Ondas Inc. Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Accounting Policies, by Policy (Policies)

Accounting Policies, by Policy (Policies)

12 Months Ended

Dec. 31, 2025

Summary of Significant Accounting Policies [Abstract]

Basis of presentation

The accompanying consolidated financial statements include the consolidated accounts of the Company and its wholly-owned, controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying Consolidated Financial Statements present the Company’s historical financial position, results of operations, changes in stockholders’ equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Events occurring subsequent to December 31, 2025 have been evaluated for potential recognition or disclosure in the consolidated financial statements.

Business Combinations

The Company accounts for business combinations in accordance with ASC 805, Business Combinations. Assets acquired, liabilities assumed, and noncontrolling interests are measured at fair value at the acquisition date. Any excess of the consideration transferred over the estimated fair value of net assets acquired is recorded as goodwill.

Goodwill and Intangible Assets

Goodwill and other intangible assets result from the Company’s acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. The Company reviews identified intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company also tests intangible assets with indefinite lives and goodwill for impairment at least annually. Refer to Notes 6 and 7 for additional information about the Company’s goodwill and other intangible assets.

Revenue Recognition

The Company derives revenues primarily from the Ondas Networks and OAS products and services. Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. Significant judgments related to revenue recognition include the determination of performance obligations, the timing of transfer of control, and the selection of appropriate methods to measure progress toward satisfaction of performance obligations.

Product Revenues

Product revenues are generated from the sale of hardware and related products. For product sales, control generally transfers to the customer at a point in time. In determining when control transfers, the Company considers, among other indicators, whether it has a present right to payment, legal title has transferred, the customer has obtained the significant risks and rewards of ownership, and customer acceptance has occurred, where acceptance is not considered a formality. The Company’s principal shipping terms are Free On Board (“FOB”) Shipping Point, or equivalent. Generally, revenue is recognized upon shipment of the product when control transfers based on the contractual shipping terms and customer acceptance provisions. For sales arrangements with shipping terms other than FOB Shipping Point, revenue recognition is evaluated based on the specific contractual shipping terms and customer obligations. Shipping and handling activities are not assessed as separate performance obligations as they are considered fulfillment activities.

If a performance obligation related to a product sale remains unsatisfied after shipment—typically installation or customer acceptance—revenue related to that performance obligation is deferred until the obligation has been satisfied. The Company estimates expected product returns at the time of sale and records them as a reduction of revenue. Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are accounted for as variable consideration and recorded as a reduction of revenue at the time of sale. Estimates of product returns, customer allowances, and rebates are based on historical experience, current trends, and known contractual terms.

Revenue related to extended warranty and service arrangements is recognized over the term of the arrangement, as control of the services transfers to the customer over time. Revenue from other long-term product-related contracts is recognized over time using a cost-to-cost input method, which measures progress based on costs incurred relative to total estimated costs, provided the criteria for over-time recognition under ASC 606 are met. This method requires management to make estimates of total expected costs, which are reviewed and updated periodically and may change as the contract progresses.

Service Revenues

Service revenues consist primarily of (i) routine support and maintenance services, (ii) product training, installation, and onsite deployment services, and (iii) engineering and professional services related to the development and customization of software and hardware applications. Support and maintenance services represent stand-ready obligations to provide ongoing technical support and updates and are recognized ratably over the service period, as the customer simultaneously receives and consumes the benefits of the services. Training, installation, and onsite deployment services are generally distinct performance obligations that are recognized at a point in time, when the related services have been performed and control has transferred to the customer. Engineering and professional services are recognized over time, as the services create or enhance assets that the customer controls or have no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. Revenue for these arrangements is recognized using a cost-to-cost input method, under which revenue is recognized based on the ratio of actual costs incurred to total estimated costs. Management has determined that this method provides the best measure of progress toward satisfaction of the related performance obligations.

For arrangements containing multiple service performance obligations, the transaction price is allocated to each performance obligation based on its relative standalone selling price, as stated in the Company’s contracts.

