Red Cat Holdings, Inc. (RCAT)

CIK: 0000748268. SIC: 7372 Services-Prepackaged Software. Latest 10-K as of: 2026-03-19.

SIC breadcrumb: Services > Business Services > SIC 7372 Services-Prepackaged Software

SEC company page: https://www.sec.gov/edgar/browse/?CIK=748268. Latest filing source: 0001628280-26-019861.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-19. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000748268.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000748268.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-032121.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-05-07. Report date: 2026-03-31.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2025 as may be amended, supplemented or superseded from time to time by other reports we file with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a drone technology company integrating robotic hardware and software for military, government and commercial operations. We were originally incorporated under the laws of the State of Colorado in 1984 under the name “Oravest International, Inc.” In November 2016, we changed our name to “TimefireVR, Inc.” and re-incorporated in Nevada. In May 2019, we completed a share exchange agreement with Propware which resulted in the Propware shareholders acquiring an 83% ownership interest, and management control, of the Company. In connection with the share exchange agreement, we changed our name to “Red Cat Holdings, Inc.”, and our operating focus to the drone industry.

Prior to the share exchange agreement, Propware was focused on the research and development of software solutions that could provide secure cloud-based analytics, storage and services for the drone industry. Following the share exchange agreement and name change, we have completed a series of acquisitions and financings which have broadened the scope of our activities in the drone industry.

Discussion and Analysis of the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Revenues

Three months ended March 31,

Change

(in thousands)

2026

2025

Amount

%

Revenues

$

15,471 

$

1,630 

$

13,841 

849 

%

Consolidated revenues totaled $15.5 million during the three months ended March 31, 2026, or the “2026 period” compared to $1.6 million during the three months ended March 31, 2025, or the “2025 period” representing an increase of $13.9 million, or 849%. The increase is attributable primarily to increased revenue associated with the scaling of drone deliveries to the U.S. Army under the SRR program.

Gross Profit

Three months ended March 31,

Change

(in thousands)

2026

2025

Amount

%

Gross Profit

$

1,965 

$

(850)

$

2,815 

(331)

%

Gross Margin

13 

%

(52)

%

Consolidated gross profit totaled $2.0 million during the 2026 period compared to a gross loss of $0.8 million during the 2025 period representing an increase of $2.8 million. On a percentage basis, gross profit was 13% during the 2026 period compared to a gross loss of 52% during the 2025 period. The gross profit increase was primarily due to higher revenue and lower inventory write-offs in the 2026 period compared to the 2025 period.

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Operating Expenses

Three months ended March 31,

Change

(in thousands)

2026

2025

Amount

%

Operating Expenses

   Research and development

$

7,972 

$

3,433 

$

4,539 

132 

%

   Sales and marketing

4,577 

3,315 

1,262 

38 

%

   General and administrative

16,718 

4,880 

11,838 

243 

%

       Total operating expenses

$

29,267 

$

11,628 

$

17,639 

152 

%

Research and development expenses totaled $8.0 million during the 2026 period compared to $3.4 million during the 2025 period, representing an increase of $4.5 million or 132%. The increase was attributable primarily to increased investment in engineering personnel costs, prototype development, testing, and other expenses associated with the development of new and enhanced drone platforms and related technologies.

Sales and marketing costs totaled $4.6 million during the 2026 period compared to $3.3 million during the 2025 period, representing an increase of $1.3 million or 38%. The increase was attributable primarily to higher payroll and related personnel costs associated with expanding our sales and marketing team to support increased business development and customer engagement activities.

General and administrative expenses totaled $16.7 million during the 2026 period compared to $4.9 million during the 2025 period, representing an increase of $11.8 million or 243%. The increase was attributable primarily to higher payroll and related personnel costs resulting from increased headcount, as well as higher stock-based compensation expense. These increases reflect the expansion of our corporate, administrative, and compliance functions to support growth during the 2026 period.

Stock-Based Compensation

Three months ended March 31,

Change

(in thousands)

2026

2025

Amount

%

Stock-Based Compensation

   Research and development

$

929 

$

174 

$

755 

434 

%

   Sales and marketing

597 

863 

(266)

(31)

%

   General and administrative

3,291 

562 

2,729 

486 

%

       Total stock-based compensation

$

4,817 

$

1,599 

$

3,218 

201 

%

During the 2026 period, we incurred stock-based compensation costs of $4.8 million compared to $1.6 million in the 2025 period, resulting in an increase of $3.2 million or 201%. This increase was driven by expense from new grants awarded since March 31, 2025, primarily due to increased headcount.

