NOTE 4: CONCENTRATION OF CREDIT RISK

Cash and cash equivalents

The Company had cash and cash equivalents of $23.5 million and $8.7 million at June 30, 2026 and December 31, 2025, respectively. The Company invests excess cash in U.S. treasury securities, certificates of deposit or deposit accounts, all with maturities of less than three months. Cash equivalents consisting of U.S. treasury securities were $23.3 million and $8.2 million at June 30, 2026 and December 31, 2025, respectively.

The Company’s cash balances are held in United States financial institutions, which from time to time may exceed the Federal Deposit Insurance Corporation limit. There were no amounts at risk at June 30, 2026 and December 31, 2025.

Accounts receivable

The Company routinely assesses the financial strength of its customers. In accordance with the “expected credit loss” model of ASC 326, the carrying amount of accounts receivable is reduced by a valuation allowance that reflects the best estimate of the amounts the Company does not expect to collect. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating our reserve, including types of customers and their credit worthiness, experience and historical data adjusted for current conditions and reasonable supportable forecasts. The Company records an allowance for credit losses based upon a specific review of all significant outstanding invoices. For those invoices not specifically reviewed, provisions are provided based upon the collection history, current economic trends and reasonable supportable forecasts.

Accounts receivable is presented net of an allowance for credit losses of $15,000 and $30,000 as of June 30, 2026 and December 31, 2025, respectively. The allowance is based on prior experience and management’s evaluation of future economic conditions. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for credit losses could be material to our results of operations and financial condition.

NOTE 4: CONCENTRATION OF CREDIT RISK (continued)

At June 30, 2026, the accounts receivable balance included amounts from two customers that represented 53.2% and 27.3% of total accounts receivable. As of December 31, 2025, the accounts receivable balance includes amounts from two customers that represented 57.0% and 28.2% of total accounts receivable.

Sales concentration

Revenue from a single customer in any one period can exceed 10% of our total revenues. During the three months ended June 30, 2026, two customers represented 50.9% and 24.3% of revenues, and during the six months ended June 30, 2026, three customers represented 39.4%, 20.9%, and 14.3% of revenues.

During the three months ended June 30, 2025, three customers represented 34.9%, 21.0% and 11.8% of revenues, and during the six months ended June 30, 2025, three customers represented 47.3%, 21.3% and 10.9% of revenues.