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 2023-12-15

 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 WASHINGTON,
D.C. 20549

 FORM

 (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, 2023

 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

 Kaival Brands Innovations Group, Inc.

 (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

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 28, 2023, 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 $ 33,701,454 based on the closing price per share (or $12.60), of the registrant's
common stock as reported by The NASDAQ Stock Market LLC.

 As of February 13, 2024, there were 2,846,335 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, 2023

 PAGE

 Cautionary
Statement Regarding Forward-Looking Statements

 iii

 PART
I

 Item

 Business

 Item
1A

 Risk
Factors

 Item
1B

 Unresolved
Staff Comments

 Item

 Properties

 Item

 Legal
Proceedings

 Item

 Mine
Safety Disclosures

 PART
II

 Item

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

 Item

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

 Item
7A

 Quantitative
and Qualitative Disclosures about Market Risk

 Item

 Financial
Statements and Supplementary Data

 Item

 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

 PART
III

 Item

 Directors,
Executive Officers and Corporate Governance

 Item

 Executive
Compensation

 Item

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

 Item

 Certain
Relationships and Related Transactions, and Director Independence

 Item

 Principal
Accounting Fees and Services

 PART
IV

 Item

 Exhibits,
Financial Statement Schedules

 Item

 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, 2023 (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:

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

 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 August 2022 11 th Circuit Court of Appeals decision overturning the U.S. Food and Drug Administration's ("FDA") previous denial of Bidi's Premarket Tobacco Product Application ("PMTA") for its non-tobacco flavored BIDI Stick electronic nicotine delivery system ("ENDS"), which we are permitted to distribute in the U.S. subject to FDA enforcement and maintenance of all state licenses and permits, and the outcome of the FDA's pending review of such PMTA, the denial of which could have a substantial adverse impact on our company;

 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 QuikfillRx, LLC (now known as Kaival Marketing Services) to provide key sales, marketing and other support services to us;

 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;

 the influence on our company of Kaival Holdings, LLC, our majority shareholder which is controlled by Nirajkumar Patel, our Chief Science and Regulatory Officer and a director of our company, and the potential for conflicts of interests between Kaival Holdings and our company and our minority stockholders;

 - ii -

 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 such as COVID-19.

 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.

 - iii -

 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. Our primary product is the Bidi Stick as well as other products manufactured by our affiliate Bidi
Vapor LLC ("Bidi"). We hold the exclusive worldwide right to market and distribute the Bidi Stick and certain
other products manufactured by Bidi. Our current revenue generating activities are focused on driving sales growth of the BIDI
Stick, primarily through wholesale and traditional retail channels, including convenience stores. Along with our affiliate Bidi, which
bears the bulk of the responsibility for U.S. Food and Drug Administration ("FDA") and other regulatory matters relating to
its products, we are committed to steadfast compliance with established FDA requirements regarding the use of our products.

 At the same time, as the FDA regulatory
landscape and PMTA-related enforcement continues to evolve, we have faced challenges and industry-wide headwinds, which we are continuing
to navigate by pursuing new revenue opportunities by diversifying our platform through the distribution, development, and subsequent scaling
of other nicotine and non-nicotine products. An important goal for our company is to leverage our existing presence with our sales channels
to establish an efficient platform from which to create shareholder value by developing and growing
current and potentially new business lines, revenues and, ultimately, positive cash flows and profitability.

 Business Strategy

 In addition
to our focus on driving revenue through distribution of the BIDI Stick, we intend to build our revenue by executing key internal
strategic initiatives. 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 vendor and broker
 alliances to maximize targeted market penetration;

 Search
 for high-caliber, experienced talent that create 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;

 2024 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 other other
 distribution relationships.

 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

 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 presently distribute products to wholesalers and retailers of ENDS products, having ceased
all direct-to-consumer sales in February 2021. Nirajkumar Patel, our Chief Science and Regulatory Officer and director and an indirect
controlling shareholder of our company, owns Bidi.

 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. 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").

 We process all sales made to non-retail
customers, with all sales to non-retail customers made through Bidi's age-restricted website, www.wholesale.bidivapor.com. We ceased
all direct-to-consumer sales in February 2021 in order to better ensure youth access prevention and to comply with the Prevent All Cigarette
Trafficking Act (known as the PACT Act). We provide all customer service and support at our own expense. We set the minimum prices for
all sales made by us. We maintain adequate inventory levels of products in order to meet the demands of our non-retail customers and
deliver products sold to these customers.

 A key third party collaborator
of ours is QuikfillRx, a Florida limited liability company which does business as "Kaival Marketing Services" to reflect
its contributions to our company. QuikfillRx provides 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 provides these services
to us pursuant to a Services Agreement, most recently amended on November 9, 2022, which has a current term ending on October 31, 2025
(subject to potential one-year extensions) and pursuant to which QuikfillRx receives monthly cash compensation and was granted certain
equity compensation in the form of options.

 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 yet launched any Kaival-branded products, nor has it begun to provide white label wholesale solutions for other product manufacturers.

 We have, and may continue to,
utilize Kaival Labs to acquire or license complimentary businesses or assets. 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 assurances 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.

 FDA PMTA and MDO Determinations, Related Court
Actions and the Impact on Our Business

 Non-Tobacco Flavored BIDI
Sticks

 In September 2021, in connection
with the Bidi's Premarket Tobacco Product Application ("PMTA") process for BIDI Stick, the U.S.
Food and Drug Administration ("FDA") effectively "banned" non-tobacco flavored ENDS by denying nearly all then-pending
PMTAs for such products (including Bidi's). Following the issuance by the FDA of a related Marketing Denial Order ("MDO")
regarding these ENDS products, manufacturers were 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.

 On September
29, 2021, Bidi petitioned the U.S. Court of Appeals for the Eleventh Circuit (or the 11 th Circuit) to review the FDA's
denial of the PMTAs for its non-tobacco flavored BIDI Stick ENDS (including the Arctic BIDI Stick), arguing that it was arbitrary
and capricious under the Administrative Procedure Act (or the 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 (or the 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 non-tobacco flavored products compared to tobacco-flavored ENDS products, and that the FDA should have gone
through the notice and comment rulemaking process for this requirement.

 On August
23, 2022, the 11 th Circuit set aside (i.e., vacated) the MDO issued to the non-tobacco flavored BIDI Sticks and remanded
Bidi's PMTA back to the FDA for further review. Specifically, the 11 th Circuit held that the MDO was "arbitrary
and capricious" in violation of the APA because the 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 11 th Circuit's
opinion further indicated that the FDA did not properly review the data and evidence that it has long made clear are critical to the
"appropriate for the protection of the public health" standard for PMTAs set forth in the Tobacco Control Act including,
in Bidi's case, "product information, scientific safety testing, literature reviews, consumer insight surveys, and details
about our company's youth access prevention measures, distribution channels, and adult-focused marketing practices," which
"target only existing adult vapor product users, including current adult smokers," as well as our retailer monitoring program
and state-of-the-art anti-counterfeit authentication system. Because a MDO must be based on a consideration of the relevant factors,
such as the marketing and sales-access-restrictions plans, the denial order was deemed arbitrary and capricious, and vacated by the FDA.

 The
FDA did not appeal to the 11th 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.

 In
light of the 11 th Circuit decision, we have had the continued ability 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. 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. As none of these scenarios apply to Bidi, we believe the current risk of FDA enforcement
is low.

 Since
the PMTA was remanded, Bidi has continued to update its application with the results of new studies, including a nationwide population
prevalence study on the BIDI Stick that is currently undergoing peer review for publication.

 Classic
BIDI Stick

 Separately,
on or about May 13, 2022, the FDA placed the tobacco-flavored Classic BIDI Stick into the final Phase III scientific review, and
in September 2022 completed a remote regulatory assessment of Bidi and its contract manufacturer in China, SMISS Technology Co. LTD,
in relation to the pending PMTA for the Classic BIDI Stick.

 On
March 20, 2023 Bidi received its anticipated deficiency letter for the Classic BIDI Stick PMTA, outlining FDA's remaining
scientific questions. On June 18, 2023, Bidi, provided a timely, comprehensive response to the FDA's deficiency letter.

 On
January 22, 2024, FDA issued a MDO for the Classic BIDI Stick. While this development precludes us from marketing the Classic BIDI
Stick, which could have a material adverse affect on our company, the FDA's decision does not involve the ten PMTAs for Bidi Vapor ' s
non-tobacco flavored devices described above which are still under the FDA ' s scientific
review. Those ten products remain available for sale, subject to FDA ' s enforcement discretion.

 In response to the Classic BIDI
Stick MDO, on January 26, 2024, Bidi filed a petition requesting that the 11 th Circuit review the MDO, which Bidi believes
was, among other things, arbitrary and capricious, in violation of the Administrative Procedure Act. Bidi is also seeking a stay of the
MDO pending the outcome of the litigation. No assurances can be given on the outcome.

 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.

 In
the near term, we expect to seek 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.

 Marketing
Strategy

 Currently,
we market and place our ENDS products into national distribution channels through long-standing industry relationships in accordance
with the A&R Distribution Agreement and with the assistance of QuikfillRx. We process all sales made to non-retail customers.

 Our
long-term marketing strategy remains based on FDA compliance and our commitment to preventing underage access to our ENDS products. As
such, we steer away from social media marketing and, instead, are more focused on ground-level marketing and advertising within authorized
retailer locations (i.e., advertisement on retail partners' back-bar tobacco products area). Part of this ground-level marketing
effort focuses on supporting our authorized partner stores and distributors in spreading brand awareness of our ENDS products to their
adult (21 years of age and older) consumer base by providing in-store marketing materials.

 Retail
stores also have access to online informative videos about the Bidi story, which can be used to educate and assist in training all of
their staff members about the core values of Bidi. From a recycling initiative to the commitment to preventing underage ENDS use, and
stand against the illicit market of ENDS products, we believe that together with Bidi, we are taking the necessary steps to ensure that
our partners are aligned with our community goals.

 We
also attend trade shows at established expos throughout the United States and we have a dedicated sales and marketing team that focuses
on these efforts and more.

 We conduct our sales and marketing
activities in close coordination with our consultant QuikfillRx. Pursuant to our Service Agreement with QuikfillRx (most recently amended
as of November 9, 2022), QuikfillRx provides services and support relating to our sales management function (including, without limitation,
services and support relating to business planning and strategy development, staffing and recruitment, training and onboarding, direct
sales and marketing, and monitoring and results evaluation), website development and design, graphics, content, public communication,
social media, management and analytics, and market and other research.

 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.

 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.

 Resellers

 Currently, our potential distribution
network reach is approximately 48,000 stores in the United States. Our products can be found in many national and regional convenience-store
chains, such as QuikTrip and GPM Investments, as well as at convenience stores (known in the industry as "c-stores") serviced
through distributors such as S. Abraham and Sons and H.T. Hackney Co. Finally, our products are also accessible to adults 21 years of
age and older through the age-gated digital delivery service mobile application, GoPuff, in more than 50 cities across the United States.

 Concentrations

 Concentration of Purchases and Other Receivable -
Related Party:

 For the year ended October 31,
2023, 100% of the inventories of Products, consisting solely of the BIDI Stick, were purchased from Bidi, a related party company
that is owned by Nirajkumar Patel, our Chief Science and Regulatory Officer and director, in the amount of approximately $12.8 million,
as compared to $1.5 million for the year ended October 31, 2022.

 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 $1,5,21,491. In fiscal
year 2023, such inventories accounted for 100% of the total related party accounts payable. There was no related party accounts payable
balance as of October 31, 2022.

 Concentration of Revenues and Accounts Receivable:

 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 15%, (ii) H.T. Hackney Co generated approximately 14%, (iii) FAVS Business,
LLC generated approximately 14%, (iv) C Store Master generated approximately 13%, and (v) QuikTrip Corporation generated approximately
11%.

 For the year ended October 31, 2022, a substantial portion of our revenues
from the sale of Products, solely consisting of the BIDI Stick were derived from the following customers: (i) Favs Business, LLC
("Favs Business") generated approximately 31%, (ii) H.T. Hackney Co. generated approximately 15%, and (iii) GPM generated
approximately 12%. In addition, FAVS Business LLC, C Store Master, and QuikTrip Corporation accounted for approximately 35%, 35%, and
19% of the total accounts receivable from customers, respectively, as of October 31, 2023. Favs Business and QuikTrip Corporation accounted
for approximately 65% and 15% of the total accounts receivable from customers, respectively, as of October 31, 2022.

 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 several 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.

 Competition

 Because we solely distribute Bidi's
products, which comprises all our business operations, Bidi's competitors in the ENDS industry are indirect competitors of ours.
Many of these competitors in the ENDS industry are better capitalized than we are and have access to greater resources, financial, and
otherwise. We believe that our ability, and Bidi's ability, to effectively compete in the industry and acquire a strong market
position is, and will continue to be, in large part due to the growing recognition of the Bidi brand name, the perceived quality of each
of our products, and the ongoing efforts of our sales, marketing, and distribution teams. Through Bidi, we compete against, just to name
a few, what we refer to as "big tobacco" companies, including Altria Group, Inc. (formerly Philip Morris); British American
Tobacco p.l.c. (formerly Reynolds); Swedish Match; Swisher International; and manufacturers including U.K. based Imperial Brands, PLC,
NJOY, and Logic Technology. "Big tobacco" has substantially greater resources, and a customer base that has historically
demonstrated loyalty to their brands, which can pose a significant hurdle to competitors operating in the same, or similar, industries.

 Competition in the ENDS industry
is based upon not only brand quality and positioning but also on price, packaging, promotion, and retail availability and visibility.
Given the decreasing prevalence and public acceptance of cigarette consumption, the "big tobacco" companies continue to demonstrate
an increased interest and participation in other/additional tobacco industries/markets. As such, we consider the "big tobacco"
companies to be our primary competitors now, but it is our belief that we have the capability to compete successfully.

 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 eighteen 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,
web development, warehouse staff, 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 are Nirajkumar Patel and Eric Mosser (a former executive and director 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 12 existing patents and 46 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.

 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, 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-21 reverse stock split (the "2024 Reverse Stock Split") of the shares of our Common Stock. The 2024 Reverse
Stock Split became 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 our 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, 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. The par value per share of our Common Stock
was not affected by the 2024 Reverse Stock Split.

 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 Our Business and Industry

 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, 2023, we had cash and cash equivalents of only approximately $0.5 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 our debt 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. If adequate funds are not available,
we may be required to delay, reduce the scope of or eliminate one or more of our new products in development.

 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.

 We currently rely exclusively on Bidi as the
supplier of the Bidi products that we distribute. The loss of this relationship, or any negative impacts on Bidi's ability to manufacture
the Bidi products, would severely harm our business.

 Pursuant to the A&R Distribution
Agreement between us and Bidi, Bidi has engaged us to act as the sole distributor of the ENDS products and related components, including
the BIDI Stick, manufactured by Bidi. Any failure by Bidi to fulfil its obligation under the A&R Distribution Agreement could
have a material adverse effect on our revenue and operating results and operating cash flows; and could impair the strength of our brand.

 In addition, because of our dependence
on Bidi as the exclusive supplier of our products, any loss of our relationship with Bidi, or any adverse change in the financial health
of Bidi that would affect its ability to perform its obligations under the A&R Distribution Agreement, would have a material adverse
effect on our revenue, operating results, and ability to run our business.

 Further, Bidi is subject to supply
shortages and interruptions, long lead times, and act-of-God events such as global pandemics, weather related catastrophes, or conflict,
any of which could disrupt the operations of Bidi and have a material adverse impact on our results of operations. We may be unable to
identify or contract with new suppliers or producers in the event of a disruption to our supply and could experience a material adverse
effect on our revenue, operating results, and ability to run our business.

 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 outsource key sales and marketing and other
key functions to QuikfillRx, and the loss of this relationship would damage our business.

 We conduct our sales and marketing
activities in close coordination with our consultant QuikfillRx. Pursuant to our agreement with QuikfillRx (most recently amended in
November 2022), QuikfillRx provides key services to us. We are therefore reliant on our relationship with QuikfillRx, and the loss of
that relationship for any reason would significantly damage our ability to operate our business.

