Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 305

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 1B
Chunk 305
---
 Variable lease payments
may include costs such as common area maintenance, utilities, real estate taxes or other costs. Variable lease payments are recognized
in operating expenses in the period in which the obligations for those payments are incurred. The Company records rent expense for its
operating lease, which has escalating rent payments, on a straight-line basis over the lease term. The Company does not have any financing
leases.

The Company made a policy election not to separate
non-lease components from lease components for all its leases; therefore, it accounts for lease and non-lease components as a single lease
component. The Company also elected the short-term lease recognition exemption for all leases that qualify, such that leases with a term
of 12 months or less are not recognized on the balance sheet.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, which include
definite-lived intangibles, long-lived fixed assets and lease right-of-use assets, for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. Factors that could trigger an impairment review include significant under-performance
relative to expected historical or projected future operating results, significant changes in the manner of the Company’s use of
the acquired assets or the strategy for the Company’s overall business or significant negative industry or economic trends. If this
evaluation indicates that the value of the long-lived asset may be impaired, the Company makes an assessment of the recoverability of
the net carrying value of the asset over its remaining useful life. If this assessment indicates that the long-lived asset is not recoverable,
based on the estimated undiscounted future cash flows of the technology over the remaining useful life, the Company reduces the net carrying
value of the related asset to fair value and may adjust the remaining useful life. An impairment analysis is subjective and assumptions
regarding future growth rates and operating expense levels can have a significant impact on the expected future cash flows and impairment
analysis.

No impairment of long-lived assets was identified for the years  ended October 31, 2024
and 2023, respectively.

Revenue Recognition

The Company recognizes revenue in accordance with
ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company recognizes revenue when a customer
obtains control of promised goods, in an amount that reflects the consideration that the Company expects to receive in exchange for the
goods. To determine revenue recognition for arrangements within the scope of ASC 606, the Company