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Kaival Brands Applauds FDA's Continued Enforcement Against Unauthorized ENDS Products

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Company meets with regulators to push for increased enforcement, encourages retailers to focus on youth access prevention and promotion of compliant brands

GRANT, Fla., Aug. 18, 2021 /PRNewswire/ -- Kaival Brands Innovations Group, Inc. (NAS: KAVL) ("Kaival Brands," the "Company," or "we"), the exclusive global distributor of products manufactured by Bidi Vapor, LLC ("Bidi Vapor"), expressed its continued and strong support of enforcement of rules and regulations governing the electronic nicotine delivery systems ("ENDS") industry. The Company encourages retailers to comply with applicable regulatory requirements, and to focus on youth access prevention and promotion of compliant brands.

(PRNewsfoto/Kaival Brands)
(PRNewsfoto/Kaival Brands)

FDA is expected to make a major announcement in September that could impact which companies can remain on the market.

Kaival Brands not only takes extremely seriously its commitment to safeguard our youth, but also its capacity to provide the BIDI® Stick, a top-quality disposable ENDS, to adult tobacco consumers seeking a consistent vaping experience. While the Company continues to exceed stringent Food and Drug Administration ("FDA") compliance mandates and applauds the agency's enforcement efforts – including 140 warning letters so far this year to firms selling or distributing more than 16,800,000 unauthorized ENDS – it remains concerned about the numerous ENDS companies, particularly distributors of disposable ENDS, that appear to have taken advantage of FDA's ground-level enforcement struggles during the COVID-19 pandemic.

On or about September 9, 2021, FDA is expected to make a major announcement regarding its Premarket Tobacco Product Application, or PMTA, review process that could impact which companies can remain on the market. Kaival Brands believes that as we approach this deadline, other manufacturers in the industry are "dumping" non-compliant, potentially hazardous and poorly manufactured products into the marketplace. Further, it believes that given the potentially far-reaching consequences of the pending FDA decisions, which the Company believes will force many of these other manufacturers to cease production, some retailers may be lowering their usual standards in return for economic gain.

Kaival Brands remains committed to its high-quality product, youth-access prevention, complying with applicable laws and regulations, and working with like-minded retailers. "We place enormous importance on our integrity and our brand name," said Nirajkumar Patel, Founder and Chief Executive Officer of Kaival Brands. "At Kaival Brands, we have built a state-of-the-art, compliance driven, set of detailed protocols around the quality of our product and where and to whom we sell it. We are confident that our model is well suited for an environment in which regulatory oversight and enforcement is far greater than it is today. In fact, not only are we ready for increased regulation and enforcement, we both encourage and welcome it."

Additional Regulatory Commentary: Kaival Brands Meets with Regulators to Push for Increased Enforcement; The Company and Bidi Vapor Further Encourage Retailers to Comply with the Law and Focus on Youth Access Prevention and Compliant Brands

Kaival Brands and Bidi Vapor are committed to complying with all federal and state laws applicable to the distribution of the BIDI® Stick ENDS, including the Family Smoking Prevention and Tobacco Control Act ("TCA"), which amended the Food, Drug and Cosmetic Act ("FDCA"), and the Prevent All Cigarette Trafficking ("PACT") Act. The top priority of both companies is to ensure that the BIDI® Stick, which is it intended exclusively for adult tobacco users, is marketed responsibly, and sold only to adults 21 and over. Kaival Brands and Bidi Vapor are committed to these principles notwithstanding the current environment where, because of the lack of enforcement, companies continue to distribute non-compliant and counterfeit ENDS products, including products that appear to target youth. To encourage enforcement, Bidi Vapor has provided detailed information, including verified third-party test reports, to the FDA, Office of Compliance and Enforcement, regarding numerous tobacco product violations from companies marketing non-compliant products, particularly disposable ENDS. These are products that, unlike the BIDI® Stick, were likely not on the market on August 8, 2016, may not subject to timely submitted PMTAs, and appear to be in violation of numerous FDA requirements, including the FDCA's adulteration and misbranding provisions. Beyond FDA, Bidi Vapor has met with several federal agencies including the Federal Trade Commission, or FTC, the Bureau of Alcohol, Tobacco, Firearms and Explosives, or ATF, Customs and Border Protection, or CBP, and several state Attorney Generals' offices, to alert them about the rising number of illegal and dangerous products flooding the market.

