Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 841

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 7A
Chunk 841
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 between the Purchase Amount and the Purchase Price is imputed interest that is recorded as interest expense when paid.

On August 9, 2023, the Company entered into a Securities
Purchase Agreement (the “SPA”) with AJB Capital Investments, LLC (“AJB”), pursuant to which the Company sold a
Promissory Note in the principal amount of $650,000 (the “Note”) to AJB in a private transaction for a purchase price of $585,000
(giving effect to original issue discount of $65,000). The Note matures on February 8, 2024 (the “Maturity Date”) and bears
interest at the rate of 10% per annum. Interest shall be payable on a monthly basis beginning on the date that is one month following
the date of issuance of the Note. Provided no event of default (as defined in the Note) is in effect as of the Maturity Date, the Company
may elect to extend the Maturity Date for a period of six (6) months. Pursuant to the terms of the
SPA, the Company paid a commitment fee to AJB in the form of 19,048 shares of Common Stock
(the “Commitment Fee Shares”) with a relative fair value of $130,478 which was recognized as discount to the note. The debt
discount and issuance costs are amortized over the term of the note. Amortization expense amounted to $38,273 and $122,273    for
the years ended October 31, 2024 and October 31, 2023, respectively. 

Under the SPA, the Company has the right to repurchase
half of the Commitment Fee Shares if the Note is repaid in full prior to maturity. On December 1, 2023, the Company fully paid the loan
balance in advance of the maturity date. In connection with the repayment of the Note, the Company agreed that AJB would be permitted
to retain all of the Commitment Fee Shares. The Company recognized $98,432 as loss on extinguishment of debt for the year then ended October
31, 2024. As of October 31, 2024 and October 31, 2023 the carrying value of the loan and unamortized debt discount and issuance costs
were 0zero and zero and $513,295 and 136,705, respectively.

Note 7 – Leases 

The Company capitalizes all leased assets pursuant
to AS