,
under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase Amount,
which is collected by the lenders at the disclosed weekly payment rate. The Company's former Chief Executive Officer, Eric Mosser
personally guarantees the performance of these loans. These loans were fully paid on December 4, 2023, upon their maturity.

 On November 29, 2023, the Company entered into two
loan agreements which are collateralized by all assets of the Company until the loans are repaid in full. As illustrated in the following
table, under the terms of these agreements, the Company received the disclosed Purchase Price and agreed to repay the disclosed Purchase
Amount, which is collected by the lenders at the disclosed weekly payment rate. The Company's former Chief Executive Officer, Eric
Mosser personally guarantees the performance of these loans. These loans were fully paid on June 13, 2024, upon their maturity.

 F- 18

 The following table shows the loan agreements as of
October 31, 2024:

 Schedule of loan agreements

 Inception Date

 Purchase Price

 Purchased Amount

 Outstanding Balance

 Payment frequency

 Payment Rate

 Deferred Finance Fees

 November 29, 2023

 $

 600,000

 $

 864,000

 $

 —

 Weekly

 30,857

 $

 —

 November 29, 2023

 600,000

 864,000

 —

 Weekly

 30,857

 —

 $

 1,200,000

 $

 1,728,000

 $

 —

 $

 —

 The following table shows the loan agreements as of
October 31, 2023:

 Inception Date

 Purchase Price

 Purchased Amount

 Outstanding Balance

 Payment frequency

 Payment Rate

 Deferred Finance Fees

 May 9, 2023

 $

 400,000

 $

 580,000

 $

 53,709

 Weekly

 20,714

 $

 3,434

 May 9, 2023

 400,000

 580,000

 80,467

 Weekly

 20,714

 5,247

 $

 800,000

 $

 1,160,000

 $

 134,176

 $

 8,681

 The Company has accounted for these agreements as
loans under ASC 860 because while the Company provided rights to current and future receipts, the Company still had control over the receipts.
The difference between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid.

 On August 9, 2023, the Company entered into a Securities
Purchase Agreement (the "SPA") with AJB Capital Investments, LLC ("AJB"), pursuant to which the Company sold a
Promissory Note in the principal amount of $650,000 (the "Note") to AJB in a private transaction for a purchase price of $585,000
(giving effect to original issue discount of $65,000). The Note matures on February 8, 2024 (the "Maturity Date") and bears
interest at the rate of 10% per annum. Interest shall be payable on a monthly basis beginning on the date that is one month following
the date of issuance of the Note. Provided no event of default (as defined in the Note) is in effect as of the Maturity Date, the Company
may elect to extend the Maturity Date for a period of six (6) months. Pursuant to the terms of the
SPA, the Company paid a commitment fee to AJB in the form of 19,048 shares of Common Stock
(the "Commitment Fee Shares") with a relative fair value of $ 130,478 which was recognized as discount to the note. The debt
discount and issuance costs are amortized over the term of the note. Amortization expense amounted to $ 38,273 and $ 122,273 for
the years ended October 31, 2024 and October 31, 2023, respectively.

 Under the SPA, the Company has the right to repurchase
half of the Commitment Fee Shares if the Note is repaid in full prior to maturity. On December 1, 2023, the Company fully paid the loan
balance in advance of the maturity date. In connection with the repayment of the Note, the Company agreed that AJB would be permitted
to retain all of the Commitment Fee Shares. The Company recognized $ 98,432 as loss on extinguishment of debt for the year then ended October
31, 2024. As of October 31, 2024 and October 31, 2023 the carrying value of the loan and unamortized debt discount and issuance costs
were 0 zero and zero and $ 513,295 and 136,705, respectively.

 Note 7 – Leases

 The Company capitalizes all leased assets pursuant
to ASU 2016-02, Leases (Topic 842) ("Topic 842"), which requires lessees to recognize right-of-use ("ROU") assets
and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer than
12 months and classified as either financing or operating leases. The Company excludes short-term leases having initial terms of 12 months
or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

 The Company does not have financing leases and only
one operating lease for office space and inventory storage space with Just Pick, LLC ("Just Pick"), a related party that was
owned and controlled by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company (see Note 9). Certain of the
Company's leases, have and may in the future, include renewal options, which have been and might be in the future, included in the
calculation of the lease liabilities and right of use assets when the Company is reasonably certain to exercise the option.

 F- 19

 Cash flow information related to leases was as follows:

 Schedule of cash flow information related to leases

 October 31, 2024

 October 31, 2023

 Other Lease Information

 Cash paid for amounts included in the measurement of lease liabilities:

 Operating cash flows from operating leases

 $

 ( 198,392

)

 $

 ( 190,541

)

 The following table provides the maturities of lease liabilities as of
October 31, 2024:

 Schedule of maturities of lease liabilities

 Operating

 Leases

 Year ending October 31, 2025

 $

 238,800

 Year ending October 31, 2026

 253,614

 Year ending October 31, 2027

 274,946

 Year ending October 31, 2028

 175,989

 Total future undiscounted lease payments

 $

 943,349

 Less: Imputed interest

 ( 77,141

)

 Present value of lease liabilities

 $

 866,208

 As of October 31, 2024, the Company had no additional
leases which had not yet commenced.

 Note 8 – Stockholders' Equity

 Series B Convertible Preferred Stock

 On May 30, 2023, the Company issued 900,000 shares
of the Series B Preferred Stock as consideration for the acquisition of the GoFire Purchased Assets. The Series B Preferred Stock carries
no voting rights except: (i) with respect to the ability of the holders of a majority of the then outstanding Series B Preferred Stock
(the "Majority Holders"), to nominate a director to the Company's board of directors, and (ii) that the vote of the
Majority Holders is necessary for effecting any amendment to the Company's Certificate of Incorporation or Certificate of Designation
that affects the Series B Preferred Stock. The Series B Preferred Stock is redeemable at the option of the Company at a redemption price
of $ 15 per share, subject to potential downward adjustments based on the trading price of the Common Stock. Subject to additional 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). As of October 31, 2024, the Company had accrued a dividend
of $ 382,500 payable to Series B shareholders.

 F- 20

 Reverse Stock Split

 On January 22, 2024, the Company filed a
Certificate of Amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware to affect a 1-for-21
reverse stock split (the "2024 Reverse Stock Split") of the shares of the Common Stock. The 2024
Reverse Stock Split was effective on January 25, 2024, on the Nasdaq Stock Market. No fractional shares were issued in connection
with the 2024 Reverse Stock Split. Any fractional shares of the Company's Common Stock that would have otherwise resulted from
the 2024 Reverse Stock Split were rounded up to the nearest whole number. In connection with the 2024 Reverse Stock Split, the Board
approved appropriate and proportional adjustments to all outstanding securities or other rights convertible or exercisable into
shares of the Common Stock, including, without limitation, all preferred stock, warrants, options, and other equity compensation
rights. All historical share and per-share amounts reflected throughout these accompanying consolidated
financial statements have
been retroactively adjusted to reflect the 2024 Reverse Stock Split as if the split occurred as of the earliest period presented.
The par value per share of the Common Stock was not affected by the 2024 Reverse Stock Split.

issued 1,746,500
 shares of common stock in connection with the June 2024 Public Offering (see below).

issued 2,174,456
 shares of common stock from exercises of pre-funded warrants (see below).

issued 52,949
 shares of common stock for rounding of shares related to the Reverse Split.

issued 16,667
 shares of common stock to a FINRA member broker-dealer in connection with the termination of its relationship with such broker
dealer. The fair value was $ 62,000
 based on the closing price of the common stock on the termination date and recorded as stock-based compensation.

issued 333,200
 shares of common stock from exercises of warrants for total consideration of $ 385,746.

issued 1,400,144
 shares of common stock to settle the related party payable to Bidi of $ 1,275,000.
The Company recognized a loss on the settlement of the payable of $ 142,786.

 During the year ended October 31, 2023, the Company
issued 95,239
 shares of Common Stock as consideration for the acquisition of the GoFire Purchased Assets. The Company also issued 4,381
 shares of Common Stock as compensation for advisory services rendered in connection with the GoFire APA. See Note 4.

 During the year ended October 31, 2023, the Company
issued 19,048
 common shares with a value of $ 130,478
 as part of a loan issued on August 9, 2023.

