UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): March 31, 2020

Kaival Brands Innovations Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 000-56016 83-3492907
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer Identification No.)

 

 

4460 Old Dixie Highway

Grant, Florida 32949

(Address of principal executive office, including zip code)

 

Telephone: (833) 452-4825

(Registrant's telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
None None None

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company [X]

 

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. [ ]

 

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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

 

On March 31, 2020 (the “Effective Date”), Kaival Brands Innovations Group, Inc., a Delaware corporation (the “Company”), entered into a service agreement (the “Service Agreement”) with QuikfillRx LLC, a Florida limited liability company (“QuikfillRx”), whereby QuikfillRx has agreed to provide 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 (the “Services”). The Services will be provided by QuikfillRx as requested from time to time by the Company.

 

Pursuant to the terms of the Agreement, QuikfillRx is solely responsible for maintaining appropriate staffing levels of all personnel and outside resources required to perform the Services, including, without limitation, digital marketing staff, creatives, researchers, social media managers, content writers, and search engine optimization specialists (collectively, the “Personnel”). QuikfillRx is also solely responsible for payment of compensation to the Personnel, including payment and withholding of applicable taxes and other payroll-related charges, such as payments for insurance and other benefits.

 

In consideration for the provision of the Services by QuikfillRx, the Company will pay to QuikfillRx General Compensation (as defined below) and Bonus Compensation (as defined below). “General Compensation” consists of the following: (i) for the Services provided in March 2020, the Company will pay QuikfillRx $36,000, which amount was paid prior to the Effective Date and $50,000 within three (3) business days of the Effective Date; (ii) for each calendar month commencing April 2020 through October 2020, the Company will pay QuikfillRx an amount equal to $100,000 per month for the Services to be performed during such calendar month; (iii) if the parties agree to extend the term of the Agreement beyond the original expiration date of October 31, 2020, then for the period between November 1, 2020 and October 31, 2021, the Company will pay QuikfillRx $125,000 per month for the Services to be performed during such calendar month; and (iv) if the parties agree to extend the term of the Agreement beyond October 31, 2021, then for the period between November 1, 2021 and October 31, 2022, the Company will pay QuikfillRx $150,000 per month for the Services to be performed during such calendar month.

 

The Company will also pay QuikfillRx “Bonus Compensation” equal to 1.17% of the Company’s gross quarterly sales during each applicable fiscal quarter that are attributable to the Services provided by QuikfillRx pursuant to the Agreement (the “Applicable Gross Quarterly Sales”), to be paid as follows: (i) an amount equal to 0.9% of the Applicable Gross Quarterly Sales will be paid, at the Company’s option in (A) cash, (B) shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), or (C) a combination of cash and Common Stock; and (ii) an amount equal to 0.27% of the Applicable Gross Quarterly Sales will be paid by the Company to QuikfillRx in cash.

 

The number of shares of Common Stock issued in lieu of a cash payment will be based upon a per share price equal to the average closing price of the Company’s Common Stock as reported by the OTC Markets Group, Inc. on the three (3) trading days immediately preceding the date of issuance. The shares of the Company’s Common Stock issued will bear a restrictive legend. The Company cannot issue in excess of: (x) 12,000,000 shares of Common Stock during the period commencing on the Effective Date and ending October 31, 2020; (y) 12,000,00 shares of Common Stock for either renewal term for the periods commencing November 1, 2020 through October 31, 2021, or commencing November 1, 2021 through October 31, 2022; provided, however, that the maximum amount of the Company’s Common Stock issuable in connection with any such Bonus Compensation commencing on the Effective Date through October 31, 2022 cannot exceed an amount equal to 30,000,000 shares of Common Stock.

 

If the Company suffers a “Change of Control Transaction” (as defined below), then within five (5) business days of the closing of such Change of Control Transaction, the Company will issue QuikfillRx a number of shares of Common Stock equal to 12,000,000 shares less the number of shares of Common Stock previously issued to QuikfillRx during the applicable period, if any, in which such Change of Control Transaction occurs. If the Agreement continues following such Change of Control Transaction, the Company will be credited the value of the Common Stock against any obligation to pay Bonus Compensation for the fiscal quarter in which the Change of Control Transaction occurs. The Company will not be obligated to issue QuikfillRx any shares of Common Stock pursuant to the Agreement if the Company provides notice to QuikfillRx of termination of the Agreement prior to the consummation of the Change of Control Transaction with (for) cause. A “Change of Control Transaction” means any of the following: (i) any sale, lease, or other disposition of all or substantially all of the Company’s assets, (ii) any merger, consolidation, equity exchange, reorganization, or other similar transaction or series of transactions in which the equity holders of the Company as of the Effective Date collectively own fifty person (50%) or less of the voting power in the resulting entity immediately after such event, and (iii) any purchase or purchases by any person or persons of equity interests of the Company, the effect of which is that the equity holders of the Company as of the Effective Date collectively own fifty percent (50%) or less of the voting power in the Company immediately after such event.

 

The Company will reimburse QuikfillRx for any actual out-of-pocket, third-party expenses incurred by QuikfillRx so long as the same are pre-approved by the Company in writing, which approval may be given or withheld in the Company’s sole discretion.

 

Pursuant to the Agreement, the Company granted to QuikfillRx a royalty-free, limited, non-exclusive, non-transferable, and non-sublicensable license to use all trademarks owned by or licensed to the Company during the term of the Agreement and solely in connection with the performance of Services by QuikfillRx. The Company did not grant any right or license not expressly granted in the Agreement, and QuikfillRx did not receive any ownership interest in any of the rights or licenses granted as those rights and licenses remains the sole and exclusive property of the Company. On the expiration or termination of the Agreement, any rights or licenses expressly granted to QuikfillRx under the Agreement will cease.

 

With respect to the marketing and sales materials, advertisements, or promotions, in whatever form or media, produced by or for the Company as part of the Services (the “Advertising Materials”), QuikfillRx will ensure that such materials conform to standards and specifications as reasonably established by the Company and issued to QuikfillRx from time to time. The Company will retain the right to final approval of the over the design and manner of production of the Advertising Materials and QuikfillRx will not use Advertising Materials in connection with the Services without such approval.

 

The Agreement commenced on the Effective Date and will continue until October 31, 2020. It may only be extended or renewed upon the written consent of both parties. Either party is entitled to terminate the Agreement at any time, without cause, with thirty (30) days written notice to the other party. Either party may also terminate the Agreement in the event of material breach by the other party if the breaching party (i) fails to pay any amount due under the Agreement for more than ten (10) calendar days after receiving notice of the nonpayment from the nonbreaching party, (ii) materially breaches any provision of the Agreement, which remains uncured after thirty (30) calendar days following written notice thereof, or (iii) becomes insolvent or files, or has filed against it, a petition for voluntary or involuntary bankruptcy or under any other insolvency law, makes or seeks to make a general assignment for the benefit of its creditors or applies for, or consents to, the appointment of a trustee, receiver, or custodian for a substantial part of its property, or is generally unable to pay its debts as they become due. In such event, termination is effective immediately upon the breaching party’s receipt of the nonbreaching party’s notice of termination or any later date as stated in the notice.

