$KAVL Kaival Brands Applauds FDA's Continued Enfor

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


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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.

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, " 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.