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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2025
Summary of Significant Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements as of and for the years ended December 31, 2025 and 2024 have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to applicable rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include all normal adjustments necessary for a fair presentation of the Company’s financial position at December 31, 2025 and 2024, and operating results and cash flows for the periods presented. Principles of Consolidation The consolidated financial statements include the accounts of Cyngn Inc. and its wholly owned subsidiary. Intercompany accounts and transactions have been eliminated upon consolidation. Foreign Currency Translation The functional and reporting currency for Cyngn is the U.S. dollar. Monetary assets and liabilities denominated in currencies other than U.S. dollar are translated into the U.S. dollar at period end rates, income and expenses are translated at the weighted average exchange rates for the period and equity is translated at the historical exchange rates. Foreign currency translation adjustments and transactional gains and losses are immaterial to the consolidated financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments include but are not limited to internal-use software, warrants and share-based compensation. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates. Reclassifications Certain prior period balances for the consolidated financial statement for December 31, 2024 have been reclassified to conform with the current year presentation. These reclassifications relate to inventory and accounts and other receivables that were previously presented as prepaid expenses and other current assets, as well as deferred revenue that was previously presented as accrued expenses and other current liabilities. These reclassifications had no impact on previously reported net loss, total assets, or total shareholders’ equity. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, which is placed with high-credit-quality financial institutions and at times exceeds federally insured limits. Cash maintained with domestic financial institutions generally exceed the Federal Deposit Insurance Corporation insurable limit. To date, the Company has not experienced any losses on its deposits of cash. Cyngn invests in U.S. Treasury securities and carries these at amortized cost and recognizes gains and losses when realized. Concentration of Supplier Risk The Company generally utilizes suppliers for outside development and engineering support. The Company does not believe that there is any significant supplier concentration risk as of December 31, 2025 and December 31, 2024. Cash and Short-term Investments The Company considers its bank accounts and all highly liquid investments that are both readily convertible to cash with minimal risk of changes in value due to changes in interest rates, to be cash. As of December 31, 2025 and December 31, 2024, the Company had approximately $1.0 million of cash and $33.7 million in short-term investments and $23.6 million of cash and no short-term investments, respectively. The Company considers short-term investments to include marketable U.S. government securities that it intends to hold until maturity and redeem within one year. The Company treated its U.S. government treasury bill placements as held-to-maturity securities in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic (“ASC”) 320, Investments - Debt and Equity Securities, and recorded these securities at amortized cost on the accompanying consolidated balance sheets as of December 31, 2025 and December 31, 2024. Accounts and Other Receivable Accounts receivables are recorded at the invoiced amount and do not bear interest. The Company provides for probable uncollectible amounts based upon its assessment of the current status of the individual receivables and after using reasonable collection efforts. The allowance for credit losses was zero as of December 31, 2025 and December 31, 2024. In addition, the Company utilizes current and historical collection data as well as assesses current economic conditions in order to determine expected trade credit losses on a prospective basis. No credit losses were recorded as of December 31, 2025 and December 31, 2024. Other receivables primarily consist of Employee Retention Credit (“ERC”) claims related to 2020 and 2021. Fair Value Measurements The accounting guidance under ASC Topic 820, Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. As such, fair value is considered a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses the following fair value hierarchy prescribed by U.S. GAAP, which prioritizes the inputs used to measure fair value as follows: Level 1-Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2-Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3-Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and liabilities are considered to be fair valued on a recurring basis if fair value is measured regularly. However, if the fair value measurement of an instrument does not necessarily result in a change in the amount recorded on the consolidated balance sheets, assets and liabilities are considered to be fair valued on a nonrecurring basis. This typically occurs when accounting guidance requires assets and liabilities to be recorded at the lower of cost or fair value, or on certain nonfinancial assets and liabilities. Nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets, intangible assets, and share-based compensation measured at fair value upon initial recognition. The carrying amounts of the Company’s cash and accounts receivable are reasonable estimates of their fair values due to their short-term nature. The fair values of the Company’s share-based compensation and underwriter warrants were based on observable inputs and assumptions used in Black-Scholes valuation models derived from independent external valuations. Inventory Inventory consists of autonomous vehicle units, including tuggers equipped with DriveMod Kits (“DMKs”), which are integrated with the Company’s proprietary Enterprise Autonomy Suite (“EAS”) software and sold to customers as part of a fully integrated autonomous vehicle solution. Substantially all assembly and integration activities are performed by third-party suppliers prior to receipt; therefore, the Company classifies its inventory as finished goods and does not maintain separate classifications for raw materials or work in process. Inventory is stated at the lower of cost or net realizable value. Cost is determined using the specific identification method, as each autonomous vehicle is individually serialized and tracked, and the Company is able to identify the specific cost associated with each unit. The specific cost of each vehicle is transferred to deferred costs upon deployment. The Company periodically reviews inventory for excess quantities, obsolescence, or other indicators that the carrying value may not be recoverable. If the carrying value of inventory exceeds its net realizable value, the Company records a write-down to net realizable value, with the adjustment recognized in cost of goods sold. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Construction work in progress includes production costs and costs of materials used in the development of the Company’s autonomous driving software. Assets are held as construction work in progress until placed into service, at which date depreciation commences over the estimated useful lives of the respective assets. Depreciation is recorded on a straight-line basis over each asset’s estimated useful life. Repair and maintenance costs are expensed as incurred.