 

The Company is also entitled to terminate the Agreement at any time upon written notice to QuikfillRx in the event it reasonably determines: (i) to initiate a recall, market withdrawal, product correction, or advisory safety communication regarding any of its products or services, or (ii) that any of its products or services are subject to any restriction or prohibition on sale anywhere within the United States under any applicable laws, statutes, rules, regulations, ordinances, judgments, orders, decrees, injunctions, and writs of any governmental entity.

 

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The above description of the Agreement does not purport to be complete and is qualified in its entirety by the full text of such Agreement, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.

 

ITEM 7.01 REGULATION FD DISCLOSURE

 

On April 1, 2020, the Company issued a press release announcing its entry into the Agreement as described above under Item 1.01. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K (“Current Report”).

 

The information in Exhibit 99.1 shall not be deemed as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of such Section, nor shall it be deemed incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.

 

FORWARD LOOKING STATEMENTS

 

This Current Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks, uncertainties, and assumptions that are difficult to predict. All statements other than statements of historical fact contained in this Current Report, including statements regarding future events, our future financial performance, business strategy, and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” or “should,” or the negative of these terms or other comparable terminology. The forward-looking statements made herein are based on the Company’s current expectations. Actual results could differ materially from those described or implied by such forward-looking statements as a result of various important factors, including, without limitation, its limited operating history; competitive factors in the Company’s industry and market; the duration and scope of the COVID-19 pandemic and impact on the Company’s distribution channels; actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that the Company could take to reduce operating costs; the inability of the Company to generate and sustain profitable sales growth, or convert inventory to cash; circumstances or developments that may make the Company unable to implement or realize the anticipated benefits, or that may increase the costs, of its current and planned business initiatives; and those factors detailed by the Company in its public filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K. The forward-looking statements made herein are based on the Company’s current expectations, assumptions, and projections, which could provide to be incorrect. The forward-looking statements made herein speak only as of the date of this Current Report and the Company undertakes no obligation to update publicly such forward-looking statements to reflect subsequent events or circumstances, except as otherwise required by law.

 

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ITEM 9.01 FINANCIAL STATEMENTS

 

(d) Exhibits

 

Exhibit Number  Description of Exhibit
10.1 Service Agreement by and between Kaival Brands Innovations Group, Inc. and QuikfillRx LLC, dated March 31, 2020.
99.1 Press Release dated April 1, 2020.

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

Dated: April 1, 2020

By: /s/ Nirajkumar Patel

Nirajkumar Patel

Chief Executive Officer, Chief Financial Officer, and a Director

 

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SERVICE AGREEMENT

This Service Agreement (this “Agreement”), is made and entered into this 31st day of March, 2020 (the “Effective Date”) by and between:

Kaival Brands Innovations Group, Inc.

4460 Old Dixie Hwy

Grant-Valkaria, Florida 32949

(hereinafter, the “Client”)

 

and

 

QuikfillRx LLC

8852 Shell Island Drive

Jacksonville, Florida 32216

(hereinafter the “Contractor”)

 

The Client and the Contractor are herein referred to, individually, as a “Party” and, collectively as the “Parties”.

RECITALS

WHEREAS, the Client desires to engage the Contractor to provide the Services (as defined herein) to the Client and the Contractor is willing to provide the Services to the Client on the terms and subject to the conditions set forth in this Agreement.

NOW THERFORE, in consideration of the mutual benefits and obligations set forth in this Agreement, the receipt and sufficiency of which consideration is hereby acknowledged, the Client and the Contractor agree as follows:

1.        TERM OF AGREEMENT

 

The initial term (“Term”) of this Agreement will commence on the Effective Date and, unless terminated as provided herein, shall continue and remain in full force and effect until October 31, 2020. The Term may only be extended/renewed upon the written consent of the Parties, to be given or withheld in each Party’s sole discretion.

2.        SERVICES PROVIDED; CONTRACTOR OBLIGATIONS

 

The Contractor shall provide to the Client certain services and support relating to sales management (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 as more particularly set forth in Schedule “A” – Scope of work attached hereto (collectively, the “Services”).

 

The Contractor shall be solely responsible for all personnel and outside resources required in its performance of the Services, including, without limitation, digital marketing staff, creatives, researchers, social media managers, content writers and SEO specialists. The Contractor shall ensure staffing level is right-sized and meets the demand for workload.

 

The Contractor shall provide the Services in accordance with the terms and subject to the conditions set forth in this Agreement and in a professional and diligent manner consistent with industry standards and good business practice. The Contractor shall comply with all applicable laws in its performance of the Services. The Contractor shall comply with digital marketing industry standards and self-regulatory guidelines and best practices in providing the Services. The Contractor shall be responsible for the payment of all compensation owed to its personnel and representatives, including, if applicable, the payment and withholding of social security and other payroll taxes, withholding of income taxes, unemployment insurance, workers’ compensation insurance payments, and disability benefits. The Contractor shall provide such telephonic, in person, or status reports and/or attend status meetings relating to the Contractor’s performance of the Services and related matters as the Client may reasonably request from time to time.

 

The Contractor represents, warrants, and covenants to the Client that: (a) the Client will receive good and valid title to all Deliverables (as hereinafter defined), free and clear of all encumbrances and liens of any kind; (b) none of the Services, Deliverables, or the Client’s use thereof infringe or will infringe any Intellectual Property Rights (as hereinafter defined) of any third party arising under the laws of the United States or any other applicable jurisdiction; and (c) no Deliverables provided in electronic form by the Contractor to the Client contain or will contain any (i) trojan horse, worm, backdoor, or other software or hardware devices the effect of which is to permit unauthorized access or to disable, erase, or otherwise harm any computer, systems or software, or (ii) any time bomb, drop dead device, or other software or hardware device designed to disable a computer program automatically with the passage of time or under the positive control of a person other than an authorized licensee or owner of a copy of the program or the right and title in and to the program.

 

3.        COMPENSATION

 

In consideration for the provision by the Contractor of the Services, the Client agrees to compensate the Contractor as set forth on Schedule “B” attached hereto. All monetary amounts referred to in this Agreement are in USD (U.S. Dollars). Payment to the Contractor of the General Compensation and Bonus Compensation set forth on Schedule “B” (and as both terms are defined on Schedule “B”) and the reimbursement of Reimbursable Expenses as set forth on Schedule “B” (and as such term is defined on Schedule “B) shall constitute payment in full for the performance of the Services, and the Client shall not be responsible for paying any other fees, costs, or expenses. For purposes of clarification, the Contractor shall be responsible for payment of all costs it incurs in connection with the performance of the Services except as expressly set forth on Schedule “B” related to Reimbursable Expenses.