Other (Income) Expense

Three months ended March 31,

Change

(in thousands)

2026

2025

Amount

%

Other (income) expense

$

(754)

$

10,645 

$

(11,399)

(107)

%

Other income totaled $0.8 million during the 2026 period compared to other expense of $10.6 million during the 2025 period, representing an increase of $11.4 million or 107%. This increase was attributable primarily to the change in fair value of convertible notes payable, which resulted in a loss of $10.7 million during the 2025 period compared to a loss of $0.9 million during the 2026 period. Interest income also increased from $0.1 million during the 2025 period to $1.3 million during the 2026 period.

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Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Three months ended March 31,

2026

2025

Net cash provided by (used in):

Operating activities

$

(31,945)

$

(15,907)

Investing activities

(6,783)

(273)

Financing activities

2,782 

14,749 

   Net decrease in cash

$

(35,946)

$

(1,431)

Operating Activities

Net cash used in operating activities was $31.9 million during the three months ended March 31, 2026 (or the “2026 period”) compared to net cash used in operating activities of $15.9 million during the three months ended March 31, 2025 (or the “2025 period”), representing an increase of $16.0 million or 101%. The increase was attributable primarily to inventory purchases made during the 2026 period, partially offset by accounts receivable collections. Net cash used in operations, net of non-cash expenses, totaled $6.2 million during the 2026 period, compared to $12.9 million during the 2025 period, resulting in a decrease of $6.7 million, or 52%. Net cash used related to changes in operating assets and liabilities totaled $11.6 million during the 2026 period, compared to net cash used of $5.7 million during the 2025 period, representing an increase of $5.9 million. Changes in operating assets and liabilities can fluctuate significantly from period to period depending upon the timing and level of multiple factors, including inventory purchases, vendor payments, and customer collections.

Investing Activities

Net cash used in investing activities was $6.8 million during the 2026 period compared to net cash used in investing activities of $0.3 million during the 2025 period, resulting in an increase of $6.5 million. This increase was due to increased purchases of property and equipment.

Financing Activities

Net cash provided by financing activities totaled $2.8 million during the 2026 period compared to net cash provided by financing activities of $14.7 million during the 2025 period. This decrease is attributable primarily to proceeds from issuance of convertible notes payable of $15.0 million received during the 2025 period which were not present in the 2026 period. This decrease was partially offset by proceeds from warrant exercises of $2.8 million during the 2026 period which were not present in the 2025 period.

Liquidity and Capital Resources

At March 31, 2026, we reported current assets totaling $209.7 million, current liabilities totaling $19.1 million and net working capital of $190.6 million. Cash totaled $131.9 million at March 31, 2026. Inventory related balances, including prepaid inventory, totaled $62.7 million.

Critical Accounting Policies and Estimates

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements.

In addition to our critical accounting estimates and polices below, refer to “Note 2 – Summary of Significant Accounting Policies” for further information.

Revenue Recognition

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We recognize revenue in accordance with ASC Topic 606 - Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (“FASB”). This standard includes a comprehensive evaluation of factors to be considered regarding revenue recognition including (i) identifying the promised goods, (ii) evaluating performance obligations, (iii) measuring the transaction price, (iv) allocating the transaction price to the performance obligations if there are multiple components, and (v) recognizing revenue as each obligation is satisfied. We determined there to be judgment in the determination of performance obligations identified in certain contracts. Our revenue transactions include the shipment of goods to customers as orders are fulfilled, completion of non-recurring engineering, completion of training, and customer support services. We recognize revenue upon shipment of product or prototypes unless otherwise specified in the purchase order or contract.

Purchase Price Accounting

We record our acquisitions under the acquisition method of accounting, under which the identifiable assets acquired and liabilities assumed are initially recorded at their respective fair values and any excess purchase price is reflected as goodwill. We utilize management estimates and, in some instances, independent third-party valuation firms to assist in determining the fair values of assets acquired, liabilities assumed, and contingent consideration, if any. Such estimates and valuations require us to make significant assumptions, including projections of future events and operating performance.

The fair value of brand names, backlog, customer relationships, non-compete agreements, and proprietary technology acquired in our acquisitions are determined using various valuation methods based on significant assumptions specific to each acquisition. We evaluate each acquired intangible asset individually to determine whether its useful life is finite or indefinite. Brand names are assigned an indefinite useful life when no factors are identified that would limit the period over which the brand name is expected to contribute to the Company's cash flows; otherwise, brand names are amortized over their estimated useful lives.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Proprietary technology is being amortized over six to seven years. Backlog is being amortized over two years.

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-19. Report date: 2025-12-31.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited consolidated financial statements and related notes and other financial data included elsewhere in this Annual Report on Form 10-K. In addition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. For more information regarding forward-looking statements, please refer to the discussion above under the heading “Forward-Looking Statements.”