Bidi Vapor and Kaival Brands also encourage retailers, who are on the "front line" in the battle against youth use of tobacco and nicotine products, to do their part to enforce non-compliant players off the market. FDA makes clear that, "[i]f you sell tobacco products, you must comply with all applicable federal laws and regulations for retailers."i While most retailers are aware of their obligations to age verify customers seeking to purchase tobacco products, complying with the law – and being a good corporate citizen – goes beyond simple ID checks. Retailers must also do their part to ensure that the products on their shelves are legal, no matter the profit margin. In fact, the FDCA prohibits, among other things, the introduction, delivery for introduction and receipt in interstate commerce of any tobacco product (including ENDS) that is adulterated or misbranded. See 21 U.S. Code § 331. ENDS products that were introduced to the market after August 8, 2016, that are not subject to timely submitted PMTAs, whose packaging and labeling contains inaccurate information (e.g., regarding nicotine content) or is targeting youth, are all bases for the underlying products to be adulterated and/or misbranded. Kaival Brands and Bidi Vapor are committed to working with FDA to ensure that only legal products are marketed. Toward this end, Bidi Vapor has engaged with several well-known third-party analytical laboratories to test the nicotine content of several disposable brands on the market and has reported the results to FDA, along with detailed summaries of potential FDCA violations.

By not doing the due diligence necessary to ensure that all tobacco products stocked on their shelves are fully compliant with all applicable federal and state laws, retailers are not just breaking the law, but the public trust – and putting youth and other vulnerable populations at risk. Kaival Brands is committed to brick-and-mortar retail, which the Company believes is a stronger age-verification distribution model compared to traditional online retail channels for ENDS. The wholesalers and direct retailers Kaival Brands partners with are required to sign the Company's Wholesaler & Direct Retailer Agreement which, among other things, requires parties to comply with all applicable regulations and abide by Bidi Vapor's and the Company's comprehensive age-verification procedures.ii

Direct retailers are further required to sign a Retailer Pledge that commits them to complying with, among other things, age-verification requirements, and adult-focused marketing, as well as participating in the Company's mystery shopper program.iii

Failure to comply with the agreement and/or pledge carries immediate, material consequences, including order cancellation and revocation of product distribution rights. To help its business partners understand the FDA's tobacco retailer guidance, Bidi Vapor has produced training videos for its authorized retailers. Kaival Brands also recently announced plans to shift distribution from smaller retailers to focus on large wholesalers and distributors, who are more likely to take youth prevention seriously and work with compliant brands.iv

Mr. Patel, the Company's President and Chief Executive Officer, owns and controls Bidi Vapor. As a result, Bidi Vapor and the Company are considered under common control and Bidi Vapor is considered a related party.

ABOUT BIDI VAPOR

Based in Melbourne, Florida, Bidi Vapor maintains a commitment to responsible marketing, supporting age-verification standards and sustainability through its BIDI® Cares recycling program. The Company's premiere device, the BIDI® Stick, is a premium product made with medical-grade components, a UL-certified battery, and technology designed to deliver a consistent vaping experience for adults 21 and over. Bidi Vapor is also adamant about strict compliance with all federal, state, and local guidelines and regulations. At Bidi Vapor, innovation is key to our mission, with the BIDI® Stick promoting environmental sustainability, while providing a unique vaping experience to adult smokers.

ABOUT KAIVAL BRANDS

Based in Grant, Florida, Kaival Brands is a company focused on growing and incubating innovative and profitable products into mature and dominant brands in their respective markets. Our 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. Kaival Brands is the exclusive global distributor of all products manufactured by Bidi Vapor.

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. 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, whether the FDA extends past September 9, 2021 the current grace period for certain ENDS products, including ours, to remain on the market pending the FDA's review of the associated Premarket Tobacco Applications (PMTA); 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; changes in government regulation or laws that affect our business; significant changes in our relationships with our distributor or sub-distributors; 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 Securities and Exchange Commission's rules and regulations, we do not have any intention or obligation to update any forward-looking statements publicly, whether as a result of new information, future events, or otherwise.

i See Selling Tobacco Products in Retail Stores, FDA, https://www.fda.gov/tobacco-products/retail-sales-tobacco-products/selling-tobacco-products-retail-stores.

ii See Wholesaler & Direct Retailer Agreement, Bidi Vapor, available at: https://bidivapor.com/wholesaler-and-direct-retailer-agreement/.

iii See BIDI Vapor Retailer Pledge Terms, available at: https://wholesale.bidivapor.com/wp-content/uploads/2020/05/Retailer-Pledge-.pdf see also BIDI® Stick, BIDI® Retailer Pledge US, YouTube (Dec. 10, 2020), https://www.youtube.com/watch?v=SVUKzzXv2yY.

iv See Kaival Brands (OTCQB: KAVL) Reports Second Quarter Revenues of $18.1 million and an additional $41.6 million in consignment-based orders from Grocery Store Warehouse and C-Store Master, available at https://www.prnewswire.com/news-releases/kaival-brands-otcqb-kavl-reports-second-quarter-revenues-of-18-1-million-and-an-additional-41-6-million-in-consignment-based-orders-from-grocery-store-warehouse-and-c-store-master-301316746.html.

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SOURCE Kaival Brands