 

4.        PENALTIES FOR LATE PAYMENT

 

Except for payments that the Client is disputing in good faith, the Client shall pay interest on all late payments, calculated daily and compounded monthly at the lesser of the rate of 5% per month or the highest rate permissible under applicable law.

 

5.        INTELLECTUAL PROPERTY

 

For purposes of this Section 5, the following terms shall have the meanings described herein:

 

“Client Trademarks” means all Trademarks owned by or licensed to the Client.

 

“Client Advertising Materials” means marketing and sales materials, advertisements, or promotions, in whatever form or media, produced by or for the Client as part of the Services.

 

“Copyrights” means any works of authorship or other copyrightable works, including any copyright registrations and applications therefor.

 

“Intellectual Property Rights” means all industrial and other intellectual property rights comprising or relating to: (a) Patents; (b) Trademarks; (c) internet domain names, whether or not Trademarks, registered by any authorized private registrar or governmental authority, web addresses, web pages, website, and URLs; (d) Copyrights; (e) Trade Secrets; and (f) all industrial and other intellectual property rights, and all rights, interests, and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the foregoing, however arising, in each case whether registered or unregistered and including all registrations and applications for, and renewals or extensions of, these rights or forms of protection under the laws of any jurisdiction throughout in any part of the world.

 

“Patents” means all patents (including all reissues, divisionals, provisionals, continuations and continuations-in-part, re-examinations, renewals, substitutions, and extensions thereof), patent applications, and other patent rights and any other governmental authority-issued indicia of invention ownership (including inventor's certificates, petty patents, and patent utility models).

 

“Trademarks” means all rights in and to U.S. and foreign trademarks, service marks, trade dress, trade names, brand names, logos, trade dress, corporate names, and domain names and other similar designations of source, sponsorship, association or origin, together with the goodwill symbolized by any of the foregoing, in each case whether registered or unregistered and including all registrations and applications for, and renewals or extensions of, these rights and all similar or equivalent rights or forms of protection in any part of the world.

 

“Trade Secrets” means all inventions, discoveries, trade secrets, business and technical information and know-how, databases, data collections, patent disclosures, and other confidential and proprietary information and all rights therein.

 

Subject to the terms and conditions of this Agreement, the Client hereby grants to the Contractor a royalty-free, limited, non-exclusive, non-transferable and non-sublicensable license to use the Client Trademarks during the Term solely in connection with the performance of the Services. The Contractor will promptly discontinue the display or use of any of the Client Trademarks or change the manner in which a Client Trademark is displayed or used with regard to the Services when requested by the Client. Other than the express licenses granted by this Agreement, the Client grants no right or license to the Contractor, by implication, estoppel, or otherwise, to any Intellectual Property Rights of the Client. The Contractor acknowledges and agrees that: (a) any and all of Client’s Intellectual Property Rights are and shall remain the sole and exclusive property of the Client or its licensors; (b) the Contractor shall not acquire any ownership interest in any of the Client’s Intellectual Property Rights under this Agreement; (c) any goodwill derived from the use by the Contractor of the Client’s Intellectual Property Rights inures to the benefit of the Client or its licensors, as the case may be; and (d) the Contractor shall use the Client’s Intellectual Property Rights solely for the purposes of performing its obligations under this Agreement and only in accordance with this Agreement and the instructions of the Client. On expiration or earlier termination of this Agreement, the Contractor’s rights under this Section 5 shall cease immediately and the Contractor shall immediately cease all uses of the Client Trademarks. The Client Advertising Materials shall conform to standards and specifications reasonably established by the Client and issued and provided by the Client to the Contractor from time to time. The Contractor further shall comply with any reasonable request made by the Client designed to maintain or improve the quality standards of the Client Advertising Materials. The Client shall have final approval, which may be retracted at any time in the Client’s sole discretion, over the design and manner of producing the Client Advertising Materials. The Contractor may not use any Client Advertising Materials in connection with the Services without the prior approval of the Client and must discontinue any use as part of the Services if and to the extent that the Client at any time determines that such use would impair the value of the Client Trademarks or the goodwill associated therewith or the reputation of the Client. The Contractor’s use of Client Trademarks shall be subject to the Client’s approval at all times, to be given or withheld in its sole discretion. All service mark, trademark, and trade name uses of the Client Trademarks by the Contractor shall inure to the benefit of the Client.

 

The Client is, and shall be, the sole and exclusive owner of all right, title, and interest in and to all documents, work product, and other materials that are delivered to Client hereunder (including, without limitation, all Client Advertising Materials) by or on behalf of the Contractor in connection with the Services or developed or created in the course of performing the Services, including all Intellectual Property Rights therein (collectively, the “Deliverables”). The Contractor acknowledges and will cause its representatives, personnel, and other agents to agree that with respect to any copyrights in any Deliverables that may qualify as “work made for hire” as defined in 17 U.S.C. § 101, the Client shall own the copyrights in such Deliverables as a “work made for hire” for the Client. With respect to any of the Deliverables that do not constitute a “work made for hire,” the Contractor hereby irrevocably assigns, and shall cause its representatives, personnel, and other agents to irrevocably assign to the Client, in each case without additional consideration, all right, title, and interest throughout the world in and to the Deliverables. The Contractor shall cause its representatives, personnel, and other agents to irrevocably waive, to the extent permitted by applicable law, any and all claims any such person or entity may now or hereafter have in any jurisdiction to so-called “moral rights” or rights of droit moral with respect to the Deliverables. Upon the request of the Client, the Contractor shall, and shall cause its representatives, personnel, and other agents to, promptly take such further actions, including execution and delivery of all appropriate instruments of conveyance, as may be necessary to assist the Client to prosecute, register, perfect, or record its rights in or to any Deliverables.

 

The rights and obligations set forth in this Section 5 shall survive termination or expiration of this Agreement.

 

6. CONFIDENTIAL INFORMATION

 

During the Term of this Agreement, including any extensions or renewals hereof, the Contractor may become aware of, or learn of, or be provided with Confidential Information of the Client. “Confidential Information” means any information, technical data, or know-how of the Client actually disclosed to or received by the Contractor or its representatives, whether before or after the execution of this Agreement, whether tangible or intangible and in whatever form or medium provided, including, but not limited to, that which relates to research, product plans, products, services, customers, markets, software, developments, inventions, processes, designs, drawings, engineering, hardware configuration information, marketing, or finances, together with all information generated by the Contractor or by its representatives that contains, reflects, or is derived from the information so provided. Confidential Information does not include information, technical data, or know-how that: (i) is in the lawful possession of the Contractor at the time of disclosure as shown by the Contractor’s files and records immediately prior to the time of disclosure; (ii) prior or after the time of disclosure becomes generally known by the public, not as a result of any inaction or action of by the Contractor or its representatives; (iii) is approved for release by the Client in writing; or (iv) is disclosed to the Contractor by a third party who is not prohibited from disclosing the information pursuant to a fiduciary, contractual, or other duty owed to the Client. The Contractor agrees to keep all Confidential Information strictly confidential for a period of ten (10) years from disclosure and shall not disclose any such Confidential Information to any third party.

