Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 728

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 7
Chunk 728
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ities 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. Several other states and localities have banned flavored
ENDS, including Washington, D.C., New York (and New York City), New Jersey, Rhode Island, Illinois (and Chicago), Utah and Massachusetts,
with several more considering similar bans (e.g., Maryland and Connecticut).

39

Ability
to Meet Demand for our Products

We believe that the
matters described under “FDA PMTA Determinations, 11th Circuit Decision and Impact on Our Business” could have
decreased demand for our Products and would likely have negative opportunities to distribution channels for us through which we could
sell our Products. However, an unlikely increase in demand for the Products would require us to raise cash and/or obtain financing in
order to purchase Products from Bidi for resale in the marketplace. As a result, we are faced with the risk that such cash or financing
will not be available in sufficient amounts or on terms acceptable to us (or at all) to meet the market demand for the Products. Our
inability to fulfill this demand will damage our reputation and could materially impact our ability to increase sales of the Products
which, in turn, would adversely impact our results of operations.

Inflation

Consumer purchases of tobacco
products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of
consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic
conditions. The U.S. has been experiencing an environment of material inflation in recent quarters, and this condition may impact discretionary
consumer purchases, such as the BIDI® Stick. Demand for our products may also decline during recessionary periods or at other times
when disposable income is lower, and taxes may be higher.

Supply
Chain

The spread of COVID-19 throughout
the world as well as increasing tensions with China over the past several years has created global economic uncertainty, which may cause
partners, suppliers, and potential customers to closely monitor their costs and reduce activities. Any of the foregoing could materially
adversely affect the supply chain