Development Revenues

Development revenues are derived from customer contracts that include research, development, and engineering services. These arrangements include substantive, contractually defined development milestones, each of which represents a measure of progress toward satisfaction of the related performance obligation. Revenue from development arrangements is recognized upon achievement of the applicable milestone, as milestone achievement corresponds with the transfer of control of the underlying services to the customer. The Company has determined that the use of milestone achievement as an output method provides a faithful depiction of performance in accordance with ASC 606. These arrangements include substantive, contractually defined development milestones, each of which represents a measure of progress toward satisfaction of a performance obligation and is not contingent solely upon billing or customer funding events.

Remaining Performance Obligations

The Company discloses remaining performance obligations for contracts with an original expected duration of greater than one year. The Company has elected the practical expedient in ASC 606-10-50-14 and therefore does not disclose information about remaining performance obligations for (i) contracts with an original expected duration of one year or less and (ii) performance obligations for which revenue is recognized in the amount to which the Company has the right to invoice.

As of December 31, 2025, the aggregate amount of transaction price allocated to remaining performance obligations for contracts not subject to the practical expedients described above was $472 thousand and recorded within Other long-term liabilities on the Consolidated Balance Sheets. The Company expects to recognize this amount as revenue during 2027 and 2028.

Use of Estimates

The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements. Such management estimates include those relating to allocation of consideration for business combinations to identifiable tangible and intangible assets, revenue recognition, inventory write-downs to reflect net realizable value, fair values of financial instruments and goodwill, assumptions used in the valuation of stock-based awards, derivative warrant liabilities, and valuation allowances against deferred tax assets. Actual results could differ from those estimates.

Cash and Cash Equivalents, and Restricted Cash

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash includes cash that is not readily available for use in the Company’s operating activities. At December 31, 2025, $37.6 million of our restricted cash balance relates to funds held in escrow in connection with the acquisition of Sentrycs which will be released when the remaining payments are due pursuant to the Sentrycs Agreement. The remaining restricted cash balance at December 31, 2025 and 2024 is attributable to (i) minimum cash reserves required to be maintained to cover bank guarantees issued for new customer orders and operating leases, and (ii) minimum cash reserve requirements for credit cards.

The Company periodically monitors its positions with, and the credit quality of, the financial institutions with which it invests. Periodically throughout the year, and as of December 31, 2025, the Company has maintained balances in excess of federally insured limits. As of December 31, 2025, the Company was approximately $549 million in excess of federally insured limits.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are stated at a gross invoice amount less an allowance for credit losses as well as net of any discounts or other forms of variable consideration. We estimate allowance for credit losses by evaluating specific accounts where information indicates our customers may have an inability to meet financial obligations, such as customer payment history, credit worthiness, and receivable amounts outstanding for an extended period beyond contractual terms. We use assumptions and judgments, based on the best available facts and circumstances, to record an allowance to reduce the receivable to the amount expected to be collected. These allowances are evaluated and adjusted as additional information is received. We had allowance for credit losses as of December 31, 2025 and 2024 of $389 thousand and $0, respectively. During the years ended December 31, 2025 and 2024, we recognized $0 and $993 thousand of expense related to credit losses, respectively.

Short-term investments

The Company’s short-term investments consist of certificates of deposit carried at amortized cost and marketable equity securities, which are measured at fair value at each reporting date, with unrealized gains and losses recognized in Other income (expense), net in the Company’s Consolidated Statements of Operations. Realized gains and losses on sales of marketable equity securities are determined using the specific identification method and are included in Other income (expense), net in the Company’s Consolidated Statements of Operations. Dividend income is recognized on the ex-dividend date.

Inventory

Inventories, which consist solely of raw materials, work in process and finished goods, are stated at the lower of cost (first-in, first-out) or net realizable value, net of reserves for obsolete inventory. We continually analyze our slow-moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we established reserves. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. On December 31, 2025 and 2024, such reserves were $1.7 million and $221 thousand, respectively.

Inventory consists of the following:

(dollars in thousands)	December 31, 2025			December 31, 2024
Raw Material	$	14,153		$	4,354
Work in Process		1,470			306
Finished Goods		7,992			5,383
Less Inventory Reserves		(1,652	)		(221	)
Total Inventory, Net	$	21,963		$	9,822

As of December 31, 2025 and 2024, the Company reclassified $0 and $2.29 million of machinery and equipment, net into inventory, as OAS has shifted its focus from service revenue, selling a data subscription service to its customers based on the information collected by their autonomous systems, to product revenue, primarily selling their Optimus System™ and Iron Drone Raider™.