 

Except as provided herein, the Contractor may disclose Confidential Information only to the extent required by law, statute, regulation, or order of a court of competent jurisdiction; provided, where permissible, the Client is given advance notice of such disclosure and an opportunity to contest such disclosure.

The Contractor agrees not to use the Confidential Information for its own use or for any purpose except to perform its obligations under this Agreement. The Contractor will not disclose any Confidential Information to third parties except those directors, officers, managers, employees, consultants, advisors and agents who are required to have the information in order to perform Contractor’s obligations under this Agreement. The Contractor will inform those directors, officers, managers, employees, consultants, advisors and agents to whom Confidential Information is disclosed or who have access to Confidential Information of the existence of this Agreement and will, upon request, promptly notify the Client in writing of the names of each person who has such Confidential Information or access thereto. The Contractor agrees that it will take all reasonable measures to protect the secrecy of and avoid disclosure or use of Confidential Information in order to prevent it from falling into the public domain or the possession of persons other than those persons authorized hereunder to have any such information, which measures shall include the highest degree of care that the Contractor utilizes to protect its own confidential or proprietary information. The Contractor agrees to notify the Client in writing of any misuse or misappropriation of such Confidential Information, which may come to the Contractor’s attention. Upon request by the Client, all or any portion of the Confidential Information shall be promptly returned to the Client, accompanied by all copies of such documentation. All such materials and documents shall be returned no later than fifteen (15) days after the date of any such request. Nothing in this Agreement is intended to grant any rights to the Contractor under any patent, copyright, trade secret or other intellectual property right nor shall this Agreement grant the Contractor any rights in or to the Confidential Information, except the limited right to use such Confidential Information solely for the purposes of performing its obligations under this Agreement. The Contractor acknowledges and agrees; (i) Confidential Information has commercial value and is not in the public domain, (ii) unauthorized use or disclosure of such Confidential Information is likely to cause harm to the Client which is irreparable and not readily measurable in monetary damages, and (iii) in the event of unauthorized disclosure or use, the Client shall be entitled to seek and obtain injunctive relief, without any undertaking as to damages and without prejudice to any other rights, recourse or remedies it may have under this Agreement or at law or in equity.

7.       RETURN OF PROPERTY

 

Upon the expiration or termination of this Agreement, the Contractor will promptly return to the Client any property, documentation, records, or Confidential Information that is the property of the Client.

 

8.       RELATIONSHIP OF PARTIES; NO EXCLUSIVE RELATIONSHIP

 

In providing the Services under this Agreement it is expressly agreed the Contractor is acting as an independent contractor and not as an employee. The Contractor and the Client acknowledge this Agreement does not create a partnership or joint venture between them and is exclusively a contract for service. The Client is not required to pay, or make any contributions to, any social security, local, state or federal tax, unemployment compensation, workers' compensation, insurance premium, profit-sharing, pension, or any other employee benefit for the Contractor during the Term. The Contractor is responsible for paying, and complying with reporting requirements for, all local, state, and federal taxes related to payments made to the Contractor under this Agreement.

 

The Parties acknowledge and agree that the Services are not being offered or provided by the Contractor exclusively to the Client and that the Client has not engaged the Contractor to be its exclusive provider of any of the Services. Nothing in this Agreement shall prevent Contractor from offering the same, substantially similar, or any other services to any other person. Further, nothing in this Agreement shall prevent the Client from obtaining the same, substantially similar or any other services from any other person.

 

 

9.       LIMITED RIGHT OF SUBSTITUTION

 

Except as otherwise provided in this Agreement, the Contractor may, subject to obtaining the Client’s prior written consent, which may be given or withheld in its sole discretion, engage a third party sub-contractor to perform some or all of the obligations of the Contractor under this Agreement. The Client’s consent shall not relieve the Contractor of its obligations under the Agreement, and the Contractor shall remain fully responsible for the performance of each such permitted sub-contractor and its employees and for their compliance with all the terms and conditions of this Agreement as if they were the Contractor’s own employees. Nothing contained in this Agreement shall create any contractual relationship between the Client and any of the Contractor’s permitted sub-contractors.

 

In the event the Contractor hires a sub-contractor that is consented to in advance by the Client: (i) the Contractor will pay the sub-contractor for its services and the fees and other compensation payable by the Client to the Contractor hereunder will remain payable by the Client to the Contractor, (ii) for the purposes of the indemnification clause of this Agreement, the sub-contractor is an agent of the Contractor, and (iii) the Contractor shall cause the sub-contractor to sign such confidentiality and other agreements, which may include work-for-hire, as may be reasonably requested by the Client.

 

10.       TERMINATION

 

Either Party may terminate this Agreement, without cause, upon not less than thirty (30) days prior written notice to the other Party.

 

Either Party may terminate this Agreement, with (for) cause, by providing written notice to the other Party (the “Breaching Party”):

 

(a) if the Breaching Party fails to pay any amount when due under this Agreement that is not otherwise being disputed in good faith by the non-paying party (“Payment Failure”) and the failure continues for ten (10) business days after the Breaching Party’s receipt of notice of nonpayment;

 

(b) if the Breaching Party materially breaches any provision of this Agreement (other than a Payment Failure), and either the breach cannot be cured or, if the breach can be cured, it is not cured by the Breaching Party within thirty (30) days after the Breaching Party’s receipt of notice of such breach; or

 

(c) if the Breaching Party becomes insolvent or files, or has filed against it, a petition for voluntary or involuntary bankruptcy or under any other insolvency law, makes or seeks to make a general assignment for the benefit of its creditors or applies for, or consents to, the appointment of a trustee, receiver, or custodian for a substantial part of its property, or is generally unable to pay its debts as they become due.

 

In addition to the rights and remedies of a Party hereunder, during the continuation of any Payment Failure or other material breach of this Agreement, the non-breaching Party may suspend its performance of this Agreement until such breach is cured (whether performance of Services by the Contractor, payment performance by the Client, or otherwise).

 

Any termination with (for) cause is effective on the Breaching Party’s receipt of the other Party’s notice of termination or any later date set out in the notice.

 

In addition to the foregoing termination rights of the Parties, the Client shall have the right to terminate this Agreement effective immediately upon written notice to the Contractor in the event: (i) it reasonably determines to initiate a recall, market withdrawal, product correction and/or advisory safety communication regarding any of its products or services, (ii) it reasonably determines that any of its products or services are subject to any restriction or prohibition on sale anywhere within the United States under any applicable laws, statutes, rules, regulations, ordinances, judgments, orders, decrees, injunctions, and writs of any governmental entity, or (iii) the Client suffers a Change of Control Transaction (as defined in Schedule “B”).

