ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS
Appointment of New Director
On June 30, 2021, the Board of Directors (the "Board") of Kaival Brands
Innovations Group, Inc. (the "Company," "we," "us," or "our") appointed George
Chuang to serve on the Board effective immediately. Mr. Chuang was appointed to
fill a vacancy created by Ms. Carolyn Hanigan's recent resignation.
The Board evaluated Mr. Chuang's independence in accordance with the
independence standards for directors set forth in Rule 5605(a)(2) of the Nasdaq
Listing Rules (the "Nasdaq Standards"), and affirmatively determined that Mr.
Chuang qualifies as an independent director. Mr. Chuang has been appointed to
serve on the Finance Committee, the Audit Committee, the Governance and
Nominating Committee, and Chair of the Compensation Committee.
Mr. Chuang, age 53, has served as the Chief Executive Officer of Lucy Labs, Inc.
since 2018. Prior to that he served as the co-managing principal of Hillside
Advisors LLC from 2015 to 2017. Mr. Chuang is also the owner of USB Media, Inc.,
a company he founded in 2007. During his career, Mr. Chuang spent time at Chase
Manhattan Bank as an assistant Treasurer for their Credit Risk Department, as a
management consultant at Pricewaterhouse Management Consulting, and served as
the Chief Accounting Officer for several equity product sales groups at Lehman
Brothers. In addition, Mr. Chuang spent eight years as a Principal at Pacific
Partnership Advisors LLC, a consulting firm with offices in New York and
Beijing, which facilitated cross border transactions. Mr. Chuang graduated from
the University of Chicago and obtained a Master of Business Administration
degree at Yale University.
There is no arrangement or understanding between Mr. Chuang and any other person
pursuant to which Mr. Chuang was appointed as one of our directors. There are no
family relationships between Mr. Chuang and any of our directors or executive
officers. There are no related party transactions involving Mr. Chuang that are
reportable under Item 404(a) of Regulation S-K.
In connection with his appointment as a director, we entered into an Independent
Director Agreement (the "Director Agreement") with Mr. Chuang, pursuant to which
we agreed to pay Mr. Chuang cash compensation in the amount of $25,000 per
quarter during the first year of the Director Agreement, and $12,500 per quarter
during the second year of the Director Agreement. We also agreed to grant Mr.
Chuang a non-qualified stock option to purchase up to 300,000 shares of our
common stock, with 90,000 shares underlying the stock option vesting
immediately, 105,000 shares underlying the stock option vesting on June 30,
2022, and the remaining 105,000 shares underlying the stock option vesting on
June 30, 2023. The exercise price per share was based on the closing bid price
of our common stock on June 30, 2021, or $0.7599 per share. The foregoing
summary is qualified in its entirety by the full text of the Director Agreement,
which is filed herewith as Exhibit 10.1 to this Current Report on Form 8-K (this
"Report") and is incorporated by reference herein.
Resignation of Chief Financial Officer and Appointment of Interim Chief
Financial Officer
Effective as of June 30, 2021, Mr. Nirajkumar Patel has resigned as our Chief
Financial Officer. Mr. Patel will continue to serve in his role as our Chief
Executive Officer and as a director.
Effective as of June 30, 2021, the Board appointed Mark Thoenes to serve as our
Interim Chief Financial Officer and ratified and approved the Consulting
Agreement between us and Mr. Thoenes (the "Consulting Agreement").
Mr. Thoenes, age 68, has more than 35 years of diverse financial and operational
leadership. He has been a licensed Certified Public Accountant since 1984, and
began his career with Ernst & Young Global Limited. From 2000 to 2010, Mr.
Thoenes served as the Executive Vice President/Chief Financial Officer of
Rentrak Corporation ("Rentrak"), a publicly-traded company listed on Nasdaq and
headquartered in Portland, Oregon. Founded in 1977, Rentrak went public in 1986,
and remained a public company until it was acquired by comScore, Inc. in 2016,
after Mr. Thoenes left Rentrak. For the past eleven years, Mr. Thoenes has been
the President of MLT Consulting Services, LLC, a full-service business/financial
consulting firm.
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.
The Consulting Agreement is for a term of approximately 6 months, or until
December 31, 2021, and may be extended by the parties. Mr. Thoenes is assisting
us as Interim Chief Financial Officer until such time as we have identified an
individual to serve as a full-time Chief Financial Officer.
There is no arrangement or understanding between Mr. Thoenes and any other
person pursuant to which he was selected as Interim Chief Financial Officer. Mr.
Thoenes has no family relationships with any of our directors or executive
officers, and has no direct or indirect material interest in any transaction
required to be disclosed pursuant to Item 404(a) of Regulation S-K.
The foregoing description of the Consulting Agreement contained herein does not
purport to be complete and is qualified in its entirety by reference thereto,
which is attached to this Report as Exhibit 10.2 and is incorporated herein by
reference.
ITEM 7.01 REGULATION FD DISCLOSURE
On July 1, 2021, the Company issued a press release announcing the appointment
of Mr. Chuang as a director and Mr. Thoenes as our Interim Chief Financial
Officer, both effective as of June 30, 2021. A copy of the press release is
attached as Exhibit 99.1 to this Report and is incorporated by reference herein.
The information in the press release shall not be deemed "filed" for any
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or otherwise subject to the liabilities of that section, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act.
ITEM 9.01 FINANCIAL STATEMENTS
(d) Exhibits
Exhibit Number Description of Exhibit
10.1 Independent Director Agreement, dated June 30, 2021, by and
between the Company and George Chuang
10.2 Consulting Agreement, dated June 14, 2021, by and between the
Company and Mark Thoenes
99.1 Press Release dated July 1, 2021
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