 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. Specifically, the Court held that the MDO was "arbitrary and capricious" in violation of the Administrative
Procedure Act ("APA") because the 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 opinion further indicated
that the FDA did not properly review the data and evidence that it has long made clear are critical to the "appropriate for the
protection of the public health" standard for PMTAs set forth in the Tobacco Control Act including, in Bidi's case, "product
information, scientific safety testing, literature reviews, consumer insight surveys, and details about the company's youth access
prevention measures, distribution channels, and adult-focused marketing practices," which "target only existing adult vapor
product users, including current adult smokers," as well as our retailer monitoring program and state-of-the-art anti-counterfeit
authentication system. Because an MDO must be based on a consideration of the relevant factors, such as the marketing and sales-access-restrictions
plans, the denial order was deemed arbitrary and capricious, and vacated by the FDA. The FDA did not appeal the 11th Circuit's decision.

 In the meantime, Bidi has been
able to continue marketing and selling the non-tobacco flavored BIDI Sticks, subject to FDA's enforcement discretion, for
the duration of the PMTA scientific review. 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. As none of these scenarios
apply to Bidi, we believe the risk of FDA enforcement is low. However, there is a risk that Bidi's PMTA for non-tobacco flavored
BIDI Sticks will be denied, which would have a significant adverse affect 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, which Bidi is contesting via a petition for review with the 11 th
Circuit. The January 2024 MDO regarding Classic BIDI Stick has had an adverse impact on our business, and the outcome of Bidi's
11 th Circuit petition is uncertain and will likely take many months or longer to resolve. Our continuing inability to sell
Classic BIDI Stick could continue to cause material impediments to our ability to operate our business and cause a material adverse
affect on our results of operations.

 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 has
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 four states have banned the sale of flavored
ENDS (e.g., New York, New Jersey, Rhode Island, and Massachusetts), with several more considering similar bans (e.g., Maryland, California,
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 zero marketing authorizations for non-tobacco flavored 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 four states have banned the sale of flavored ENDS (e.g., New York, New Jersey,
Rhode Island, and Massachusetts), with several more considering similar bans (e.g., Maryland, California, 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, 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.

 We have grown significantly in
a short amount of time and intend to continue to grow in the future. However, any future growth will place additional demands on our
resources, and we cannot be sure we will be able to manage our growth effectively. 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 management, especially our Executive Chairman and Interim Chief Executive Officer and President, Barry Hopkins,
our Chief Financial Officer, Treasurer and Secretary, Thomas Metzler, our Chief Operating Officer, Stephen Sheriff and our Chief Science
& Regulatory Officer, Nirajkumar Patel. If one or more of our executive officers are unable or unwilling to continue in their present
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. The initial Series B Preferred Director is Mr. James P. Cassidy. 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. On January 26, 2022, Nasdaq notified us that we were not in compliance with the requirement to
maintain a minimum closing bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule"),
because the closing bid price of our Common Stock was below $1.00 per share for 30 consecutive business days. While this listing deficiency
was cured, on January 30, 2023, Nasdaq again notified us that we were not in compliance with the Bid Price Rule given that our Common
Stock had traded at below $1.00 for 30 consecutive business days. While we regard compliance with the Bid Price Rule as of February
8, 2024 as a result of our January 2024 reverse stock split, we remain subject to the risk that our Common Stock price could again fall
below $1.00 and we may again become subject to delisting for failure to comply with the Bid Price Rule.

 Moreover, on November 7, 2023,
we received written notice from Nasdaq stating that we failed to hold an annual meeting of shareholders within twelve (12) months after
our fiscal year ended on October 31, 2022, as required by Nasdaq Listing Rule 5620(a) (or the Annual Meeting Listing Rule). We submitted
a plan of compliance to Nasdaq and have been granted until April 29, 2024 to hold our annual meeting.

 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 shareholder 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 shareholder Kaival Holdings 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 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, our affiliated majority stockholder, together with our officers and
directors, beneficially own a combined total of approximately 68,64% 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 stockholder, 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. In particular, the interests of Kaival
Holdings (which is controlled by Nirajkumar Patel, our Chief Science and Regulatory Officer and director) may not always coincide with
our interests or the interests of other stockholders, which could cause Mr. Patel to become subject to conflicts of interests which may
not be resolved in favor of our minority stockholders. Mr. Patel also controls Bidi, our principal commercial partner, as well as the
entity that is the landlord of our principal officer and warehouse, all of which creates the potential for conflicts of interest for Mr.
Patel. 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 interests 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, 2023. Specifically, our management has found that our internal control system over financial reporting was ineffective
as of October 31, 2023, 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, 2023, our Chief Executive Officer and our 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 2. Properties.

 On August 1, 2020, we began leasing
office space consisting of 1,595 square feet as our main corporate office in Grant, Florida for $1,000 per month. The five-year lease
agreement is with a related party, Just Pick, LLC ("Just Pick"). Nirajkumar Patel, our Chief Science and Regulatory Officer
and director, is also an officer of Just Pick. We believe our office space is sufficient to meet our current needs.

 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 by our Chief Science and Regulatory Officer and director, Nirajkumar Patel. 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 or positive impact on our ability to operate our business given
our reliance on Bidi.

 Item 4. Mine Safety Disclosures.

 Not applicable.

 PART
II

 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 8, 2024, the last reported sales price of our Common Stock was $2.70.

 Holders

 As of February 6, we had approximately
 7,400 record holders of our Common Stock.

 Dividends

 Our authorized Common Stock consists
of 1,000,000,000 shares with a par value of $0.001 per share. There were 2,793,386 shares
of Common Stock issued and outstanding as of October 31, 2023 as compared to 2,674,718
shares of the Common Stock issued and outstanding as of October 31, 2022.

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

 Common Stock

 Our authorized Common Stock consists of 1,000,000,000 shares with a par value
of $0.001 per share. There were 2,793,386 shares of Common Stock issued and outstanding
as of October 31, 2023 as compared to 2,674,718 shares of the Common Stock issued and outstanding
as of October 31, 2022.

 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.

 During the year ended October
31, 2023, we issued 19,048 shares of Common Stock as part of a loan transaction with AJB Investments entered into on August 9, 2023.
Such loan has been repaid in full as of the date of this Report.

 During the fiscal year ended October
31, 2022, third parties exercised warrants to purchase 40,744 shares of our Common Stock for net proceeds of $1,625,650.

the fiscal year ended October 31, 2022, we issued 5,870 shares of Common Stock with the fair value of $172,379 to employees for
services RSUs that were settled with common shares. Of the shares issued to employees, 2,130 shares were withheld by us to satisfy tax
withholding obligations equal to $59,862.

 During the fiscal year ended October
31, 2022, 618 shares of our Common Stock were issued to an individual as compensation for consulting services rendered to us. We issued
the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance of
shares of our Common Stock did not involve any public offering).

 During the fiscal year ended October
31, 2022, 731 shares of our Common Stock were issued to QuikfillRx, LLC as compensation for marketing and promotion services rendered
to us. We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that
the issuance of shares of our Common Stock did not involve any public offering).

 During the fiscal year ended October
31, 2022, 539 shares of our Common Stock were issued to an individual as compensation for professional legal services rendered to us.
We issued the shares in reliance on the exemption from registration pursuant to Section 4(a)(2) of the Securities Act (in that the issuance
of shares of our Common Stock did not involve any public offering).

 During the fiscal year ended,
October 31, 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.

 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).

 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, 2023, 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

 Our
business is focused on the sales, marketing and distribution of ENDS products, also known as "e-cigarettes", in a variety
of favors. Our primary product is the Bidi Stick as well as other products manufactured by our affiliate Bidi. We hold
the exclusive worldwide right to market and distribute the Bidi Stick and certain other products manufactured by Bidi.
We intend to drive revenue growth primarily through wholesale and traditional retail channels, including convenience stores.

to the A&R Distribution Agreement, Bidi granted us an exclusive worldwide right to distribute Bidi's ENDS and related components
(as more particularly set forth in the A&R Distribution Agreement and referred to herein as the products) 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 presently distribute products to wholesalers and retailers
of ENDS products, having ceased all direct-to-consumer sales in February 2021. Nirajkumar Patel, our Chief Science and Regulatory Officer
and director and an indirect controlling stockholder of our company, owns Bidi.

 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. 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 the products.

 We process all sales made only to non-retail customers, with all sales to
non-retail customers made through Bidi's age-restricted website, www.wholesale.bidivapor.com. We ceased all direct-to-consumer
sales in February 2021 in order to better ensure youth access prevention and to comply with the Prevent All Cigarette Trafficking (or
PACT) Act. We provide all customer service and support at our own expense through QuikfillRx as described below. We set the minimum prices
for all sales made by us. We maintain adequate inventory levels of products in order to meet the demands of our non-retail customers and
deliver the products sold to these customers.

 A key
third party collaborator of ours is QuikfillRx, which does business as "Kaival Marketing Services" to reflect its contributions
to our company. QuikfillRx provides us 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. QuikfillRx provides these
services to us pursuant to a Services Agreement, most recently amended on November 9, 2022, which has a current term ending on October
31, 2025 (subject to potential one-year extensions) and pursuant to which QuikfillRx receives monthly cash compensation and was granted
certain equity compensation in the form of options.

 We have
also maintain key international licensing agreements with Philip Morris and its affiliates as described under Item 1 – Business.

 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.

 Dependence on Bidi
and Nirajkumar Patel

 We are wholly dependent on Bidi
to supply the BIDI Sticks to us for distribution. Accordingly, any supply or other issues that impact Bidi indirectly impact us
and our ability to operate our business. Moreover, and while we are seeking to diversify our product offerings, the loss of our relationship
with Bidi would substantially harm the viability of our business, which constitutes an on-going risk factor to our business.

 Bidi is controlled by Nirajkumar
Patel, our Chief Science and Regulatory Officer and a director of our company. Moreover, Kaival Holdings, an entity controlled by Mr.
Patel, is our majority stockholder. In addition, our corporate headquarters is leased to us by an affiliate of Mr. Patel. Therefore, Mr.
Patel has the power and ability to control or influence our business. As of October 31, 2023 our company had an accounts payable to Mr.
Patel and Bidi in the amount of $2,474,817.

 Dependence on QuikfillRx,
LLC and Distributors

 We are
substantially dependent on QuikfillRx, LLC (d/b/a Kaival Marketing Services, or KMS) to provide key marketing, sales and other support
services to us. In addition, we rely on third-party brokers and distributors to introduce and place our products into our historic foundation
of convenience stores and more recently into new retail channels, including dollar, grocery and mass-merchandisers. The loss of one or
more of these key relationships would have a material adverse effect on our business.

 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

 Our
products (including both our core Bidi Stick products and any products that we may develop from the GoFire assets) are and will be heavily
regulated by the FDA, which has broad regulatory powers. As described under Item 1 – Business – FDA PMTA and MDO Determinations,
Related Court Actions and the Impact on Our Business, the outcome FDA actions and related proceedings against or by Bidi (including the
January 2024 MDO regarding Classic Bidi Sticks) could have a material adverse impact on our ability to operate our business given our
reliance on Bidi. 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. For example, in November 2022 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 have banned flavored ENDS, including New York, New Jersey, Rhode Island, and Massachusetts, with several
more considering similar bans (e.g., Maryland, and Connecticut).

 Also,
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 Bidi products we sell.

 In
addition, 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 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.

 Ability
to Meet Demand for our Products

 Increased demand for our products
and have opened new distribution channels for us through which we can sell our products. However, a sharp increase in demand for products
will require us to use 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 products. Our inability to fulfill this demand will damage our reputation and could materially impact
on our ability to increase sales of products which, in turn, would adversely impact the results of our 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 and Russia's February 2022
invasion of Ukraine 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 products could have a materially adverse effect on the 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 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's 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.

 Our management plans to continue
similar operations with increased marketing and enhanced efforts to increase sales, which we believe will result in increased revenue
and ultimately net income and positive cash flow from operations.

 However, there is no assurance
that our plans will be able to generate expected or greater amounts of revenues or ever 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 have sufficient
cash on hand as of the date of this Report to support our operations for at least 12 months. As of October 31, 2023, we had working capital
of approximately $2 million and total cash of approximately $0.5 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, increased
costs and our potential plan to redeem for cash the shares of our Series B Preferred Stock issued in connection with our GoFire asset
purchase in May 2023. Our efforts are directed toward generating positive cash flow and, ultimately, profitability. As our efforts during
our fiscal 2023 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
increase 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 $3.0 million for fiscal year ended 2023, compared to cash flow used in operations of approximately $5.7 million for
fiscal year ended 2022. The decrease in cash flows used in operations for the fiscal year ended 2023 compared to the fiscal year ended
2022 was primarily due to changes in Other receivable – related party, 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 $315,769 for the fiscal year ended 2023, compared to zero cash flow used in investing activities for the fiscal year ended
2022. 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 $136,789 for the fiscal year ended 2023, compared to $1.6 million provided by financing activities for the fiscal year
ended 2022. The cash provided by financing activities for the fiscal year ended 2023 consisted primarily of short-term financing.

 Results of Operations

 Fiscal year ended
October 31, 2023, compared to fiscal year ended October 31, 2022

 Revenues:

 Revenues
for fiscal year 2023 were approximately $13.1 million, compared to
approximately $12.8 million in fiscal year 2022. Revenues slightly increased in fiscal year 2023, primarily due to royalties received
from PMPSA.

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

 Gross
profit in fiscal year 2023 was approximately $2.6 million, compared to approximately $1.2 million for fiscal year 2022. Total cost of
revenue was approximately $10.5 million for fiscal year 2023, compared to approximately $11.5 million for fiscal year 2022. The
increase in gross profit volume is primarily driven by the decrease in cost of revenue.

 Operating Expenses:

 Total operating expenses
were approximately $13.2 million for fiscal year 2023, compared to approximately $15.6 million for fiscal year 2022. For the fiscal year
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 $2.0 million. In fiscal year 2022, operating expenses consisted primarily of advertising
and promotion fees of approximately $2.7 million, stock option compensation expense of approximately $6.0 million, professional fees of
approximately $3.2 million, salaries and wages of $1.7 million, and all other general and administrative expenses of approximately $2.0
million. We expect future operating expenses to increase as we seek to generate increased sales growth and invest in our infrastructure
to support the planned business growth.

 Income Taxes:

 We
have Federal net operating loss ("NOL") carryforwards of approximately $23.8 million and state NOL carryforwards of approximately
$186 thousand. 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 2021 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. Management determined that a valuation allowance of approximately
$7.3 million for the year ended on October 31, 2023, 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 2023 was approximately $11.1 million, or $(4.13) basic and diluted net loss per share, compared to a net loss of
approximately $(14.4) million, or $(7.60) basic and diluted net loss per share, for fiscal year 2022. The decrease in net loss for
the fiscal year 2023, as compared to net loss in fiscal year 2022, is attributable to the revenues and expenses factors noted above.
Weighted-average Common Stock outstanding were 2,721,080 on October 31, 2023, as compared to 1,890,971 on October 31, 2022. The increase
in the weighted-average shares in fiscal year 2023 was primarily attributable to the issuance of 118,668 shares of Common Stock.

 Accrued Expenses:

 During fiscal year 2023, we accrued
approximately $81,300 for two quarterly bonuses and approximately $58,400 for approved expenses payable to QuikfillRx based on our applicable
gross quarterly sales for the six months ended October 31, 2023. During fiscal year 2022, we accrued approximately $33,900 for a quarterly
bonus and approximately $18,000 for approved expenses payable to QuikfillRx based on our applicable gross quarterly sales for the three
months ended October 31, 2022. Excise taxes totaling approximately $5,800 were accrued based on taxable sales during the fourth
quarter of fiscal year 2023, compared to excise taxes of approximately $6,600 that were accrued in fiscal year 2022 based on taxable
sales during the fourth quarter of fiscal year 2022.

 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,
2023, 100% of the inventories of products, consisting solely of the BIDI Stick, were purchased from Bidi, a related party
company that is owned by Nirajkumar Patel, our Chief Science and Regulatory Officer and director, in the amount of approximately $12.8 million,
as compared to $1.5 million for the year ended October 31, 2022.

 On
October 31, 2023, a credit of $3.0 million was applied from the related-party receivable balance to the related part 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 related to purchases of inventories was $1.5 million.
There was no related party accounts payable balance as of October 31, 2022. As of October 31,2022, we had a related party receivable balance
due from Bidi of $3,704,132 of which $1,539,486 and $2,164,646 were classified as current and non-current respectively.

