Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 240

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1A
Chunk 240
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 his wife.

Purchases and Accounts Payable

During the fiscal year ended October 31, 2024, 100% of the inventories of Products,
consisting solely of the BIDI® Stick, were purchased from Bidi, a related party controlled by Nirajkumar Patel, the former Chief
Executive Officer and Director of the Company, in the amount of $250,560, As of October 31, 2024, the Company had $0 in accounts payable
to Bidi from inventory purchases.

During the fiscal year ended October 31, 2023, the
Company purchased Products equal to $12,747,006 from Bidi, a related party company that is
also owned by Nirajkumar Patel, the former Chief Executive Officer and Director of the Company. As of October 31, 2023, the Company had
an accounts payable balance of $1,521,491 to Bidi.

    F-24

The KBI License
agreement provides that KBI shall pay Bidi license fees equivalent to 50% of the adjusted earned royalty payments, after any offsets
due to jointly agreed costs such development costs incurred for entry to specific international markets. During the year ended
October 31, 2024, the Company paid license fees of approximately $220,000 to
Bidi. As of October 31, 2024, the Company has a payable to Bidi of $131,683
related to the PMI License Agreement of which $108,215
was paid in December 2024.

Leased Office Space and Storage Space

 On
June 10, 2022, the Company entered into a Lease Agreement with Just Pick, owned and controlled by Nirajkumar Patel, the former Chief
Executive Officer and Director of the Company. The Company had $198,392 and $190,541 in operating lease expenses for the years ended
October 31, 2024 and October 31, 2023, respectively.

Note 10 – Income Tax

The Company is subject to federal income taxes and
state income tax in the U.S. Significant judgment is required in determining the provision for income taxes and income tax assets and
liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

The Tax Cuts and Jobs Act (the “Tax Act”)
was enacted on December 22, 2017 and reduced the U.S. federal corporate tax rate from 35% to