Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 492

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 3
Chunk 492
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31, 2023

Expected dividend yield

0
%

0
%

Expected option term (years)

5.5 – 7

6.25 – 10

Expected volatility

214.72 - 225.52
%

270.98 – 286.91
%

Risk-free interest rate

3.78 - 4.63
%

3.47 - 4.34
%

    F-14

The expected term of options granted represents the
period of time that options granted are expected to be outstanding. The expected volatility was based on the volatility in the trading
of the Company’s common stock. The risk-free interest rate used is based on the published U.S. Department of Treasury interest rates
in effect at the time of stock option grant for zero coupon U.S. Treasury notes with maturities approximating each grant’s expected
term. Forfeitures and cancellations are recorded as they occur.

Income Tax

Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the
recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities
are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and
tax credits that are available to offset future federal income taxes. The Company believes that its income tax filing positions and deductions
will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s
financial condition, results of operations, or cash flow.

The Company has Federal net operating loss (“NOL”)
carryforwards, consisting of total deferred tax assets, totaling approximately $29.8 million and state NOL carryforwards, consisting of
total deferred tax liabilities, totaling approximately $0.3 million. With the changes instituted by the CARES Act, the Federal NOLs have
an indefinite life and will not expire. The Company’s federal and state tax returns for the 2021, 2022, and 2023 tax years generally
remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the deferred tax asset
if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax asset