Company: KAVL
Filing Date: 2025-06-10
Form Type: 10-Q
Source: 0001731122-25-000842
Chunk: 16

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-06-10
Form: 10-Q
Item: Item 1
Chunk 16
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 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 performs 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. The Company only applies 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. Under ASC 606, disaggregated revenue from contracts
with customers depicts the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

    F-10

Products Revenue

The Company generates products revenue from the sale
of the Products (as defined above) to non-retail customers. The Company recognizes 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. The Company determined that a customer obtains control of the Product upon shipment when title of such product and risk
of loss transfer to the customer. However, when the Company enters a consignment agreement with a new customer, once it ships and delivers
the requested amount of ordered Products to its distribution center for its retail sales locations, the Company retains ownership of the
delivered Products until they are delivered to the actual retail stores (as opposed to the Company’s consignment customer). The
Company’s shipping and handling costs are fulfillment costs, and such amounts are classified as part of cost of sales. The Company
offers credit sales arrangements to non-retail (or wholesale) customers and monitors the collectability of each credit sale routinely.

Revenue is measured by the transaction price, which
is defined as the amount of consideration expected to be received in exchange for providing goods to customers. The transaction price
is adjusted for estimates of known or expected variable consideration, which includes refunds and returns as well as incentive offers
and promotional discounts on current orders. Estimates for sales returns are based on, among other things, an assessment of historical
trends, information from customers