Company: KAVL
Filing Date: 2025-09-16
Form Type: 10-Q
Source: 0001731122-25-001266
Chunk: 24

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-09-16
Form: 10-Q
Item: Item 1
Chunk 24
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 the performance condition is probable of occurrence. The grant-date fair value of share options is estimated using the
Black-Scholes-Merton option-pricing model.

Fair Value of Financial Instruments

The Company’s balance sheet includes certain
financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively
short period of time between the origination of these instruments and their expected realization.

    F-13

ASC 820, Fair Value Measurements and Disclosures
(“ASC 820”), defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about
market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy
are described below:

    ●
    Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

    ●
    Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

    ●
    Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon
certain market assumptions and pertinent information available to management as of July 31, 2025 and October 31, 2024. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these
instruments. These financial instruments include cash, accounts receivable,