 

Upon any termination of this Agreement, any unpaid General Compensation, Bonus Compensation, and/or Reimbursable Expenses for periods of time up to the date of termination (and pro-rated for partial periods, as applicable to the General Compensation) shall be paid by the Client to the Contractor within thirty (30) days following the date of termination. Notwithstanding the forgoing, upon termination of this Agreement by the Client with (for) cause, the Client shall not be obligated to pay, and the Contractor shall not be entitled to receive, any unpaid Bonus Compensation for any period of time prior to the date of termination. Upon termination of this Agreement, the Contractor shall refund the Client for any portion of the General Compensation paid by the Client applicable to any period following the date of termination. By way of example, if this Agreement is terminated as of June 16, 2020 and assuming the Client paid the General Compensation for all of June 2020 prior to the date of termination, the Contractor shall refund the Client and amount equal to $50,000 (or 15/30 of the $100,000 General Compensation paid by the Client for the entire month of June 2020). The Client shall have the right to offset any amounts payable by the Client to the Contractor against any amounts due to the Client by the Contractor hereunder.

 

11.       DISPUTE RESOLUTION; CHOICE OF LAW; CHOICE OF FORUM; WAIVER OF JURY TRIAL

 

The Parties shall first attempt in good faith to resolve any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity hereof (each, a “Dispute”) by negotiation and consultation between themselves. In the event that such Dispute is not resolved on an informal basis within thirty (30) days after one Party provides notice to the other Party of such Dispute (the “Escalation to Mediation Date”), either Party may, by written notice to the other Party, submit the Dispute to any mutually agreed upon mediation service for mediation. The Parties shall cooperate with the mediation service and with one another in selecting a neutral mediator and in scheduling the mediation proceedings. The Parties shall use commercially reasonable efforts in participating in the mediation. The Parties agree that the mediator’s fees and expenses and the costs incidental to the mediation shall be shared equally between the Parties. The Parties further agree that all offers, promises, conduct, and statements, whether oral or written, made in the course of the mediation by any of the Parties, their agents, employees, experts, and attorneys, and by the mediator and any employees of the mediation service, are confidential, privileged, and inadmissible for any purpose, including impeachment, in any litigation, arbitration or other proceeding involving the Parties; provided, that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation. If the Parties cannot resolve for any reason, including, but not limited to, the failure of either Party to agree to enter into mediation or agree to any settlement proposed by the mediator, any Dispute within sixty (60) days after the Escalation to Mediation Date, either Party may pursue any other option including litigation.

 

This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Florida.

 

Each of the Parties agrees that the courts situated in the State of Florida shall have exclusive jurisdiction over any issues relating to the construction, interpretation, or breach of this Agreement and that exclusive venue shall be in courts situated in Duval County, Florida. Each of the Parties submits to the exclusive jurisdiction of any state or federal court sitting in such Duval County, Florida, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding shall be heard and determined exclusively in any such court. Each Party also agrees not to bring any action or proceeding arising out of or relating to this Agreement (exclusive of any action seeking equitable remedies) in any other court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or in equity.

 

THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY, AFTER CAREFUL CONSIDERATION AND AN OPPORTUNITY TO SEEK LEGAL ADVICE, WAIVE THEIR RIGHT TO HAVE A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF OR IN ANY WAY CONNECTED WITH ANY OF THE PROVISIONS OF OR MATTERS RELATED TO THIS AGREEMENT.

 

12.       NOTICES

 

All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally (including by Federal Express or other recognized overnight courier) or mailed by registered or certified mail (return receipt requested) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

 

Kaival Brands Innovations Group, Inc. QuikfillRx, LLC
4460 Old Dixie Hwy 8852 Shell Island Drive
Grant-Valkaria, Florida 32949 Jacksonville, Florida 32216
Attn: Niraj Patel Attn: Russell Quick

 

All notices, requests or instructions given in accordance herewith shall be deemed given (i) on the date of delivery, if hand delivered, (ii) three (3) business days after the date of mailing, if mailed by registered or certified mail, return receipt requested, and (iii) one (1) business day after the date of sending, if sent by Federal Express or other recognized overnight courier.

 

13.       INDEMNIFICATION

 

Except to the extent paid in settlement from any applicable insurance policies, and to the extent permitted by applicable law, each Party shall indemnify, hold harmless, and defend the other Party and its parent, officers, directors, partners, members, shareholders, employees, agents, affiliates, successors, and permitted assigns (as applicable and collectively, the “Indemnified Party”) against any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including reasonable attorneys’ fees, fees, and the costs of enforcing any right to indemnification under this Agreement and the cost of pursuing any insurance providers incurred by any Indemnified Party, arising out of or relating or arising in connection with such indemnifying Party’s (i) breach or non-fulfillment of any representation, warranty, or covenant set out in this Agreement or (ii) negligent or more culpable act or omission (including recklessness or willful misconduct) in connection with the performance of this Agreement. Notwithstanding anything to the contrary in this Agreement, no indemnifying Party is obligated to indemnify or defend an Indemnified Party against any claim (whether direct or indirect) to the extent that the claim or corresponding losses arise out of or result from, in whole or in part, the Indemnified Party’s or its personnel’s: (a) negligence or more culpable act or omission (including recklessness or willful misconduct); or (b) bad faith failure to materially comply with any of its obligations set out in this Agreement. This indemnification will survive the termination of this Agreement.

 

14.       MODIFICATION OF AGREEMENT

 

Any amendment or modification of this Agreement by either Party in connection with this Agreement will only be binding if evidenced in writing signed by each Party or an authorized representative of each Party.

 

15.       TIME OF THE ESSENCE

 

Time is of the essence in this Agreement. No extension or variation of this Agreement will operate as a waiver of this Section 15.

 

16.       ASSIGNMENT

 

The Contractor will not voluntarily, or by operation of law, assign or otherwise transfer any of its rights or obligation under this Agreement without the prior written consent of the Client, to be given or withheld in the Client’s sole discretion. For purposes of this Section 16, a Change of Control Transaction shall constitute and assignment requiring the Client’s consent. A “Change of Control Transaction” means any of the following: (i) any sale, lease or other disposition of all or substantially all of the Contractor’s assets, (ii) any merger, consolidation, equity exchange, reorganization, or other similar transaction or series of transactions in which the equity holders of the Contractor as of the Effective Date collectively own fifty percent (50%) or less of the voting power in the resulting entity immediately after such event, and (iii) any purchase or purchases by any person or persons of equity interests of the Contractor, the effect of which is that the equity holders of the Contractor as of the Effective Date collectively own fifty percent (50%) or less of the voting power in the Contractor immediately after such event.

 

17.       ENTIRE AGREEMENT

 

This Agreement constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, regarding such subject matter, including any proposals related hereto.

 

18.       TITLES/HEADINGS

 

Headings are inserted for the convenience of the Parties only and are not to be considered when interpreting this this Agreement.

 

19. MISCELLANEOUS

 

If any provision of this Agreement is determined to be invalid or unenforceable, that determination shall not affect the validity or enforceability of the remaining provisions of this Agreement, which shall continue in full force and effect, with such changes as are necessary to avoid any inequitable result.

