Company: KAVL
Filing Date: 2025-02-10
Form Type: 10-K
Source: 0001731122-25-000185
Chunk: 468

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-02-10
Form: 10-K
Item: Item 3
Chunk 468
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 assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenue and expenses during the period. We evaluate our significant estimates on an ongoing basis,
including, but not limited to, estimates related to allowance for doubtful accounts, and income tax provisions. We base our estimates
on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results could differ from those estimates.

We believe that the assumptions associated with our
revenue recognition have the greatest potential impact on our financial statements. Therefore, we consider this to be our only critical
accounting policy and we do not consider any of our estimates to be critical accounting estimates.

However, we consider Revenue Recognition the most
critical accounting policy for the Company that could create a material misevaluation of Product Revenue if not adhered to and implemented
successfully. Under ASC 606, Revenue from Contracts with Customers (Topic 606) (“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