 June 2024 Public Offering

 On June 21, 2024, the Company entered into a securities
purchase agreement (the "Purchase Agreement") with the certain purchasers (the "Purchasers) for the purchase and sale
of an aggregate of $5,393,250 of the Company's securities consisting of 3,525,000 units (the "Units'). With respect
to (i) 1,350,000 of the Units (the "Common Units"), each such Common Unit consisted of one share of the Company's common
stock, par value $0.001 per share ("Common Stock") and one and one-half common warrants ("Common Warrants") to
purchase one and one-half shares of Common Stock and (ii) the other 2,175,000 Units (the "Pre-funded Units"), each such Pre-funded
Unit consisted of a pre-funded warrant ("Pre-funded Warrant") to purchase one share of Common Stock and one and one-half Common
Warrants. Pursuant to the Purchase Agreement, the Common Units were sold at a purchase price of $1.53 per Unit and the Pre-funded Units
were sold at a purchase price of $1.529 per Unit. The sale of the Units to the Purchasers closed on June 24, 2024 (the "Closing
Date"). The Company also sold 396,500 Common Units to additional investors, who did not enter into the Purchase Agreement, under
the same terms sold to Purchasers. The sale of securities by the Company pursuant to the Purchase Agreement combined with the concurrent
sale of securities to additional investors is referred to herein as the "June 2024 Public Offering'. The aggregate gross proceeds
to the Company from the June 2024 Public Offering were approximately $ 5,997,720, before deducting
placement agent fees and expenses and other transaction costs of $ 744,993. Of the total gross
proceeds, $ 2,672,145 and $ 3,325,575 were allocated
to the common stock and the pre-funded warrants, respectively.

 F- 21

 See further Common Warrants and Pre-Funded Warrants
details below.

 Stock Options

 Summary of stock options information is as follows:

 Schedule of stock options information

 Average

 Aggregate Number

 Aggregate Exercise Price

 Exercise Price Range

 Exercise

Price

 Outstanding, October 31, 2022

 152,489

 $

 8,921,429

 $

 21.63 - 602.28

 $

 58.50

 Granted

 300,188

 5,314,460

 10.08 - 20.72

 17.66

 Exercised

 —

 —

 —

 —

 Cancelled, forfeited, or expired

 ( 3,571

)

 ( 154,481

)

 43.26

 43.26

 Outstanding, October 31, 2023

 449,106

 $

 14,081,408

 $

 10.08 - 602.28

 $

 31.36

 Granted

 104,693

 529,899

 2.81 - 11.76

 5.06

 Exercised

 —

 —

 —

 —

 Cancelled, forfeited, or expired

 ( 364,209

)

 ( 7,763,571

)

 2.81 - 545.58

 15.75

 Outstanding, October 31, 2024

 189,590

 $

 6,847,736

 $

 3.64 - 602.28

 36.12

 Exercisable, October 31, 2024

 170,280

 $

 6,643,041

 $

 3.64 - 602.28

 $

 39.01

 During the years ended October 31, 2024, and 2023,
the Company recognized $ 108,234 and $ 3,168,430, respectively of stock option expense related to outstanding stock options. The weighted-average
grant-date fair value of the options granted during the fiscal years ended October 31, 2024 and October 31, 2023 were $ 5.03 and $ 15.81, respectively.

 The total fair value of stock options that vested
during the fiscal years ended October 31, 2024 and October 31, 2023 were $ 830,907 and $ 1,885,367 respectively.

 On October 31, 2024, the Company had $ 54,935 of
unrecognized expenses related to options, which is expected to be recognized over a weighted-average period of approximately 1.52 years.
The weighted average remaining contractual life is approximately 3.53 years for stock options outstanding as of October 31, 2024.
The aggregate intrinsic value of these outstanding options as of October 31, 2024 was zero.

 Compensation expense related to performance-based
options is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions
will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings
in the period of the change. Compensation cost is not recognized for service and performance-based awards that do not vest because service
or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. If vesting occurs prior to the
end of the requisite service period, expense is accelerated and fully recognized through the vesting date.

 Warrants

 Warrant information as of the periods indicated is as follows:

 Schedule of warrant information

 Aggregate

 Average

 Aggregate
 Number

 Exercise

 Price

 Exercise
 Price Range

 Exercise

Price

 Outstanding,
 October 31, 2022

 110,396

 $
 4,401,801

 $
 39.90

 $
 39.90

 Granted

 132,152

 9,544,205

 12.39 - 126.00

 72.22

 Exercised

 —

 —

 —

 —

 Cancelled,
 forfeited, or expired

 —

 —

 —

 —

 Outstanding,
 October 31, 2023

 242,548

 $
 13,946,006

 $
 12.39 - 126.00

 $
 57.51

 Granted

 8,057,250

 6,812,056

.001 - 1.16

 0.85

 Exercised

 ( 2,508,200
)

 ( 387,921
)

.001 - 1.16

 0.15

 Cancelled,
 forfeited, or expired

 ( 36,912
)

 ( 544,025
)

 12.39 - 15.33

 14.74

 Outstanding,
 October 31, 2024

 5,754,686

 $
 19,826,116

 $
 1.16 - 126.00

 $
 3.45

 Exercisable,
 October 31, 2024

 5,754,686

 $
 19,826,116

 $
 1.16 - 126.00

 $
 3.45

 F- 22

 The weighted average remaining contractual life is
approximately 4.56 years for Common Stock warrants outstanding as of October 31, 2024. As
of October 31, 2024, the intrinsic value of outstanding stock warrants was zero.

 June 2024 Public Offering Warrants

 The Company issued a common stock purchase warrant
to purchase an aggregate of 5,882,250 shares of Common Stock in connection with the June 2024 Public Offering with an initial exercise
price of $ 1.53 per share (equal to 100% of the public offering price of each unit sold in this offering). The warrant is exercisable immediately
and will expire five years from the date of issuance. However, if, on the date that is 30 calendar days immediately following the Closing
Date (the "Reset Date"), the Reset Price (as defined below) is less than the exercise price of the Common Warrants on the
Reset Date, then the exercise price of the Common Warrants shall be decreased to the Reset Price. "Reset Price" means 100%
of the arithmetic average of the daily VWAPs during the five trading days immediately preceding the Reset Date, provided, that in no event
shall the Reset Price be less than $0.574 per share (subject to adjustment for reverse and forward stock splits, recapitalizations and
similar transactions following the date of the securities purchase agreement). Immediately after the Reset Date, the Reset Exercise Price
is $ 1.1577 per share. As of October 31, 2024, June 2024 Public Offering Warrants to purchase 5,549,050 shares of Common Stock remain outstanding.

 GoFire Acquisition Warrants

 The Company issued a common stock purchase warrant
to purchase an aggregate of 95,240 shares of Common Stock as consideration for the acquisition of the GoFire Purchased Assets. The Warrant
is exercisable for a period of four ( 4) years from the Closing Date. The exercise price for the Warrant Shares is $ 63.00, $ 84.00, $ 105.00
and $ 126.00 per share, respectively, for each of four tranches of 23,810 Warrant Shares. The exercise prices of the Warrant are subject
to customary stock-based (but not price-based) adjustments upon the occurrence of stock splits and the like involving the Common Stock.
The Warrant is exercisable on a cash basis only, except that the Warrant may be exercised on a "cashless basis" if at the
time of exercise there is not an effective registration statement under the Securities Act of 1933, as amended covering the public resale
of the Warrant Shares. As of October 31, 2024, GoFire Acquisition Warrants to purchase 95,240 shares of Common Stock remain outstanding.

 September 2021 Public Offering Warrants

 The Company issued a common stock purchase warrant
to purchase a total of 193,036 shares of Common Stock in connection with the Company's underwritten public offering in September
2021, at an exercise price of $ 39.90 per share. These warrants expire in 2026. As of October 31, 2024, September 2021 Public Offering
Warrants to purchase 110,396 shares of Common Stock remain outstanding.

 Other Warrants

 The Company issued a common stock purchase warrant
to purchase an aggregate of 17,524 shares of Common Stock as compensation for advisory services rendered directly related to the GoFire
APA. The warrant is exercisable for a period of five (5) years from the Closing Date. The exercise price for the warrant shares is $ 14.70
per share. The warrant is non-exercisable or transferrable for six months after the date of the closing of APA other than as permitted
by FINRA Rule 5110. The warrant may be exercised as to all or a lesser number of shares of Common Stock for a period of five ( 5) years
after the Closing Date. The Company entered into a financial advisor and placement agent agreement in April 2023 with an advisor. As part
of the consideration for the advisor's services, the Company will issue warrants to purchase an aggregate of 17,143 shares of Common
Stock at an exercise price of $ 15.33 per share and a term of 5 years. During the twelve (12) month engagement period, the Company will
grant the advisor warrants to purchase 1,429 shares of Common Stock each month. The Company issued the first six (6) months of warrants
to purchase 8,572 shares of Common Stock upon the execution of the agreement and will issue monthly warrants each month at a rate of 1,429
warrants per month until 17,143 warrants have been issued in aggregate. The Company issued warrants to purchase a total of 15,715 shares
of Common Stock.

 F- 23

 The Company entered into a financial advisor and placement
agent agreement in August 2023 with an advisor. As part of the consideration for the advisor's services, the Company issued warrants
to purchase an aggregate of 3,673 shares of common stock at an exercise price of $ 12.39 per share and a term of 5 years.