 

Except as otherwise set forth herein, all rights and remedies provided in this Agreement are cumulative and not exclusive, and the exercise by either Party of any right or remedy does not preclude the exercise of any other rights or remedies that may otherwise be available.

 

This Agreement is binding on and inures to the benefit of the Parties and their respective permitted successors and permitted assigns.

 

This Agreement is for the sole benefit of the Parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, any legal or equitable right, benefit, or remedy of any nature whatsoever, under or by reason of this Agreement.

 

This Agreement may be executed in counterparts, each of which is deemed an original, but all of which together are deemed to be one and the same agreement. A signed copy of this Agreement delivered by email or other means of electronic transmission is deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

 

[Signature page follows.]

 

 

 
 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the Effective Date.

 

Kaival Brands Innovations Group, Inc. QuickfillRx LLC
   
By: /s/ Nirajkumar Patel By: /s/ Russel Quick
Name: Nirajkumar Patel Name: Russell Quick
Title: President and Chief Executive Officer Title: Manager

 
 

 

Schedule “A” – Scope of Services

 

Sales Management:

· Planning and Strategy Development
o Create and execute a comprehensive sales strategy that is targeted by class of trade as may be reasonably requested by the Client from time to time; provided, however, any such sales strategy shall remain subject to the Client’s prior written approval prior to execution, which approval may be subsequently withdrawn or modified by Client.
o Advise the Client and, from time to time as may be requested by the Client, negotiate on the Client’s behalf, key sales metrics that are acceptable to the Client, in its sole discretion, for end cost to the various sales outlets.
o As may be reasonably requested by the Client from time to time, create compelling selling stories for each sales channel opportunity.
o As may be reasonably requested by the Client from time to time, assign and oversee Contractor account representatives to handle large accounts for Client sales and channels.
o As may be reasonably requested by the Client from time to time, create and execute press relations strategies to grow and develop the Client’s reputation and credibility trail with the press and the industry; provided, however, any such strategies shall remain subject to the Client’s prior written approval prior to execution, which approval may be subsequently withdrawn or modified by the Client.
· Training and Onboarding
o Ensure that all Contractor staff and disciplines have the right tools, storage, and software to support the operations and performance of the Contractor’s obligations (e.g. Adobe Photoshop, Grammarly, Google Drive Storage, etc.).
o Ensure that growth avenues are available for Contractor staff growth and upskilling as business demand grows.
o Provide Contractor staff as may be reasonably required to provide technical support for sales and marketing operations related concerns as may from time to time be requested by the Client.
· Directing Sales Marketing Approach to Reach Goals
o Advise the Client’s executives or other designees on sales strategy implementation for optimal sales revenue.
o As may be reasonably requested by the Client from time to time, connecting Client brands with key industry-related entities to ensure seamless operations.
o As may be reasonably requested by the Client from time to time, providing direction and research-backed literature in identifying the appropriate course of sales marketing approach for new Client target markets. This includes, but is not limited to, creation of all sales material required for the various sales channels, PowerPoints, sales literatures, sales videos, and local social media integrations.
o As may be reasonably requested by the Client from time to time, communicate and evaluate new and potential sales partners for Client brands.
o As may be reasonably requested by the Client from time to time, advise the Client on how to ensure tradeshow presence of different brands for networking.
· Monitoring and Evaluating Results
o As may be reasonably requested by the Client from time to time, evaluation of the effectiveness of sales and marketing approaches and strategies.
o As may be reasonably requested by the Client from time to time, provide results evaluation on different digital marketing outputs and collaterals.

WEB DEVELOPMENT & DESIGN:

· As may be reasonably requested by the Client from time to time, create website design and layout with relevant and identified Client brand themes and at par with competitor websites and create mockup designs and redesigns of Client websites.
· As may be reasonably requested by the Client from time to time, update content on Client websites, improve content, add blog pages and update product variation, and fix headers, footers and other page elements.
· As may be reasonably requested by the Client from time to time, research the Recycling Program Plugin for future use by the Client and assist and advise the Client on implementation of the same.

GRAPHICS:

· As may be reasonably requested by the Client from time to time, advise the Client in the creation of business cards for print and digital versions for certain key executives of the Client as identified by the Client.
· As may be reasonably requested by the Client from time to time, advise and complete social media covers and posting graphics for the Client and the Client’s brands; all subject to the Client’s prior written approval prior to going “live.”
· As may be reasonably requested by the Client from time to time, create images background removal and provide photo enhancement.
· As may be reasonably requested by the Client from time to time, design and create tradeshow graphics (e.g., booth designs, flyers and collaterals), logos for the Client’s products, webpage design and graphic assets for the Client and the Client’s brands, T-shirt and phone grip designs for the Client and the Client’s brands, and pitch deck slide templates.

CONTENT:

· As may be reasonably requested by the Client from time to time, prepare press releases for the Client and the Client’s brands (to be developed by the Contractor in consultation with the Client), age verification systems, and Client and its brands launches, educational content blogs for Client-related websites, and content for Client and Client-related tradeshows and websites, all subject to the Client’s prior written approval prior to any release or going “live” of the same.
· As may be reasonably requested by the Client from time to time, research sample advertising stories and tips on how to create one and advise the Client related to the same.
· As may be reasonably requested by the Client from time to time, create equity advertising stories in consultation with the Client.
· As may be reasonably requested by the Client from time to time, conduct research for sample materials and marketing campaigns for Client including any applicable Client equity advertising plans.
· As may be reasonably requested by the Client from time to time, research, review and advise the Client in connection with press release template samples for the Client’s press release templates.
· As may be reasonably requested by the Client from time to time, create press release templates for the Client and Client-related brands.
· As may be reasonably requested by the Client from time to time, create brochures to be used by Client and for its related brands in various jurisdictions.
· As may be reasonably requested by the Client from time to time, advise and collaborate with the Client in connection with the Client’s investor deck and the Client’s sales deck with product updates and in connection with its environmental platform.
· As may be reasonably requested by the Client from time to time, prepare and conduct content analysis on competitor brands and create a list of content areas for improvement for Client and Client-related brands.

PRESS RELATIONS & RESOURCES:

· As may be reasonably requested by the Client from time to time, prepare press wiring for the Client and Client-related products and age verification press releases; all subject to the Client’s prior written approval prior to any release or going “live” of the same.

RESEARCH:

· As may be reasonably requested by the Client from time to time, conduct competitor analysis (e.g., Blu, Stig, Myle, Juul, Puffbar, and Vuse).
· As may be reasonably requested by the Client from time to time, research hemp products and herbal products and other Client-related products or potential products.
· As may be reasonably requested by the Client from time to time, create presentations related to the Client and Client-related products.
· As may be reasonably requested by the Client from time to time, research vaping news, press releases, online articles, medical studies, vaping journals, e-cigarette excise tax and nicotine license requirements and other requirements applicable to the Client and Client-related products for each state in the United States, under Canadian laws on packaging and Food Drug Administration - PMTA, and other applicable jurisdictions and legal requirements, including research on vending vape/cigarette in each state within the United States and other applicable jurisdictions.
· As may be reasonably requested by the Client from time to time, conduct research and reports relating to bloggers, influencers, and news outlets, including creating lists of applicable channels that may be useful with the reach of the Client’s content.
· As may be reasonably requested by the Client from time to time, conduct market research on vaping and recycling in various jurisdictions, including market share, applicable laws and regulations, and competitor sterilization processes and other applicable processes and methodologies.
· As may be reasonably requested by the Client from time to time, conduct research on selling of the Client’s and Client-related products, including hemp products as herbal products.

