SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation | The interim unaudited condensed consolidated financial statements included herein, presented in accordance with generally accepted accounting principles in the United States of America (GAAP), and stated in U.S. dollars, have been prepared by us, without an audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.
These financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2025, and notes thereto which are included in the annual report on Form 10-K previously filed with the SEC on March 31, 2026, (the “Annual Report”). We follow the same accounting policies in the preparation of interim reports. The results of operations for the interim periods covered by this Form 10-Q may not necessarily be indicative of results of operations for the full fiscal year or any other interim period. |
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| Principles of Consolidation | The accompanying condensed consolidated financial statements include the accounts of TOMI and its wholly owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation. All intercompany accounts and transactions have been eliminated in consolidation. |
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| Reclassification of Accounts | Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no material effect on previously reported results of operations or financial position. |
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| Use of Estimates | The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to allowance for credit losses, inventory, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. |
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| Fair Value Measurements | The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. |
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| Cash and Cash Equivalents | Cash and cash equivalents include cash on hand, held at financial institutions and other liquid investments with original maturities of three months or less. At times, these deposits may be more than insured limits. At June 30, 2026, and December 31, 2025, there were no cash equivalents. |
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| Accounts Receivable | Accounts receivable is stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. Management assesses the collectability of outstanding customer invoices and maintains an allowance resulting from the expected non-collection of customer receivables. In estimating this reserve, management considers factors such as industry sector, historical collection experience, customer creditworthiness, specific customer risk, and current and expected general economic conditions. For those customers to whom we extend credit, in accordance with the Current Expected Credit Loss (CECL) model, we make a risk-based evaluation at the point of sale which is then reviewed on both an individual and collective (pool) basis during each reporting period based on ASC 326.
Movements on credit loss accounts are shown below:
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| Inventories | Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods and raw materials. We expense costs to maintain certification to cost of goods sold as incurred.
We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence, and future customer demand. We record an allowance for estimated losses when the facts and circumstances indicate that inventories may not be usable or realized when comparing current inventory levels to anticipated demand for our product. Our reserve for obsolete inventory was $500,000 and $500,000 as of June 30, 2026, and December 31, 2025, respectively. |
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| Property and Equipment | We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation commences for equipment, furniture and fixtures and vehicles, once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the remaining lease term at the time the asset was placed into service or the service lives of the improvements, whichever is shorter. |
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| Leases | We recognize a right-of-use (“ROU”) asset and lease liability for all leases with terms of more than 12 months, in accordance with ASC 842. We utilize the short-term lease recognition exemption for all asset classes as part of our on-going accounting under ASC 842. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities. Recognition, measurement and presentation of expenses depend upon classification as a finance or operating lease.
As a lessee, we utilize the reasonably certain threshold criteria in determining which options we will exercise. Furthermore, our lease payments are based on index rates with minimum annual increases. These represent fixed payments and are captured in the future minimum lease payments calculation. In determining the discount rate to use in calculating the present value of lease payments, we used our incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
We have also elected the practical expedient not to separate lease and non-lease components for all asset classes, meaning all consideration that is fixed, or in-substance fixed, will be captured as part of our lease components for balance sheet purposes. Furthermore, all variable payments included in lease agreements will be disclosed as variable lease expense when incurred. Generally, variable lease payments are based on usage and common area maintenance. These payments will be included as variable lease expense in the period in which they are incurred. |
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| Vendor Concentration | The Company is dependent on a limited number of third-party suppliers for the manufacture of its SteraMist® line of equipment and for the supply of its BIT Solution. This dependence results in concentration of both purchasing activity and accounts payable balances among a small number of vendors.
As of June 30, 2026, two vendors accounted for approximately 61% of total accounts payable, compared to approximately 42% for one vendor as of December 31, 2025.
For the three and six months ended June 30, 2026, two vendors collectively accounted for approximately 77% and 70% of total cost of sales, respectively, compared to approximately 50% and 49% for the three and six months ended June 30, 2025, respectively. The increase in concentration reflects an increase in equipment sales during the current year period.
The Company remains committed to diversifying its supplier base, though it is substantially dependent on these vendors for its primary product lines. Any disruption to these relationships could have a material adverse effect on the Company’s ability to fulfill customer orders and on its results of operations. Refer to Item 1A, Risk Factors, as disclosed in the Company’s Form 10-K, for further discussion of risks related to its reliance on third-party manufacturers and suppliers. |
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| Income Taxes | The Company accounts for income taxes in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. A significant area of judgment relates to the realization of deferred tax assets, including net operating loss carryforwards and other deductible temporary differences. The Company evaluates the realizability of its deferred tax assets based on available evidence, including historical operating results, projections of future taxable income, and the expected reversal of temporary differences.
