Item 5.02 Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers.
On March 18, 2023, Paul Reuter notified the Board
of Directors (the “Board”) of Kaival Brands Innovations Group, Inc. (the “Company”) of his intent
to retire and resign from the office of Chairman of the Board and each Board committee on which he serves, effective immediately. Mr.
Reuter’s retirement and resignation was not the result of any disagreement with management or the Company on any matter relating
to the Company’s operations, policies or practices.
In connection with his retirement from the Board,
on March 18, 2023, the Company granted to Mr. Reuter a one-time cash payment of $50,000. In addition, all options to purchase shares of
the Company’s common stock that were previously issued to Mr. Reuter and subject to automatic vesting vested in full.
Following Mr. Reuter’s departure from the
Board, effective March 19, 2023, the Board adopted, by unanimous consent to action and pursuant to the powers of the Board under the
Company’s bylaws and applicable law, to expand and fix the size of the Board from five members to seven members. The Board
subsequently appointed Messrs. Barry M. Hopkins, David Worner and Mark Thoenes to the Board to fill the three resulting vacancies.
Mr. Hopkins was appointed to the position of Chairman of the Board.
Messrs. Roger Brooks and George Chuang, each current
members of the Board, will remain on the Board. Following the changes to the Board, the Board consists of a total of seven members, four
of whom (Messrs. Hopkins, Worner, Brooks and Chuang) are “independent” directors within the meaning of listing rules of the
NASDAQ Stock Market.
On March 20, 2023, the Company issued a press release
regarding the change in the composition of the Board. Such press release is filed as Exhibit 99.1 to this Report.
Biographical Summaries of Messrs. Hopkins, Worner
and Thoenes
Barry M. Hopkins
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. The Board believes
Mr. Hopkins is qualified to serve on the Board because of his considerable experience in retail and knowledge of the tobacco and cigarette
industry.
Mr. Hopkins (a) is not a party to any arrangement
or understanding with any other person pursuant to which he was selected as a director of the Company and (b) has not been involved in
any transactions with the Company or related persons of the Company that would require disclosure under Item 404(a) of the Regulation
S-K.
David Worner
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. The
Board believes Mr. Worner is qualified to fulfill a director role with the Company because of the wealth of knowledge he possesses in
accounting and finance.
Mr. Worner (a) is not a party to any arrangement or
understanding with any other person pursuant to which he was selected as a director of the Company and (b) has not been involved in any
transactions with the Company or related persons of the Company that would require disclosure under Item 404(a) of the Regulation S-K.
Mark Thoenes
Mark Thoenes currently serves as Interim Chief Financial
Officer of the Company, a position he has held since June 2021. Mr. Thoenes has more than 35 years of diverse financial and operational
leadership. He has been a licensed Certified Public Accountant since 1984 and began his career with Ernst & Young Global Limited.
Following over a decade of executive experience in finance and operational roles for privately held healthcare companies, from 2000 to
2010, Mr. Thoenes served as the Executive Vice President and Chief Financial Officer of Rentrak Corporation, a publicly traded company
listed on Nasdaq. Since his departure from Rentrak, Mr. Thoenes has been the President of MLT Consulting Services, LLC, a full-service
business and financial consulting firm where he has provided outsourced financing and operational management services for companies The
Board believes Mr. Thoenes is qualified to serve on the Board because of his history with the Company and because of his accounting, financial and
operational experience.
Aside from agreements that have previously been disclosed
by the Company in its filings with the Securities and Exchange Commission related to his position as Interim Chief Financial Officer of
the Company, Mr. Thoenes has not been involved in any transactions with the Company or related persons of the Company that would require
disclosure under Item 404(a) of Regulation S-K. There are no arrangements or understandings between him and any other persons pursuant
to which he was or is to be selected as a director.
Committee Assignments
On March 19, 2023, the Board approved a reconstitution
of the Audit, Compensation and Nominating and Corporate Governance Committees of the Board. As a result, the current members of each Board
committee are as follows:
| Committee |
|
Chairman |
|
Committee Members |
| Audit Committee |
|
X |
|
Roger Brooks |
| |
|
|
|
David Worner |
| |
|
|
|
George Chuang |
| |
|
|
|
|
| Compensation Committee |
|
X |
|
David Worner |
| |
|
|
|
Barry Michael Hopkins |
| |
|
|
|
George Chuang |
| |
|
|
|
|
| Governance and Nominating Committee |
|
X |
|
Barry Michael Hopkins |
| |
|
|
|
David Worner |
| |
|
|
|
Roger Brooks |
Compensatory Arrangements
In connection with each of his appointments to the
Board, the Company has agreed to grant Messrs. Hopkins, Worner, and Thoenes compensation in accordance with the following schedule:
| |
ANNUAL DIRECTOR COMPENSATION |
| BOARD |
Cash |
Non-Qualified Stock Options |
Grant Date |
Vest Date |
Expiration Date |
| Barry M. Hopkins |
$100,000 |
125,000 |
3/19/2023 |
3/19/2024 |
3/19/2033 |
| David Worner |
$100,000 |
125,000 |
3/19/2023 |
3/19/2024 |
3/19/2033 |
| Mark Thoenes |
$ – |
– |
N/A |
N/A |
N/A |
Such equity grants shall be issued under and shall
be governed pursuant to the terms of the Company’s Amended and Restated 2020 Stock and Incentive Compensation plan.