 Concentration of Revenues and Accounts Receivable:

 For the fiscal year 2023, (i)
approximately 15% 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 14% from H.T. Hackney Co in the amount of $1.8 million,
(iii) approximately 14% from FAVS Business, LLC in the amount of $1.8 million, (iv) approximately 13% from C Store Master in the amount
of $1.8 million, and (v) approximately 11% from QuikTrip Corporation in the amount of $1.5 million. For the fiscal year 2022, (i) approximately
31% of the revenue from the sale of Products, solely consisting of the BIDI Stick, was generated from Favs Business
in the amount of approximately $3.9 million, (ii) approximately 15% of the revenue from the sale of the Products was generated from H.T.
Hackney Co. in the amount of approximately $1.9 million, and (iii) approximately 12% of the revenue from the sale of Products, solely
consisting of the BIDI Stick, was generated from GPM, in the amount of approximately $1.5 million.

 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. Favs Business with an outstanding balance of approximately $375,000 and QuikTrip Corporation, with
an outstanding balance of approximately $85,000, accounted for approximately 65% and 15% of the total accounts receivable from customers,
respectively, as of October 31, 2022.

 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, 2023, or October 31, 2022. Cash on October 31, 2023, and October 31, 2022, were $0.5 million and $3.7 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. We adopted ASC 606, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), in the
second quarter of fiscal year 2020, as this was the first quarter that we generated revenues. Under 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 it 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)

Balance Sheets

Statements of Operations

Statements of Changes in Stockholders' Equity

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

 Kaival Brands Innovations Group, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance
sheet s of Kaival Brands Innovations Group, Inc. and its subsidiaries (collectively, the "Company")
as of October 31, 2023 and 2022, 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, 2023 and 2022,
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 raise 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 13, 2024

 F- 2

 Kaival Brands Innovations
Group, Inc.

Balance Sheets

 ASSETS

 CURRENT
ASSETS:

 Cash

 $

 533,659

 $

 3,685,893

 Accounts
receivable

 1,869,276

 574,606

 Other
receivable - related party - short term

 —

 1,539,486

 Inventories, net

 4,071,824

 1,239,725

 Prepaid
expenses

 430,668

 426,407

 Income
tax receivable

 —

 1,607,302

 Total
current assets

 6,905,427

 9,073,419

 Fixed
assets, net

 2,842

 —

 Intangible
assets, net

 11,468,309

 —

 Other
receivable - related party - net of current portion

 —

 2,164,646

 Right
of use asset - operating lease

 1,008,428

 1,198,969

 TOTAL
ASSETS

 $

 19,385,006

 $

 12,437,034

 LIABILITIES
AND STOCKHOLDERS' EQUITY

 CURRENT
LIABILITIES:

 Accounts
payable

 $

 374,332

 $

 40,023

 Accounts
payable - related party

 2,474,817

 —

 Loans
payable, net

 799,471

 —

 Accrued
expenses

 736,194

 1,099,157

 Customer
deposits

 —

 44,973

 Customer
refund due

 392,406

 —

 Deferred
revenue

 —

 235,274

lease obligation - short term

 184,568

 166,051

 Total
current liabilities

 4,961,788

 1,585,478

 LONG
TERM LIABILITIES:

lease obligation, net of current portion

 866,207

 1,050,776

 TOTAL
LIABILITIES

 5,827,995

 2,636,254

 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, 2023 and October 31, 2022, respectively)

 —

 —

 Series
B Convertible Preferred stock ($ 0.001 par value, 900,000 shares authorized, 900,000 and none issued and outstanding
as of October 31, 2023 and October 31, 2022, respectively)

 —

stock

 ($ 0.001
par value, 1,000,000,000 shares authorized, 2,793,386 and 2,674,718 shares issued and outstanding as of October 31, 2023 and October
31, 2022, respectively)

 2,793

 2,675

 Additional
paid-in capital

 44,317,266

 29,429,281

 Accumulated
deficit

 ( 30,763,948

)

 ( 19,631,176

)

 Total
Stockholders' Equity

 13,557,011

 9,800,780

 TOTAL
LIABILITIES & EQUITY

 $

 19,385,006

 $

 12,437,034

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

 F- 3

 Kaival Brands Innovations
Group, Inc.

Statements of Operations

 For
the Years Ended October 31,

 2023

 2022

 Revenues

 Revenues,
net

 $

 12,395,134

 $

 12,701,539

 Revenues
- related party

 10,828

 68,139

 Royalty
revenue

 780,929

 117,292

 Excise
tax on products

 ( 99,873

)

 ( 125,513

)

 Total
revenues, net

 13,087,018

 12,761,457

 Cost
of revenues

 Cost
of revenue - related party

 10,512,423

 11,345,912

 Cost
of revenue - other

 —

 174,520

 Total
cost of revenue

 10,512,423

 11,520,432

 Gross
profit

 2,574,595

 1,241,025

expenses

 Advertising
and promotion

 2,450,721

 2,679,308

 General
and administrative expenses

 10,787,775

 12,950,373

 Total
operating expenses

 13,238,496

 15,629,681

 Other
income (expense)

 Interest
expense, net

 ( 466,523

)

 Total
other income (expense)

 ( 466,523

)

 Loss
before income taxes provision

 ( 11,130,424

)

 ( 14,388,652

)

 Provision
for (benefit from) income taxes

 2,348

)

 Net
loss

 ( 11,132,772

)

)

 Preferred
stock dividend

 ( 112,500

)

 —

 Net
loss attributable to common shareholders

 $

 ( 11,245,272

)

 $

)

 Net
loss per common share - basic and diluted

 $

 ( 4.13

)

 $

 ( 7.60

)

 Weighted
average number of common shares outstanding - basic and diluted

 2,721,080

 1,890,971

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

 F- 4

 Kaival
 Brands Innovations Group, Inc.

 Statements of Changes in Stockholders' Equity

 For
 the years ended October 31, 2023, and 2022

 Convertible
Preferred Shares

 Par
Value Convertible Preferred Shares

 Convertible
Preferred Shares

 Par
Value Convertible Preferred Shares

Shares

 Par
Value Common Shares

 Additional
Paid-in Capital

 Accumulated
Deficit

 Total

 (Series
A)

 (Series
A)

 (Series
B)

 (Series
B)

 Balances, October
31, 2021

 3,000,000

 $

 3,000

 —

 $

 —

 1,437,869

 $

 1,438

 $

 21,580,716

 $

 ( 5,260,841

)

 $

 16,324,313

 Stock
Issued for Services - RSUs

 —

 —

 —

 —

 5,870

 172,373

 —

 172,379

shares settled and cancelled

 —

 —

 —

 —

 ( 2,130

)

 ( 2

)

 ( 59,860

)

 —

 ( 59,862

)

stock issued for compensation

 —

 —

 —

 —

 1,888

 65,321

 —

 65,323

 Exercise of
common stock warrants

 —

 —

 —

 —

 40,744

 1,625,609

 —

 1,625,650

 Converted
Series A Convertible Preferred Stock

 ( 3,000,000

)

 ( 3,000

)

 —

 —

 1,190,477

 1,190

 1,810

 —

 —

 Stock
option expense

 —

 —

 —

 —

 —

 —

 6,043,312

 —

 6,043,312

 Net
loss

 —

 —

 —

 —

 —

 —

 —

)

)

 Balances, October

 —

 $

 —

 —

 $

 —

 2,674,718

 $

 2,675

 $

 29,429,281

 $

 ( 19,631,176

)

 $

 9,800,780

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

shares issued for services

 —

 —

 —

 —

 4,381

 51,506

 —

 51,510

shares issued for loan

 —

 —

 —

 —

 19,048

 130,459

 130,478

 Stock
option expense

 —

 —

 —

 —

 —

 —

 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

 —

 $

 —

 900,000

 $

 2,793,386

 $

 2,793

 $

 44,317,266

 $

 ( 30,763,948

)

 13,557,011

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

 F- 5

 Kaival Brands Innovations
Group, Inc.

Statements of Cash Flows

 For
the Year Ended

 For
the Year Ended

 CASH
FLOWS FROM OPERATING ACTIVITIES

 Net loss

 $

 ( 11,132,772

)

 $

)

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

 Stock based compensation

 —

 237,702

 Stock options expense

 3,168,430

 6,043,312

 Stock warrants expense

 218,909

 —

 Depreciation and amortization

 328,304

 —

 Amortization
of debt discount

 463,160

 —

 Bad debt expense

 47,727

 —

 ROU operating lease expense

 190,541

 132,890

 Inventory reserve

 381,512

 —

 Write-off of inventory

 105,057

 259,563

 Changes in current assets and
liabilities:

 Accounts receivable

 ( 1,342,397)

 1,410,580

 Other receivable - related party

 3,704,132

 ( 3,704,132

)

 Prepaid expenses

 325,739

 ( 106,876

)

 Inventory

 ( 3,318,668

)

 13,827,082

 Inventory deposit - related party

 —

 2,925,000

 Income tax receivable

 1,607,302

 146,292

 Accounts payable

 334,309

 ( 202,806

)

 Accounts payable - related party

 2,474,817

 ( 12,667,769

)

 Accrued expenses

 ( 475,463

)

 519,553

 Deferred revenue

 ( 235,274

)

 235,274

 Customer deposits

 ( 44,973

)

 44,973

 Customer refunds due

 392,406

 ( 316,800

)

 Right of use liabilities - operating
lease

 ( 166,052

)

 ( 118,633

)

 Net cash used in operating activities

 ( 2,973,254

)

 ( 5,705,130

)

 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 the exercise of
warrants

 —

 1,625,650

 Settled RSU shares with cash

 —

 ( 59,862

)

 Proceeds from loans payable

 1,272,980

 —

 Payments on loans payable

 ( 1,136,191

)

 —

 Net cash provided by financing
activities

 136,789

 1,565,788

 Net change in cash

 $

 ( 3,152,234

)

 $

 ( 4,139,342

)

 Beginning cash balance

 3,685,893

 7,825,235

 Ending cash balance

 $

 533,659

 $

 3,685,893

 SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:

 Interest paid

 $

 3,363

 $

 —

 Income taxes paid

 $

 —

 $

 —

 NON-CASH
TRANSACTIONS

 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

 $

 —

 Preferred stock dividend

 $

 112,500

 $

 —

 Insurance financed by third party

 $

 330,000

 $

 —

stock issued for note payable financing

 $

 130,478

 $

 —

 Conversion of Series A Preferred
Stock Shares to Common Stock Shares

 $

 —

 $

 25,000

 New ROU leased asset recognized

 $

 —

 $

 1,276,255

 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.

 Current Description of Business

 The
Company is focused on growing and incubating innovative and profitable products into mature, dominant brands. 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"),
a related party company that is also owned by Nirajkumar Patel, the Chief Science and Regulatory Officer and director of the Company.
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." The Company ceased all direct-to-consumer sales in February 2021.

 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").

 F- 7

 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.

 Current 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. 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.

 COVID-19

 In January 2020, the World
Health Organization (the "WHO") announced a global health emergency because of a new strain of coronavirus ("COVID-19")
originating in Wuhan, China and the risks to the international community as the virus spread globally beyond its point of origin. In
March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure.

 The Company was indirectly
impacted by supply chain issues and regulatory oversight. The Company believes that many retailers and distributers relaxed their compliance
standards as an indirect result of COVID-19 for two reasons: (i) government enforcement of regulations was very limited due to imposed
social restrictions, resulting in less in-person monitor enforcement by government officials and (ii) retail stores experienced light
foot traffic from customers due to COVID-19 restrictions and fears, which resulted in relaxed compliance in an effort to generate additional
revenue.

 Impact of FDA PMTA Determinations and August 2022
11 th Circuit Decision

 In September 2021, in connection with the PMTA process,
the 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 challenged 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
the FDA 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 flavored ENDS product, and not strictly a menthol flavored product.

 F- 8

 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 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. 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 11th Circuit. On February 1, 2022, the appellate court granted Bidi's motion to stay (i.e., put
on hold) the MDO, 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 Premarket Tobacco
Product Application ("PMTA") 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 the 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 opinion further indicated that the FDA did not
properly review the data and evidence that it has long made clear are critical to the appropriate for the protection of the public health
("APPH") standard for PMTAs set forth in the Tobacco Control Act including, in Bidi's case, "product information,
scientific safety testing, literature reviews, consumer insight surveys, and details about the company's youth access prevention
measures, distribution channels, and adult-focused marketing practices," which "target only existing adult vapor product
users, including current adult smokers," as well as the Company's retailer monitoring program and state-of-the-art anti-counterfeit
authentication system. Because a MDO must be based on a consideration of the relevant factors, such as the marketing and sales-access-restrictions
plans, the denial order was deemed arbitrary and capricious, and vacated by the FDA.

 The FDA did not appeal the 11th Circuit's decision.
The Agency 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.

 In the meantime, the Company anticipates continued
ability 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. The Company cannot provide any assurances as to the
timing or outcome.

 F- 9

 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. 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.

 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 Kaival Brands International. 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, 2023, and October 31, 2022.

 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 $ 252,586
and $ 2,912,793
as of October 31, 2023, and October 31, 2022, respectively.

 Advertising and Promotion

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

 F- 10

 Accounts Receivable and Allowance for Doubtful Accounts

 Receivables are stated at cost, net of an allowance
for doubtful accounts. The Company establishes an allowance for doubtful accounts based on the management's assessment of the collectability
of accounts receivable. A considerable amount of judgment is required in assessing the amount of the allowance and the Company considers
the historical level of credit losses and collection history and applies percentages to aged receivable categories. The Company makes
judgments about the creditworthiness of debtors based on ongoing credit evaluations and monitors current economic trends that might impact
the level of credit losses in the future. If the financial condition of the debtors were to deteriorate, resulting in their inability
to make payments, a larger allowance may be required. As of October 31, 2023, based upon management's assessment of the accounts
receivable aging and the customers' payment history, the Company has determined that no allowance for doubtful accounts is required.
The Company also had no allowance for doubtful accounts as of October 31, 2022.

 On January 22, 2024, the FDA issued an MDO on Bidi
Vapor's "Classic" BIDI Stick PMTA. 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 $ 113,243 as of October 31, 2023
which is included in accrued expenses in the consolidated balance sheets in order to comply with ASC 855 Subsequent Events. See Note 12.

 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. As of October 31, 2023, the inventories only consisted of finished
goods and were located in three locations; the Kaival main warehouse and two customer warehouses whose service agreements are on
a consignment basis with Kaival. During fiscal year 2023, the Company had a write-off of $ 105,057 related to short-coded Bidi sticks
that were no longer able to be sold. Based upon fiscal year 2023 inventory management procedures and their results, the Company has determined
that no allowance for inventory is required as of October 31, 2022.

 On January 22, 2024, the FDA issued an MDO on Bidi
Vapor's "Classic" BIDI Stick PMTA. 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 $381,512 as of October 31, 2023 in
order to comply with ASC 855 Subsequent Events. See Note 12.

 Revenue Recognition

 The Company adopted ASC 606, Revenue from
Contracts with Customers (Topic 606) ("ASC 606"), in the second quarter of fiscal year 2020, as this was the first
quarter that the Company generated revenues. Under 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, 2023, and October
31, 2022, the Company has $ 0 and $ 44,973 in deposits from customers, respectively, which is included with the Company's current
liabilities. As of October 31, 2023, and October 31, 2022, the Company has $ 0 and $ 235,274 in deferred income from PMI guaranteed royalty
revenue prepayments, respectively, which is included with the Company's current liabilities.

 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, 2023, and October 31, 2022, the Company had $ 392,406 and $ 0 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. 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.

 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. 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.

 F- 12

 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 thought 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.

 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, 2023, the
Company paid license fees of approximately $150,000 to Bidi. As of October 31, 2023 and 2022, no additional license fees are owed to Bidi.

 F- 13

 Concentration of Revenues and Accounts Receivable

 For the fiscal year 2023, (i) approximately 15% 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) approximately 14% or $ 1,842,511 was generated from H.T. Hackney Co, (iii) approximately 14% or $ 1,817,310 was generated from FAVS
Business, LLC, (iv) approximately 13% or $ 1,759,563 was generated from C Store Master, and (v) approximately 11% or $ 1,501,439 was generated
from QuikTrip Corporation.

 For the fiscal year 2022, (i) approximately 30% or
$ 3,945,534 of the revenue from the sale of Products, solely consisting of the BIDI Stick, was generated from Favs Business,
(ii) approximately 15% or $ 1,892,245 of the revenue from the sale of the Products was generated from H.T. Hackney Co., and (iii) approximately
11% or $ 1,472,888 of the revenue from the sale of Products, solely consisting of the BIDI Stick, was generated from GPM.

 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.

 Favs Business with an outstanding balance of $ 375,425
and QuikTrip Corporation, with an outstanding balance of $ 85,510, accounted for approximately 65% and 15% of the total accounts receivable
from customers, respectively, as of October 31, 2022.