Recent Developments

Change in Fiscal Year

In September 2024, our Board of Directors approved a change in fiscal year end from April 30 to December 31, effective as of December 31, 2024. In accordance with SEC regulations, our Consolidated Financial Statements are comprised of our Consolidated Balance Sheets as of December 31, 2025 and 2024 and our Consolidated Statements of Operations, Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows for the year ended December 31, 2025, eight months ended December 31, 2024, and year ended April 30, 2024. As a result, this Management’s Discussion and Analysis of Financial Condition and Results of Operations is comparing our results of operations for the year ended December 31, 2025 with our results of operations for the eight month period ended December 31, 2024 and the year ended April 30, 2024.

Capital Transactions

In April 2025, we entered into a securities purchase agreement with certain institutional investors pursuant to which we issued and sold, in a registered direct offering, an aggregate of 4,724,412 shares of our common stock, par value $0.001 per share, at a price of $6.35 per share. The gross proceeds were approximately $30 million, before deducting the placement agents’ fees and other offering expenses.

In June 2025, we entered into a securities purchase agreement with certain institutional investors pursuant to which we issued and sold, in a registered direct offering, an aggregate of 6,448,276 shares of our common stock, par value $0.001 per share, at a price of $7.25 per share. The gross proceeds were approximately $46.8 million, before deducting the placement agents’ fees and other offering expenses.

In September 2025, we entered into an underwriting agreement with a certain institutional investor pursuant to which we issued and sold, in a registered direct offering, an aggregate of 15,625,000 shares of our common stock, par value $0.001 per share, at a price of $9.60 per share. We also granted the underwriters a thirty day option to purchase up to an additional 2,343,750 shares of common stock at the public offering price, which the underwriters exercised in full at closing. The gross proceeds were approximately $172.5 million, before deducting the underwriters’ fees and other offering expenses.

Discussion and Analysis of Year Ended December 31, 2025 compared to Eight Month Transition Period Ended December 31, 2024 and Year Ended April 30, 2024

Revenues

Consolidated revenues totaled $40.7 million during the year ended December 31, 2025 (or the “2025 Period”) compared to $4.9 million during the eight months ended December 31, 2024 (or the "Transition Period") and compared to $17.8 million during the year ended April 30, 2024 (or the "2024 Period"). This represents an increase of $35.8 million, or 739% compared to the Transition Period and an increase of $22.9 million, or 128% compared to the 2024 Period. The increase compared to both periods is attributable primarily to increased revenue associated with the commencement and scaling of drone deliveries to the U.S. Army under the SRR program.

Gross Profit

Consolidated gross profit totaled $1.3 million during the 2025 Period compared to gross loss of $1.4 million during the Transition Period and gross profit of $3.7 million during the 2024 Period. This represents an increase of $2.7 million, or 195% compared to the Transition Period and a decrease of $2.4 million, or 65% compared to the 2024 Period. On a

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percentage basis, gross profit was 3% during the 2025 Period compared to gross loss of 28% during the Transition Period and gross profit of 21% during the 2024 Period. Our manufacturing facility is currently operating below its designed production capacity. These lower production levels, combined with higher fixed overhead costs, have resulted in lower gross margins during the 2025 Period. As production volumes increase, we expect fixed overhead costs, including labor, to be allocated across a greater number of units, which is expected to reduce per-unit production costs and improve gross margins.

Operating Expenses

Research and development expenses totaled $17.9 million during the 2025 Period compared to $6.6 million during the Transition Period and $6.3 million during the 2024 period. This represents an increase of $11.3 million, or 171% compared to the Transition Period and an increase of $11.6 million, or 186% compared to the 2024 Period. The increase compared to both periods was attributable primarily to increased investment in research and development activities, including engineering personnel costs, prototype development, testing, and other expenses associated with the development of new and enhanced drone platforms and related technologies.

Sales and marketing costs totaled $13.1 million during the 2025 Period compared to $6.3 million during the Transition Period and $5.1 million during the 2024 Period. This represents an increase of $6.8 million, or 107% compared to the Transition Period and an increase of $8.0 million, or 158% compared to the 2024 Period. The increase compared to both periods was attributable primarily to higher payroll and related personnel costs associated with expanding our sales and marketing team to support increased business development and customer engagement activities.

General and administrative expenses totaled $36.9 million during the 2025 Period compared to $11.5 million during the Transition Period and $11.2 million during the 2024 Period. This represents an increase of $25.4 million, or 222% compared to the Transition Period and $25.7 million, or 229% compared to the 2024 Period. The increase compared to both periods was attributable primarily to higher payroll and related personnel costs resulting from increased headcount, as well as higher stock-based compensation expense. These increases reflect the expansion of our corporate, administrative, and compliance functions to support growth during the 2025 Period.