 The total Other Warrants to purchase 36,912 shares
of Common Stock were cancelled on December 15, 2023.

 Pre-Funded Warrants

 The Company issued a pre-funded warrant to purchase
an aggregate of 2,175,000 shares of Common Stock in connection with the June 2024 Public Offering. The Pre-funded Warrants were sold to
Purchasers whose purchase of Common Units in the June 2024 Public Offering would have otherwise resulted in such Purchaser beneficially
owning more than 4.99% (or, at the election of the purchaser, 9.99%) of the Company's outstanding Common Stock. The exercise price
of each Pre-funded Warrant is $ 0.001 per share. The Pre-funded Warrants are exercisable immediately and may be exercised at any time until
all of the Pre-funded Warrants are exercised in full.

 Immediately after the Closing Date, the Purchasers
of the Pre-funded Units exercised all of the 2,175,000 Pre-funded Warrants and purchased shares of common stock. The Company issued 2,174,456
shares of common stock from exercises of pre-funded warrants, consisting of 1,450,000 Pre-funded Warrants through cash exercise and 725,000
Pre-funded Warrants through cashless exercise. The Company received proceeds amounting to $ 1,450 from the cash exercise of the Pre-funded
Warrants. As of October 31, 2024, there were no Pre-Funded Warrants outstanding.

 Note 9 – Related-Party Transactions

 In March 2020, the Company commenced business
operations as a result of becoming the exclusive distributor of certain ENDS and related components (the "Products") manufactured
by Bidi, a related party company that is also owned by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company.

 On June 24, 2024, the Company obtained a short-term
loan from Bidi, a related party company to finance the state and franchise tax fees. The principal amount was $218,787 and was not subject
to interest. The entire principal balance of this loan shall be due and payable in full immediately upon receipt of funds by the Company
pursuant to the June 2024 Public Offering noted above. This loan was fully paid on June 25, 2024, and as of October 31, 2024, had
an outstanding balance of zero.

 Revenue and Accounts Receivable

 During the fiscal year ended October 31, 2024, the
Company recognized revenue of $ 5,950 from one company owned by Nirajkumar Patel, the former Chief Executive Officer and former Director of
the Company, and/or his wife.

 During the fiscal year ended October 31, 2023, the
Company recognized revenue of $ 10,828 from three companies owned by Nirajkumar Patel, the
former Chief Executive Officer and a former Director of the Company, and/or his wife.

 Purchases and Accounts Payable

 During the fiscal year ended October 31, 2024, 100% of the inventories of Products,
consisting solely of the BIDI Stick, were purchased from Bidi, a related party controlled by Nirajkumar Patel, the former Chief
Executive Officer and Director of the Company, in the amount of $ 250,560, As of October 31, 2024, the Company had $ 0 in accounts payable
to Bidi from inventory purchases.

 During the fiscal year ended October 31, 2023, the
Company purchased Products equal to $ 12,747,006 from Bidi, a related party company that is
also owned by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company. As of October 31, 2023, the Company had
an accounts payable balance of $ 1,521,491 to Bidi.

 F- 24

 The KBI License
agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets
due to jointly agreed costs such development costs incurred for entry to specific international markets. During the year ended
October 31, 2024, the Company paid license fees of approximately $ 220,000 to
Bidi. As of October 31, 2024, the Company has a payable to Bidi of $ 131,683
related to the PMI License Agreement of which $ 108,215
was paid in December 2024.

 Leased Office Space and Storage Space

 On
June 10, 2022, the Company entered into a Lease Agreement with Just Pick, owned and controlled by Nirajkumar Patel, the former Chief
Executive Officer and Director of the Company. The Company had $ 198,392 and $ 190,541 in operating lease expenses for the years ended
October 31, 2024 and October 31, 2023, respectively.

 Note 10 – Income Tax

 The Company is subject to federal income taxes and
state income tax in the U.S. Significant judgment is required in determining the provision for income taxes and income tax assets and
liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

 The Tax Cuts and Jobs Act (the "Tax Act")
was enacted on December 22, 2017 and reduced the U.S. federal corporate tax rate from 35 % to 21 %, eliminated corporate Alternative Minimum
Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain companies. The Company
fulfilled and shipped all the Products from Florida and, thus, it is subject to the state corporate income tax of Florida with a tax rate
of 5.5 %. There is no difference between the income tax computed at the combined federal and state statutory rate to the income tax effective
rate.

 Significant components of the tax expense recognized
in the accompanying statements of operations for the years ended October 31, 2024, and October 31, 2023, are as follows:

 Schedule of components of income tax expense

 October 31,

 2024

 2023

 Current Tax Expense:

 Federal

 $

 —

 $

 —

 State

 2,348

 Total Current Tax Expense

 2,348

 Deferred Tax Expense:

 Federal

 —

 —

 State

 —

 —

 Total Deferred Tax Expense

 —

 —

 Tax provision:

 Federal

 —

 —

 State

 2,348

 Total

 $

 $

 2,348

 F- 25

 Total net deferred taxes are comprised of the following
on October 31, 2024, and October 31, 2023:

 Schedule of deferred tax assets and liabilities

 October 31,

 2024

 2023

 Deferred Tax Assets:

 Stock Compensation Expense – NQSO

 $

 1,871,908

 $

 2,069,641

 Other

 837,264

 499,203

 Net Operating Loss Carryforwards

 6,258,699

 4,998,800

 Total Deferred Tax Asset

 8,967,871

 7,567,644

 Deferred Tax Liabilities:

 Prepaid Expenses

 ( 75,319

)

 ( 27,497

)

 Right of Use Asset

 ( 188,810

)

 ( 220,859

)

 Total Deferred Tax Liabilities

 ( 264,129

)

 ( 248,356

)

 Less: Valuation Allowance

 ( 8,703,742

)

 ( 7,319,288

)

 Net Deferred Tax Asset

 $

 —

 $

 —

 The Company has Federal NOL carryforwards of
approximately $ 29.8 million and state NOL carryforwards of approximately $ 0.4 million. With the changes instituted by the CARES Act,
the Federal NOLs have an indefinite life and will not expire. The Company's federal and state tax returns for the 2023 and 2022
tax years generally remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the
deferred tax asset if, based on the weight of the evidence, it is more likely than not that some portion or all the deferred tax assets
will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a valuation
allowance of $ 8,703,742 for the year ended on October 31, 2024, it is necessary to reduce the deferred tax asset to the amount that will
more likely than not be realized.

 Note 11 – Commitments and Contingencies

 The Company follows ASC 450-20, Los s Contingencies, to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties
and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably
estimated. There were no commitments or contingencies as of October 31, 2024, and October 31, 2023, other than the below:

 QuikfillRx Service Agreement

 On March 31, 2020, the Company entered into a service
agreement (the "Service Agreement") with QuikfillRx LLC, a Florida limited liability company ("QuikfillRx"),
whereby QuikfillRx provides the Company with certain services and support relating to sales management, website development and design,
graphics, content, public communication, social media, management and analytics, and market and other research (collectively, the "Services").

 Effective as of November 9, 2022, the Company entered
into its latest amendment to the Service Agreement with QuikfillRx (collectively with prior amendments, the "Amended Service Agreement").
The November 9, 2022 amendment to the Service Agreement was captioned as the "Fourth Amendment" although it was the fifth
amendment to the Service Agreement. Pursuant to the Amended Service Agreement:

 (a) the term of the Amended Service Agreement was
extended (unless earlier terminated pursuant to the terms of the Amended Service Agreement) from November 1, 2022 (the "Effective
Date") until October 31, 2025, following which the term shall automatically renew for successive one (1) year period beginning November
1, 2025;

 (b) QuikfillRx agreed to change its "doing business
as" name to "Kaival Marketing Services" within thirty (30) days following the Effective Date;

 (c) it was provided that either party may terminate
the Amended Service Agreement without cause upon not less than ninety (90) days prior written notice to the other party;

 F- 26

 (d) QuikfillRx was granted a one-time, fully vested,
ten-year non-qualified option award to purchase up to 11,905 shares of Company common stock with an exercise price of $20.72 per share
(the closing price of the Company's common stock on November 9, 2022). The option grant was memorialized pursuant to a Nonqualified
Option Agreement, dated November 9, 2022, between the Company and QuikfillRx; and

 (e) the parties agreed to revise the compensation
for services as follows: (i) payment of $125,000 per month; (ii) bonus equivalent to 0.27% of the applicable gross quarterly sales and
(iii) a grant of 3,000,000 nonqualified stock options to purchase shares of Company common stock which shall vest based on achievement
of certain net revenue and profit margin targets up to $180,000,000 in total net revenues over a period of 3 years.