Property and Equipment

All additions, including improvements to existing facilities, are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation of property and equipment is principally recorded using the straight-line method over the estimated useful lives of the assets. The estimated useful lives typically are 3 to 17 years for machinery and equipment. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. Upon the disposal of property, the asset and related accumulated depreciation accounts are relieved of the amounts recorded therein for such items, and any resulting gain or loss is recorded in operating expenses in the year of disposition.

Impairment of Long-Lived Assets

Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. There was no impairment of long-lived assets for the years ended December 31, 2025 and 2024.

Other Assets

Other long-term assets generally consist of right-of-use assets resulting from leases, long-term portion of prepaid expenses, and refundable deposits that are not expected to be received in the next twelve months.

Other Liabilities

Other liabilities generally consist of operating lease liabilities, accrued interest, contingent consideration, long-term deferred revenue, and refundable sub-lease deposit that are not expected to be repaid in the next twelve months.

Government Grants

The Company receives government grants from the Israel Innovation Authority (the “IIA”) to finance its research and development programs in Israel, through which we have received IIA participation payments of $365 thousand and $300 thousand for December 31, 2025 and 2024, respectively. The grant funds are royalty-bearing grants and are repayable to the extent that future economic benefits are expected from the research project that will result in royalty-bearing sales. Repayments are calculated at a rate of 3% of future sales of the developed products, up to 100% of the amounts of grants received plus interest at LIBOR.

The liability for grants received is first measured at fair value using a discounted cash flow model based on forecasted future sales of the products developed using the grant funds, using a discount rate that reflects a market rate of interest. The difference between the amount of the grant received and the fair value of the liability is accounted for as a government grant and recognized as a reduction of research and development expenses.

At each reporting date, the Company determines the fair value of the government grant liability based on 3% of forecasted future sales of the products developed using the grant funds, discounted using a discounted cash flow model, and recognizes the change in the government grant liability through other income (expense). Amounts paid as royalties are treated as a reduction of the liability. Royalty payments are due every nine months. There is no maturity date. The liability exists until it is paid in full through royalty payments, or the Company reports to the IIA that there will be no further sales.

The Company made royalty payments of $342 thousand and $277 thousand during the years ended December 31, 2025 and 2024, respectively.

The Company’s royalty liability to the IIA as of December 31, 2025 and 2024 was $3.7 million and $2.6 million, respectively. We recognized a loss of $204 thousand related to the change in fair value of the government grant liability, including LIBOR interest expense accrued, for the year ended December 31, 2025. We recognized a gain of $95 thousand related to the change in fair value of the government grant liability, including LIBOR interest expense accrued, for the year ended December 31, 2024. Refer to Note 14, Government grants, for the reconciliation of the beginning and ending balances for the Level 3 government grant liability measured at fair value and the Company’s assumptions.

Noncontrolling Interests

Noncontrolling interests represents the minority shareholders’ proportionate share of the Company’s majority-owned subsidiaries. The portion of net income (loss) attributable to noncontrolling interests is presented as net loss attributable to noncontrolling interest in the consolidated statements of operations, and the portion of other comprehensive income (loss) of these noncontrolling interests is presented in the consolidated statements of stockholders’ equity.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent equity interests in consolidated subsidiaries that are not attributable to the Company and that are subject to redemption upon the occurrence of events that are not solely within the Company’s control, including temporary equity classified instruments and put options embedded in the noncontrolling interest.

Redeemable noncontrolling interests are initially measured at their fair value. Noncontrolling interests which are currently redeemable are measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date or the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. For noncontrolling interests which are probable of becoming redeemable, the Company uses the accretion method for instruments with fixed redemption amounts or the immediate method for instruments redeemable at fair value or based on a formula, if such amounts are greater than the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. Adjustments to the carrying value of the redeemable noncontrolling interests are recorded through additional paid-in capital.

Further information regarding the Company’s redeemable noncontrolling interests is included in Note 13 – Redeemable Noncontrolling Interests.

Derivative Warrant Liabilities

The Company classifies as equity any warrants that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any warrants that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control), (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement) or (iii) that contain reset provisions that do not qualify for the scope exception. The Company assesses classification of its common stock warrants and other freestanding warrant instruments at each reporting date to determine whether a change in classification between assets and liabilities is required.

Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified. Warrants that are determined to require asset or liability classification are measured at fair value upon issuance and are subsequently remeasured to fair value at each balance sheet date with any change in fair value recognized in the consolidated statements of operations.

Embedded Derivatives

Features embedded into contracts are assessed to determine if they represent embedded derivatives which require bifurcation and separate recognition. Embedded derivatives requiring bifurcation are accounted for at fair value, with subsequent changes in fair value recognized in the consolidated statements of operations.

Fair Value of Financial Instruments

Our financial assets measured at fair value on a recurring basis consist primarily of cash equivalents such as money market funds, and short-term investments, such as publicly traded stock and warrants exercisable for publicly traded stock. Our financial liabilities measured at fair value on a recurring basis consist primarily of government grant liabilities. The carrying amount of receivables, accounts payable, and accrued expenses approximates our fair value because of the short-term maturity of such instruments. In connection with the business combinations completed during the year ended December 31, 2025, the Company recognized identifiable intangible assets, including developed technology, customer relationships, trade names, and non-compete agreements. These intangible assets were measured at fair value on a non-recurring basis as of their respective acquisition dates in accordance with ASC 805, Business Combinations. These measurements are not subsequently remeasured and the assets are amortized over their estimated useful lives. Refer to Note 14 for the fair values of the Company’s assets and liabilities.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with U.S. GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgment occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision.

Stock-based Compensation

We calculate stock-based compensation expense for option awards (“Stock-based Award(s)”) based on the estimated grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) and recognize the expense on a straight-line basis over the vesting period. We account for forfeitures as they occur.

The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the vesting period in determining the fair value of Stock-based Awards. The expected term is based on the “simplified method”, due to the Company’s limited option exercise history. Under this method, the term is estimated using the weighted average of the service vesting period and contractual term of the option award. As the Company does not yet have sufficient history of its own volatility, the Company has identified several public entities of similar size, complexities and industry and calculates historical volatility based on the volatilities of these companies. Although we believe our assumptions used to calculate stock-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.

We recognize restricted stock unit expense over the period of vesting or the period that services will be provided. Compensation associated with shares of the Company’s Common Stock, par value $0.0001 (the “Common Stock”), issued or to be issued to consultants and other non-employees is recognized over the expected service period beginning on the measurement date, which is generally the time the Company and the service provider enter into a commitment whereby the Company agrees to grant shares in exchange for the services to be provided.

Shipping and Handling

We expense all shipping and handling costs as incurred. These costs are included in Cost of Goods Sold on the accompanying Consolidated Statements of Operations.

Advertising and Promotional Expenses

We expense advertising and promotional costs as incurred. We recognized expenses of $359 thousand and $76 thousand for the years ended December 31, 2025, and 2024, respectively. These costs are included in Sales and marketing on the accompanying Consolidated Statements of Operations.

Research and Development

Costs for research and development are expensed as incurred except for research and development equipment with alternative future use. Research and development expenses consist primarily of salaries, salary-related expenses and costs of contractors and materials.

Product Warranty

We offer service-type and assurance-type warranties, the terms and conditions of which vary depending upon the product sold. For assurance-type warranties, we accrue a liability for the estimated cost of the assurance-type warranty at the time the product is sold. For service-type warranties, costs are expensed as incurred and the transaction price attributable to the service-type warranty performance obligation is recognized over the warranty period. Factors that affect our warranty liability include the number of units sold, historical and anticipated rates of warranty claims, and cost per claim. We periodically assess the adequacy of our recorded warranty liability and adjust the accrual as claims data and historical experience warrants.

Leases

Under Topic 842, Leases, operating lease expense is generally recognized evenly over the term of the lease. We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement. If we determine the arrangement is a lease, or contains a lease, at lease inception, we then determine whether the lease is an operating lease or a finance lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, we use the non-cancellable lease term plus options to extend that we are reasonably certain to take. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our leases generally do not provide an implicit rate. As such, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. This rate is generally consistent with the interest rate we pay on borrowings under our credit facilities, as this rate approximates our collateralized borrowing capabilities over a similar term of the lease payments. We have elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying assets. We have elected not to separate lease and non-lease components for any class of underlying asset.