Based on the Company’s recent history of operating losses, management has concluded that it is more likely than not that its deferred tax assets will not be realized. Accordingly, the Company has recorded a full valuation allowance against its deferred tax assets. The valuation allowance will be maintained until sufficient positive evidence exists to support the realization of these assets.
Additional information regarding the Company’s income taxes, including deferred tax assets and net operating loss carryforwards, is included in Note 13. Income Taxes to the consolidated financial statements. |
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| Net Loss Per Share | Basic net loss per share is computed by dividing our net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures. The computation of diluted EPS is similar to the computation of basic EPS except that the numerator may have to adjust for any dividends and income or loss associated with potentially dilutive securities that are assumed to have resulted in the issuance of shares of common stock and the denominator may have to adjust to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued during the period to reflect the potential dilution that could occur from shares of common stock issuable through a contingent shares issuance arrangement, stock options, warrants, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, and warrants, and the if-converted method is used for convertible preferred stock as prescribed in FASB ASC Topic 260. Because of the net loss for the three and six months ended June 30, 2026 and 2025, the impact of including these in our computation of diluted EPS was anti-dilutive.
Potentially dilutive securities as of June 30, 2026 and 2025 consisted of the following, as adjusted for our recent stock split:
Warrants, options, RSU’s, preferred stock and shares associated with the conversion of debt to purchase approximately 1.97 million and 1.95 million shares of common stock were outstanding at June 30, 2026 and June 30, 2025, respectively, but were excluded from the computation of diluted net loss per share at June 30, 2026 and 2025 due to the anti-dilutive effect on net loss per share.
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| Revenue Recognition | We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition, we perform the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy the performance obligations.
We must use judgment to determine: (a) the number of performance obligations and whether they are distinct from one another; (b) the transaction price; and (c) the standalone selling price for each performance obligation for purposes of transaction price allocation.
Title and risk of loss generally pass to our customers upon shipment. Shipping and handling costs charged to customers are included in product revenues, and the associated expenses are treated as fulfillment costs included in cost of revenues. Revenues are reported net of sales taxes collected from customers.
Product revenue includes sales of our standard and customized equipment, BIT Solution and accessories, recognized upon transfer of control to the customer. Service and training revenue includes high-level decontamination engagements, equipment validation and customer training, recognized as the agreed-upon services are rendered.
A portion of our revenue is derived from SIS and CES, which may involve multiple performance obligations including equipment supply, installation, validation and ongoing service. For these arrangements, management exercises significant judgment in identifying and allocating the transaction price among the distinct performance obligations and in determining the point at which control transfers to the customer. Delays in project completion or customer acceptance can affect the timing of revenue recognition.
We record estimated allowances for sales returns using a specific identification method based on subsequent return activity and historical averages. As of June 30, 2026 and December 31, 2025, we recorded allowances of $76,621 and $47,844, respectively.
Disaggregation of Revenue
The following table presents our revenues disaggregated by revenue source (rounded to nearest thousand).
Product and Service Revenue
Revenue by Geographic Region
Product and Service Revenue
Revenue by Geographic Region
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| Costs to Obtain a Contract with a Customer | We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We generally expense sales commissions when incurred because the amortization period would have been one year or less. |
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| Contract Balances | As of June 30, 2026, and December 31, 2025, we had contract balances and unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed in the amounts of $431,100 and $424,032, respectively. The increase in deferred revenue reflects growth in our SIS and CES project pipeline and the timing of project milestones. Changes in assumptions regarding the timing of project completion or customer acceptance could affect the amount and timing of revenue recognized in future periods.
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| Equity Compensation Expense | We account for equity compensation expense in accordance with FASB ASC 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, equity compensation expense is estimated at the grant date based on the award’s fair value.
The valuation methodology used to determine the fair value of options and warrants issued as compensation during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The expected term of the Company’s warrants has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” warrants. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock, par value $0.01 (the “Common Stock”) and does not intend to pay dividends on its Common Stock in the foreseeable future. The Company has elected to account for forfeitures as they occur.
On July 7, 2017, our shareholders approved the Company’s Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan authorized the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units/shares. Giving effect to the Reverse Stock Split, approximately 666,667 shares (2,000,000 pre-split) of Common Stock were authorized for issuance under the 2016 Plan. Shares issued under the 2016 Plan could be authorized but unissued shares, treasury shares, or any combination thereof. Provisions in the 2016 Plan permitted the reuse or reissuance of shares of Common Stock underlying cancelled, expired or forfeited awards and stock appreciation rights settled in cash. Equity compensation awards were typically granted in consideration for the future performance of services to the Company. All recipients of awards under the 2016 Plan were required to enter into award agreements at the time of grant.
