Question 1

If a reverse split is utilized are there concerns about the float upon uplisting and are there plans to expand shares through additional offerings ?

Accepted Answer

We cannot discuss the details of a reverse split because at this stage, we have only advised stockholders that we may move forward with this option in the near term, but have not made any definitive decisions at this point. But in the event we move forward with the option, we expect that a reverse split would still leave a significant number of shares outstanding.

Regarding additional share offerings, Kaival Brands has not engaged in a single stock offering or issuance for capital raising purposes. While we do not comment on potential capital raising activities, we do note that one of the benefits of a Nasdaq listing for any company is that an exchange-listed company may have more access to capital markets than a non-listed company.

Question 2

The share price nearly reached $4 organically before a sell off. What is management’s view on share price volatility lately including that rise?

Accepted Answer

In the beginning of 2021 Kaival Brands’ shares were trading around $0.40. While market prices can move for various reasons, we note that the price began to rise earlier this year as we continued to publicly disclose information regarding our business and results, enabling investors to develop a better understanding of our company.

Question 3

What benefit do Kaival Brands and Kaival Brand’s stockholders receive from being listed on the Nasdaq versus being quoted on the OTCQB?

Accepted Answer

The benefits from being listed on the Nasdaq are significant and would represent a significant positive step forward for the company, a turning point in our development.

One of the most significant potential benefits of being listed on the Nasdaq is that it could significantly boost the available audience of potential investors as many institutional investors have investment parameters that prohibit them from owning OTC stocks.

With an uplisting to the Nasdaq, Kaival Brands’ shares would potentially qualify to be purchased by many institutions – mutual funds, hedge funds, pension funds, etc. – that may not be able to invest while we are quoted on the OTC. Furthermore, a Nasdaq listing can provide enhanced liquidity and more orderly trading markets.

Question 4

We appreciate your foresight and taking our questions! Is management taking into consideration how to transition to Nasdaq in ways that minimize negative impact to early stockholders?

Accepted Answer

We view a transition to the Nasdaq as an extremely positive event for stockholders as it has the potential to: (1) significantly expand the potential audience of investors (most institutional investors are prohibited from buy OTC stocks); (2) increase investor awareness of Kaival Brands; (3) provide more efficient and deeper markets for the shares; (4) create potential for institutional advocates; and (5) provide avenues for capital raising to expand internationally.

Question 5

Do you think Kaival Brands will exceed $1 billion in revenue for 2022?

Accepted Answer

We are not providing guidance for 2022, though we note that we did previously announce that guidance will be discussed in August.

That being said we continue to make great strides with new distribution partners and have gained authorization enter certain international markets. We continue to navigate through the swarms of black market and counterfeit products continuously available.

We would be remiss if we failed to mention the significant job the FDA is doing to protect consumers from “bad actors” through the Premarket Tobacco Product Application process and Youth Prevention strategies. We also believe that the recent extension of the Prevent All Cigarette Trafficking (PACT) Act to cover vaping products is a very positive step in the right direction.

Question 6

Are the restricted stock units issues as part of the compensation arrangements going to be subject to the reverse split as well?

Accepted Answer

Yes, all shares, restricted or unrestricted, granted prior to the reverse split are also subject to a reverse split if it is indeed enacted.

Question 7

Kaival Brands’ earnings rely heavily on BIDI&reg; Stick's success. Have there been discussions to buy other products, or to distribute other products that will help diversify Kaival Brands’ revenues?

Accepted Answer

The Company is very excited about our new product, the BIDI^® Pouch. The pouch market is a very significant opportunity in the U.S. alone. Many of our current distributors have already begun to carry the BIDI^® Pouch.

Question 8

Australia and New Zealand are very small vaping markets, and Australia has a lot of legal issues currently with vaping. Why are you targeting these markets instead of somewhere like France or China with many more smokers?

Accepted Answer

Yes, we are able to market and distribute product now in Australia and New Zealand, but we are also eligible to market and distribute the product in the U.K., Spain, France, Italy, Germany, The Netherlands, Austria, Russia. and the Czech Republic. We are very excited about our international opportunities.