 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 based on certain assumptions which include the expected term, expected volatility and discount
rate.

 The expected term of options granted represents the
period of time that options granted are expected to be outstanding. The expected volatility is based on the volatility in the trading
of the Common Stock over the expected term of the award. The assumed discount rate is the default risk-free ten-year interest rate for
U.S. Treasury bills.

 Net Loss Per Share

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

 F- 14

 Diluted net income
 (loss) per share is calculated by dividing net income (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 as-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.
 For the year ended October 31, 2023 the outstanding common stock equivalents excluded from the computation of diluted net loss were 449,106 shares
 for stock options, 242,548 shares
 for warrants and 357,120 shares
 for series B convertible preferred stock. For the year ended, October 31, 2022 the outstanding common stock equivalents excluded
 from the computation of diluted net loss were 152,489 shares
 for stock options and 110,396 shares
 for warrants.

 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 $ 23.8 million and state NOL carryforwards, consisting
of total deferred tax liabilities, totaling approximately $ 0.2 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 2020, 2021, 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 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 $ 7,319,289 for the -year ended on October 31, 2023, and a valuation allowance of $ 4,286,289 for the year ended on October 31, 2022
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, 2023 and 2022. 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, restricted cash, accounts receivable, accounts payable and accrued expenses. As of October
31, 2023, and 2022, the Company did not have any financial assets or liabilities measured and recorded at fair value on a recurring
basis.

 Recent Accounting
Pronouncements

 In August 2020, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20)
and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and
Contracts in an Entity's Own Equity ("ASU 2020-06"). ASU 2020-06 simplified the accounting for certain financial instruments
with characteristics of liabilities and equity. This ASU (1) simplified the accounting for convertible debt instruments and convertible
preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that required entities
to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred
stock; (2) revised the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features
that are both indexed to the issuer's own stock and classified in stockholders' equity, by removing certain criteria required
for equity classification; and (3) revised the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings
per share ("EPS") for convertible instruments by using the if-converted method. In addition, entities must presume share settlement
for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. ASU 2020-06 was effective for the Company
for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption was permitted.
The Company has elected to early adopt ASU 2020-06 effective beginning November 1, 2022. There was no impact on the consolidated financial
statements as a result of adopting this standard.

 The Company does not believe
that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material
effect on the accompanying financial statements. However, In March 2022, the FASB issued ASU 2022-02, "Financial Instruments-Credit
Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures." ASU 2022-02 addresses areas identified by the FASB as
part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the current expected credit loss ("CECL")
model. The amendments eliminate the accounting guidance for troubled debt restructurings ("TDRs") by creditors that have
adopted the CECL model and enhance the disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower
is experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs
for financing receivables and net investment in leases by year of origination in the vintage disclosures. The amendments in this ASU
should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, where an entity
has the option to apply a modified retrospective transition method resulting in a cumulative-effect adjustment to retained earnings in
the period of adoption. This is not effective for the Company until November 1, 2023

 Note 3 – Going Concern

 The accompanying 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 Financial Accounting
Standards Board ("FASB"), Accounting Standards Update ("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 financial statements are issued.

 The Company will need significant
additional funds to satisfy its outstanding payables, fund its working capital, and fully implement its business plan as the Company seeks
to grow its revenues and ultimately achieve positive cash flow and profitability. 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 Company's negative cash flows from operations, significant recurring losses and present need for additional funding.
All of these factors raise substantial doubt regarding the Company's ability to continue as a going concern.

 Management
plans to continue similar operations with increased marketing and enhanced efforts to increase sales, which the Company believes will
result in increased revenue and ultimately net income and positive cash flow from operations.

 However, there is no assurance
that the Company's plans will be able to generate expected or greater amounts of revenues or ever 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.

 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)

 F- 16

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 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

Stock

 $

 1,119,800

 Series
B Preferred Stock

 9,047,980

Stock Warrants

 1,059,523

 Transaction
Costs

 568,672

 Total
consideration

 $

 11,795,975

 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, net

 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
$ 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 14.6 years.

 The Company recognized an amortization expense of
$327,666 for the year ended October 31, 2023. Amortization expense is included under general and administrative expenses in the consolidated
statement of operations.

 F- 17

 Future amortization expense of intangible assets
is as follows:

 Schedule of future amortization expense of intangible assets

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 7,536,319

 Total

 $

 11,468,309

 Note 6 – Loans Payable

 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.

 The Company has accounted for these agreements as
loans under ASC 860 because while we provided rights to current and future receipts, we 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.

 The following table shows our loan agreements as
of October 31, 2023, and there were none as of October 31, 2022:

 Schedule
of loan agreements

 Purchase

 Payment

 Payment

 Deferred

 Inception
Date

 Price

 Purchased Amount

 Outstanding Balance

 frequency

 Rate

 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

 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 $122,273 for the year ended October 31, 2023. 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.
As of October 31, 2023 the carrying value of the loan and unamortized debt discount and issuance costs were $513,295 and $136,705 respectively

 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, 2023, the remaining balance was $ 152,000.

 F- 18

 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 a related party,
as of October 31, 2023. 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.

 Office and Storage Space On November 1, 2021 the
Company entered into a month-to-month lease agreement with Ranger Enterprises, LLC, located in Seymour, Indiana, to store product inventory
at this satellite location. The Company made payments on this lease in the amount of $19,959. The lease was terminated in June 2022.

 On November 11, 2021 the Company entered into a month-
to-month lease agreement with FFE Solutions Group, located in Salt Lake City Utah, to store additional product inventory at this satellite
location. The Company made payments on this lease in the amount of $19,108. This lease was terminated in April 2022.

 On June 10, 2022, the Company entered into a Lease
Agreement (the "2022 Lease") with Just Pick for approximately 21,332 rentable square feet combined in the office building
and warehouse located at 4460 Old Dixie Highway, Grant-Valkaria, Florida 32949 (the "Premises"), together with all improvements
thereon. The Company must pay Just Pick base rent equal to $ 17,777 per month during the first year of the Lease Term with a five-year
lease renewal option. 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 (1/12th) of the market annual rent for the seventh through eleventh years, if applicable. In addition to the base rent, the Company
must pay one hundred percent (100%) of operating expenses, insurance costs, and taxes for each calendar year during the Lease term. For
both the ROU asset and ROU liability, the lease renewal option was considered in the calculation with an incremental borrowing rate of
 4.5 %. The Company had $ 190,541 and $ 118,633 in operating lease expenses for the year ended October 31, 2023, and October 31, 2022, respectively.

 Cash flow information related to leases was as follows:

 Schedule of cash flow information related to leases

 Other
Lease Information

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

cash flows from operating leases

 $

 ( 190,541

)

 $

 ( 118,633

)

 The following table summarizes the lease-related
assets and liabilities recorded in the consolidated balance sheets on October 31, 2023, and 2022:

 Schedule of condensed balance sheet

 Lease
Position

Leases

lease right-of-use assets

 $

 1,008,428

 $

 1,198,969

 Right
of use liability operating lease, current portion

 $

 184,568

 $

 166,051

 Right
of use liability operating lease, long term

 866,207

 1,050,776

 Total
operating lease liabilities

 $

 1,050,775

 $

 1,216,827

 F- 19

 The following table provides the future minimum operating
lease payments as of October 31, 2023:

 Schedule of lessee operating lease liability maturity

 Leases

 Future
 minimum operating lease liabilities on October 31, 2023

 2024

 $
 228,133

 2025

 238,800

 2026

 253,614

 2027

 274,946

 2028
 and thereafter

 175,989

 Total
 future undiscounted lease payments

 $
 1,171,482

 Less:
 Imputed interest

 ( 120,707
)

 Present
 value of lease liabilities

 $
 1,050,775

 As of October 31, 2023, the Company had no additional
leases which had not yet commenced.

 Note 8 – Stockholders' Equity

 Common Shares

 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.

 During the year ended October 31, 2022, the Company issued 1,888
common shares for services rendered with a fair value of $ 65,323.
There were 1,190,477
common shares issued for the conversion of Series A Convertible Preferred Stock to Common Stock, see preferred shares converted
below. The Company issued 40,744
for $ 1,625,650
proceeds for the exercise of warrants.

 The Company's stock-based compensation for Common Stock issued for
services for the fiscal years ended October 31, 2023, and October 31, 2022, was $ 0 and $ 237,702, respectively.

 Restricted Stock Unit Awards

 During the year ended October 31, 2022, 5,870 shares
of Common Stock were issued to seven employees of the Company pursuant to restricted stock unit ("RSU") agreements, resulting
in $ 172,379 of share-based compensation. Of the shares issued to employees, 2,130 shares were withheld by the Company
to satisfy tax withholding obligations equal to $ 59,862.

 On March 4, 2022, the Company's Board approved
the termination of the RSU agreements with the consent of the employees. At the time these agreements were terminated, there remained
 1,564,166 unvested RSUs with approximately $ 4,457,875 of related unvested compensation. See Common Stock Compensation Transition
Plan below for additional details.

 Series A Convertible Preferred Stock

 Each share of the Series A Preferred Stock was initially
convertible into 100 shares of Common Stock However, it was affected by a subsequent reverse stock split also, the conversion rate
was adjusted such that each share of the Series A Preferred Stock is 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. 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.

 F- 20

 Series B Convertible Preferred Stock

 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. 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).

 Stock Options

 Summary of stock options information is as follows:

 Schedule of stock options

 Average

Price

 Price
Range

Price

October 31, 2021

 7,143

 $

 3,074,010

 $

 191.52 - 602.28

 $

 430.17

 Granted

 148,124

 6,708,460

 21.63 - 59.85

 45.29

 Exercised

 —

 —

 —

 —

 Cancelled,
forfeited, or expired

 ( 2,778

)

 ( 861,041

)

 191.52 - 545.58

 309.95

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

October 31, 2023

 449,106

 $

 14,081,408

 $

 10.08 - 602.28

 31.36

 Exercisable,
October 31, 2023

 185,496

 $

 9,194,852

 $

 12.81 - 602.28

 $

 49.57

 F- 21

 The fair value of each option granted during the
year ended October 31, 2023 and 2022 was estimated on the date of grant using the Black-Scholes option-pricing model with the
weighted average assumptions in the following table:

 Schedule of assumptions

 2023

 2022

 Expected dividend yield

 %

 %

 Expected option term (years)

 6.25 - 10

 Expected volatility

 270.98 %- 286.91

 %

 279.81 %- 288.93

 %

 Risk-free interest rate

 3.47 %- 4.34

 %

 1.74 %- 3.13

 %

 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 Common Stock. The assumed discount rate was the default risk-free ten-year interest rate for US Treasury bills.

 During the year ended October 31, 2022, the Company recognized stock option expense
of $ 6,043,312 related to outstanding stock options. As of October 31, 2022, the Company had $ 1,716,795 of unamortized stock option expense.
The weighted average remaining contractual life is approximately 9.52 years for stock options outstanding on October 31, 2022. As of October
31, 2022, the outstanding options have an intrinsic value of $ 50,000.

 On February 27, 2022, non-qualified stock options
exercisable for up to 9,524 shares of Common Stock were awarded to two consultants of the Company. These stock options have a ten-year
term from the grant date, with one-half of the shares vesting on the grant date and the remaining one-half of the shares vesting on the
first anniversary of the grant date. The fair value of the options on the grant dates was $ 489,998 using a Black-Scholes option pricing
model with the following assumptions: stock price $ 51.45 per share (based on the quoted trading price on the date of grant), a computed
volatility of 288.93 %, expected term of 10 years, and a risk-free interest rate of 1.83 %.

 On April 22, 2022, non-qualified stock options exercisable
for up to 3,571 shares of Common Stock were awarded to one consultant of the Company. These stock options have a ten-year term from the
grant date, with one-half of the shares vesting on June 30, 2022 and the remaining one-half of the shares vesting on October 31, 2022. The
fair value of the options on the grant date was 106,499 using a Black-Scholes option pricing model with the following assumptions: stock
price $ 29.82 per share (based on the quoted trading price on the date of grant), a computed volatility of 286.00 %, expected term of 10
years, and a risk-free interest rate of 2.90 %.

 On May 18, 2022, non-qualified stock options exercisable
for up to 23,810 shares of Common Stock were awarded to one consultant of the Company. These stock options have a ten-year term from
the grant date, with the shares fully vesting on December 1, 2022. The fair value of the options on the grant date was $ 514,997 using
a Black-Scholes option pricing model with the following assumptions: stock price $ 21.63 per share (based on the quoted trading price
on the date of grant), a computed volatility of 284.70 %, expected term of 10 years, and a risk-free interest rate of 2.89 %.

 On August 1, 2022, non-qualified stock options exercisable
for up to 1,190 shares of Common Stock were awarded to one employee of the Company. These stock options have a ten-year term from the
grant date, with the shares fully vesting on August 1, 2023. The fair value of the options on the grant date was $ 29,000 using a Black-Scholes
option pricing model with the following assumptions: stock price $ 24.36 per share (based on the quoted trading price on the date of grant),
a computed volatility of 281.14 %, expected term of 10 years, and a risk-free interest rate of 2.60 %.

 On August 24, 2022, non-qualified stock options exercisable
for up to 2,381 shares of Common Stock were awarded to one consultant of the Company. These stock options have a ten-year term from the
grant date, with the shares fully vesting on grant date. The fair value of the options on the grant date was $ 65,999 using a Black-Scholes
option pricing model with the following assumptions: stock price $ 27.72 per share (based on the quoted trading price on the date of grant),
a computed volatility of 279.81 %, expected term of 10 years, and a risk-free interest rate of 3.11 %.

 On March 4, 2022, options exercisable for up to an
aggregate of 65,981 shares of Common Stock were granted from this new stock option program to the executive officers and employees, as
a result of the transition. The fair values of the options on the grant dates, as noted above, were approximately $ 3,948,948 using
a Black-Scholes option pricing model with the following assumptions: stock price $ 59.85 per share (based on the quoted trading price
on the date of grant), volatility of 294.55 %, expected term of 10 years, and a risk-free interest rate range of 1.62 %. The Company is
amortizing the expense over the vesting terms of each option. Please reference the Common Stock Compensation Transition Plan below.

 On June 24, 2022, non-qualified stock options exercisable
for up to 41,667 shares of Common Stock were awarded to two officers and three board members of the Company. These stock options have
a ten-year term from the grant date, with 17,858 fully vested on June 24, 2022, and 23,809 vest over the next 2 years on June 23, 2023,
and June 23, 2024. The fair value of the options on the grant dates was $ 1,504,990 using a Black-Scholes option pricing model with the
following assumptions: stock price $ 36.12 per share (based on the quoted trading price on the date of grant), a computed volatility of
 283.12 %, expected term of 10 years, and a risk-free interest rate of 3.13 %.

 F- 22

 During the year ended October 31, 2023, the Company
recognized stock option expense of $ 3,168,430 related to outstanding stock options. As of October 31, 2023, the Company had $ 3,904,525
of unamortized stock option expense. The weighted average remaining contractual life is approximately 8.99 years for stock options outstanding
on October 31, 2023. As of October 31, 2023, the outstanding options have an intrinsic value of $ 0.

 On November 9, 2022, non-qualified stock options
exercisable for up to 11,905 shares of Common Stock were awarded to one supplier of the Company. These stock options have a ten-year
term from the grant date, with the shares fully vested on the issue date. The fair value of the options on the grant date was $ 246,747
using a Black-Scholes option pricing model with the following assumptions: stock price $ 20.72 per share (based on the quoted trading
price on the date of grant), a computed volatility of 275.68 %, expected term of 10 years, and a risk-free interest rate of 4.12 %.

 On November 9, 2022, non-qualified stock options exercisable
for up to 142,857 shares of Common Stock were awarded to one supplier of the Company. These stock options have a ten-year term from the
grant date, with the shares fully vesting based on the achievement of certain net revenue and profit margin targets up to $ 180,000,000
in total net revenues over a period of 3 years. However, the grant provides that if the Company's gross profit margin in any year
over the 3 year period exceeds 15%, a certain number of options will vest to be calculated based on the Company's total revenues.
The fair value of the options on the grant date was $ 2,960,968 using a Black-Scholes option pricing model with the following assumptions:
stock price $ 20.72 per share (based on the quoted trading price on the date of grant), a computed volatility of 275.68 %, expected term
of 10 years, and a risk-free interest rate of 4.12 %. Management determined that it is not probable that the performance condition related
to the net revenue and profit margin to be met over a period of 3 years will be achieved. However, for the year ended October 31, 2023,
 total options of 10,387 vested due to the Company's gross profit margin exceeding 15 % for the current year.

