Kaival Brands Innovations Group Inc

Executive Compensation

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers, which is defined herein as (i) all individuals serving or having served as our principal executive officer or officers during the year ended October 31, 2023, (ii) each of our two other most highly compensated executive officers who were serving as executive officers at the end of the year ended October 31, 2023, and (iii) any individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer as of the fiscal year ended October 31, 2023.

Narrative Discussion

The following is a narrative discussion of the material information that we believe is necessary to understand disclosed in the foregoing Summary Compensation Table. The following narrative disclosure is separated into sections, with a separate section for each of our named executive officers.

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

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

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

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

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

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

Nirajkumar Patel

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

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

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

Eric Mosser

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

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

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

Mark Thoenes

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

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

Potential Payments Upon Termination or Change-of-Control

Other than the stock options mentioned above in “Outstanding Equity Awards at Fiscal Year-End”, none of our named executive officers are entitled to any payments upon termination or change-of-control.

Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide retirement or similar benefits for our named executive officers.

Employment Agreements

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

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

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

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

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

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

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

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

Director Compensation

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