Net Loss Per Common Share

Basic net loss per share is computed by dividing net loss available to common stockholders’ (the numerator) by the weighted average number of shares of Common Stock outstanding for each period (the denominator).

The computation of diluted net loss per share is similar to the computation of basic net loss per share 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 stock options, warrants, restricted stock units, or convertible preferred stock. For purposes of determining diluted earnings per common share, the treasury stock method is used for stock options, warrants, and restricted stock units. Because of the net loss for the years ended December 31, 2025 and 2024, the impact of including this in our computation of diluted net loss per share was anti-dilutive.

The following potentially dilutive securities for the years ended December 31, 2025 and 2024 have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

	Years Ended December 31,
	2025		2024
Warrants to purchase common stock		75,476,378		26,490,110
Options to purchase common stock		20,014,381		4,289,359
Potential shares issuable under 2022 Convertible Promissory Notes		-		19,356,876
Potential shares issuable under 2023 Additional Notes		-		30,011,617
Potential shares issuable under 2024 Additional Notes		-		119,544,155
Restricted stock units		9,110,776		252,417
Total potentially dilutive securities		104,601,535		199,944,534

Concentration of Customers

A small number of customers have accounted for a substantial amount of our revenue. Revenue from significant customers, those representing 10% or more of total revenue, was composed of two customers accounting for 55% and 11% of the Company’s revenue for the year ended December 31, 2025, respectively. Three customers accounted for 52%, 26% and 10% of the Company’s revenue for the year ended December 31, 2024, respectively.

Accounts receivable from significant customers, those representing 10% or more of the total accounts receivable, were composed of one customer accounting for 73% of the Company’s accounts receivable balance as of December 31, 2025, respectively. Two customers accounted for 78% and 10% of the Company’s accounts receivable balance as of December 31, 2024, respectively.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures, which enhances the transparency of income tax disclosures in ASC 740, Income Taxes, primarily related to the rate reconciliation and income taxes paid information. The ASU is effective for fiscal years beginning after December 15, 2024, may be applied retrospectively and early adoption is permitted. The Company first applied the ASU to the Company’s annual disclosures for the year ended December 31, 2025. The ASU will be applied prospectively.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement — reporting Comprehensive Income — Expense Disaggregation Disclosures. The ASU requires entities to provide disaggregated disclosures of certain categories of expenses on an annual and interim basis including purchases of inventory, employee compensation, depreciation and intangible asset amortization for each income statement line item that contains those expenses. This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027 with early adoption permitted. The Company is currently assessing the impact of this ASU on its disclosures in the Consolidated Financial Statements.

In July 2025, the Financial Accounting Standards Board issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides practical expedients to simplify the estimation of expected credit losses for current accounts receivable and contract assets. The guidance is effective for annual reporting periods beginning after December 15, 2025. The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting model for capitalizing internal-use software costs by replacing the project-stage approach with a principles-based recognition threshold. The guidance is effective for annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

In December 2025, the Financial Accounting Standards Board issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes authoritative guidance for the recognition, measurement, presentation, and disclosure of government grants received by business entities. The amendments expand Topic 832 by introducing a comprehensive accounting framework, largely based on International Accounting Standard 20, and are effective for public business entities for annual reporting periods beginning after December 15, 2028, including interim periods within those annual periods. Early adoption is permitted. The Company receives royalty-bearing research and development grants from the Israel Innovation Authority that are repayable based on future sales of products developed using the grant funding. Accordingly, the Company expects that ASU 2025-10 will be applicable upon adoption and may impact the recognition and presentation of such grants, including the timing of grant income and the accounting for related royalty obligations. The Company is currently evaluating the impact of the amendments, including the transition method to be applied, on its consolidated financial statements and related disclosures.

In December 2025, the Financial Accounting Standards Board issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies and reorganizes existing interim reporting requirements and introduces a principle requiring disclosure of material events occurring since the end of the prior annual reporting period. The guidance is effective for interim reporting periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company does not expect adoption of this ASU to have a material impact on its interim financial statements or disclosures.

Reclassification

Certain amounts reported in the prior year financial statements have been reclassified to conform to the current year’s presentation.