Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 211

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1A
Chunk 211
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 the funds are insured and how the accounts are titled. The standard deposit
insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. The Company had uninsured cash of $3,652,300
and $252,586 as of October 31, 2024, and October 31, 2023, respectively.

Advertising and Promotion

All advertising, promotion and marketing expenses,
including commissions, are expensed when incurred.

Accounts Receivable and Reserve for Credit Losses

Accounts receivable pertain to contracts with customers
who are granted credit by the Company in the ordinary course of business and are recorded at the invoiced amount. Accounts receivable
does not bear interest. Accounts receivable presented on the consolidated balance sheet are adjusted for any write-offs and net of allowance
for credit losses. The Company’s reserve for credit losses is developed by using relevant available information including historical
collection and loss experience, current economic conditions, prevailing economic conditions, supportable forecasted economic conditions
and evaluations of customer balances. Once a receivable is deemed uncollectible after collection efforts have been exhausted, it is written
off against the reserve for credit losses. The Company closely monitors the credit quality of its customers and does not generally require
collateral or other security on receivables. The reserve for credit losses is measured on a collective basis when similar risk characteristics
exist.

    F-9

Based
upon management’s assessment of the accounts receivable aging and the customers’ payment history, the Company has determined
that no reserve for credit losses is required as of October 31, 2024 and October 31, 2023.

On January 22, 2024, the FDA issued an MDO on Bidi
Vapor’s “Classic” BIDI ® Stick PMTA, which Bidi is currently appealing before the 11th Circuit Court
of Appeals. The Company evaluated the impact of this MDO to the financial statements and recorded an estimated accrual for potential customer
returns of the “Classic” products of $46,775 and $113,243 as of October 31, 2024, and October 31, 2023, respectively,
which is included in accrued expenses in the consolidated balance sheets.

Credit Risk 

Financial instruments, which are potentially subject
to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue. The
Company performs periodic credit evaluations of its