 On February 6, 2023, non-qualified stock options
exercisable for up to 7,141
shares of Common Stock were awarded to five employees of the Company. These stock options have a ten-year term from the grant date,
with the shares vesting on 50% on February 6, 2024. The fair value of the options on the grant date was $ 109,499
using a Black-Scholes option pricing model with the following assumptions: stock price $ 15.33
per share (based on the quoted trading price on the date of grant), a computed volatility of 270.98 %,
expected term of 10
years, and a risk-free interest rate of 3.63 %.

 On February 6, 2023, non-qualified stock options
exercisable for up to 47,620 shares of Common Stock were awarded to two senior executives of the Company. These stock options have a
ten-year term from the grant date, with the shares fully vesting on February 6, 2023 and the remaining 50 % vesting on February 6, 2024. The fair value of the options on the grant date
was $ 729,988 using a Black-Scholes option pricing model with the following assumptions: stock price $ 15.33 per share (based on the quoted
trading price on the date of grant), a computed volatility of 270.98 %, expected term of 10 years, and a risk-free interest rate of 3.63 %.

 On February 6, 2023, non-qualified stock options
exercisable for up to 17,856 shares of Common Stock were awarded to three independent board members of the Company. These stock options
have a ten-year term from the grant date, with the shares fully vesting on February 6, 2024. The fair value of the options on the grant
date was $ 273,747 using a Black-Scholes option pricing model with the following assumptions: stock price $ 15.33 per share (based on the
quoted trading price on the date of grant), a computed volatility of 270.98 %, expected term of 10 years, and a risk-free interest rate
of 3.63 %.

 On February 6, 2023, non-qualified stock options
exercisable for up to 9,524 shares of Common Stock were awarded to one consultant acting as a sales broker for the Company. These stock
options have a ten-year term from the grant date, with the shares fully vesting based on the achievement of certain net revenue targets
up to $ 100,000,000 in total net revenues over time to be generated from certain customers as listed in the sales broker agreement. The
fair value of the options on the grant date was $ 145,998 using a Black-Scholes option pricing model with the following assumptions: stock
price $ 15.33 per share (based on the quoted trading price on the date of grant), a computed volatility of 270.98 %, expected term of 10
years, and a risk-free interest rate of 3.63 %. Management determined that it would not be probable that the performance conditions will be met
and as such no expense was recognized on this award for the year ended October 31, 2023.

 On March 3, 2023, non-qualified stock options
exercisable for up to 2,381
shares of Common Stock were awarded to one interim senior executive of the Company. These stock options have a ten-year term from
the grant date, with the shares fully vesting on June 30, 2023. The fair value $12.87 of the options on the grant date was $ 30,650
using a Black-Scholes option pricing model with the following assumptions: stock price $ 12.817
per share (based on the quoted trading price on the date of grant), a computed volatility of 286.91 %,
expected term of 10
years, and a risk-free interest rate of 3.97 %.

 F- 23

 On March 19, 2023, non-qualified stock options exercisable
for up to 11,904 shares of Common Stock were awarded to two independent board members of the Company. These stock options have a ten-year
term from the grant date, with the shares fully vesting on March 19, 2024. The fair value of the options on the grant date was $ 217,498
using a Black-Scholes option pricing model with the following assumptions: stock price $ 18.27 per share (based on the quoted trading
price on the date of grant), a computed volatility of 286.15 %, expected term of 10 years, and a risk-free interest rate of 3.47 %.

 On July 8, 2023, incentive stock options
exercisable for up to 2,381
shares of Common Stock were awarded to one employee of the Company. These stock options have a ten-year term from the grant date,
with the shares vesting 25% annually through July 8, 2027. The fair value of the options on the grant date was $ 39,409
using a Black-Scholes option pricing model with the following assumptions: stock price $ 16.56
per share (based on the quoted trading price on the date of grant), a computed volatility of 280.34 %,
expected term of 6.25 years, and a risk-free interest rate of 4.01 %.

 On August 1, 2023, incentive stock options exercisable
for up to 39,095 shares of Common Stock were awarded to two senior executives of the Company. These stock options have a ten-year term
from the grant date, with the shares vesting as following: 1/4 of options on August 1, 2024 and thereafter 1/36 per month through August
1, 2027. The fair value of the options on the grant date was $ 485,000 using a Black-Scholes option pricing model with the following assumptions:
stock price $ 12.41 per share (based on the quoted trading price on the date of grant), a computed volatility of 270.03 %, expected term
of 6.25 years, and a risk-free interest rate of 4.05 %.

 On August 22, 2023, incentive stock options exercisable
for up to 7,524 shares of Common Stock were awarded to one senior executive of the Company. These stock options have a ten-year term from
the grant date, with the shares vesting as following: 1/4 of options on August 22, 2024 and thereafter 1/36 per month through August 22,
2027. The fair value of the options on the grant date was $ 75,808 using a Black-Scholes option pricing model with the following assumptions:
stock price $ 10.08 per share (based on the quoted trading price on the date of grant), a computed volatility of 278.31 %, expected term
of 6.25 years, and a risk-free interest rate of 4.34 %.

 Common Stock Compensation Transition Plan

 During the second quarter of fiscal year 2021 the
Board and executive management began cost reduction discussions, including the reduction of non-cash items such as equity compensation
awards. Those discussions stalled primarily due to the focus on other corporate events of significant value.

 In the first and second fiscal quarters of 2022,
the Board resumed discussions, assessments, and evaluations regarding the equity compensation awarded to its officers and employees.
The Board ultimately approved a stock option program for equity awards granted to its officers and employees. The Compensation Committee
of the Board finalized the program in February 2022 and approved it in March 2022. While evaluating and designing this program, the Compensation
Committee did not utilize any aspects of value to the employees or other features. Therefore, the termination of the RSU program and
the newly adopted stock option program were developed completely independent of each other and terminated and implemented, respectively,
distinctly and simultaneously. Management concluded under ASC 718 these transactions are a cancelation and replacement whereby total
compensation cost measured at the date of a cancellation and replacement is the portion of the grant-date fair value of the original
award for which the service is expected to be rendered at that date plus the incremental cost resulting from the cancellation and replacement.
Incremental cost is measured as the excess of the fair value of the replacement award over the fair value of the cancelled award at the
cancellation date in which there was none since the fair value of the replacement award was less than the fair value of the canceled
award.

 The outcomes of this decision and the transition
on March 4, 2022, resulting in: (i) the termination of the RSU program for all executive officers and employees, consisting of 1,564,166
unvested RSUs and (ii) the implementation a new stock option program for executive officers and employees. The stock options granted
pursuant to the program will have ten-year terms from the grant date, with one-half of the shares vesting on the grant date and the remaining
one-half of the shares vesting on the first anniversary of the grant date. Please reference the Stock Options disclosure above.

 F- 24

 Warrants

 Summary Warrant Shares information is as follows:

 Schedule
of warrant
information

 Average

Price

 Price
Range

Price

October 31, 2021

 151,139

 $

 6,030,452

 $

 39.90

 $

 39.90

 Granted

 —

 Exercised

 ( 40,743

)

 ( 1,625,650

)

 39.90

 39.90

 Cancelled,
forfeited, or expired

 —

 —

 —

 —

October 31, 2022

 110,396

 4,404,802

 39.90

 39.90

 Granted

 132,152

 9,544,205

 12.39 - 126.00

 72.22

 Exercised

 —

 Cancelled,
forfeited, or expired

 —

 —

 —

 —

October 31, 2023

 242,548

 $

 13,949,006

 $

 12.39 - 126.00

 $

 57.51

 Exercisable,
October 31, 2023

 242,548

 $

 13,949,006

 $

 12.39 - 126.00

 $

 57.51

 The outstanding warrants as of October 31, 2023 and
2022 have a weighted average remaining contractual life of 3.44 years and 3.92 years, respectively, and an intrinsic value of $ 0 for both
periods.

 As part of the Company's underwritten
public offering in September 2021, the Company issued warrants to purchase a total of 193,036 shares of Common Stock at an exercise
price of $ 39.90 per share. These warrants expire in 2026. Warrants for 40,743 shares of Common Stock were exercised during the
fiscal year ended October 31, 2022, for proceeds of $ 1,625,650.

 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.

 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 determined the fair value of the warrant as of the acquisition date and included it as part of the
asset acquisition cost (see Note 4).

 F- 25

 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. For the year ended October 31, 2023, the Company issued warrants to purchase a total of 15,715 shares of Common Stock. For
the year ended October 31, 2023, the Company recognized stock warrant expense of $ 218,909.

 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 Company determined the fair value of the warrants
using the Black-Scholes option-pricing model with the following assumptions:

 Schedule of fair value of the warrants

 Expected
term (years)

 Expected
volatility

 243.20 % - 247.90

 %

 Risk-free
interest rate

 3.81 % - 4.18

 %

 The expected term represents the contractual term
of the warrant. The expected volatility was based on the Company's observed equity volatility over the period matching the term
of the warrant. The assumed discount rate was the risk-free rate based on the rate of treasury securities with the same or similar term
as warrant.

 Note 9 – Related-Party Transactions

 Revenue and Accounts Receivable

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

 During the fiscal year ended October 31, 2022, the
Company recognized revenue of $ $ 68,139 from five companies owned by Nirajkumar Patel, the Chief Science and Regulatory Officer and director
of the Company, and/or his wife.

 Purchases and Accounts Payable

 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 Company's
Chief Science and Regulatory Officer and director. As of October 31, 2023, the Company had an accounts payable balance of $ 1,521,491
to Bidi.

 During the fiscal year ended October 31, 2022, the
Company purchased Products equal to $ 1,505,390 from Bidi, a related party company that is also owned by Nirajkumar Patel, the Company's
Chief Science and Regulatory Officer and director. As of October 31, 2022, the Company did no t have an accounts payable balance to Bidi.

 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, 2023, the Company paid license fees of approximately $150,000 to Bidi. As of
October 31, 2023 and 2022, no additional license fees are owed to Bidi. As
 of October 31, 2023, the Company has a payable to Bidi of $ 712,524
 for certain non-recurring engineering costs related to the PMI License Agreement which were fully paid in November 2023,
 and $240,802 for reimbursement of insurance expense.

 F- 26

 Office Space and Other Leases

 On June 10, 2022, the Company entered into a Lease
Agreement (the "2022 Lease") with Just Pick, LLC 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 to the Company because the Company's Chief Science Officer and director,
Mr. Nirajkumar Patel, owns and controls Just Pick, LLC. See also Note 7. We believe our office space is sufficient to meet our current
needs.

 During the fiscal year ended October 31, 2021, the
Company was part of a five-year lease agreement with Just Pick, LLC (a related party), which began on August 1, 2020. The Company was
not yet being charged for the leased space under the terms and conditions of the lease between the Company and Just Pick, LLC. Accordingly,
no payments were made on the lease during the fiscal year ended October 31, 2022. The lease ended in the same year of signing the previously
mentioned lease with Just Pick, LLC on June 10, 2022.

 Concentration of Purchases and Other Receivable
- Related Party

 For the year ended October 31, 2023, 100% of the
inventories of Products, consisting solely of the BIDI Stick, were purchased from Bidi, a related party company that is owned by
Nirajkumar Patel, our Chief Science and Regulatory Officer and director, in the amount of $ 12,747,006, as compared to $ 1,505,390 for
the year ended October 31, 2022.

 On April 29, 2022, the
Company and Bidi agreed to cancel the $2,295,000 inventory order paid in advance in fiscal year 2021 and this was a credit against
the accounts payable due to Bidi. Inventory quality control expenses were paid by the Company
on behalf of Bidi during the year ended October 31, 2022, in
the amount of approximately $723,000, and were offset as a credit against the accounts payable balance-related party. A credit of $2,924,655
was applied on August 1, 2022, resulting in a related-party receivable balance due from Bidi of $2,134,413, to
be applied on future product orders. On October 31, 2022, the Company and Bidi agreed to a return for short-coded or expiring inventory.
An additional credit of $1,543,545 and $108,841 for
recycling cost was applied on October 31, 2022, to the
related-party receivable balance due from Bidi.

 As of October 31, 2022,
the Company has a related-party receivable balance due from Bidi of $3,704,132, in which $1,539,486 of
the receivable is classified as current and $2,164,646 is classified as non-current. The receivable balance will be realized though
Bidi applying 5% credits on all future orders of product until the entire balance is extinguished.

 On October 31, 2023, the remaining related-party
receivable balance from Bidi of $2,954,470 was applied against our 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 related to purchase of inventories was $1,521,491. There was no related
party accounts payable balance as of October 31, 2022.

 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 4.458 %. 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 (benefit)
recognized in the accompanying statements of operations for the years ended October 31, 2023, and October 31, 2022, are as follows:

 Schedule
of components of income tax expense

31,

 2023

 2022

 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- 27

 Total net deferred taxes are comprised of the following
on October 31, 2022, and October 31, 2023:

 Schedule
of deferred tax assets and liabilities

31,

 2023

 2022

 Deferred
Tax Assets:

 Stock
Compensation Expense – NQSO

 $

 2,069,641

 $

 1,694,324

 Other

 499,203

 362,170

 Net
Operating Loss Carryforwards

 4,998,800

 2,582,061

 Total
Deferred Tax Asset

 7,567,644

 4,638,555

 Deferred
Tax Liabilities:

 Prepaid
Expenses

 ( 27,497

)

 ( 92,420

)

 Right
of Use Asset

 ( 220,859

)

 ( 259,866

)

 Total
Deferred Tax Liabilities

 ( 248,356

)

 ( 352,286

)

 Less:
Valuation Allowance

 ( 7,319,288

)

 ( 4,286,269

)

 Net
Deferred Tax Asset

 —

 —

 The Company has Federal NOL carryforwards of
approximately $23.8 million and state NOL carryforwards of approximately $186,000. 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 2022 and 2021
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 $ 7,319,288 for the year ended on October 31, 2023, 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, 2023, and October 31, 2022, other than the below:

 Consulting Agreements

 On March 17, 2021, the Company entered into a consulting
agreement with Russell Quick, pursuant to which the Company granted stock options exercisable for up to 1,985
 shares of Common Stock in exchange for consulting services. The shares underlying the stock options fully vested on December 1,
2021. The exercise price per share was $ 602.28.
The Company recognized approximately $ 190,000
 in expense to account for the stock options during the fiscal year ended October 31,2022. Russell Quick is the Chief Executive
Officer of QuikfillRx.

 F- 28

 On December 1, 2021, the Company and Russell Quick
agreed to renew his consulting agreement for one year, pursuant to which on May 18, 2022, the Company granted non-qualified stock options
exercisable for up to 23,810 shares of the Common Stock in exchange for on-going consulting services. The shares underlying the stock
options fully vest on December 1, 2022. They have a 10 -year expiration. The exercise price per share is $ 21.63. The Company recognized
approximately $434,000 in expense to account for the stock options in the fiscal year ended October 31, 2022. The Company accrued approximately
$ 33,871 for a quarterly bonus payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results of the three months ended
October 31, 2022. As of the date of these financial statements, Mr. Quick has not exercised any of his fully vested stock options.

 On February 4, 2022, the Company entered into a Consulting
Agreement with Oakhill Europe Ltd ("Oakhill Europe"), pursuant to which the Company engaged Oakhill Europe to provide strategic
advising and negotiation assistance for potential international distribution agreements (collectively, the "Oakhill Services"),
in exchange for a $15,000 monthly retainer, incentive compensation bonuses of up to $175,000, and an incentive compensation bonus value
of $75,000 paid in fully-vested non-qualified stock options, upon the achievement of certain events. On April 24, 2022, the Company
 approved amending the Consulting Agreement for Oakhill Europe, in order to modify the previously granted
stock option award from " an incentive compensation bonus value of $ 75,000 paid in fully-vested non-qualified stock options,
upon the achievement of certain events" to the following amended terms; "Non-Qualified Stock Options exercisable for up to
 3,572 shares of Common Stock of the Client with an exercise price equal to the market closing price upon the Effective Date of the Amendment,
with a vesting schedule as follows: (a) 1,786 shares of the Common Stock underlying the granted stock options will vest upon the earlier
of either: (i) June 30, 2022 or (ii) the occurrence of the achievement of certain events; and b. 1,786 shares of Common Stock underlying
the granted stock options will vest upon the earlier of either: (i) October 31, 2022 or (ii) the achievement of certain events."
 The option shares are exercisable at a price of $ 29.82 per share, which equaled the closing price of the
Common Stock as of the date immediately prior to the grant date. The option has a ten-year term. The issuances were exempt from the registration
requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering. The
option shares issued to Oakhill Europe were cancelled on February 1, 2023.