On or around January 29, 2026, the 2016 Plan expired in accordance with its terms and has not yet been replaced by a successor equity incentive plan. Awards outstanding as of the expiration date remain subject to the terms of the 2016 Plan and the applicable award agreements; however, no new awards may be granted under the 2016 Plan following its expiration. The Company intends to submit a successor equity incentive plan for shareholder approval at its next annual meeting of shareholders.
For awards of restricted stock units (“RSUs”), fair value is determined based on the closing market price of the Company’s Common Stock on the grant date. Compensation expense for RSUs is recognized on a straight-line basis over the requisite service period.
During the six months ended June 30, 2026, the Company issued 16,667 shares of Common Stock under the 2016 Plan to members of its Board and 11,111 RSUs vested in favor of Mr. David Vanston, the Company’s former Chief Financial Officer (see Note 9). During the six months ended June 30, 2025, the Company issued 20,000 shares of Common Stock under the 2016 Plan to members of its Board. |
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| Concentrations of Credit Risk | Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We maintain cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation limit of $250,000 at times during the year. |
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| Long-Lived Assets Including Acquired Intangible Assets | We assess long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating long-lived assets for impairment, we measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If our long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. We base the calculations of the estimated fair value of our long-lived assets on the income approach. For the income approach, we use an internally developed discounted cash flow model that includes, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We had no long-lived asset impairment charges for the three and six months ended June 30, 2026 and 2025. |
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| Advertising and Promotional Expenses | Advertising and promotional costs are expensed in the period they are incurred. For the three and six months ended June 30, 2026, advertising and promotional expenses included in selling expenses were approximately $29,000 and $52,000, respectively. For the same periods in 2025, advertising and promotional expenses included in selling expenses were approximately $33,000 and $64,000, respectively. |
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| Research and Development Expenses | Research and development expenses are expensed in the period they are incurred. For the three and six months ended June 30, 2026, research and development expenses were approximately $38,000 and $95,000, respectively. For the same periods in 2025, research and development expenses were approximately $84,000 and $129,000, respectively. |
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| Business Segments | Pursuant to the guidance in ASC 280, we currently have one reportable business segment due to the fact that we derive our revenue primarily from one product in which 1) The business activities are homogenous in nature, 2) The entire operation faces similar market conditions and risks, 3) There is a high degree of integration in its operations, 4) Internal evaluations of financial results are conducted on a consolidated basis. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above. See Note 15, Segment Reporting for more details. |
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| Going Concern | For the six months ended June 30, 2026 and 2025, our net loss was approximately $1,193,000 and $1,493,000, respectively, and net cash (used in) operations was approximately $1,299,000 and $463,000, respectively. As of June 30, 2026, we had approximately $322,000 in cash and cash equivalents, working capital of approximately $1,818,000, total stockholders’ equity of $1,428,000, and an accumulated deficit of $59.2 million. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. The consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business; no adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we not continue as a going concern.
Management’s Plan to Address Going Concern
Equity Line of Credit and Shelf Registration Statement
In November 2025, we entered into a $20.0 million Equity Line of Credit (“ELOC”) with Hudson Global Ventures, LLC. Our Form S-3 shelf registration statement became effective on December 8, 2025, under which the Company is registered to offer and sell up to $50.0 million of securities from time to time. Under the ELOC, we may, at our sole discretion, direct Hudson Global Ventures to purchase between $25,000 and $2.0 million of our common stock per draw, subject to the terms of the facility. Through June 30, 2026, the Company had issued approximately 1.35 million shares under the ELOC and received aggregate net proceeds of approximately $1.92 million. As a result, approximately $18.1 million of contractual capacity remained available under the facility as of June 30, 2026, subject to market conditions, applicable ownership limitations, regulatory requirements, and the availability of registered shares. Further details are set out in Note 9 to these consolidated financial statements.
Capital Markets Access
Our effective Form S-3 shelf registration statement provides a registered platform to raise up to $50,000,000 of securities from time to time. We have engaged Bancroft Capital as an investment banking advisor to explore additional financing opportunities, including equity and equity-linked transactions with existing and new investors.
Reverse Stock Split
On July 20, 2026, subsequent to the period covered by this Report, the Company effected a 1-for-3 reverse stock split of its Common Stock and Series A Preferred Stock, primarily to regain compliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum closing bid price of $1.00 per share. Continued listing on The Nasdaq Capital Market is important to management’s plan to address the Company’s going concern conditions, as it supports the Company’s ability to access the capital markets, including through the ELOC and the Company’s effective Form S-3 shelf registration statement described above. The Reverse Stock Split did not generate cash proceeds and does not, by itself, resolve the Company’s operating losses or liquidity needs; there can be no assurance that the Reverse Stock Split will be sufficient to regain or maintain compliance with Nasdaq’s continued listing requirements. Further details of the Reverse Stock Split are set out in Note 9 to these consolidated financial statements.
