Kaival Brands Innovations Group, Inc. (NASDAQ:
KAVL) ("Kaival Brands," the "Company" or "we,” “our” or
similar terms), the exclusive distributor of all products
manufactured by Bidi Vapor, LLC (“Bidi Vapor”), including the BIDI®
Stick electronic nicotine delivery system (ENDS), which are
intended for adults 21 and over, today announced it has acquired an
extensive patent portfolio from GoFire, Inc. with the goal of
diversifying its product offerings and creating near and longer
term revenue opportunities.
The acquired assets will be housed in Kaival
Labs, Inc., a wholly owned subsidiary of Kaival Brands which
develops new branded and white-label products and services in the
vaporizer and inhalation technology sectors.
In the near term, Kaival Brands expects to seek
third-party licensing opportunities in the cannabis, hemp/CBD,
nicotine and nutraceutical markets, as a means of monetizing its
new patents. Longer term, the Company believes it can utilize the
acquired patents to create innovative and market-disruptive
products, including patent protected vaporizer devices and related
hardware and software applications.
The GoFire patent portfolio includes 12 existing
and 46 pending with 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 European
Patent Organisation, 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.
“This is a transformative asset acquisition for
Kaival Brands,” stated Eric Mosser, President and Chief Operating
Officer of Kaival Brands. “As we look to the future of our company
beyond our core BIDI® Stick distribution business, the purchase of
this extensive patent portfolio marks the first step in
diversifying our product offerings for adult consumers and
potential revenue streams. We are already exploring near-term,
revenue generating opportunities through royalty-based licensing
agreements with third party partners in the cannabis, hemp/CBD,
nicotine and nutraceutical spaces. Our longer-term plan is to
incorporate this intellectual property into new, adult-focused
products and expand into new segments such as cannabis/hemp,
nutraceutical, and pharmaceutical markets that we can sell
ourselves through existing and potential new distribution partners,
once all necessary regulatory clearances have been obtained.
Additionally, we believe that the portfolio provides us with
certain strategic advantages due to the limited number of patents
in the vaporizer space. In short, we believe this forward-looking
acquisition, with the acquisition consideration structured in key
respects at premiums to the current market value of our common
stock, broadens and strengthens our company and our prospects
considerably as we seek to drive value for our
stockholders.”
Nirajkumar Patel, Chief Science and Regulatory
Officer of Kaival Brands and owner of Bidi Vapor, stated, “We
believe these patents and patent applications represent a valuable
opportunity to increase our product portfolio and diversify revenue
streams. From a science perspective, these patents are innovative
with novel applications, and we look forward to developing these
patents into commercial or pharmaceutical products for adult
consumers. From a regulatory point of view, there are only so many
patents in the vaporizer space, and we believe that acquiring an
extensive portfolio such as this is a wise strategic purchase for
the long-term success of Kaival Brands.”
Peter Calfee, Chief Executive Officer of GoFire,
Inc., stated, “We are excited to place these valuable assets into
Kaival’s hands. After working hard to create this intellectual
property with a goal of providing safer and healthier products to
the marketplace, we engaged in a comprehensive assessment of how
best to further its development into actual products and services
with consumer reach. At the end of that process, we chose to invest
our patent portfolio in Kaival in exchange for Kaival equity as the
right fit for our technology. We have confidence in Kaival’s
management team and board of directors as Kaival seeks to further
develop and ultimately monetize this technology for the benefit of
all Kaival stockholders, including GoFire’s stockholders. We look
forward to realizing the potential market strength of this patent
portfolio with Kaival.”
Transaction Overview
The consideration for the purchased patents
consists primarily of Kaival Brands equity securities. In certain
key aspects, the equity consideration was structured in a
forward-looking manner with valuations or exercise prices struck at
premiums to the current market price of Kaival Brands’ common
stock.
Specifically, the equity consideration consists
of: (i) 2,000,000 shares of Kaival Brands common stock; (ii)
900,000 shares of newly designated, non-voting Series B Preferred
Stock valued at $15 per share and (iii) warrants to purchase
2,000,000 shares of common stock with exercise prices ranging from
$3.00 to $6.00 per share for each of four 500,000 share tranches.
The Company could receive up $9,000,000 in cash proceeds if such
warrants are exercised in the future for cash.
The Series B Preferred shares are redeemable at
$15 per share or at lower prices depending on the market value of
the Company’s common stock at the time of redemption. Each
preferred share is convertible into 8.3333 shares of Company common
stock, or 7,500,000 common shares in total. Each preferred share
has a $15 face value which, on an as converted basis, equates to a
value of $1.80 for each of the 8.3333 shares of common stock
receivable upon conversion, representing a premium to the market
price of the Kaival’s common stock as of the closing date. However,
the preferred shares may be only converted into common stock
beginning 18 months following the closing and then only on a
limited basis over the next 5 years, if the Company has not
redeemed the preferred shares prior to conversion. The holders of
the Series B preferred shares are also entitled to nominate one
individual to serve on board of directors of Kaival Brands, with
the initial board member being James P. Cassidy, a GoFire board
advisor with significant investment, management and tobacco
industry experience.
The share consideration is subject to a
six-month lockup agreement. GoFire or its designees have been
granted certain registration rights with respect to the common
stock issued as part of or underlying the equity consideration.
