Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 43

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 43
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 illegal, cheaper tobacco-related products, and providing greater rewards for smugglers. All of these factors
based on illicit trade have had and may continue to have an adverse effect on our overall sales volume, may restrict the ability to increase
selling prices, damage our brand equity, and may lead to commoditization of our products. If we are unable to manage the risks posed by
illicit competition, our results of operation and overall business may suffer.

Our products are regulated by the FDA, which has broad regulatory
powers. Increases in tobacco-related taxes have been proposed or enacted and are likely to continue to be proposed or enacted in numerous
jurisdictions. 

Tobacco products, premium cigarette papers, and tubes
have long been subject to substantial federal, state, and local excise taxes. Such taxes have frequently been increased or proposed to
be increased, in some cases significantly, to fund various legislative initiatives or further disincentivize tobacco usage. Since 1986,
smokeless products have been subject to federal excise tax. Federally, smokeless products are taxed by weight (in pounds or fractional
parts thereof) manufactured or imported. Any increases in tobacco-related taxes may materially adversely affect the demand for our products.

The market for ENDS products is subject to a
great deal of uncertainty and is still evolving. 

ENDS products, having recently been introduced to
market over the past 10 to 15 years, are at a relatively early stage of development, and represent core components of a market that is
evolving rapidly, highly regulated, and characterized by a number of market participants. Rapid growth in the use of, and interest in,
ENDS products is recent, and may not continue on a lasting basis. The demand and market acceptance for these products is subject to a
high level of uncertainty. Therefore, we are subject to all the business risks associated with a new enterprise in an evolving market.

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For example, ENDS products that are non-tobacco flavored
continue to face the threat of prohibition at the local level, as many state and local authorities and attorneys general push for bans
or request the FDA to deny a PMTA for flavored ENDS. To date, at least nine states, including the District of Columbia, have banned the
sale of flavored ENDS (e.g., California, Massachusetts, Illinois, New Jersey, New York, Rhode Island, and Utah), with several more considering
similar bans (e.g., Maryland and Connecticut). As the September 9