Company: KAVL
Filing Date: 2025-06-10
Form Type: 10-Q
Source: 0001731122-25-000842
Chunk: 13

Company: Kaival Brands Innovations Group, Inc.
Filing Date: 2025-06-10
Form: 10-Q
Item: Item 1
Chunk 13
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-insured bank, per ownership category. The Company had uninsured cash of $1,555,702
and $3,652,300 as of April 30, 2025, and October 31, 2024, respectively.

Advertising and Promotion

All advertising, promotion and marketing expenses, including commissions,
are expensed when incurred.

Accounts Receivable and Reserve for Credit Loss

Accounts receivable pertain to contracts with customers
who are granted credit by the Company in the ordinary course of business and are recorded at the invoiced amount. Accounts receivable
does not bear interest. Accounts receivable presented on the consolidated balance sheet are adjusted for any write-offs and net of allowance
for credit losses. The Company’s reserve for credit losses is developed by using relevant available information including historical
collection and loss experience, current economic conditions, prevailing economic conditions, supportable forecasted economic conditions
and evaluations of customer balances. Once a receivable is deemed uncollectible after collection efforts have been exhausted, it is written
off against the reserve for credit losses. The Company closely monitors the credit quality of its customers and does not generally require
collateral or other security on receivables. The reserve for credit losses is measured on a collective basis when similar risk characteristics
exist.

Based upon management’s assessment of the accounts
receivable aging and the customers’ payment history, the Company has determined that no reserve for credit losses is required as
of April 30, 2025 and October 31, 2024.

On January 22, 2024, the FDA issued an MDO on Bidi Vapor’s “Classic”
BIDI ® Stick PMTA, which was subsequently upheld by the 11th Circuit Court of Appeals. The Company evaluated the impact
of this MDO to the financial statements and recorded an estimated accrual for potential customer returns of the “Classic”
products of 0zero and $46,775 as of April 30, 2025, and October 31, 2024, respectively, which is included in accrued expenses
in the unaudited interim consolidated balance sheets.

Credit Risk 

Financial instruments, which potentially subject us
to concentrations of credit risk, consist primarily of purchases of inventories, accounts payable, accounts receivable, and revenue. The
Company performs periodic credit evaluations of its customers and generally does not require collateral on trade receivables. Historically,
the Company has not experienced significant credit losses.

Inventories

All product inventory is purchased from