 On February 21, 2024, the Company terminated the agreement
and all amendments with QuikFillRx. Per the termination, the Company was required to pay $ 80,000 by March 1, 2024, in full satisfaction
of all obligations, debts, and prior services, including but not limited to stock incentives, bonuses, third party obligations, owed by
the Company to QuickfillRx. The Company made the required payment on February 28, 2024.

 International Trade Commission claims against the
Company

 On June 11, 2024, RAI Strategic Holdings, Inc., R.J.
Reynolds Vapor Company, R.J. Reynolds Tobacco Company, and RAI Services Company (collectively, the "RJ Reynolds Entities")
filed a patent infringement complaint with the International Trade Commission (the "ITC") against Bidi, the Company, and forty
(40) other respondents (the "ITC Complaint") pursuant to Section 337 of the Tariff Act of 1930, as amended. Specifically,
the ITC Complaint alleges that one or more components or elements of the Bidi Stick infringe U.S. Patent No. 11,925,202, which is owned
by one of the RJ Reynolds Entities. 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. On July 17, 2024, the Company was dismissed from the ITC proceeding
and is no longer a defendant in the ITC proceeding. No damages are recoverable in the proceedings before the ITC. If Bidi is prohibited
from importing the Bidi Stick, then the Company's business, operations, financial results, and reputation would be significantly
adversely impacted.

 Note 12 – Subsequent Events

 On January 2, 2025, the Company issued 3,025,000 fully
vested shares of common stock to directors, officers and an employee pursuant to grants under the Company's Amended and Restated
2020 Stock and Incentive Compensation Plan.

 On December 3, 2024, the Company paid accrued dividends
of $ 405,000 to Series B Preferred shareholders.

 On various dates from November 2024 through January 2025, the Company received
reimbursements of non-recurring engineering costs from PMPSA totaling $ 932,937 which have been fully remitted to Bidi.

 F- 27

 Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.

 None.

 Item 9A. Controls and Procedures.

 Evaluation of Disclosure Controls and Procedures

 We maintain "disclosure controls and procedures,"
as such term is defined in Rule 13a-15e and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required
to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our President
& Chief Operating Officer and our Interim Chief Financial Officer to allow for timely decisions regarding required disclosure.

 As of October 31, 2024, the end of the year covered
by this Report, we carried out an evaluation under the supervision and with the participation of members of our management, including
our President & Chief Operating Officer and our Chief Financial Officer, of the effectiveness of the design and the operation of our
disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Our management has concluded, based on their evaluation,
that the disclosure controls and procedures were not effective as of the end of the year covered by this Report due to material weaknesses
identified below.

 Management's Annual Report on Internal
Control Over Financial Reporting

 Our management is responsible for establishing and
maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control
over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles. Our management assessed our internal control over financial reporting using the criteria in Internal Control –
Integrated Framework (2013 Framework), issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
A system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

 Based on our evaluation under the framework in COSO,
our management concluded that our internal control over financial reporting was ineffective, taken as a whole, as of October 31, 2024,
based on such criteria. Material weaknesses existed in the design or operation of certain of our internal controls over financial reporting
that adversely affect our internal controls. A material weakness is a significant deficiency, or combination of deficiencies, in internal
control over financial reporting that results in more than a remote likelihood that a material misstatement of the annual or interim financial
statements may not be prevented or detected. Management determined that there was a lack of resources to provide segregation of duties
consistent with control objectives, the lack of sufficient and consistent real time remote communications, and the lack of a fully developed
formal review process that includes multiple levels of review over financial disclosure and reporting processes. However, management has
been in the process of implementing new controls that should mitigate, if not fully eliminate certain identified risks in our control
over financial reporting.

 The weaknesses and the related risks are not uncommon
in a company of our size because of the limitations in the location, size and number of our staff. To address these material weaknesses,
and subject to the receipt of additional financing or cash flows, we have undertaken certain remediation measures to date to address the
material weaknesses described in this Report, including implementing procedures pursuant to which we can ensure proper segregation of
duties and hire additional resources to ensure appropriate review and oversight, as well as more timely formal communications processes,
more diligent review and approval of all disbursements and more timely review of all banking transactions sales orders and inventory management.

 A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met under all potential conditions,
regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a
simple error or mistake. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.

 Auditor's Report on Internal Control Over
Financial Reporting

 This Report does not include an attestation report
of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide
only management's report in this Report.

 Changes in Internal Control Over Financial Reporting

 There have been no changes in our internal control
over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) that have occurred during
the fourth quarter ended October 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

 Item 9B. Other Information.

 None.

 Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections

 Not Applicable.

 Item 10. Directors, Executive Officers and Corporate
Governance.

 The following table and text set
forth the names and ages of our directors and executive officers as of the date of this Report. Our board of directors (the "Board")
is comprised of only one class of directors. Also provided herein are brief descriptions of the business experience of each director and
executive officer during the past five years (based on information supplied by them) and an indication of directorships held by each director
in other public companies subject to the reporting requirements under the Federal securities laws. During the past ten years, none of
our directors or executive officers has been involved in any legal proceedings that are material to an evaluation of the ability or integrity
of such person:

 Name

 Age

 Position(s)

 Dates
 in Position or Office

 David
 Worner (1)

 March 19, 2023–
 Current

 Mark
 Thoenes (2)

 Director and Interim Chief Executive Officer

 August 1, 2023– Current

 Ketankumar
 Patel (3)

 April 24, 2024– Current

 Ashesh
 Modi (4)

 April 24, 2024– Current

 Eric
 Morris (5)

 Interim Chief Financial Officer

 March 7, 2024– Current

 (1)

 Mr. Worner serves as chair of the Audit Committee and a member of the Audit and Governance and Nominating Committee.

 (2)

 Mr. Thoenes was appointed to the Board effective August 1, 2023. From June 30, 2021 until August 1, 2023, he served as our Interim Chief Financial Officer.

 (3)

 Mr. Patel serves as Chair of the Compensation Committee and a member of the Governance and Nominating, and Audit Committees.

 (4)

 Mr. Modi serves as Chair of the Governance and Nominating Committees and a member of the Audit, and Compensation Committee.

 (5)

 Mr. Morris was appointed our Interim Chief Financial Officer of our company on March 7, 2024

 David Worner, Director. Mr.
David Worner began his career in public accounting and is currently the Chief Executive Officer of GrowthPath Partners, a transactional
accounting and advisory firm which he founded in July 2021. From August 2012 to June 2021, Mr. Worner served as a partner at NOW CFO,
a national finance and accounting consulting firm. Prior to his time at NOW CFO, Mr. Worner worked as a Controller at Covario, an independent
provider of search marketing agency services, from August 2010 until August 2012. Prior to his time at Covario, from September 2006 to
August 2012, he worked as an Accounting Manager for Securities and Exchange Commission Reporting and SOX Management for NTN Buzztime,
a company that produces interactive entertainment across different platforms. Mr. Worner received a bachelor's degree in accounting
from the University of New Orleans in 2005.

 Mark Thoenes, Director and Interim
Chief Executive Officer. Mr. Mark Thoenes, has more than 35 years of diverse financial and operational leadership to our company.
From June 30, 2021 to August 1, 2023, he served as our Interim Chief Financial Officer on a consulting basis. He has been a licensed Certified
Public Accountant since 1984 and began his career with Ernst & Young Global Limited. From 2000 to 2010, Mr. Thoenes served as the
Executive Vice President/Chief Financial Officer of Rentrak Corporation ("Rentrak"), a publicly traded company listed on Nasdaq
and headquartered in Portland, Oregon. Founded in 1977, Rentrak went public in 1986, and remained a public company until it was acquired
by comScore, Inc. in 2016, after Mr. Thoenes left Rentrak. For the past eleven years, Mr. Thoenes has been the President of MLT Consulting
Services, LLC, a full-service business/financial consulting firm.

 Ketankumar Patel, Director:
 In 2017, Mr. Patel founded liquor franchise company called In and Out Liquors. Through that business, he developed a thorough understanding
of how to manage and sell high-value, age-restricted products. Mr. Patel is a graduate of APC College of Pharmacy, Chikhali, Maharastra,
India. After obtaining his degree in 2005, Mr. Patel moved to the United States in 2006. We believe that Mr. Patel is qualified to serve
on our board of directors due to his background in our industry and the business of age-restricted products.

 Ashesh Modi, Director: Since
2017, Mr. Modi, has been a pharmacist at Publix. Since 2016, Mr. Modi has also held a realtor license and has managed multi-million-dollar
deals, earning accolades such as being named a top 1% Realtor by Lokation Real Estate in 2022. He also served as President of the Indian
Association of the Space Coast in Florida in 2017 -2018. After earning a Bachelor of Pharmacy degree from A R College of Pharmacy at Sardar
Patel University in India, he came to USA in 2002 where he attended Master's in Public Health from the University of Oklahoma. We
believe that Mr. Modi is qualified to serve on our board of directors due to his background in our industry.