 On August
1, 2022, the Company approved the grant of a stock option award to an employee, to acquire up to 1,191 shares of Common Stock under the
Company's Amended 2020 Stock and Incentive Compensation Plan. The option shares vest on August 1, 2023 and are exercisable at a
price of $ 24.36 per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The
option has a ten-year term. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2)
thereof as a transaction not involving a public offering.

 On August 24, 2022, Company
approved amending the Consulting Agreement for Mark Thoenes, the Company's then Interim Chief Financial Officer, in order to
extend its term, modify the vesting terms of the previously granted stock option award, and approved the grant of a stock option
award to acquire up to 2,381
shares of Common Stock under the Company's Amended 2020 Stock and Incentive Compensation Plan. The option shares vest on
August 24, 2022 and are exercisable at a price of $ 27.72
per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The option has a
ten-year term. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2)
thereof as a transaction not involving a public offering.

 On October 28, 2022, The Company
entered into a settlement agreement with a customer in the amount of $ 150,000. The full settlement released and discharged both parties
from future claims and damages, neither party has any further obligations to the other party arising out of or relating to the customer
agreement.

 F- 29

 Executive Compensation

 On May 28, 2020, the Board approved cash bonus awards
to each of Nirajkumar Patel, the Company's then Chief Executive Officer, and Eric Mosser, the Company's then Chief Operating
Officer. With respect to the Chief Executive Officer, the Board approved a cash bonus award equal to $30,000 for every $25 million in
gross revenues generated by the Company. With respect to the Chief Operating Officer, the Board approved a cash bonus award equal to
$20,000 for every $25 million in gross revenues generated by the Company. On May 28, 2020, the Board also approved an equity bonus award
for each of the Chief Executive Officer and the Chief Operating Officer. With respect to the Chief Executive Officer, the Board approved
an award of 358 restricted shares of the Common Stock for every $50 million in accumulated gross revenues generated by the Company. With
respect to the Chief Operating Officer, the Board approved an award of 298 restricted shares of the Common Stock for every $50 million
in accumulated gross revenues generated by the Company. The Company's accumulated gross revenues will be evaluated on a quarterly
basis, beginning with the second quarter of fiscal year 2020. On October 31, 2020, the Company determined that the fair value of the
equity bonus shares, or $165,000, should be accrued as it was deemed likely that the $50 million revenue target would be met. The Company
issued these shares to the Chief Executive Officer and Chief Operating Officer on January 1, 2021. During the quarter ended April 30,
2021, the $75 million and $100 million accumulated revenue targets were both achieved, and the Company determined that the fair market
value of the 655 shares, or approximately $70,785, and the cash bonuses totaling $100,000 were accrued at April 30, 2021.

 During the quarter ended April 30, 2022, the $ 125
million accumulated revenue targets were achieved, and the Company determined that cash bonuses totaling $ 50,000 were accrued on April
30, 2022.

 On March 4, 2022, the Board terminated all future
cash and equity bonus awards for the Company's Chief Executive Officer and its Chief Operating Officer.

 On March 5, 2022, the Company granted a stock option
award to Nirajkumar Patel, then the Company's Chief Executive Officer, to acquire up to 28,572 shares of Common Stock under the
Company's 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Patel's services as Chief Executive
Officer. The option shares are exercisable at a price of $59.85 per share, which equaled the closing price of the Common Stock as of
the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue
of Section 4(a)(2) thereof as a transaction not involving a public offering.

 On March 5, 2022, the Company granted stock
option awards to Eric Mosser, the Company's then Chief Operating Officer, to acquire up to 23,810 shares of Common Stock under
the Company's 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Mosser's services as Chief
Operating Officer. The option shares are exercisable at a price of $59.85 per share, which equaled the closing price of the Common
Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the
Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering.

 On June 24, 2022, the Company granted a stock option
award to Nirajkumar Patel, Chief Science and Regulatory Officer, to acquire up to 11,905 shares of Common Stock under the Company's
2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Patel's services as Chief Science and Regulatory Officer.
The option shares are exercisable at a price of $ 36.12 per share, which equaled the closing price of the Common Stock as of the date
immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of
Section 4(a)(2) thereof as a transaction not involving a public offering.

 On June 24, 2022, the Company granted stock
option awards to Eric Mosser, the Company's then President and Chief Operating Officer, to acquire up to 11,905
shares of Common Stock under the Company's 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr.
Mosser's services as President and Chief Operating Officer. The option shares are exercisable at a price of $ 36.12
per share, which equaled the closing price of the Common Stock as of the date immediately prior to the grant date. The issuances
were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not
involving a public offering.

 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").
The Services are provided by QuikfillRx as requested from time to time by the Company.

 F- 30

 On June 2, 2020, the Company entered into the First
Amendment to the Service Agreement (the "First Amendment") with QuikfillRx. Effective as of March 16, 2021, the Company entered
into the Second Amendment to Service Agreement (the "Second Amendment") with QuikfillRx. Effective as of September 17, 2021,
the Company entered into the Third Amendment to the Service Agreement (the "Third Agreement") with QuikfillRx. Effective
as of June 24, 2022, the Company entered into the Fourth Amendment to the Service Agreement (the "Fourth Agreement" and,
collectively with the First Amendment, Second Amendment, Third Amendment, and the Service Agreement, the "Amended Service Agreement")
with QuikfillRx. Pursuant to the terms of the Amended Service Agreement, the parties agreed to the following "General Compensation"
payments: (i) for the Services provided in March 2020, the Company paid QuikfillRx an amount equal to $86,000; (ii) for the Services
provided in April 2020, the Company paid QuikfillRx an amount equal to $100,000; (iii) each calendar month commencing May 2020 through
October 2020, the Company paid QuikfillRx an amount equal to $100,000 per month for the Services to be performed during such calendar
month; (iv) for each calendar month between November 1, 2020 and October 31, 2021, the Company paid QuikfillRx $125,000 per month for
the Services to be performed during such calendar month; (iv) for the period between November 1, 2021 and June 30, 2022, the Company
paid QuikfillRx $150,000 per month for the Services to be performed during such calendar month; (v) for the period between July 1, 2022
and October 31, 2024, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar month;
and (vi) parties acknowledged that as a result of extensions to the term of the Service Agreement, such term of the Original Agreement
will end on October 31, 2023. The parties have agreed to extend such term for an additional one year until October 31, 2024. In addition,
the Company will pay the following quarterly bonuses:

 An amount
equal to 0.9% of the Applicable Gross Quarterly Sales (as defined in the Amended Service Agreement), which amount shall, at the Company's
option be paid in (a) cash or (b) shares of the Company's Common Stock, or (c) a combination of cash and Common Stock.

 An amount
equal to 0.27% of the Applicable Gross Quarterly Sales, which amount must be paid in cash.

 During fiscal year 2023, the Company accrued approximately
$ 81,300 for two quarterly bonuses payable to QuikfillRx based on our applicable gross quarterly sales for the six months ended October
31, 2023. The Company accrued $33,871 for a quarterly bonus payable to QuikfillRx, based on the Applicable Gross Quarterly Sales results
of the three months ended October 31, 2022.

 F- 31

 Note 12 – Subsequent Events

 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 our 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 and other
financial information 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.

 Repayment
of AJB Note

 On
December 1, 2023, the Company repaid all amounts due and owing under the Note to AJB in full, in an aggregate amount, including accrued
interest, equal to $ 650,181. In connection with the repayment of the Note, the Company
agreed that AJB would be permitted to retain all of the Commitment Fee Shares.

 Receivables
Purchase Transactions

 On
November 29, 2023, the Company entered into two receivables purchase transactions pursuant to: (i) a Future Receivables Sale and
Purchase Agreement, dated November 29, 2023, between Clearview Funding Solutions LLC ("Clearview") and the Company (the
"Clearview Agreement"), and (ii) a Future Receivables Sale and Purchase Agreement, dated November 29, 2023, between
Mr. Advance LLC ("Advance") and the Company (the "Advance Agreement").

to the Clearview Agreement, the Company sold future receivables in the principal amount of $ 864,000 (the "Clearview Future
Receivables") to Clearview in a private transaction for a purchase price of $ 600,000 (giving effect to original issue discount
of $ 264,000). In connection with the sale of the Clearview Future Receivables, the Company also paid an origination fee to Clearview
for underwriting and application costs of $ 36,520, resulting in net proceeds to the Company of $ 563,480 (gross of advisory fees). The
Company's obligations under the Clearview Agreement are personally guaranteed by Eric Mosser, the Company's former Chief
Executive Officer and President.

to the Advance Agreement, the Company sold future receivables in the principal amount of $ 864,000 (the "Advance Future Receivables")
to Advance in a private transaction for a purchase price of $ 600,000 (giving effect to original issue discount of $ 264,000). In connection
with the sale of the Advance Future Receivables, the Company also paid an origination fee to Advance for underwriting and related expenses
of $ 36,035, resulting in net proceeds to the Company of $ 563,965 (gross of advisory fees). The Company's obligations under the
Advance Agreement are also personally guaranteed by Mr. Mosser.

 Common Stock Transaction

 On December 15, 2023 the Company 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.

 Stock
Options Transactions

 On
February 8, 2024 (the "Grant Date"), Barry M. Hopkins received a 10-year incentive stock option grantto purchase 63,881 shares
of Common Stock in partial consideration of his employment services to the Company. The exercise price of such grant option is $5.25
per share, equal to the fair market value of the Issuer's cCommon sStock on November 9, 2023, which is the effective date of the Reporting
Person's Mr. Hopkins' employment agreement with the IssuerCompany. The option shall vest over four years. One-quarter of the option
shall vest on the first anniversary of the Ggrant Ddate and afterward shall vest monthly at the rate of 1/36 per month until fully vested.

 In
connection with his appointment to the Company's board of directors, on May 30, 2023, James P. Cassidy received a 10-year non-qualified
stock option to purchase 5,953 shares of Common Stock with an exercise price of $11.76 per share, the fair market value of the Common
Stock on May 30, 2023. In connection with Mr. Cassidy's resignation from the board of directors on January 25, 2024, he agreed
that such option should be terminated and cancelled.

 F- 32

 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, 2023, 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, 2023,
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, 2022 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

 Nirajkumar Patel (1)

 Chief Science & Regulatory Officer and Director

 June 24, 2022– Current

 Barry M. Hopkins (2)

 Director, Executive Chairman and Interim Chief Executive Officer and President

 March 19, 2023– Current

 Roger Brooks (3)

 March 17, 2021– Current

 George Chuang (4)

 June 30, 2021– Current

 David Worner (5)

 March 19, 2023– Current

 Mark Thoenes (6)

 August 1, 2023 – Current

 Stephen Sheriff (7)

 Chief Operating Officer and Investor Relations Officer

 August 22, 2023– Current

 Thomas Metzler (8)

 Chief Financial Officer, Treasurer, and Secretary

 August 1, 2023– Current

 (1)

 Mr. Patel served as our Chief Executive Officer and Chief Financial Officer from February 20, 2019, until June 24, 2022.

 (2)

 Mr. Hopkins was appointed as our Executive Chairman on November 6, 2023 and Interim Chief Financial Officer and President on December 22, 2023.

 (3)

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

 (4)

 Mr. Chuang serves as a member of the Compensation, Audit and Governance and Nominating Committees.

 (5)

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

 (6)

 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.

 (7)

 Mr. Sheriff was appointed as our Chief Operating Officer on August 22, 2023.

 (8)

 Mr. Metzler was appointed as our Chief Financial, Treasurer, and Secretary of our company on August 1, 2023.

 Nirajkumar
Patel, Chief Science & Regulatory Officer, and Director. Nirajkumar Patel attended AISSMS College of Pharmacy in Pune, India
and received a Bachelor of Science Degree in Pharmacy in 2004. After moving to the United States in 2005, Mr. Patel became a United States
citizen in 2008 and obtained a master's degree in chemistry from the Florida Institute of Technology in 2009. Mr. Patel is a prominent
local businessman in Brevard County, Florida. In 2017 and 2018, Mr. Patel served as Vice President for the Board of the Indian Association
of the Space Coast, located in Brevard County, Florida. Mr. Patel founded, and has served as a Board member of, the Florida Independent
Liquor Stores Owners Association since 2017. In 2013, Mr. Patel launched Just Chill Products LLC, a highly successful developer/manufacturer
of high-end CBD products and has served as its Chief Executive Officer and Chief Science Officer since 2017. In 2017, Mr. Patel created
Relax Lab Inc., a producer/manufacturer of a CBD relaxation beverage, and currently serves as its Chief Executive Officer and Chief Science
Officer. In 2017, Mr. Patel also created RLX Lab LLC, a producer/manufacturer of a non-CBD relaxation beverage, and currently serves
as its Chief Executive Officer and Chief Science Officer. In 2017, Mr. Patel also founded KC Innovations Lab Inc., a CBD white-label
manufacturing service and developer/producer of best-selling white-label CBD products including cosmetics, edibles, beverages, topicals,
and vape oils, and currently serves as its Chief Executive Officer and Chief Science Officer. Additional companies that are owned by
Nirajkumar Patel, the Chief Science & Regulatory Officer and director of our company, and/or his wife include Beach Food Store created
in 2004, Diya Food Store created in 2010, Cloud Nine 2012 created in 2012, JC Products of USA, LLC created in 2013 and Just Pick, LLC.
We believe that Mr. Patel is qualified to serve on our Board because of his prior and current management experience, as well as his business
experience within our business industry.

 Barry M. Hopkins, Executive
Chairman and Interim Chief Executive Officer and President. Mr. Barry Hopkins has decades of experience in business development,
performance management, and retail, having spent over thirty years with Altria, one of the world's largest producers and marketers
of tobacco, cigarettes and related products. While at Altria, Mr. Hopkins served in various roles, including District Manager, Vice President
of Sales, Vice President of Trade Marketing, and Vice President of National accounts. In 2005, Mr. Hopkins founded Ideas in Motion, a
consulting company. For seven years while running Ideas in Motion, Mr. Hopkins consulted with Turning Point Brands, a consumer products
company that markets and distributes products including alternative smoking accessories and consumables. Mr. Hopkins eventually joined
Turning Point Brands in 2012 as a Senior Executive and gradually transitioned to other senior level roles including Senior Vice President
of Sales and Marketing, and Senior Vice President of Executive Organizational Development. Mr. Hopkins remained at Turning Point Brands
for over eleven years and, while there, garnered recognition for the development and implementation of a systematic connection process
that ultimately resulted in eight record setting quarters exceeding all prior sales and profit objectives.

 Roger Brooks, Director. Mr.
Roger Brooks has served as the Chairman, Treasurer, and Co-founder of Abierto Networks, a digital media and engagement technology company
focused on the convenience store, retail, and other similar consumer market segments, since 2005. At Abierto Networks, Mr. Brooks has
also served on the Compensation Committee since 2005. Prior to his roles at Abierto Networks, from 1998 to 2008, Mr. Brooks was the lead
independent director and member of the compensation and audit committees for Moldflow Corporation, a Nasdaq-listed software company that
was sold to Autodesk, Inc. in 2008. From February 2016 to June 2019, Mr. Brooks served as an independent director of Lytron, Incorporated,
a closely held international industrial solutions company. From 1998 to 2002, Mr. Brooks served as President, Chief Executive Officer,
and member of the board for Intelligent Controls, Inc., a publicly traded software and instrumentation company, which was sold to Franklin
Electric Co. Inc. Mr. Brooks was President, Chief Executive Officer, and a board member of Dynisco, Inc. from 1987 to 1996 where he grew
the company from $10 million of sales to an international company with over $100 million of sales. Mr. Brooks holds a Bachelor of Arts
degree from the University of Connecticut and a Master of Business Administration degree from New York University, Stern Graduate Business
School. He is also a graduate of the Stanford University Executive Management Program. Mr. Brooks extensive experience gained from his
roles as an executive officer and director of numerous public companies, as well as experience in the convenience store, retail, and
other consumer markets will be invaluable to the Board and qualifies him for service as a director.