Pending Merger with Carbonium Core, Inc.
On June 28, 2026, the Company entered into an Agreement and Plan of Merger with Carbonium Core, Inc. (“Carbonium”), pursuant to which Carbonium will become a wholly owned subsidiary of the Company. The Merger Agreement requires the Company and Carbonium to work together in good faith to arrange and complete a financing transaction resulting in gross proceeds to the Company of not less than $10,000,000 prior to Closing, completion of which is itself a condition to Closing. If consummated, management believes the Merger, together with the associated Financing Transaction, would materially improve the Company’s liquidity position and its ability to fund operations beyond the actions described above. However, the Merger is subject to numerous closing conditions, including completion of the Financing Transaction and required shareholder approvals, and there can be no assurance that the Merger will be completed on the anticipated timeline, on the terms currently contemplated, or at all. Accordingly, management’s plan to address the Company’s going concern conditions does not rely on the completion of the Merger or the Financing Transaction.
Convertible Note Management
As of June 30, 2026, we had $3,135,000 in total convertible note principal outstanding, with a net carrying value of $2,949,000 after amortized debt issuance costs. We are evaluating options to reduce our outstanding convertible note obligations, including potential conversion into equity or repayment using proceeds from the Hudson Global equity line, either of which would reduce total debt and improve stockholders’ equity. Further details of our convertible notes are set out in Note 8 to these consolidated financial statements.
Pipeline Conversion to Revenue
As of June 30, 2026, our integrated project pipeline for SteraMist Integrated Systems (“SIS”), Hybrid, and Custom Engineered Systems (“CES”) totaled approximately $4.3 million across 13 customers, compared to approximately $3.0 million in November 2025. During the quarter, we secured a $440,000 annual purchase order for recurring decontamination services with a leading global medical technology company, providing quarterly professional iHP decontamination services for critical cleanroom and laboratory environments. These opportunities represent potential future revenue and are not committed orders or guarantees of future performance.
More broadly, the Company maintained a total sales pipeline of approximately $35 million, including approximately $8.6 million in advanced-stage opportunities, which management believes provides a meaningful source of future revenue growth. As of June 30, 2026, sales backlog totaled approximately $2.2 million and has subsequently increased to approximately $2.5 million, providing visibility into near-term revenue conversion from automated integrated systems, consumables, and recurring service revenue.
Cost Management
We reduced total operating expenses by $180,000, or 10%, and $428,000, or 12% during the three and six months ended June 30, 2026 compared to the same prior year period. We continue to actively manage controllable costs while preserving the technical and commercial capacity required to execute on our pipeline.
Customer Deposit Policy
Our customer deposit policy, implemented during 2025, requires deposits on equipment orders ahead of fulfilment. This policy reduces working capital exposure and is expected to generate incremental operating cash flow benefits in 2026 as it becomes fully embedded across our order intake process.
While management believes the actions described above provide a reasonable basis to address the going concern conditions, there can be no assurance that we will successfully implement this plan, that our pipeline will convert to revenue on the anticipated timeline, or that additional capital will be available on terms acceptable to us. If we are unable to execute this plan, we may be required to delay, reduce, or eliminate certain operations, which could materially adversely affect our business, financial condition, and results of operations. |
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| Recent Accounting Pronouncements | Recently issued accounting pronouncements not yet adopted
In November 2024, FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). In January 2025, ASU No. 2025-01 was issued to clarify the effective date for all public business entities. The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
Recently adopted accounting pronouncements
In December 2023, FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company adopted ASU 2023-09, applied on a prospective basis as of January 1, 2025, because the ASU affects disclosures only, adoption did not affect our consolidated financial statements.
On July 4, 2025, the U.S. H.R.1, an act to provide for reconciliation pursuant to title II of H. Con. Res. 14. (the “OBBBA”) was enacted. The OBBBA introduces multiple tax law and other legislative changes, including modifications to income tax provisions such as domestic research and development expenses, capital expenditures, and U.S. taxation of international earnings; the repeal or acceleration of the sunset of certain tax credits under the 2022 Inflation Reduction Act and elimination of certain penalties for violations of certain regulatory credit programs. We have recognized the effects of the OBBBA provisions in our financial results to the extent they are applicable to the year ended December 31, 2025. We will continue to evaluate the impact of these provisions on our 2026 and subsequent consolidated financial statements.
In July 2025, FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. We adopted ASU 2025-05 in the first quarter of 2026 on a prospective basis and did not elect the practical expedient. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or on the allowance for credit losses as of June 30, 2026. |
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