 Eric Morris, Interim Chief
Financial Officer. Mr. Morris has served as our Interim Chief Financial Officer since March 2024. Prior to this position he was our
Controller from April 2023 to March 2024. He has been a licensed Certified Public Accountant since 2006. From Sept 2017 to April 2023,
he worked as a fractional accounting consultant at a privately held company with a diverse group of clients. Prior to his time as a consultant,
from December 2010 to August 2017, he was the Controller at a privately held Parking Meter Company. Mr. Morris received a bachelor's
degree in accounting from Linfield University in 2000. We believe that Mr. Morris is qualified to serve as our Interim Chief Financial
Officer because of his prior and current management experience, as well as his business experience

 Changes to Management and Board of Directors in
the year ended October 31, 2024

 On December 21, 2023, Eric Mosser,
the Company's then Chief Executive Officer and President of our company, provided written notice to our board of directors of his
resignation as a member of the board, effective immediately. Mr. Mosser's resignation is not due to any disagreements between him
and our company or our board of directors.

 In
connection with his resignation, on December 21, 2023, we and Mr. Mosser entered into an amendment to Mr. Mosser's employment agreement
with our company, dated August 1, 2023. Pursuant to such amendment, effective December 21, 2023, Mr. Mosser resigned as Chief Executive
Officer and President of our company and became a Senior Advisor to our company and the Chief Executive Officer of KBI. Mr. Mosser reported to Barry M. Hopkins, our Executive Chairman, until such time as a new Chief Executive Officer and
President would be appointed. At such time, Mr. Mosser reported to our Chief Executive Officer as a Senior Advisor. Pursuant to the Amendment,
Mr. Mosser's base salary was $251,000 per annum,
effective as of January 1, 2024.

 On
December 21, 2023, the Board appointed Eric
Mosser, a current Senior Advisor to the Company and the Chief Executive Officer of Kaival International Brands, LLC, a wholly
owned subsidiary of the Company, as the Company's President and Interim Chief Executive Officer, to serve in such capacity
until a successor is duly appointed and approved by the Board.

 On December 22, 2023, our board of directors appointed Mr. Hopkins as Interim
Chief Executive Officer and President of our company, to serve in such capacity until a successor is duly appointed and approved by our
board.

 On January 25, 2024, James P. Cassidy
provided written notice to the board of directors of his resignation from the Board, effective immediately

 On February 20, 2024, Thomas Metzler,
the Chief Financial Officer, Secretary and Treasurer of the Company, provided written notice to the Company's Board of his resignation,
effectively immediately.

 On February 22, 2024, Barry M.
Hopkins, the Interim Chief Executive Officer, President, and Director of the Company, provided written notice to the Company's Board
of Directors (the "Board") of his resignation, effectively immediately.

 On February 22, 2024, Stephen Sheriff,
the Chief Operating Officer of the Company, provided written notice to the Company's Board of his resignation, effectively immediately.

 On February 22, 2024, Roger Brooks,
a Director of the Company, provided written notice to the Company's Board of his resignation effectively immediately.

 On February 26, 2024, George Chuang,
a Director of the Company, provided written notice to the Company's Board of his resignation effectively immediately.

 On March 7, 2024, the Board appointed
Nirajkumar Patel, the Company's Chief Science and Regulatory Officer, as the Company's Chief Executive Officer.

 On March 7, 2024, the Board appointed Eric
Morris as the Company's Interim Chief Financial Officer, to serve in such capacity until a successor is duly appointed
and approved by the Board.

 On March
8, 2024, Eric Mosser, President and the Interim Chief Executive Officer of the Company, provided written notice to the Company's
Board of his resignation, effectively immediately.

 On April 23, 2024, Ashesh Modi was appointed
to the Board of Directors of the Company.

 On April 23, 2024, Ketankumar
Patel was appointed to the Board of Directors of the Company.

 On September 12, 2024, the Board
appointed Mark Thoenes as interim chief executive officer of the Company, effective immediately. He succeeded Mr. Nirajkumar Patel who
unexpectedly passed away on September 7, 2024.

 Family Relationships

 There are no family relationships
among any of our directors or executive officers.

 Involvement in Certain Legal
Proceedings

 During the last ten years, none
of or officers, directors or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K,
other than as otherwise disclosed in this Report.

 Arrangements

 Other than with respect to the
Series B Director as described under "Description of Capital Stock-–-Preferred Stock—Series B Preferred Stock—Series
B Director", there are no arrangements or understandings between an executive officer or director and any other person pursuant
to which he was selected as an executive officer or director.

 Directors and Executive Officers Qualifications

 Although we have not formally established
any specific minimum qualifications that must be met by each of our officers, we generally evaluate the following qualities: educational
background, diversity of professional experience, including whether the person is a current or was a former chief executive officer or
chief financial officer of a public company or the head of a division of a prominent international organization, knowledge of our business,
integrity, professional reputation, independence, wisdom, and ability to represent the best interests of our stockholders.

 The Governance and Nominating Committee
of the Board prepares policies regarding director qualification requirements and the process for identifying and evaluating director candidates
for adoption by our Board. The above-mentioned attributes, along with the leadership skills and other experiences of our officers and
Board members described above, provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of stockholder
value appreciation through organic and acquisition growth.

 Director Independence

 Under Nasdaq standards, a director
is not "independent" unless the Board affirmatively determines that he or she does not have a direct or indirect material
relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line tests for independence set forth
by the Nasdaq rules. Our Board has undertaken a review of its composition, the composition of its committees and the independence of our
directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent
judgment in carrying out his responsibilities. Based on these standards, the Board has determined that Messrs. Worner, Patel, and Modi
are "independent" directors within the meaning of listing rules of the Nasdaq Stock Market.

 All the members of the Audit, Compensation
and Governance and Nominating Committees were also independent during our fiscal year ended October 31, 2024. In making determinations
regarding director independence, our Board considered the relationships that each non-employee director has with us and all other facts
and circumstances our Board deemed relevant in determining their independence, including the director's beneficial ownership of
our Common Stock and the relationships of our non-employee directors with certain of our significant stockholders.

 Meetings of the Board and Board Committees

 Our Board has an Audit Committee,
a Compensation Committee and Governance and Nominating Committee. The entire Board met 16 times, including telephonic meetings, during
fiscal 2024. All directors attended at least 75% of our Board meetings held during the time each director served on our Board.

 Audit Committee. The
Audit Committee currently consists of David Worner (Chair), Ketankumar Patel and Ashesh Modi. The Audit Committee met 4 times during fiscal
2024. The meetings included discussions with management and with our independent registered public accounting firm to discuss our interim
and annual financial statements, and the effectiveness of our financial and accounting functions and organization. The Audit Committee
acts pursuant to a written charter adopted by our Board.

 The purpose of the Audit Committee
is to represent and assist the Board in its general oversight of our accounting and financial reporting processes, audits of our financial
statements, and our internal control and audit functions. Management is responsible for (a) the preparation, presentation, and integrity
of our financial statements; (b) accounting and financial reporting principles; and (c) our internal controls and procedures designed
to promote compliance with accounting standards and applicable laws and regulations. Our independent registered public accounting firm
is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing
standards.

 Our Board has determined that the
Audit Committee is comprised entirely of independent members as defined under applicable SEC rules and the Nasdaq Rules. Our Board has
determined that Mr. Worner, the Chair of the Audit Committee, is an "audit committee financial expert" as defined under SEC
rules.

 Compensation Committee. The
Compensation Committee currently consists of Ketankumar Patel (Chair), David Worner and Ashesh Modi. The Compensation Committee met 6
times during fiscal 2024. The Compensation Committee acts pursuant to a written charter adopted by our Board.

 The purpose of the Compensation
Committee is to discharge the responsibilities of the Board relating to compensation of our executives, to produce an annual report on
executive compensation for inclusion in our annual proxy statement, and to oversee and advise the Board on the adoption of policies that
govern our compensation programs, including stock and benefit plans.

 The Compensation Committee is responsible
for determining executive compensation, including approving recommendations regarding equity awards for all of our executive officers,
setting base salary amounts, and fixing compensation levels. This includes reviewing and making recommendations to our Board regarding
corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating, at least annually, the Chief Executive Officer's
performance in light of these goals and objectives, and reviewing and making recommendations to our Board regarding the Chief Executive
Officer's compensation level based on such an evaluation.

 The Compensation Committee also
annually reviews director compensation to ensure non-employee directors are adequately compensated for the time expended in fulfilling
their duties to us, as well as the skill-level required by us of members of our Board. After the Compensation Committee completes their
annual review, they make recommendations to our Board regarding director compensation. The Compensation Committee is authorized to engage
compensation consultants, if they deem necessary, to assist with the Compensation Committee's responsibilities related to our executive
compensation program and the director compensation program.