 George Chuang, Director. Mr.
George Chuang has served as the Chief Executive Officer of Lucy Labs, Inc. since July 2017 and as the Chair of the Board of Directors
of Lucy Labs, Inc. since November 2021. Prior to that, he served as the co-managing principal of Hillside Advisors LLC from June 2015
to July 2017. Mr. Chuang was also the principal owner of USB Media, Inc., a technology B2B company he founded in 2007. During his career,
Mr. Chuang spent time at Chase Manhattan Bank as an assistant Treasurer for their Credit Risk Department, as a management consultant
at Price Waterhouse Management Consulting, and served as the Chief Administrative Officer for several equity product sales groups at
Lehman Brothers. In addition, Mr. Chuang spent eight years as a Principal at Pacific Partnership Advisors LLC, a consulting firm with
offices in New York and Beijing, which facilitated cross-border transactions. Mr. Chuang graduated from the University of Chicago and
obtained a Master of Business Administration degree at Yale University. Mr. Chuang's experience in capital markets and global supply
chain knowledge, as well as his business experience in start-up companies, qualifies him for service as a director.

 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.
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.

 Stephen Sheriff, Chief Operating
Officer and Investor Relations Officer. Mr. Stephen Sheriff brings over a decade of finance and entrepreneurial leadership to his
role as Chief Operating Officer and Investor Relations Office. Since August 2022, he has served as our Director of Administration &
Communications. In this role, he managed our investor, public relations and human resource programs in addition to overall responsibility
for the development and implementation of key programs and initiatives, including customer and vendor relations. Since January 2022,
he has also served as co-founder and Managing Partner of Riverhill Group, a management consulting firm focused on assisting early-stage
companies in the areas of funding, scaling and expanding operations. Since 2012, he has also been a Managing Partner at Riverhill Ventures,
a socially conscious, strategic investment and consulting firm primarily focused on quick service restaurants, natural foods and consumer
brands. Through his Riverhill-related experiences, Mr. Sheriff has been an investor in and advisor to several early-stage companies.
From September 2018 to September 2020, he also was an Associate at Solebury Trout (now Solebury Strategic Communications), a leading
life sciences-focused investor relations firm based in New York City. Mr. Sheriff received his Bachelor of Arts in Counseling Psychology
from Delaware Valley University.

 Thomas Metzler, Chief Financial
Officer, Treasurer, and Secretary. Mr. Thomas Metzler brings over 20 years of finance and operational experience in the vaping and
consumer products sector to our company. Since June 2019, he has worked as an accounting and operational consultant. From April 2013
to June 2019, Mr. Metzler served as Managing Director of a Division of Turning Point Brands (NYSE: TPB), a manufacturer, marketer and
distributor of branded alternative smoking accessories and consumables with active ingredients. At Turning Point Brands, Mr. Metzler
led a team to transform the process of financial management efficiencies, which improved cost controls, managed inventory turn, developed
strategic product promotions to accelerate product distribution, and built strategic alliances with suppliers. Mr. Metzler also developed
& monitored key performance indicators which generated record growth with retail and wholesale distributors. He also provided post-acquisition
assistance to integrate newly acquired entities into Turning Point Brands and advocated for the vapor industry by meeting with the White
House's OMB/OIRA office, and various congressional and senatorial offices. Mr. Metzler was a significant contributor as a Standard
Technical Panel member in developing UL 8139- Electrical Systems of Electronic Cigarettes and Vaping Devices, a safety standard that
evaluates the electrical and battery systems of vaping devices and electronic cigarettes. Mr. Metzler was a licensed CPA for over 20
years, during which time he provided accounting and related consulting services to many companies. He began his career working with public
and private companies in the assurance practice at PricewaterhouseCoopers LLP in Boston. Mr. Metzler earned a B.S. in Accounting from
Canisius College.

 December 2023 Management Changes

 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. Moser will report
to Barry M. Hopkins, our Executive Chairman, until such time as a new Chief Executive Officer and President are appointed. At such time,
Mr. Mosser shall report to our Chief Executive Officer as a Senior Advisor. Pursuant to the Amendment, Mr. Mosser's base salary
shall be $251,000 per annum, effective as of January 1, 2024.

 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. Mr. Hopkins is our principal executive officer.

 Executive Chairman

 On November 6, 2023, our Board,
pursuant to the powers of the Board provided for under applicable Delaware law, approved the creation of the new officer position of
Executive Chairman and appointed Barry M. Hopkins, the then Chairman of the Board, to the office of Executive Chairman. The duties and
responsibilities of the Executive Chairman are as follows:

 1. The Executive Chairman acts
as the principal executive officer of our company, with the President and Chief Executive Officer continuing to have primary responsibility
for managing our day-to-day operations under the supervision of the Executive Chairman. The Executive Chairman shall provide advice and
consultation to our President and Chief Executive Officer and our other officers regarding the overall management of our business and
affairs, All significant strategic initiatives and projects of our company require prior consultation with and approval by the Executive
Chairman.

 2. Define our strategic direction
and, working with the President and Chief Executive Officer and other officers of our company, ensure that our strategic direction is
(a) properly communicated to the Board for its approval as required or deemed appropriate and (b) implemented by our company.

 3. Chair annual and special Board
meetings and annual stockholder meetings and, subject to availability and invitation, attend meetings of the committees of the Board.

 4. Provide guiding principles
for the proper functioning of Board and its committees in accordance with applicable laws, rules and regulations.

 5. Foster and promote the integrity
of the Board and a culture where the Board works harmoniously for the long-term benefit of our company and its stockholders.

 6. Act as liaison between the
Board and our officers to ensure that strategic policy and other decisions of the Board are fully presented to and discussed, debated,
and decided by the Board.

 7. Consult with Board members
outside the regularly scheduled meetings of the Board as required.

 8. Ensure that there is efficient
communication among the Executive Chairman, the President and Chief Executive Officer, and our other officers and employees and Board
members.

 9. Partner with the President
and Chief Executive Officer, work to strengthen our relationships with existing customers and foster key relationships that lead to new
business. In this regard, the Executive Chairman will act as our representative with current and potential commercial partners and also
potential sources of financing.

 Family Relationships

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

 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, Brooks, and Chuang 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, 2023. Our Board
is presently considering changes to the composition of the Compensation and Governance and Nominating Committees given Mr. Hopkins'
assumption of the role as our principal executive officer in November 2023. 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 10 times, including telephonic meetings, during
fiscal 2023. 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 Roger Brooks (Chair), David Worner and George Chuang. The Audit Committee met 4 times during fiscal
2023. 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, a copy of which can be accessed at our corporate website at
Changes to this charter from time to time will be posted on our website at such address.

 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. Brooks, 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 David Worner (Chair), Barry Hopkins and Roger Brooks. The Compensation Committee met 6 times
during fiscal 2023. Our Board is presently considering changes to the composition of the Compensation Committee given Mr. Hopkins'
assumption of the role as our principal executive officer in November 2023. The Compensation Committee acts pursuant to a written charter
adopted by our Board, a copy of which can be accessed at our corporate website at
Changes to this charter from time to time will be posted on our website at such address.

 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 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 Barry Hopkins (Chair), David Worner and
Roger Brooks. The Governance and Nominating Committee did not meet as such during fiscal 2023. Our Board is presently considering
changes to the composition of the Governance and Nominating Committee given Mr. Hopkins' assumption of the role as our principal
executive officer in November 2023. The Governance and Nominating Committee acts pursuant to a written charter
adopted by our Board, a copy of which can be accessed at our corporate website at
Changes to this charter from time to time will be posted on our website at such address.

 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 2023 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees.

 Director Diversity

 The following chart sets forth
the board diversity information required by Nasdaq for our directors as of the date of this Report:

 Board
Diversity Matrix

 Total
Number of Directors

 Female

 Male

 Non-Binary

 Did
Note Disclose Gender

 Part
I: Gender Identity

 Directors

 —

 —

 —

 Part
II: Demographic Background

 African
American or Black

 —

 —

 —

 Alaskan
Native or Native American

 —

 —

 —

 —

 Asian

 —

 —

 —

 Hispanic
or Latinx

 —

 —

 —

 —

 Native
Hawaiian or Pacific Islander

 —

 —

 —

 —

 White

 —

 —

 —

 Two
or More Races or Ethnicities

 —

 —

 —

 —

 LGBTQ+

 —

 —

 —

 —

 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

 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.

 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, 2023, (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, 2023, 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, 2023.

 Name
and principal position

 Fiscal
Year Ended October 31,

 Salary
($)

 Bonus
($)

 Stock
Awards ($) (1) (2)

 Option
Awards ($) (1)

 Non-Equity
Incentive Plan Compensation ($) (3)

 Nonqualified
Deferred Compensation Earnings ($)

 Total
($)

 Nirajkumar
Patel, Chief Science & Regulatory Officer, and Director

 2022

 244,000

 30,000

 42,584

 2,139,989

 57,709

 2,514,282

 2023

 276,000

 364,994

 640,994

 Eric
Mosser, former CEO, President, and Director (4)

 2022

 226,577

 20,000

 37,707

 1,854,991

 57,709

 2,196,984

 2023

 300,000

 699,941

 999,941

 Mark
Thoenes, former Interim CFO(5)

 2022

 347,201
(6)

 310,998

 658,193

 2023

 298,050

 30,650

 328,700

 Thomas
Metzler, CFO

 2023

 61,076

 150,000

 211,076

 Stephen
Sheriff, COO

 2022

 31,250

 29,000

 60,250

 2023

 146,528

 7,500

 75,808

 229,836

 (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 2022 option awards, refer to Note 2, " Share-Based Compensation,"
to the accompanying audited consolidated financial statements for the year ended October 31, 2023.

 (2)

 Includes fair value of shares
withheld by us to pay for taxes.

 (3)

 Consisted of cash paid in lieu
of vested RSUs.

 (4)

 Mr. Mosser resigned as our
Chief Executive Officer and President on December 21, 2023. Barry M. Hopkins became our Executive Chairman and principal executive
officer (and later Interim Chief Executive Officer and President) following the conclusion of our fiscal year ended October 31,
2023.

 (5)

 Mr. Thoenes resigned
as our Interim Chief Financial Officer on August 1, 2023

 (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.

 On February 6, 2023, we granted
stock option awards to Nirajkumar Patel, Chief Science and Regulatory Office, to acquire up to 23,810 shares of Common Stock under our
2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Patel's services as Chief Science and Regulatory Officer.
The option shares are exercisable at a price of $15.33 per share, which equaled the closing price of the Common Stock as of the date
immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of
Section 4(a)(2) thereof as a transaction not involving a public offering.

 On February 6, 2023, we
granted stock option awards to Eric Mosser, our then President and Chief Operating Officer, to acquire up to 23,810 shares of
Common Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Mosser's services as
President and Chief Operating. The option shares are exercisable at a price of $15.33 per share, which equaled the closing price of
the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements of
the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering.

 On March 3, 2023, we granted stock
option awards to Mark Thoenes, then our Interim Chief Financial Officer, to acquire up to 2,381 shares of Common Stock under our 2020
Stock and Incentive Compensation Plan, as partial compensation for Mr. Thoenes' services as Interim Chief Financial Officer. The
option shares are exercisable at a price of $12.81 per share, which equaled the closing price of the Common Stock as of the date immediately
prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2)
thereof as a transaction not involving a public offering.

 On August 1, 2023, we granted
stock option awards to Eric Mosser, our then Chief Executive Officer and President to acquire up to 27,004 shares of Common Stock under
our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Mosser's services as Chief Executive Officer and
President. The option shares are exercisable at a price of $12.41 per share, which equaled the closing price of the Common Stock as of
the date immediately prior to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue
of Section 4(a)(2) thereof as a transaction not involving a public offering.

 On August 1, 2023, we granted
stock option awards to Thomas Metzler, our Chief Financial Officer, Treasurer and Secretary to acquire up to 12,091 shares of Common
Stock under our 2020 Stock and Incentive Compensation Plan, as partial compensation for Mr. Metzler's services as Chief Financial
Officer, Treasurer, and Secretary. The option shares are exercisable at a price of $12.41 per share, which equaled the closing price
of the Common Stock as of the date immediately prior to the grant date. The issuances were exempt from the registration requirements
of the Securities Act by virtue of Section 4(a)(2) thereof as a transaction not involving a public offering.

 On August 22, 2023, we granted
stock option awards to Stephen Sheriff, our Chief Operating Officer to acquire up to 7,524 shares of Common Stock under our 2020 Stock
and Incentive Compensation Plan, as partial compensation for Mr. Sheriff's services as Chief Operating Officer. The option shares
are exercisable at a price of $10.08 per share, which equaled the closing price of the Common Stock as of the date immediately prior
to the grant date. The issuances were exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof
as a transaction not involving a public offering.

 Nirajkumar Patel

the fiscal year ended October 31, 2023, we paid a base salary of approximately $276,000 to Nirajkumar Patel, our Chief Science &
Regulatory Officer, compared to a base salary of approximately $244,000 for the fiscal year ended October 31, 2022. In May 2020,
our Board approved a cash bonus award to Mr. Patel equal to $30,000 for every $25 million in gross revenues generated by us. On the same
date, our Board also approved an equity bonus award to Mr. Patel of 3,572 restricted shares of our Common Stock for every $50 million
in accumulated gross revenues generated by us. Based on the cash bonus award, we paid Mr. Patel a cash bonus of $30,000 in fiscal year
2022 based on our meeting the gross revenue benchmarks that year and $0 in fiscal year 2023.

 We issued the following stock
compensation to Mr. Patel during fiscal years 2023 and 2022:

 Vesting
and/or Issuance Date

of Shares of our Common Stock

 Price
Per Share

Value

 11/5/2021

 $

 37.80

 $

 28,368

 2/5/2022

 $

 20.37

 $

 14,216

 During fiscal year 2022, we paid
approximately $57,709 in non-equity incentive plan compensation, which consisted of cash paid in lieu of a vested RSU issuance. The aggregate
values are based on the value of the vesting date for the shares that would have been issued.

 Eric Mosser

the fiscal year ended October 31, 2023, we paid a base salary of approximately $300,000 to Eric Mosser, our former Chief Executive Officer
and President who resigned such positions on December 21, 2023, compared to $226,577 for the fiscal year ended October 31, 2022. In May
2020, our Board approved a cash bonus award to Mr. Mosser equal to $20,000 for every $25 million in gross revenues generated by us. On
the same date, our Board also approved an equity bonus award to Mr. Mosser of 298 restricted shares of our Common Stock for every $50
million in accumulated gross revenues generated by us. Based on the cash bonus award, we paid Mr. Mosser a cash bonus of $20,000 in fiscal
year 2022 based on our meeting the gross revenue benchmarks that year and $0 in fiscal year 2023.

 We issued the following stock
compensation to Mr. Mosser during fiscal years 2023 and 2022:

 Vesting
and/or Issuance Date

of Shares of our Common Stock

 Price
Per Share

Value

 11/5/2021

 $

 37.80

 $

 25,330

 2/5/2022

 $

 20.37

 $

 12,377

 During fiscal year 2022 we paid
approximately $57,709 in non-equity incentive plan compensation, which consisted of cash paid in lieu of a vested RSU issuance. The aggregate
value is based on the value on the vesting date for the shares that would have been issued.

 Mark Thoenes

 Effective June 30, 2021, we entered
into a Consulting Agreement, dated June 14, 2021, with Mr. Thoenes (the "Consulting Agreement"), Pursuant to the Consulting
Agreement, we agreed to pay Mr. Thoenes a rate of $130 per hour and will reimburse him for usual and customary business expenses. We
paid approximately $347,671 and $298,050 to Mr. Thoenes pursuant to the Consulting Agreement during the fiscal years 2022 and 2023 respectively.
The total fair market value of these stock options on March 3, 2023 was $30,650. The Consulting Agreement was for a term of approximately
6 months, or until December 31, 2021, and was extended by the parties to July 31, 2023. Mr. Thoenes was assisting us as Interim Chief
Financial Officer. He resigned this position on August 1, 2023.

 Outstanding Equity Awards at Fiscal Year-End October 31, 2023

 Stock Option Awards

 Name

 Number of Stock Options that Have Not Vested (#)

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

 Nirajkumar Patel

 11,905

 182,504

 Eric Mosser (resigned in December 2023)

 38,909

 517,650

 Thomas Metzler

 12,092

 150,064

 Stephen Sheriff

 8,715

 94,100

 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.