SOCIAL MEDIA:

· As may be reasonably requested by the Client from time to time, create and manage (on a daily basis) social media accounts for the Client and its affiliated companies as directed by the Client.
· As may be reasonably requested by the Client from time to time, compile lists of social media tools for analytics.
· As may be reasonably requested by the Client from time to time, create social media strategies, social media calendars, and social media action plans; all of which are subject to the Client’s prior written approval prior to any release or going “live” of the same.
· As may be reasonably requested by the Client from time to time, analyze competitors’ sites and social channels.
· As may be reasonably requested by the Client from time to time, compile lists of competitors’ sites and channels.
· As may be reasonably requested by the Client from time to time, create social media diagrams for channel mapping.
· As may be reasonably requested by the Client from time to time, research scheduling tools for social media.
· As may be reasonably requested by the Client from time to time and in consultation with the Client, schedule social media calendars for April and remaining months throughout the Term of the Agreement; all of which are subject to the Client’s prior written approval prior to any release or going “live” of the same.

 

 
 

 

Schedule “B” – Compensation

 

General Compensation: The following constitute “General Compensation”:

 

· For the Services provided in March 2020, the Client shall remit the following payments to the Contractor:
o $36,000, which amount was paid prior to the Effective Date, and
o $50,000 no later than three (3) business days after the Effective Date.
· For each calendar month commencing April 2020 through October 2020, on or before the ninth (9th) day of such month, the Client shall pay the Contractor an amount equal to $100,000 for the Services to be performed during such calendar month.
· In the event the Parties agree to extend the term of this Agreement beyond the original expiration date of October 31, 2020 by mutual agreement as set forth in Section 1 of this Agreement and such extension is agreed to on or before October 15, 2020, but in any event subject to the express terms of any such mutual extension or renewal and in the event of any inconsistency between the terms hereof and the terms of such extension or renewal the terms of such extension or renewal shall control to the extent of such inconsistency, (i) this Agreement shall renew for an additional term of one year commencing November 1, 2020 through October 31, 2021, and (ii) for each calendar month commencing during such renewal term, on or before the ninth (9th) day of such month, the Client shall pay the Contractor an amount equal to $125,000 for the Services to be performed during such calendar month.
· In the event the Parties further agree to extend the term of this Agreement beyond the initial annual extension contemplated in the immediately preceding bullet by mutual agreement as set forth in Section 1 and such extension is agreed to on or before October 15, 2021, but in any event subject to the express terms of any such mutual extension or renewal and in the event of any inconsistency between the terms hereof and the terms of such extension or renewal the terms of such extension or renewal shall control to the extent of such inconsistency, (i) this Agreement shall renew for an additional term of one year commencing November 1, 2021 through October 31, 2022, and (ii) for each calendar month commencing during such renewal term, on or before the ninth (9th) day of such month, the Client shall pay the Contractor an amount equal to $150,000 for Services to be performed during such calendar month.

 

Gross Revenue Quarterly Bonus Compensation: The following constitute “Bonus Compensation”:

 

During the initial Term of this Agreement expiring October 31, 2020, and during any extension or renewal of this Agreement as may be mutually agreed upon by the Parties in writing, but in any event subject to the express terms of any such mutual extension or renewal and in the event of any inconsistency between the terms hereof and the terms of such extension or renewal the terms of such extension or renewal shall control to the extent of such inconsistency, the Client shall pay the Contractor bonus compensation based on the Client’s gross quarterly sales during each applicable fiscal quarter that are attributable to the Services provided by the Contractor hereunder, as the same may be reasonably determined by the Client (such amount being hereinafter referred to as the “Applicable Gross Quarterly Sales”), which determination shall be made by the Client within fifteen (15) calendar days following the end of any applicable fiscal quarter and the amount of such bonus shall be paid on or before the thirtieth (30th) day of such calendar month as follows:

 

· An amount equal to 0.9% of the Applicable Gross Quarterly Sales, which amount shall, at the Client’s option be paid in (a) cash or (b) shares of the Client’s common stock, par value $0.001 per share (“Common Stock”), or (c) a combination of cash and Common Stock, subject to the following:
o If the Client determines to issue shares of Common Stock in lieu of cash payment, then the number of shares to be issued shall be based upon a per share price equal to the average closing price of the Client’s Common Stock as reported by the OTC Markets Group, Inc. on the three (3) trading days immediately preceding the date of issuance of such shares of Common Stock.
o The shares of Common Stock issued to the Contractor shall be issued with a restrictive legend. Unless the shares of Common Stock are covered by an effective registration statement pursuant to the Securities Act of 1933, as amended (the “Securities Act”), an event that is not currently anticipated, the shares of Common Stock shall constitute “restricted securities,” as such term is defined in Rule 144 promulgated under Rule 144 of the Securities Act. The Contractor acknowledges and agrees that: (i) the shares of the Common Stock will not have been registered under the Securities Act or the securities laws of any state, (ii) there may not exist a market for resale of the shares of Common Stock, and (iii) such shares of Common Stock may need to be held indefinitely unless the shares of Common Stock are subsequently registered under the Securities Act or an exemption from registration is available. The Client has no obligation to register the shares of Common Stock under the Securities Act or otherwise. In connection with any transfer of the shares of Common Stock by the Contractor, the Client may require the Contractor to provide to the Client, at its expense, an opinion of counsel, satisfactory to the Client, that such transfer is in compliance with all applicable federal and state securities laws (including, without limitation, the Securities Act). Any attempted disposition of the shares of Common Stock not in accordance with the terms and conditions set forth in this Schedule “B”, shall be null and void, and the Company shall not reflect on its records any change in record ownership of any shares of Common Stock as a result of any such disposition, shall otherwise refuse to recognize any such disposition, and shall not in any way give effect to any such disposition of any shares of Common Stock.
o In no event shall the Client be permitted to exercise its option to issue the Client’s Common Stock in lieu of a cash payment for such Bonus Compensation (i) in excess of an aggregate amount of 12,000,000 shares of Common Stock for any such Bonus Compensation payable in connection with the period commencing on the Effective Date and ending October 31, 2020, (ii) subject to the express terms of any such mutual extension or renewal and in the event of any inconsistency between the terms hereof and the terms of such extension or renewal the terms of such extension or renewal shall control to the extent of such inconsistency, in excess of an aggregate amount of 12,000,000 shares of Common Stock for either renewal term for the periods commencing November 1, 2020 through October 31, 2021, or commencing November 1, 2021 through October 31, 2022, and (iii) subject to the express terms of any such mutual extension or renewal and in the event of any inconsistency between the terms hereof and the terms of such extension or renewal the terms of such extension or renewal shall control to the extent of such inconsistency, the maximum amount of the Client’s Common Stock issuable in connection with any such Bonus Compensation for the period through October 31, 2022 shall not exceed an amount equal to 30,000,000 shares of Common Stock.
o Notwithstanding anything to the contrary contained herein, if the Client suffers a Change of Control Transaction, within five (5) business days of the closing of such Change of Control Transaction the Client shall issue the Contractor a number of shares of Common Stock equal to 12,000,000 shares less the number of shares of Common Stock previously issued to the Contractor during the applicable period, if any, in which such Change of Control Transaction occurs (with the applicable period being the period commencing on the Effective Date and ending October 31, 2020, the period commencing November 1, 2020 through October 31, 2021, or the period commencing November 1, 2021 through October 31, 2022). If the Client terminates this Agreement as part of such Change of Control Transaction, no further Bonus Compensation shall be payable by the Client to the Contractor for the fiscal quarter in which the Change of Control Transaction occurs. If this Agreement continues following such Change of Control Transaction, the Client shall be credited the value of such Common Stock against any obligation to pay Bonus Compensation for the fiscal quarter in which the Change of Control Transaction occurs. Notwithstanding anything to the contrary above, in no event shall the Client be obligated to issue the Contractor any shares of Common Stock pursuant hereto if the Client provides notice to the Contractor of termination of this Agreement prior to the consummation of the Change of Control Transaction with (for) cause. A “Change of Control Transaction” means any of the following: (i) any sale, lease or other disposition of all or substantially all of the Client’s assets, (ii) any merger, consolidation, equity exchange, reorganization, or other similar transaction or series of transactions in which the equity holders of the Client as of the Effective Date collectively own fifty percent (50%) or less of the voting power in the resulting entity immediately after such event, and (iii) any purchase or purchases by any person or persons of equity interests of the Client, the effect of which is that the equity holders of the Client as of the Effective Date collectively own fifty percent (50%) or less of the voting power in the Client immediately after such event.
· An amount equal to 0.27% of the Applicable Gross Quarterly Sales, which amount must be paid in cash.