 Governance
and Nominating Committee. The
Governance and Nominating Committee currently consists of Ashesh Modi (Chair), David Worner and Ketankumar Patel. The Governance and Nominating
Committee did not meet as such during fiscal 2024. The Governance and Nominating Committee acts pursuant to a written charter adopted
by our Board.

 The purpose of the Governance and
Nominating Committee is to determine the slate of director nominees for election to our Board, to identify and recommend candidates to
fill Board vacancies occurring between annual stockholder meetings, to review our policies and programs that relate to matters of corporate
responsibility, including public issues of significance to our company and our stockholders, and any other related matters required by
the federal securities laws.

 The Governance and Nominating Committee
determines the qualifications, qualities, skills, and other expertise required to be a director and to develop, and recommend to our Board
for its approval, criteria to be considered in selecting nominees for director. The Nominating Committee and our Board believe that at
this time, it is unnecessary to adopt criteria for the selection of directors. Instead, the Nominating Committee and our Board believe
that the desirable background of a new individual member of our Board may change over time and that a thoughtful, thorough selection process
is more important than adopting criteria for directors.

 The Governance and Nominating Committee
will also identify, recruit, and screen candidates for our Board, consistent with criteria approved by our Board. The Nominating Committee
and our Board are fully open to utilizing whatever methodology is efficient in identifying new, qualified directors when needed, including
industry contacts of our directors or professional search firms. The Governance and Nominating Committee also considers any director candidates
recommended by our stockholders pursuant to the procedures described in this Proxy Statement and any nominations of director candidates
validly made by stockholders in accordance with applicable laws, rules, and regulations, and the provisions of our charter documents.

 There were no fees paid or due
to third parties in fiscal 2024 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees.

 Code of Ethics

 On March 17, 2021, our Board adopted
a Code of Ethics and Business Conduct, that applies to all directors, senior officers, and employees of the Company (the "Code of
Ethics"). The Code of Ethics was adopted to enhance and clarify our personnel's understanding of our standards of ethical
business practices, promote awareness of ethical issues that may be encountered in carrying out an employee's or director's
responsibilities, and sets forth how to address ethical issues that may arise. A copy of the Code of Ethics is available on our corporate
website at

 Delinquent Section 16(a) Reports

 Section 16(a) of the Securities Exchange Act of 1934,
as amended, requires our directors, executive officers and persons who own more than 10% of our outstanding shares of common stock ("Ten
Percent Holders") to file with the SEC reports of their share ownership and changes in their share ownership of our common stock.
Directors, executive officers and Ten Percent Holders are also required to furnish us with copies of all ownership reports they file with
the SEC. To our knowledge, based solely on a review of the copies of such reports furnished to us, the following directors, executive
officers and Ten Percent Holders did not comply with all Section 16(a) filing requirements as of October 31, 2024 as follows: Messrs.
Patel and Modi filed their Form 3s late in 2024

 Insider Trading Policy

 In March 2023, we adopted an insider trading policy governing the purchase,
sale, and/or other dispositions of our securities by our directors, officers, and employees, to promote compliance with insider trading
laws, rules and regulations, and applicable Nasdaq listing standards applicable to us. Our insider trading policy, among other things,
prohibits our directors, officers, and employees from holding our securities in a margin account or pledging our securities as collateral
for a loan. In addition, our insider trading policy prohibits employees, officers, and directors from engaging in put or call options,
short selling, or similar hedging activities involving our stock.

 Compensation Committee Interlocks and Insider Participation

 None of our executive officers
currently serve, or have served during the last year, as a member of the board of directors or compensation committee of any entity, other
than us, that has one or more executive officers serving as a member of our Board.

 Item 11. Executive Compensation

 Summary Compensation Table

 The table below summarizes all
compensation awarded to, earned by, or paid to our named executive officers, which is defined herein as (i) all individuals serving or
having served as our principal executive officer or officers during the year ended October 31, 2024, (ii) each of our two other most highly
compensated executive officers who were serving as executive officers at the end of the year ended October 31, 2024, and (iii) any individuals
for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the fiscal
year ended October 31, 2024.

 Name and principal position

 Fiscal Year Ended October 31,

 Salary ($)

 Bonus ($)

 Stock Awards ($)

 Option Awards ($) (1)

 Non-Equity Incentive Plan Compensation ($)

 Nonqualified Deferred Compensation Earnings ($)

 Total ($)

 Nirajkumar Patel, Former Interim CEO, Chief Science & Regulatory Officer and Director (2)

 2023

 276,000

 364,994

 640,994

 2024

 241,499

 241,499

 Eric Mosser, former CEO, President, and Director (3)

 2023

 300,000

 699,941

 999,941

 2024

 129,549

 129,549

 Mark Thoenes, Interim CEO and Director

 2023

 298,050 (6)

 30,650

 328,700

 2024

 74,583
 (6)

 74,583

 Thomas Metzler, Former CFO (4)

 2023

 61,076

 150,000

 211,076

 2024

 83,112

 83,112

 Stephen Sheriff, Former COO (5)

 2023

 146,528

 7,500

 75,808

 229,836

 2024

 88,352

 88,352

 Eric Morris, Interim CFO

 2023

 84,720

 3,000

 39,117

 126,837

 2024

 168,960

 1,500

 170,460

 (1)

 Reflects
the fair value of stock awards during the years in accordance with FASB ASC 718, Compensation–- Stock Compensation, using actual
forfeitures that were immaterial. For valuation assumptions related to the 2023 option awards, refer to Note 2, " Share-Based
Compensation," to the accompanying audited consolidated financial statements for the year ended October 31, 2024.

 (2)

 Mr.
Nirajkumar Patel resigned from the Company on September 7, 2024, upon his passing.

 (3)

 Mr. Mosser resigned from the Company on March 8, 2024.

 (4)

 Mr. Metzler resigned from the Company on February 20, 2024.

 (5)

 Mr. Sheriff resigned from the Company on February 22, 2024.

 (6)

 Consulting fees pursuant to
the Consulting Agreement (as defined below). See "Narrative Discussion" for additional information.

 Narrative Discussion

 The following is a narrative discussion
of the material information that we believe is necessary to understand disclosed in the foregoing Summary Compensation Table. The following
narrative disclosure is separated into sections, with a separate section for each of our named executive officers.

 Nirajkumar Patel

 During the fiscal year ended October 31, 2024, we paid a base salary of approximately
$241,499 to Nirajkumar Patel, our former CEO, Chief Science & Regulatory Officer, compared to a base salary of approximately $276,000
for the fiscal year ended October 31, 2023.

to Mr. Patel during fiscal years 2023 and 2024:

 2/6/2023

 23,810

 15.33

 365,007

 Eric Mosser

31, 2024, we paid a base salary of approximately $129,549 to Eric Mosser, our former CEO, compared to a base salary of approximately $300,000
for the fiscal year ended October 31, 2023.

to Mr. Mosser during fiscal years 2023 and 2024:

 8/1/2023

 27,004

 12.41

 335,120

 2/6/2023

 23,810

 15.33

 365,007

31, 2024, we paid a base salary of approximately $74,583 to Mark Thoenes, our Interim CEO, compared to a base salary of approximately
$298,050 for the fiscal year ended October 31, 2023.

to Mr. Thoenes during fiscal years 2023 and 2024:

 3/3/2023

 2,381

 12.87

 30,643

 4/23/2024

 10,000

 3.64

 36,400

 Thomas Meztler

31, 2024, we paid a base salary of approximately $83,112 to Thomas Meztler, our former CFO, compared to a base salary of approximately
$61,076 for the fiscal year ended October 31, 2023.

to Mr. Meztler during fiscal years 2023 and 2024:

 8/1/2023

 12,091

 12.41

 150,049

 Stephen Sheriff

31, 2024, we paid a base salary of approximately $88,352 to Stephen Sheriff, our former COO, compared to a base salary of approximately
$146,528 for the fiscal year ended October 31, 2023.

to Mr. Thoenes during fiscal years 2023 and 2024:

 8/22/2023

 7,524

 10.08

 75,842

 2/6/2023

 1,190

 15.33

 18,243

 Eric Morris

31, 2024, we paid a base salary of approximately $168,960 to Eric Morris, our Interim CFO, compared to a base salary of approximately
$84,720 for the fiscal year ended October 31, 2023.

to Mr. Morris during fiscal years 2023 and 2024:

 7/8/2023

 2,381

 16.56

 39,429

 Outstanding Equity Awards at Fiscal Year-End October 31, 2024

 Stock Option Awards

 Name

 Number of Stock Options that Have Not Vested (#)

 Market Value of Stock Options that Have Not Vested ($)

 Eric Morris

 1,786

 29,572

 2,500

 9,100

 Potential Payments Upon Termination or Change-of-Control

 Other than the stock options mentioned
above in "Outstanding Equity Awards at Fiscal Year-End", none of our named executive officers are entitled to any payments
upon termination or change-of-control.

