Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 21

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 21
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Federal Trade Commission 

The Federal Trade Commission (FTC) routinely requests
various industry sectors to provide information on marketing and advertising practices, and typically summarizes the aggregate information
provided by all respondents in a public report. The FTC issued what is known as an “Order to File Special Report” to a number
of vaping industry members, including Bidi, on June 2, 2022. Upon being advised of the exclusive distribution arrangement between Bidi
and our company, the FTC withdrew the request directed to Bidi on August 22, 2022, and issued a request to us on August 29, 2022. We responded
timely to the FTC request on November 30, 2022. No further requests were received from the FTC to date.

State and Local Regulations

As a retail seller and/or wholesale distributor of
ENDS and related products, we must follow numerous state and local regulations. Individual U.S. state laws and regulations concerning
e-cigarette and related products are also relatively new and developing. Currently, certain state laws about e-cigarette and related products
serve to define and/or tax tobacco products or e-cigarette and related products, restrict access to youth and/or retail sale, require
a license to sell such products, ban e-cigarette use in certain public spaces, and require child resistant packaging on products containing
e-liquids. In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco products. Recently, for
example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products, including e-cigarettes,
in retail locations. Thus, the non-tobacco flavored BIDI® Sticks are not permitted to be sold in California retail locations. We anticipate
more states and localities will take this approach. As a distributor, we hold all required state licenses and permits, and pay all applicable
state e-cigarette and related products excise taxes. We work closely with Bidi to ensure that it is compliant with applicable manufacturer
specific state requirements, such as any warning requirements (e.g., California Proposition 65).

Excise Taxes on Vapor Products

Vapor products are currently subject to excise taxes
at the state and local level. Currently, approximately 31 states, plus various localities and jurisdictions, impose a tax on vapor products.
We anticipate that state and localities will likely continue to impose new excise taxes on these products and / or increase existing excise