 Employment Agreements

 Eric
Mosser. On August 1, 2023, we entered an employment agreement with Mr. Mosser. Pursuant to the terms of the agreement, Mr. Mosser
was paid an annual salary of $300,000 and receives health care insurance and other customary benefits. There was no fixed period outlined
in the agreement, rather Mr. Mosser's employment was at will, meaning that either party may terminate the employment at any time
for any reason or no reason. In addition to Mr. Mosser's base salary, Mr. Mosser was entitled to bonuses at the discretion of the
Compensation Committee of our Board. Mr. Mosser resigned his positions with our company in December 2023.

 Thomas
Metzler. On August 1, 2023, we entered an employment agreement with Mr. Metzler pursuant to which he serves as our Chief Financial
Officer. Pursuant to the terms of the agreement, Mr. Metzler is paid an annual salary of $240,000 and receives health care insurance
and other customary benefits. In addition to Mr. Metzler's base salary, Mr. Metzler is entitled to bonuses at the discretion of
the Compensation Committee of our Board, up to 30% of his base salary. Pursuant to his employment agreement, we granted to Mr. Metzler,
effective August 1, 2023, an option to purchase 12,092 shares of the Common Stock with an exercise price of $12,41 per share. Such option
vests over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36
per month until fully vested. Mr. Metzler's employment agreement contains customary clawback language, which states that any incentive-based
compensation granted to Mr. Metzler, including any annual incentive bonus and stock options, that is subject to recovery under any law,
government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required
pursuant to applicable rules and our company's Compensation Clawback Policy. The agreement also contains customary provisions for
confidentiality and matters related to intellectual property and company property.

 Mr.
Metzler's employment is at will, meaning that either he or our company may terminate the employment at any time for any reason
or no reason. The employment agreement also allows for termination by us for "Cause" or by Mr. Metzler without "Good
Reason," as defined in the agreement. If we terminate Mr. Metzler's employment for Cause, or if he terminates without Good
Reason, Mr. Metzler will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement
for business expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without
any additional severance or termination payments. If we terminate Mr. Metzler without Cause, or if he terminates for Good Reason, Mr.
Metzler will be entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his
base salary, increasing to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously
granted.

 Stephen
Sherrif. On August 22, 2023, we entered an employment agreement with Mr. Sheriff pursuant to which he serves as of Chief Operating
Officer. Pursuant to the terms of the agreement, Mr. Sheriff is paid an annual salary of $225,000 and receives health care insurance
and other customary benefits. In addition to Mr. Sherrif's base salary, Mr. Sheriff is entitled to bonuses at the discretion of
the Compensation Committee of our Board, up to 30% of his base salary. Pursuant to his employment agreement, we granted to Mr. Sheriff,
effective August 22, 2023, an option to purchase 7,524 shares of the Common Stock with an exercise price of $9.24 per share. Such option
vests over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36
per month until fully vested. Mr. Sheriff's employment agreement contains customary clawback language, which states that any incentive-based
compensation granted to Mr. Metzler, including any annual incentive bonus and stock options, that is subject to recovery under any law,
government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required
pursuant to applicable rules and our company's Compensation Clawback Policy. The agreement also contains customary provisions for
confidentiality and matters related to intellectual property and company property.

 Mr.
Sheriff's employment is at will, meaning that either he or our company may terminate the employment at any time for any reason
or no reason. The employment agreement also allows for termination by us for "Cause" or by Mr. Sheriff without "Good
Reason," as defined in the agreement. If we terminate Mr. Sheriff's employment for Cause, or if he terminates without Good
Reason, Mr. Sheriff will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement
for business expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without
any additional severance or termination payments. If we terminate Mr. Sheriff without Cause, or if he terminates for Good Reason, Mr.
Sheriff will be entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his
base salary, increasing to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously
granted.

 Barry
M. Hopkins. On February 8, 2024, we entered an employment agreement with Barry M. Hopkins under which he serves as our Executive
Chairman. Pursuant to the terms of the agreement, Mr. Hopkins is paid an annual salary of $300,000 and receives health care insurance
and other customary benefits. In addition to Mr. Hopkins' base salary, Mr. Hopkins is entitled to bonuses at the discretion of
the Compensation Committee of our Board, up to 40% of his base salary. Pursuant to his employment agreement, we granted to Mr. Hopkins,
effective February 8, 2024, an option to purchase 63,881 shares of the Common Stock with an exercise price of $5.25 per share (which
was the fair market value of the Common Stock when he was appointed as our Executive Chairman on November 9, 2023). Such option vests
over four years, with one-quarter vesting on the first anniversary of the grant date and the remainder monthly at the rate of 1/36 per
month until fully vested. Mr. Hopkins' employment agreement contains customary clawback language, which states that any incentive-based
compensation granted to Mr. Hopkins, including any annual incentive bonus and stock options, that is subject to recovery under any law,
government rule or regulation, or stock exchange listing requirement, will be subject to such deductions and clawback as may be required
pursuant to applicable rules and our company's Compensation Clawback Policy. The agreement also contains customary provisions for
confidentiality and matters related to intellectual property and company property.

 Mr.
Hopkins' employment is at will, meaning that either he or our company may terminate the employment at any time for any reason or
no reason. The employment agreement also allows for termination by us for "Cause" or by Mr. Hopkins without "Good Reason,"
as defined in the agreement. If we terminate Mr. Hopkins' employment for Cause, or if he terminates without Good Reason, Mr. Hopkins
will be entitled to receive the following: (i) any unpaid base salary accrued up to the termination date, (ii) reimbursement for business
expenses, and (iii) employee benefits and equity compensation under our benefit plans as of the termination date, without any additional
severance or termination payments. If we terminate Mr. Hopkins without Cause, or if he terminates for Good Reason, Mr. Hopkins will be
entitled to receive: (i) the previously mentioned accrued amounts, (ii) severance pay equal to two (2) months of his base salary, increasing
to six (6) months after one (1) year of employment, and (iii) any rights to option or equity grants previously granted.

 Nirajkumar
Patel. We do not have formal written employment agreements with Mr. Patel.

 Director Compensation

 In fiscal year 2023, we compensated our independent
directors as follows:

 Name
of Director (1)

 Fees
Earned
 or Paid in
 Cash

 Option

Awards

 Total

 Paul
Reuter (2)

 $

 100,000

 $

 91,249

 $

 191,249

 Roger
Brooks

 87,500

 91,249

 178,749

 George
Chuang

 87,500

 91,249

 178,749

 Barry
M. Hopkins (3)

 37,500

 108,749

 146,249

 David
Worner

 37,500

 108,749

 146,249

 James
P. Cassidy (4)

 16,667

 16,667

 (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, 2023.

 (2)

 Mr. Reuter resigned from the Board on March 18, 2023.

 (3)

 Mr. Hopkins was appointed as our Executive Chairman and principal
executive officer in November 2023.

 (4)

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

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

 Securities Authorized for Issuance Under Equity Compensation Plans

 The following table sets forth
information with respect to compensation plans under which our equity securities are authorized for issuance as of the end of fiscal
year 2023:

 Plan
category

of securities to be issued upon exercise of outstanding options, warrants and rights

 Weighted
average exercise and grant price of outstanding options, warrants and rights

of securities remaining available for future issuance

 Equity
compensation plans approved by security holders

 Equity
compensation plans not approved by security holders

 2,044

 $

 377.58

 6,713,749

 Plans Not Approved by Stockholders

 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

 Common Stock

 The following table sets forth,
as of the date of this Report, the number of shares of Common Stock owned of record and beneficially by (i) each of our current directors,
(ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each stockholder known by
us to be the beneficial owner of more than 5% of our outstanding Common Stock. Beneficial ownership has been determined in accordance
with the rules and regulations of the SEC and includes voting or investment power with respect to shares. Unless otherwise indicated,
the persons named in the table have sole voting and investment power with respect to the number of shares indicated as beneficial owned
by them.

 Name and Address (1)

 Amount and Nature of Beneficial Ownership (Common Stock) (2)

 Percentage of

Class (2)

 Nirajkumar Patel (3)

 1,976,248

 69.43

 %

 Stephen Sheriff (4)

 7,596

 *

 Roger Brooks (5)

 6,746

 *

 George Chuang (6)

 6,746

 *

 Barry M. Hopkins (7)

 *

 David Worner (8)

 *

 Mark Thoenes (9)

 9,604

 *

 Thomas Metzler (10)

 *

 Current Executive Officers and Directors as a Group (8 Persons)

 2,006,940

 70.51

 %

 Kaival Holdings, LLC, 401 N. Wickham Road, Suite 130 Melbourne, FL 32935 (12)

 1,917,400

 67.36

 %

 * 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
2,846,335 shares of Common Stock outstanding as of the date of this Report. 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 as of the date of this Report 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) Nirajkumar Patel serves as our Chief Science & Regulatory Officer, and director. Consists of 1,917,400 shares of our Common Stock held by Kaival Holdings, an entity over which Mr. Patel has shared dispositive and
voting authority, and approximately 52,381 shares of our Common Stock issuable upon the exercise of vested options, and excludes approximately
11,905 shares of our Common Stock issuable upon the exercise of unvested options.

 (4) Stephen Sheriff serves as our Chief Operating
Officer. Consists of 6,405 shares of our Common Stock and approximately 1,191 shares of our Common Stock issuable upon the exercise of
vested options, and excludes approximately 8,715 shares of our Common Stock issuable upon the exercise of unvested options.

 (5) Roger Brooks serves as a member of our board.
Consists of approximately 6,746 shares of our Common Stock issuable upon the exercise of vested options and excludes approximately 5,953
shares of our Common Stock issuable upon the exercise of unvested options.

 (6) George Chuang serves as a member of our board.
Consists of approximately 6,746 shares of our Common Stock issuable upon the exercise of vested options and excludes approximately 5,953
shares of our Common Stock issuable upon the exercise of unvested options.

 (7) Barry M. Hopkins serves as our Executive Chairman
and Interim Chief Executive Officer and President. Excludes approximately 5,953 shares of our Common Stock issuable upon the exercise
of unvested options.

 (8) David Worner serves as a member of our
board. Excludes approximately 5,953 shares of our Common Stock issuable upon the exercise of unvested options.

 (9) Mark Thoenes serves as a member of our board.
Consists of 80 shares of our Common Stock and approximately 9,524 shares of our Common Stock issuable upon the exercise of vested options.

 (10) Thomas Metzler serves as our Chief Financial
Officer, Secretary and Treasurer. Excludes approximately 12,092 shares of our Common Stock issuable upon the exercise of unvested options.

 Nirajkumar Patel and Eric Mosser (our former
Chief Executive Officer and President) are the sole voting members of Kaival Holdings, with Mr. Patel holding voting control.

 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, 2023, the Company recognized revenue of $10,828 from three companies owned by Nirajkumar Patel, the Chief Science and Regulatory
Officer and a director of the Company, and/or his wife.

 Purchases and Accounts Payable

the year ended October 31, 2023, 100% of the inventories of products, consisting solely of the BIDI Stick, were purchased from
Bidi, a related party controlled by Nirajkumar Patel, in the amount of $ 12,747,006. As of October 31, 2023, the Company product
valued at $4,057,025 were held in inventory. In addition, as of October 31, 2023, the Company had an accounts payable balance to Bidi
related to purchase of inventories of $1,521,491.

 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, 2023, the Company paid license fees of approximately $150,000 to Bidi. As of October 31, 2023 and 2022, no
additional license fees are owed to Bidi. As of October 31, 2023, the Company had accounts payable to Bidi of $712,524 for NRE and
$240,802 for reimbursement of insurance expense.

 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 Science
and Regulatory Officer and director, Mr. Nirajkumar Patel, owns and controls Just Pick.

 Receivables Purchase Arrangements

 On November
29, 2023, we entered into two receivables purchase transactions pursuant to: (i) a Future Receivables Sale and Purchase Agreement,
dated November 29, 2023, between Clearview Funding Solutions LLC ("Clearview") and our company (the "Clearview
Agreement"), and (ii) a Future Receivables Sale and Purchase Agreement, dated November 29, 2023, between Mr. Advance LLC ("Advance")
and our company (the "Advance Agreement").

to the Clearview Agreement, we sold future receivables in the principal amount of $864,000 (the "Clearview Future Receivables")
to Clearview in a private transaction for a purchase price of $600,000 (giving effect to original issue discount of $264,000). In connection
with the sale of the Clearview Future Receivables, we also paid an origination fee to Clearview for underwriting and application costs
of $36,520, resulting in net proceeds to us of $563,480 (gross of advisory fees). Our obligations under the Clearview Agreement are personally
guaranteed by Eric Mosser, our former Chief Executive Officer and President.

to the Advance Agreement, we sold future receivables in the principal amount of $864,000 (the "Advance Future Receivables")
to Advance in a private transaction for a purchase price of $600,000 (giving effect to original issue discount of $264,000). In connection
with the sale of the Advance Future Receivables, we also paid an origination fee to Advance for underwriting and related expenses of
$36,035, resulting in net proceeds to us of $563,965 (gross of advisory fees). Our obligations under the Advance Agreement are also personally
guaranteed by Mr. Mosser.

 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 MaloneBailey, LLP, our principal accountants with respect to our fiscal year ended
October 31, 2023, and October 31, 2022.

 2023

 2022

 Audit
and review fees

 $

 286,725

 $

 195,000

 Audit-related
fees

 —

 10,000

 Tax
fees

 —

 —

 All
other fees

 —

 —

 Total

 $

 286,725

 $

 205,000

 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.

 PART
IV

 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

 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

 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

 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

 10.8

 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.

 10.9

 Form
 of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as
 Exhibit 10.3 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020, and is incorporated

 10.10

 Form
 of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit
 10.4 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.

 10.11

 Form
 of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Nirajkumar Patel, which was filed as
 Exhibit 10.5 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2020 and is incorporated

 10.12

 Form
 of Restricted Stock Unit Agreement by and between Kaival Brands Innovations Group, Inc. and Eric Mosser, which was filed as Exhibit
 10.6 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.

 10.13

 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

 10.14

 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

 10.15

 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.

 10.16

 Independent
 Director Agreement, dated June 30, 2021, by and between the Company and George Chuang, which was filed as Exhibit 10.1 to our Current
 Report on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto.

 10.17

 Consulting
 Agreement, dated June 14, 2021, by and between the Company and Mark Thoenes, which was filed as Exhibit 10.2 to our Current Report
 on Form 8-K filed with the Securities and Exchange Commission on July 1, 2021, and is incorporated herein by reference thereto.

 10.18

 and Restated Independent Director Agreement, dated March 29, 2021, by and between the Company and Roger Brooks, which was filed as
 Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2021, and is incorporated

 10.19

 Amendment
 to Amended and Restated Independent Director Agreement, dated July 19, 2021, by and between the Company and Roger Brooks, which was
 filed as Exhibit 10.3 to our Current Report on Form 8-K filed with Securities and Exchange Commission on July 23, 2021, and is incorporated

 10.20

 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.

 10.21

 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) +

 10.22

 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. +

 10.23

 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.

 10.24

 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.

 10.25

 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.

 10.26

 Employment
Agreement by and between the Company and Thomas Metzler, dated August 1, 2023, which was filed as Exhibit 10.1 to our Current Report
on Form 8-K filed with the Securities and Exchange Commission on August 3, 2023, and is incorporated herein by reference thereto.

 10.27

 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.*+

 10.28

 Employment
Agreement by and between the Company and Stephen Sheriff, dated August 22, 2023, which was filed as Exhibit 10.1 to our Current Report
on Form 8-K filed with the Securities and Exchange Commission on August 28, 2023, and is incorporated herein by reference thereto.

 10.29

 Employment Agreement by and between the Company and Barry Hopkins, dated February 8, 2024.*

 19.1

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

Linkbase Document*

 101.DEF

Taxonomy Extension Definition Linkbase Document*

 101.LAB

 Label Linkbase Document*

 101.PRE

 Linkbase Document*

 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/
 Barry M. Hopkins

 Barry M.
 Hopkins

 Executive Chairman, Interim
 Chief Executive, and President

 (Principal Executive Officer)

 Dated: February 13,
 2024

 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/
Barry M. Hopkins

 Barry M. Hopkins

 Executive Chairman, Interim Chief Executive
Officer, and President

 (Principal Executive Officer)

 By:

 /s/ Thomas Metzler

 Thomas Metzler

 Chief Financial Officer, Treasurer, and Secretary

 By:

 /s/ Nirajkumar
Patel

 Nirajkumar Patel

 Chief Science and Regulatory Officer and Director

 By:

 /s/ Roger Brooks

 Roger Brooks

 By:

 /s/ George Chuang

 George Chuang

 By:

 /s/ Mark Thoenes

 Mark Thoenes

 By:

 /s/
David Worner

 David Worner