Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 69

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1
Chunk 69
---
 with Congress to create a new regulatory
pathway for CBD through legislation.

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-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 PMTAs for flavored ENDS. In addition, a number of states and localities have banned the sale of non-tobacco flavored tobacco
products. Recently, for example, California passed Proposition 31, which prohibits the sale of non-tobacco flavored tobacco products,
including e-cigarettes, in retail locations. Thus, the non-tobacco flavored BIDI® Sticks are not permitted to be sold in California
retail locations. We anticipate more states and localities will take this approach. Several other states and localities have banned flavored
ENDS, including Washington, D.C., New York (and New York City), New Jersey, Rhode Island, Illinois (and Chicago), Utah and Massachusetts,
with several more considering similar bans (e.g., Maryland and Connecticut).

39

Ability
to Meet Demand for our Products

We believe that the
matters described under “FDA PMTA Determinations, 11th Circuit Decision and Impact on Our Business” could have
decreased demand for our Products and would likely have negative opportunities to distribution channels for us through which we could
sell our Products. However, an unlikely increase in demand for the Products would require us to raise cash and/or obtain financing in
order to purchase Products from Bidi for resale in the marketplace. As a result, we are faced with the risk that such cash or financing
will not be available in sufficient amounts or on terms acceptable to us (or at all) to meet the market demand for the Products. Our
inability to fulfill this demand will damage our reputation and could materially impact our ability to increase sales of the Products
which, in turn, would adversely impact our results of operations.

Inflation

Consumer purchases of tobacco
products are historically affected by economic conditions, such as changes in employment, salary and wage levels, the availability of
consumer credit, inflation, interest rates, fuel prices, sales taxes, and the level of consumer confidence in prevailing and future economic
conditions. The U.S. has been experiencing an environment of material inflation in recent quarters, and this condition may impact discretionary
consumer purchases, such