 Retirement or Similar Benefit Plans

 There are no arrangements or plans
in which we provide retirement or similar benefits for our named executive officers.

 Director Compensation

 In fiscal year 2024, we compensated
our independent directors as follows:

Name of Director (1)

 Fees Earned
 or Paid in
 Cash

 Option
 Awards

 Total

 Roger Brooks (2)

 56,111

 56,111

 George Chuang (3)

 57,222

 57,222

 James P. Cassidy (4)

 48,370

 48,370

 Barry M. Hopkins (5)

 25,000

 25,000

 David Worner

 99,167

 36,071

 135,238

 26,211

 36,071

 62,282

 Ashesh Modi (6)

 26,111

 21,643

 47,754

 Ketankumar Patel (7)

 26,111

 21,643

 47,754

 (1)

 Mr.
Patel is a named executive officer and, accordingly, his compensation is included in the "Summary Compensation Table" above.
Mr. Patel did not receive any compensation for their service as a director for the fiscal year ended October 31, 2024. Mr. Patel passed
away on September 7, 2024.

 (2)

 Mr.
Brooks resigned from the Board on February 22, 2024.

 (3)

 Mr.
Chuang resigned from the Board on February 26, 2024.

 (4)

 Mr. Cassidy resigned from the Board
on January 25, 2024.

 (5)

 Mr. Hopkins resigned from the Board
on February 22, 2024

 (6)

 Mr. Modi was appointed to the Board
on April 23, 2024.

 (7)

 Mr. Patel was appointed to the
Board on April 23, 2024.

 Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.

 Securities Authorized for Issuance Under Equity Compensation Plans

 As of October 31, 2024, there
were no outstanding equity awards issued under our Incentive Plan.

 Stock Option Plans

 On May 28, 2020, our Board adopted
the Incentive Plan. The following is a summary of the principal features of the Incentive Plan. The summary of the Incentive Plan does
not purport to be complete and is qualified in its entirety by reference to the full text of the Incentive Plan.

 Background. The purpose
of the Incentive Plan is to enhance stockholder value by linking the compensation of our employees, officers, directors, and consultants
to increases in the price of our Common Stock and the achievement of other performance objectives and to encourage ownership in the Company
by key personnel whose long-term employment is considered essential to our continued progress and success. The Incentive Plan is also
intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees and directors to act in stockholders'
interest and share in our success. The various types of incentive awards that may be provided under the Incentive Plan are intended to
enable us to respond to changes in compensation practices, tax laws, accounting regulations, and the size and diversity of its business.
We will not offer incentive stock options under the Incentive Plan. All our employees, officers, directors, and consultants will be eligible
to be granted awards under the Incentive Plan.

 The Incentive Plan will be administered
by our Board. All awards made under the Incentive Plan will be subject to the recommendations and approvals of our Board.

 Stock Subject to the Incentive
Plan. Subject to the terms of the Incentive Plan, the maximum aggregate number of shares of our Common Stock that may be subject to
or delivered under awards granted pursuant to the Incentive Plan is 4,761,905 shares. Shares subject to awards that have been canceled,
expired, settled in cash, or not issued or forfeited for any reason (in whole or in part) will not reduce the aggregate number of shares
that may be subject to or delivered under awards granted under the Incentive Plan and be available for future awards granted under the
Incentive Plan.

 Eligibility. We may grant
awards under the Incentive Plan to employees, officers, directors, and consultants.

 Types of Awards. The Incentive
Plan provides for options not qualifying as "incentive" stock options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, stock appreciation rights, shares of restricted stock, and other stock-based awards.

 Award Limitation. Non-employee
directors may not be granted awards in excess of the 200,000 shares of our Common Stock in any calendar year.

 Term and Amendments. Unless
terminated by our Board, the Incentive Plan will continue to remain effective until no further awards may be granted, and all awards granted
under the Incentive Plan are no longer outstanding. Our Board may at any time, and from time to time, amend the Incentive Plan; provided
that no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the Incentive Plan
without the holder's consent.

 Security Ownership of Certain Beneficial Owners
and Management

 The following table lists the
beneficial ownership of the Kaival Common Stock as of February 6, 2025, by (i) each named executive officer, (ii) each director, and (iii)
all of Kaival's current directors and executive officers as a group. Percentage outstanding is based on shares of Kaival Common
Stock outstanding as of February 6, 2025.

 Beneficial ownership is determined
in accordance with the rules of the SEC and, thus, represents voting or investment power with respect to the 11,542,302 shares of Kaival
Common Stock outstanding as of February 6, 2025. In computing the number and percentage of shares beneficially owned by a person, shares
that may be acquired by such person within 60 days of February 6, 2025are counted as outstanding, while these shares are not counted as
outstanding for computing the percentage ownership of any other person. Except as otherwise indicated, the persons listed below have sole
voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared
with a spouse. Unless otherwise noted, the address of each person below is c/o Kaival Brands Innovations Group, Inc., 4460 Old Dixie Highway,
Grant-Valkaria, Florida 32949. Name and Address(1)

 Number of

 Shares of Kaival

 Beneficially

 Percentage of

 Name and Address(1)

 Owned(2)

 Class(2)

 Eric Morris(3)

 778,401

 6.7
 %

 David Worner(4)

 530,952

 4.6
 %

 Mark Thoenes(5)

 634,604

 5.5
 %

 Ashesh Modi(6)

 523,000

 4.5
 %

 Ketankumar Patel(7)

 523,000

 4.5
 %

 Current Executive Officers and Directors as a Group (5 Persons)

 2,989,957

 25.9
 %

 Kaival Holdings, LLC(8)(9)

 1,569,514

 13.6
 %

 Bidi Vapor LLC(10)

 1,400,144

 12.1
 %

 * Less than
1.0%

 (1) The address
for each person listed above is 4460 Old Dixie Highway, Grant-Valkaria, Florida 32949, unless otherwise indicated.
 (2)
Applicable percentage of ownership is based on 11,542,302 shares of common stock outstanding as of February 6, 2025.

 Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common
stock that are currently exercisable within 60 days of February 6, 2025, are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership of such person but are not treated as outstanding for the purpose
of computing the percentage ownership of any person.

 (3) Eric Morris serves as our Interim Chief
Financial Officer. Includes approximately 2,381 shares of our common stock issuable upon the exercise of vested options.

 (4) David
Worner serves as a member of our board. Includes approximately 10,952 shares of our common stock issuable upon the exercise of vested
options.

 (5) Mark
Thoenes serves as a member of our board. Includes approximately 14,524 shares of our common stock issuable upon the exercise of vested
options.

 (6) Includes
3,000 shares underlying vested options.

 (7) Includes
3,000 shares underlying vested options.

 (8)
KDMM Trust I is the sole voting member of Kaival Holdings, LLC and Ankitaben Patel, as trustee of KDMM Trust I, has voting control
over the Kaival shares owned by Kaival Holdings LLC.

 (9) Address
is 401 N. Wickham Road, Suite 130 Melbourne, FL 32935

 (10) KDMM
Trust I owns all of the equity of Bidi and Ankitaben Patel, as trustee of KDMM Trust I, has voting control over the Kaival shares owned
by Bidi.

 Item 13. Certain Relationships and Related Party Transactions

 Since the beginning of our fiscal
year, we have entered into or participated in the following transactions with related persons:

 Revenue

 During the year ended October 31, 2024, the Company recognized revenue of $5,950
from three companies owned by Nirajkumar Patel, former Chief Executive Officer and director of the Company and/or his wife.

 Purchases and Accounts Payable

 During the
year ended October 31, 2024, 100% of the inventories of products, consisting solely of the BIDI Stick, were purchased from
Bidi, a related party controlled by Nirajkumar Patel and/or his wife,
in the amount of $0.3 million.

 The KBI License Agreement provides
that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets due to jointly agreed
costs such development costs incurred for entry to specific international markets. During the year ended October 31, 2024, the Company
paid license fees of approximately $220,000 to Bidi. As of October 31, 2024, the Company had accounts payable to Bidi of $131,683 for
license fees.

 Leased Office Space and Storage
Space

 We capitalize all leased assets
pursuant to ASU 2016-02, Leases (Topic 842) ("Topic 842"), which requires lessees to recognize right-of-use ("ROU")
assets and lease liability, initially measured at present value of the lease payments, on its balance sheet for leases with terms longer
than 12 months and classified as either financing or operating leases. We exclude short-term leases having initial terms of 12 months
or less from Topic 842 as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. On
June 10, 2022, we entered into the 2022 Lease with Just Pick for approximately 21,332 rentable square feet combined in our principal
office building and warehouse, together with all improvements thereon. Just Pick is considered a related party because our Chief Executive
Officer and director, Mr. Nirajkumar Patel, owns and controls Just Pick.

