Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 289

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1B
Chunk 289
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ASC 606”), we recognize revenue when
a customer obtains control of promised goods, in an amount that reflects the consideration that we expect to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (1) identify
the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate
the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance
obligation. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled
to in exchange for the goods it transfers to the customer.

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Revenue Recognition Policy

Products Revenue

We generate product revenue from the sale
of our products to non-retail customers. We recognize revenue at a point in time based on management’s evaluation of when performance
obligations under the terms of a contract with the customer are satisfied and control of the products has been transferred to the customer.
In most situations, transfer of control is considered complete when the products have been shipped to the customer. However, when we enter
a consignment agreement with a new customer, once we ship and deliver the requested amount of the products the customer ordered to its
distribution center for its retail sales location, we retain ownership of the delivered products until they
are delivered to their retail stores. When the products are sold in the stores and the funds, as stated in the consignment agreement,
are remitted to us, then we record the revenues in our financial records. We determined that a customer obtains control of the product
upon shipment when title of such product and risk of loss transfer to the customer. Our shipping and handling costs are fulfillment costs,
and such amounts are classified as part of cost of sales. The advance payment is not considered a significant financing component
because the period between when we transfer a promised good to a customer and when the customer pays for that good is short. We offer
credit sales arrangements to non-retail (or wholesale) customers and monitor the collectability of each credit sale routinely.

Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.

We qualify as a smaller reporting company, as defined
by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

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Item 8. Financial Statements and Supplementary