Though the strings are still operational fully. The small cuts (nicks) are visible and might compromise the strength of the strings causing the strings to wear out sooner.
It's a really great budget ukulele for beginners. Kala is a good trust worthy brand, so one can go for it. The Ukulele doesn't go out of tune quickly and has a very nice looking build. I bought an open box piece, which had a slight scratch at the back of the body but nothing that hampers the performance. So all in all, a good deal.