Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 166

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1A
Chunk 166
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 indicated that it is prepared to work with Congress on this matter. Accordingly, we cannot give
any assurance that such actions would not have a material adverse effect on this emerging business.

Significant increases in state and local regulation
of our products have been proposed or enacted and are likely to continue to be proposed or enacted in numerous jurisdictions. The Prevent
All Cigarette Trafficking (or PACT) Act, which went into effect in June 2010, amended the Jenkins Act and initially only applied to the
sales of cigarettes, roll-your-own tobacco, and smokeless tobacco. Specifically, the PACT Act regulates the sale, transfer, or shipment
of these products for both business-to-business transactions as well as “delivery sales,” which are defined as any sale of
cigarettes, roll-your-own tobacco, or smokeless tobacco where the consumer orders the product remotely and prohibits such deliveries through
the U.S. Postal Service (or USPS), except in certain circumstances (e.g., business-to-business deliveries).

Under the enactment of the Preventing Online Sales
of E-Cigarettes to Children Act (part of the larger 2021 Consolidated Appropriations Act), effective March 27, 2021, the definition of
“cigarettes” in the PACT Act was amended to include ENDS, which is defined as “any electronic device that, through an
aerosolized solution, delivers nicotine, flavor, or any other substance to the user inhaling from the device,” including “an
e-cigarette; an e-hookah; an e-cigar; a vape pen; an advanced refillable personal vaporizer; an electronic pipe; and any component, liquid,
part, or accessory of a device described above, without regard to whether the component, liquid, part, or accessory is sold separately
from the device.” As such, delivery sales of the BIDI® Stick are subject to the PACT Act.

The PACT Act requires all sellers to register with
the ATF, as well as the tobacco tax administrators of the states into which a shipment is made or in which an advertisement or offer is
disseminated. Delivery sellers who ship cigarettes (including ENDS) or smokeless tobacco to consumers are further required to label packages
as containing tobacco, verify the age, and identity of the customer at purchase, use a delivery method (other than through the USPS) that
checks ID and obtains adult customer signature at delivery, and maintain records of delivery sales for a period of