 

Reimbursement of Certain Expenses: The following constitute “Reimbursable Expenses”:

 

The Client shall reimburse the Contractor for any actual out-of-pocket, third-party expenses incurred by the Contractor so long as the same are pre-approved by the Client in writing, which approval may be given or withheld in the Client’s sole discretion. In no event shall the Client be obligated to reimburse the Contractor for any internal expenses, including staff, overhead or allocation of resources or for any other costs incurred by the Contractor in the performance of Services.

 




 

KAIVAL BRANDS ENGAGES QUIKFILLRx TO PROVIDE SALES MANAGEMENT AND MARKETING SERVICES

AND ANNOUNCES TWO ORDERS OF BIDITM STICKS

 

Melbourne, FL –– (April 1, 2020) –– Kaival Brands Innovations Group, Inc. (OTC PINK: KAVL) (“Kaival Brands,” the “Company,” “we,” or “our”), a company focused on growing and incubating innovative and profitable products into mature, dominant brands, today announced that it has entered into a service agreement (the “Agreement”) with QuikfillRx LLC (“QuikfillRx”), a digital service provider, pursuant to which QuikfillRx agreed to provide 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 with respect to the Company’s business.

 

Initially, Kaival Brands anticipates that QuikfillRx will assist with the marketing and promotion of certain electronic nicotine delivery systems and related components (the “Products”) of Bidi Vapor, LLC (“Bidi”). Kaival Brands is the exclusive worldwide distributor of the Products, which includes the BidiTM Stick, an innovative eco-friendly vape pen. Kaival Brands believes the collaboration with QuikfillRx brings together broad expertise in business and digital planning, product concepts, and technology creation and delivery, which will allow Kaival Brands, at least initially, to successfully promote the Products, including the BidiTM Stick. During the term of the Agreement, QuikfillRx will also assist with the marketing and sales management of other future brands or products of the Company, as the Company may request from time to time.

 

Further, in connection with the Company’s recent designation as the exclusive distributor of the Products, the Company is excited to announce that it received an order of BidiTM Sticks in the amount of $70,000 from a large national convenience chain, followed by a subsequent order in the amount of approximately $65,000. These orders are the direct result of the Company’s collaboration with QuikfillRx. The Company expects its orders to continue to grow. However, given the newness of the Company’s business operations and the ongoing COVID-19 pandemic, management is unsure how the COVID-19 pandemic will impact the Company, particularly, how this pandemic will affect future orders and, ultimately, the Company’s business, financial condition, and results of operations both in the short- and long-term.

 

Niraj Patel, the Company’s President, Chief Executive Officer and Chief Financial Officer, stated “We are thrilled to announce the hiring of QuikfillRx as we continue to launch our business operations through the growth of the Bidi brand and the availability of the Products as Bidi’s exclusive distributor. Further, we have started to receive orders for the BidiTM Stick. These initial orders signal to us that the marketplace is excited about the BidiTM Stick.”

 

The BidiTM Stick is a product that champions both health and environmental concerns. It advocates an eco-conscious way of approach with vaping pens through its “Bidi Cares: Save your Bidi. Save our Planet” recycling initiative. Mr. Patel, the Company’s President, Chief Executive Officer, and Chief Financial Officer, owns and controls Bidi; thus, Bidi and the Company are considered under common control and Bidi is considered a related-party.

 

About Kaival Brands Innovations Group, Inc.

Kaival Brands Innovations Group, Inc., is a company focused on growing and incubating innovative and profitable products into mature and dominant brands in their respective markets. Its vision is to develop internally, acquire, own, or exclusively distribute these innovative products and grow each into dominant market-share brands with superior quality and recognizable innovation. To learn more about Kaival Brands, please visit: https://kaivalbrands.com/.

 

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Forward-Looking Statements

This press release includes statements that constitute “forward-looking statements” within the meaning of federal securities laws, which are statements other than historical facts that frequently use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “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 could materially differ from what is expressed, implied, or forecasted in such statements. This press release contains certain forward-looking statements that are based on current plans and expectations and are subject to various risks and uncertainties. Our business may be influenced by many factors that are difficult to predict, involve uncertainties that may materially affect results, and are often beyond our control. Factors that could cause or contribute to such differences include, but are not limited to, the duration and scope of the COVID-19 pandemic and impact on the demand for the products we distribute; the actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that we could take to reduce operating costs; our inability to generate and sustain profitable sales growth; 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; and those factors detailed by us in our public filings with the Securities and Exchange Commission. 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 rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

Contact Name: Eric Mosser

Phone Number: 1-(833)-4-KAIVAL

Email: investors@kaivalbrands.com