Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 45

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 45
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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 four years after the
date of sale, among other things. Delivery sellers are also required to file a monthly report with the state tobacco tax administrator
and any other local or tribal entity that taxes the sale of the products. Such reports must include the name and address of the persons
delivering and receiving the shipment and the brand and quantity of the “cigarettes” that were shipped. These requirements
apply to all sales, including sales to consumers and sales between businesses.

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In addition to the de facto FDA flavor ban that has
resulted from the denial of nearly all PMTAs for flavored ENDS, ENDS products that are non-tob