In another forward-looking consideration
structure, GoFire is also entitled to potential contingent cash
consideration based on a percentage of license revenue received by
Kaival Brands over the next four years from cannabis-related
applications of the acquired patents.
Trust Capital Markets, a division of AGES
Financial Services Ltd, acted as advisor to Kaival Brands and
Winchester Capital Partners LLC acted as advisor to GoFire.
Ellenoff Grossman & Schole LLP acted as legal counsel to Kaival
Brands and the Gunster law firm acted as legal counsel to
GoFire.
Additional details regarding this transaction
will be provided in a Current Report on Form 8-K to be filed by the
Company with the U.S. Securities and Exchange Commission.
ABOUT KAIVAL LABS, INC.
Based in Grant-Valkaria, Florida, Kaival Labs is
a 100% wholly-owned subsidiary of Kaival Brands focused on
developing new branded and white-label products and services in the
vaporizer and inhalation technology sectors. Kaival Labs’ current
patent portfolio consists of 12 existing and 46 pending with novel
technologies across extrusion dose control, product preservation,
tracking and tracing usage, multiple modalities and child safety.
The patents and patent applications cover territories including the
United States, Australia, Canada, China, the European Patent
Organisation, Israel, Japan, Mexico, New Zealand and South Korea.
The portfolio also includes a fully-functional proprietary mobile
device software application that is used in conjunction with
certain patents in the portfolio.
Learn more about Kaival Labs at
https://kaivallabs.com.
ABOUT KAIVAL BRANDS
Based in Grant-Valkaria, Florida, Kaival Brands
is a company focused on incubating innovative and profitable
adult-focused products into mature and dominant brands, with a
current focus on the distribution of electronic nicotine delivery
systems (ENDS) also known as “e-cigarettes”. Our business plan is
to seek to diversify into distributing other nicotine and
non-nicotine delivery system products (including those related to
hemp-derived cannabidiol (known as CBD) products). Kaival Brands
and Philip Morris Products S.A. (via sublicense from Kaival Brands)
are the exclusive global distributors of all products manufactured
by Bidi Vapor.
Learn more about Kaival Brands at
https://ir.kaivalbrands.com.
Cautionary Note Regarding
Forward-Looking Statements
This press release and the statements of the
Company’s management and partners included herein and related to
the subject matter herein includes statements that constitute
“forward-looking statements” (as defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended), which are statements
other than historical facts. You can identify forward-looking
statements by words such as “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,”
“position,” “prospects,” “should,” “strategy,” “target,” “will,”
and similar words. All forward-looking statements speak only as of
the date of this press release. Although we believe that the plans,
intentions, and expectations reflected in or suggested by the
forward-looking statements are reasonable, there is no assurance
that these plans, intentions, or expectations will be achieved.
Therefore, actual outcomes and results (including, without
limitation, the will be able to monetize the acquired assets
described herein, and the impact of such efforts on the Company’s
results of operations) could materially and adversely differ from
what is expressed, implied, or forecasted in such statements. Our
business and our ability to expand and grow our business due to the
assets we acquired from GoFire may be influenced by many factors
that are difficult to predict, involve significant risks and
uncertainties that may materially affect actual results, and are
often beyond our control. Factors that could cause or contribute to
such differences include, but are not limited to: (i) future
actions by the FDA that could impact our business and prospects,
(ii) the outcome of FDA’s scientific review of Bidi Vapor’s pending
FDA Premarket Tobacco Product Applications, (iii) the results of
international marketing and sales efforts by Philip Morris
International, the Company’s international distribution partner,
(iv) how quickly domestic and international markets adopt our
products, (v) the scope of future FDA enforcement of regulations in
the ENDS industry or other sectors we may enter, including the
cannabis industry, (vi) the FDA’s approach to the regulation of
synthetic nicotine and other potential products we may manufacture
or sell in the future and its impact on our business, (vii)
potential federal and state flavor or other bans and other
restrictions on ENDS products and other potential products we may
manufacture or sell in the future, (viii) whether we will be able
to successfully integrate and capitalize on the patents we have
acquired from GoFire, of which no assurances can be given, (ix)
general economic uncertainty in key global markets and a worsening
of global economic conditions or low levels of economic growth, (x)
the effects of steps that we could take to reduce operating costs,
(xi) our inability to generate and sustain profitable sales growth,
including sales growth in U.S. and international markets, (xii)
circumstances or developments that may make us unable to implement
or realize anticipated benefits, or that may increase the costs, of
our current and planned business initiatives, (xiii) significant
changes in our relationships with our distributors or
sub-distributors and (xiv) other factors detailed by us in our
public filings with the Securities and Exchange Commission,
including the disclosures under the heading “Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended October 31,
2022, filed with the Securities and Exchange Commission on January
27, 2023 and accessible at www.sec.gov. All forward-looking
statements included in this press release are expressly qualified
in their entirety by such cautionary statements. Except as required
under the federal securities laws and the Securities and Exchange
Commission’s rules and regulations, we do not have any intention or
obligation to update any forward-looking statements publicly,
whether as a result of new information, future events, or
otherwise.
All Press Inquiries and Kaival Brands Investor
Relations:Stephen Sheriff, Director of Communications and
AdministrationIr.kaivalbrands.cominvestors@kaivalbrands.com
Kaival Brands Innovations (NASDAQ:KAVL)
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