Other Expense

Other expense totaled $5.0 million during the 2025 Period compared to $17.8 million during the Transition Period and $2.2 million during the 2024 Period. This represents a decrease of $12.8 million or 72% compared to the Transition Period and an increase of $2.8 million, or 126% compared to the 2024 Period. During the 2025 Period, other expense consisted primarily of a fair value adjustment on convertible notes payable of $11.4 million, partially offset by a gain on extinguishment of convertible notes payable of $3.2 million and net interest income of $2.7 million. During the Transition Period, other expense consisted primarily of a fair value adjustment on convertible note payable of $13.1 million and a loss on sale of equity method investment of $4.0 million. During the 2024 Period, other expense consisted primarily of impairment on equity method investment of $11.4 million, partially offset by a gain of $9.6 million related to the divestiture of the Consumer segment.

Net Loss

Net loss from continuing operations totaled $72.1 million during the 2025 Period compared to $43.6 million during the Transition Period and $21.5 million during the 2024 period. This represents a decrease of $28.5 million, or 65% compared to the Transition Period and a decrease of $50.6 million, or 235% compared to the 2024 Period.

Cash Flows

Operating Activities

Net cash used in operating activities was $89.1 million during the 2025 Period compared to $20.5 million during the Transition Period and $17.7 million during the 2024 Period. This represents an increase of $68.6 million compared to the Transition Period and an increase of $71.4 million compared to the 2024 Period. The increase compared to both periods was attributable primarily to the increase in net loss during the 2025 period. Non-cash expenses totaled $20.5 million during the 2025 period, compared to $22.6 million during Transition Period and $8.5 million during the 2024 Period. Net cash used related to changes in operating assets and liabilities totaled $37.6 million during the 2025 Period. Net cash provided by related to changes in operating assets and liabilities totaled $0.4 million during the Transition Period. Net cash

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used related to changes in operating assets and liabilities totaled $4.7 million during the 2024 Period. Changes in operating assets and liabilities can fluctuate significantly from period to period depending upon the timing and level of multiple factors, including inventory purchases, vendor payments, and customer collections.

Investing Activities

Net cash used in investing activities was $6.6 million during the 2025 Period compared to net cash provided by investing activities of $4.2 million during the Transition Period and $13.6 million during the 2024 Period. During the 2025 Period, net cash used in investing activities consisted entirely of purchases of property and equipment totaling $6.6 million, compared to purchases of property and equipment of $0.2 million during the Transition Period and $0.3 million during the 2024 Period. During the Transition Period, net cash provided by investing activities was primarily attributable to proceeds of $4.4 million from the sale of equity method investment and note receivable. During the 2024 Period, net cash provided by investing activities was primarily attributable to proceeds of $12.8 million from the sale of marketable securities and $1.0 million from the divestiture of the consumer segment.

Financing Activities

Net cash provided by investing activities was $254.5 million during the 2025 Period compared to $19.4 million during the Transition Period, and $7.8 million during the 2024 Period. This represents an increase of $235.1 million compared to the Transition Period and an increase of $246.7 million compared to the 2024 Period. The increase compared to both periods relates to the proceeds from issuance of common stock during the 2025 Period.

Liquidity and Capital Resources

At December 31, 2025, the Company reported current assets totaling $226.9 million, current liabilities totaling $14.8 million and net working capital of $212.1 million. Cash totaled $167.9 million at December 31, 2025. Inventory related balances, including pre-paid inventory, totaled $30.4 million.

Critical Accounting Policies and Estimates

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements.

In addition to our critical accounting estimates and polices below, refer to “Note 2 – Summary of Significant Accounting Policies” for further information.

Revenue Recognition

We recognize revenue in accordance with ASC Topic 606 - Revenue from Contracts with Customers, issued by the Financial Accounting Standards Board (“FASB”). This standard includes a comprehensive evaluation of factors to be considered regarding revenue recognition including (i) identifying the promised goods, (ii) evaluating performance obligations, (iii) measuring the transaction price, (iv) allocating the transaction price to the performance obligations if there are multiple components, and (v) recognizing revenue as each obligation is satisfied. We determined there to be judgment in the determination of performance obligations identified in certain contracts. Our revenue transactions include the shipment of goods to customers as orders are fulfilled, completion of non-recurring engineering, completion of training, and customer support services. We recognizes revenue upon shipment of product or prototypes unless otherwise specified in the purchase order or contract.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In December 2023, the FASB issued ASU 2023-09 requiring enhanced annual disclosures regarding the rate reconciliation and income taxes paid, disaggregated by jurisdiction. This standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We adopted this ASU on a prospective basis effective January 1, 2025. Refer to Note 13, Income Taxes for inclusion of new disclosures required.

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Recently issued accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03 expanding disclosure requirements related to certain income statement expenses. The amendments require tabular disclosure of certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments are effective for our fiscal year ending December 31, 2027 and may be applied retrospectively. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

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.