 Policies and Procedures for Related Party Transactions

 We follow ASC 850, Related Party
Disclosures, for the identification of related parties and disclosure of related party transactions. When and if we contemplate entering
into a transaction in which any executive officer, director, nominee, or any family member of the foregoing would have a direct or indirect
interest, regardless of the amount involved, the terms of such transaction are presented to our board of directors (other than any interested
director, if possible) for approval and documented in the board minutes.

 Item 14. Principal Accounting Fees and Services.

 Below
 is the aggregate amount of fees billed for professional services rendered by Malone Bailey,
 LLP, our principal accountants with respect to our fiscal year ended October 31, 2024, and
 October 31, 2023.

 2024

 2023

 Audit and review fees

 $
 227,120

 $
 286,725

 Audit-related fees

 —

 —

 Tax fees

 —

 —

 All other fees

 154,198

 —

 Total

 $
 381,318

 $
 286,725

 Pre-Approval Policies and Procedures

 All audit fees are approved by
the Audit Committee of our Board. The Audit Committee reviews, and in its sole discretion, pre-approves, our independent auditors'
annual engagement letter, including proposed fess and all audit and non-audit services provided by the independent auditors. Accordingly,
all services described under "Audit Fees," "Audit-related Fees," "All Other Fees," and "Tax
Fees," as applicable, were pre-approved by our Audit Committee. The Audit Committee may not engage independent auditors to perform
the non-audit services prohibited by law or regulations.

 Item 15. Exhibits, Financial Statement Schedules.

 a) Financial Statements

 1. Our financial statements are listed in
the index under Item 8 of this document; and

 2. All financial statement schedules are
omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.

 (b) Exhibits required by Item 601 of Regulation S-K.

 Exhibit
 No.

 Exhibit
 Description

 3.1

 Restated Certificate of Incorporation, which was filed as Exhibit 3.1 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on March 25, 2019, and is incorporated herein by reference thereto.

 3.2

 Bylaws, which were filed as Exhibit 3.2 to our Registration Statement on Form 10-12G filed with the Securities and Exchange Commission on February 19, 2019, and are incorporated herein by reference thereto.

 3.3

 Certificate of Ownership and Merger, as filed with the Secretary of State of the State of Delaware on June 20, 2019, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.

 3.4

 Certificate of Correction, as filed with the Secretary of State of the State of Delaware on July 15, 2019, which was filed as Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 15, 2019, and is incorporated herein by reference thereto.

 3.5

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective July 20, 2021, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2021, and is incorporated herein by reference thereto.

 3.6

 Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock, dated May 30, 2023, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.

 3.7

 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Kaival Brands Innovations Group, Inc., effective January 22, 2024, which was filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 26, 2024, and is incorporated herein by reference thereto.

 4.1

 Description of Securities*

 4.2

 Form of senior indenture, filed as Exhibit 4.4 to our Registration Statement on Form S-3 filed with the Securities and Exchange Commission on July 30, 2021, and is incorporated herein by reference thereto.

 4.3

 Form of Warrant, filed as Exhibit 4.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto.

 4.4

 Warrant Agency Agreement, dated as of September 29, 2021, by and between Kaival Brands Innovations Group, Inc. and VStock Transfer, LLC, as warrant agent, filed as Exhibit 4.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on October 4, 2021, and is incorporated herein by reference thereto.

 4.5

 Common Stock Purchase Warrant issued to GoFire, Inc on May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.

 10.1

 Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated March 31, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2020, and is incorporated herein by reference thereto.

 10.2

 First Amendment to Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated June 2, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated herein by reference thereto.

 10.3

 Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated April 3, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 6, 2020, and is incorporated herein by reference thereto. (1)

 10.4

 Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated April 11, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 13, 2020, and is incorporated herein by reference thereto. (1)

 10.5

 Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Favs Business, LLC, dated May 21, 2020, which was filed as Exhibit 10.6 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)

 10.6

 Amended and Restated Non-Exclusive Sub-Distribution Agreement by and between Kaival Brands Innovations Group, Inc. and Colonial Wholesale Distributing Inc., dated May 25, 2020, which was filed as Exhibit 10.7 to our Form 10-Q filed with the Securities and Exchange Commission on May 27, 2020, and is incorporated herein by reference thereto. (1)

 10.7

 Share Cancellation and Exchange Agreement, by and between the Company and Kaival Holdings, LLC, dated August 19, 2020, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2020, and is incorporated herein by reference thereto.

 10.8

 Amended and Restated 2020 Stock and Incentive Compensation Plan, which was filed as an annex to our Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 4, 2022 and is incorporated herein by reference thereto.

 10.8

 Lease Agreement by and between Kaival Brands Innovations Group, Inc., and Just Pick, LLC, dated July 15, 2020, which was filed as Exhibit 10.14 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on September 14, 2020, and is incorporated herein by reference thereto.

 10.9

 Consulting Agreement, by and between Kaival Brands Innovations Group, Inc. and Russell Quick, dated March 16, 2021, which was filed as Exhibit 10.18 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021, and is incorporated herein by reference thereto.

 10.10

 Second Amendment to Service Agreement, by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, effective as of March 16, 2021, which was filed as Exhibit 10.19 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2021 and is incorporated herein by reference thereto.

 10.11

 Lease Agreement by and between the Company and Just Pick, LLC, dated June 10, 2022, which was filed as Exhibit 10.24 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto.

 10.12

 Deed of Licensing Agreement by and between Kaival Brands International, LLC and Philip Morris Products S.A., dated as of June 13, 2022, which was filed as Exhibit 10.26 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 21, 2022, and is incorporated herein by reference thereto. (1) +

 10.13

 Fourth Amendment to Service Agreement, dated November 9, 2022 between the Company and QuikfillRx, which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto. +

 10.14

 Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto.

 10.15

 Nonqualified Stock Option Grant Agreement, dated November 9, 2022, between the Company and QuikfillRx, which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on November 15, 2022, and is incorporated herein by reference thereto.

 10.16

 Asset Purchase Agreement by and among Kaival Brands Innovations Group, Inc., Kaival Labs, Inc., and GoFire, Inc., dated May 30, 2023, which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on June 14, 2023, and is incorporated herein by reference thereto.

 10.17

 Deed
 of Amendment to Deed of License Agreement, executed and entered into by the Company on August 12, 2023, by and among Philip Morris
 Products S.A., Kaival Brands International, LLC, Bidi Vapor, LLC and the Company. which was filed as Exhibit 10.1 to our Quarterly
 Report on Form 10-Q filed with the Securities and Exchange Commission on September 19, 2023, and is incorporated herein by reference
 thereto.*+

 10.18

 Amended and Restated Board of Directors Compensation Agreement with Ashesh Modi which was filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.

 10.19

 Amended and Restated Board of Directors Compensation Agreement with Ketankumar Patel which was filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.

 10.20

 Amended and Restated Board of Directors Compensation Agreement with David Worner which was filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.

 10.21

 Amended and Restated Board of Directors Compensation Agreement with Mark Thoenesl which was filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 25, 2024 and incorporated herein by reference thereto.

 10.22

 Letter Agreement dated October 25, 2024, between the Company and Bidi Vapor, LLC*

 10.23

 Debt Exchange Agreement dated October 25, 2024, between the Company and Bidi Vapor, LLC*

 19.1

 Amended and Restated Insider Trading Policy*

 21.1

 List of Subsidiaries*

 23.1

 Consent of Independent Registered Public Accounting Firm*

 31.1

 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

 31.2

 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

 32.1

 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

 32.2

 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

 97.1

 Compensation Clawback Policy*

 101.INS

 Instance Document*

 101.SCH

 Taxonomy Extension Schema Document*

 101.CAL

 Calculation Linkbase Document*

 101.DEF

 Taxonomy Extension Definition Linkbase Document*

 101.LAB

 Extension Label Linkbase Document*

 101.PRE

 Cover Page Interactive

 *Filed herewith.

 + + Certain portions of this exhibit (indicated
by "[***]") have been omitted pursuant to Regulation S-K, Item 601(b)(10).as the Company has determined they are both
not material and are of the type that the Company treats as private or confidential.

 (1)

 Schedules and Exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any Schedule or Exhibit so furnished.

 Item 16. Form 10-K Summary.

 None.

 SIGNATURES

 Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

 Kaival Brands
 Innovations Group, Inc.

 By:

 /s/

 Interim Chief Executive

 Dated: February 7,
 2025

 Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

 By:

 /s/

 Interim Chief Executive Officer, Director

 Dated: February 7, 2025

 By:

 /s/ Eric
 Morris

 Eric Morris

 Interim Chief Financial Officer

 Dated: February 7, 2025

 By:

 /s/ David
 Worner

 David Worner

 Dated: February 7, 2025

 By:

 /s/ Kentankumar
 Patel

 Kentankumar Patel

 Dated: February 7, 2025

 By:

 /s/
 Ashesh Modi

 Ashesh Modi

 Dated: February
 7, 2025