NOTE 3 — REVENUE AND GRANT INCOME RECOGNITION

The Company recognizes revenue under contracts with customers to provide nuclear reactor and fuel design engineering services in the areas of research and development, systems engineering, and technology development. The Company’s revenues are generally derived from contract services predominantly performed for the U.S. Government and commercial entities. All revenues for the three and six months ended June 30, 2026 and 2025 were recognized over time.

There are three main types of contracts: cost-based contracts, cost-plus fixed fee contracts, and time and materials. Under cost-based and cost-plus fixed fee contracts, the total consideration in the Company’s contracts is paid in the form of incremental incurred cost reimbursements over time upon submission of invoices. Under time-and-materials contracts, the total consideration is based on contractually agreed upon labor rates for hours worked, plus reimbursement of materials and other costs incurred.

The allowability of certain costs under government contracts is subject to audit by the government. Certain indirect costs are charged to contracts using provisional or estimated indirect rates, which are subject to later revision based on actual costs incurred and subject to government audits of those costs. Refer to Note 15 — Commitments and Contingencies for further discussion of these cost audits.

Advanced Reactor Demonstration Program (“ARDP”)

During the year ended December 31, 2021, the Company was named an awardee under the Department of Energy’s ARDP. The objective of the ARDP is to accelerate the development and demonstration of advanced nuclear reactor technologies, pursuant to which the DOE will fund a portion of the direct and indirect costs incurred for the research and development costs to develop the intellectual property and the costs of developing and constructing both the TRISO-X fuel facility (“TX-1”) and Xe-100 commercial demonstration plant in Seadrift, Texas. Dow has been named a sub-awardee under the ARDP in connection with their involvement with the development and construction of the demonstrator reactor. The Company is constructing and will own TX-1.

Under the Company’s separate agreement with Dow, certain costs incurred by Dow related to the demonstrator reactor are funded by the Company using funds obtained through the ARDP. The Company has recognized the funds received from the DOE and the costs incurred by Dow on a gross basis as grant income and direct costs, respectively. The Company has recognized $2.0 million and $1.3 million as grant income and $1.8 million and $1.3 million as direct costs during the three months ended June 30, 2026 and 2025, respectively, related to costs incurred by Dow for the demonstration plant. The Company has recognized $5.2 million and $2.6 million as grant income and $4.5 million and $2.4 million as direct costs during the six months ended June 30, 2026 and 2025, respectively. The Company also earns revenue from Dow as a customer for certain site specific engineering, permitting, and other services related to the development of the Xe-100 plant. Refer to Note 14 — Related Party Transactions for additional information on transactions with Dow and other related parties.

Disaggregated Revenues and Grant Income

Contract Balances

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, unbilled receivables (amounts billable where the right to consideration is unconditional), contract assets (for which certain conditions must be satisfied before the right to bill is obtained), and contract liabilities (customer advances and deposits) on the condensed consolidated balance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in unbilled receivables. However, the Company sometimes receives advances or deposits from its customers, or bills customers where it has an unconditional right to consideration before revenue is recognized, resulting in contract liabilities. These liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period.

Contract assets represent revenue recognized that exceeds the amount billed to the customer and excludes amounts billable where the right to consideration is solely subject to the passage of time. The following balances were recorded within unbilled receivables and contract assets (in thousands):