Question 9

Do you have a time frame for final Phase III FDA review?

Accepted Answer

While there is no timetable for FDA review, we are working with the Agency and continue to provide them with scientific information as they review our PMTAs.

Question 10

There have been over 20 million shares added to the float since inception of Kaival Brands in March 2020. Are you aware of who is getting these shares and how come they were allowed to receive them? This is one of the biggest reasons Kaival Brands is not being valued correctly. Too many shares, not enough buyers.

Accepted Answer

Any shares of Kaival Brands’ common stock that have been issued since March 2020 have been restricted shares. These restricted shares have been issued to certain of our employees as well as outside consultants, and advisors for services rendered.

Question 11

Is there any chance BIDI&reg; Stick would be owned under the Kaival Brands’ umbrella?

Accepted Answer

There are no current plans to change the relationship between Bidi Vapor and Kaival Brands. Any change in the future to the current relationship between Bidi Vapor and Kaival Brands would be disclosed to our stockholders at the appropriate time, and as required by SEC rules and regulations.

Question 12

How can we as Kaival Brands’ stockholders make sure that we are able to receive more favorable terms as our sales increase? Economies of scale is defined as "a proportionate saving in costs gained by an increased level of production". Despite having our best quarter of sales in the first quarter of 2021, our gross margin was actually lower than the fourth quarter of 2020.

Accepted Answer

Significant economies of scale are realized when a company not only reaches a critical mass of revenue but also when the company reduces their internal investment and capital expenditure. Kaival remains optimistic in its ability to grow revenues and will continue to reinvest those revenues in capital investments and other investments.

Question 13

Considering Bidi Vapor is under control by Kaival Brands’ Chief Executive Officer, how can we (Kaival Brands’ stockholders) feel confident that profits are not just being funnelled to Bidi Vapor (the private entity) instead of Kaival Brands (the public entity)?

Accepted Answer

Mr. Patel is co-owner of an entity that is Kaival Brands’ largest stockholder. As such, Mr. Patel’s interests are very much aligned with those of all Kaival Brands’ stockholders. Additionally, the terms and conditions of all agreements between Bidi Vapor and Kaival Brands have been publicly disclosed. We would also note that Nasdaq rules require that any future transactions between Kaival Brands and Bidi Vapor would, as a related party transaction, need to be approved by Kaival Brands’ independent audit committee.

Question 14

Will management cancel any of their preferred or restricted shares? Currently management owns 200,000,000 restricted shares. They also own preferred shares convertible into 300,000,000 more shares. Additionally, they receive quarterly/annual bonuses in shares (and/or cash) as well up to 16,000,000 shares (not including arrangements outside of Niraj/Eric) through their compensation agreements. It would benefit all stockholders if insiders did not own 90% of the fully diluted shares.

Accepted Answer

As with many companies that are closely owned at their inception, we expect our ownership base to broaden and expand over time.

Question 15

With your current revenue growth profile the share price could hit the $4 minimum bid for Nasdaq in a quarter or two. Why are you in such a hurry to enact a reverse split? Wouldn't you prefer to organically uplist?

Accepted Answer

No decision has been made at this time to effect a reverse split. The act of filing the Information Statement with the SEC, which informed our stockholders of the possibility of a reverse stock split in the future, ensured that we would have that option should our board of directors deem it advisable. Further, while we are confident in our company and our future, we can not speculate on stock prices or how the market might react to future news.

Question 16

The company’s forward revenue guidance of $400 to $450 million, was that only for the domestic business?

Accepted Answer

Our 2021 revenue guidance includes an assumption of a slight contribution from non-U.S. sales. Kaival Brands has received authorization to sell and market the product in: the United Kingdom, New Zealand, Australia, Spain, Italy, France, Czech Republic and Russia. In late March, we indicated that we believe our first “non-U.S.” sales will occur within the next 6 months.

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