Property and Equipment |  | Useful life
Automobiles (DMV-registered) |  | 5 years
Machinery, tools and equipment |  | 5 years
Computers and equipment |  | 5 years
Internal-use software |  | 3 to 5 years
Furniture and fixtures |  | 7 years
Leasehold improvements |  | Shorter of 3 years or lease term
Operating Leases The Company accounts for leases in accordance with ASC 842, Leases. All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company does not hold any finance leases. The Company recognized a right-of-use asset and lease liability in the consolidated balance sheets under ASC 842 on the office space lease in Mountain View, California that commenced in May 2025 and the previous office space lease in Menlo Park, California that ended in May 2025. Lease expense will be recognized on a straight-line basis over the remaining term of the lease. Operating leases are recognized on the balance sheet as right-of-use assets, and operating lease liabilities. Costs to Develop Software The Company incurs costs related to internally developed software. Based on the nature of the software, the Company capitalizes software costs under the following guidance. Internal-Use Software costs The Company determined when to capitalize its internal-use software after planning and design efforts are successfully completed. Management has implicitly authorized funding and the software is expected to be completed and used as intended. The Company determines the amount of internal software costs to be capitalized based on the amount of time spent by the developers on projects in the application stage of development. There is judgment involved in estimating time allocated to a particular project in the application stage. Costs associated with building or significantly enhancing the internally built software platform for internal use are capitalized, while costs associated with planning new developments and maintaining the internally built software platforms are expensed as incurred. Capitalized costs include certain payroll and stock compensation costs, as well as subscription server and consulting costs. Internal-use software is classified as property and equipment and is amortized on a straight-line basis over their estimated useful life of three to five years. There is judgment involved in the determination of the useful life. Amortization of the software asset will begin when the software is substantially complete and ready for its intended use. No amortization has begun for the internal use software, as the projects are still in the application development phase. Management evaluates the useful lives of these assets on a quarterly basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. No impairment charges were associated with the Company’s internal-use software for the years ended December 31, 2025 and 2024. Costs to Develop Software to be Sold, Leased or Otherwise Marketed The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, certain payroll and stock compensation, occupancy, and professional service costs that are incurred to develop functionality for the Company’s software and internally built software platforms, as well as certain upgrades and enhancements that are expected to result in enhanced functionality are capitalized. Judgment is required in determining when technological feasibility of a product is established. Management has determined that technological feasibility is established when a working model is complete. After technological feasibility is established, judgement is required to determine the amount of payroll and stock-based compensation costs to be capitalized on the remaining development efforts. These costs will continue to be capitalized until such time as when the product or enhancement is available for general release to customers. Computer software to be sold, leased or otherwise marketed is classified as an intangible asset. Capitalized software development costs are amortized using the greater of (a) the amount computed using the ratio that current gross revenue for a product bear to total of current and anticipated future gross revenue for that product or (b) the straight-line method, beginning upon commercial release of the product, and continuing over the remaining estimated economic life of the product, not to exceed three years to five years and recorded as cost of revenue. During the year ended December 31, 2025, management completed a review of the Company’s capitalized software development projects. Based on this review, management determined that projects previously capitalized as developed software no longer met the criteria for capitalization under ASC 985-20, External-Use Software, resulting from new technical development issues that did not exist and could not have been reasonably anticipated in prior periods. As a result, the Company revised its estimate regarding the point at which technological feasibility is achieved for software development activities. This change in estimate was made to reflect management’s current expectations about the timing and certainty of future technological milestones. The change in estimate was accounted for prospectively in accordance with ASC 250, Accounting Changes and Error Corrections, and did not require restatement of prior-period financial statements. For the year ended December 31, 2025, the Company recognized a total of $1.4 million related to costs originally capitalized in 2024 and $1.2 million related to costs capitalized during the first two quarters of 2025 as research and development expense resulting from this change. Long-Lived Assets and Finite Lived Intangibles The Company has finite-lived intangible assets consisting of patents and trademarks. These assets are amortized on a straight-line basis over their estimated remaining economic lives. The patents and trademarks are amortized over 15 years. The Company reviews its long-lived assets and finite-lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The events and circumstances the Company monitors and considers include significant decreases in the market price of similar assets, significant adverse changes to the extent and manner in which the asset is used, an adverse change in legal factors or business climate, an accumulation of costs that exceed the estimated cost to acquire or develop a similar asset, and continuing losses that exceed forecasted costs. The Company assesses the recoverability of these assets by comparing the carrying amount of such assets or asset group to the future undiscounted cash flow it expects the assets or asset group to generate. The Company recognizes an impairment loss if the sum of the expected long-term undiscounted cash flows that the long-lived asset is expected to generate is less than the carrying amount of the long-lived asset being evaluated. An impairment charge would then be recognized equal to the amount by which the carrying amount exceeds the fair value of the asset. The Company also identified that the long-lived asset “Patents”, which have international and U.S. based patents, as the asset group. The Company evaluated its patents and identified expired international patent applications (“expired assets”) for the year ended December 31, 2024. The Company determined there were no further plans to put resources toward these international patent applications. The group of expired patents carrying value was set to its salvage value which is zero given no future cash flows. For the year ended December 31, 2024, the Company determined the existence of an impairment associated with the Company’s intangible asset “Patents” and accordingly recorded an impairment charge of $118,831 (see Note 6. Intangible Assets). For the year ended December 31, 2025, there were no impairment charges. Income Taxes The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance as of December 31, 2025 and December 31, 2024 (see Note 11. Income Taxes). There are no uncertain tax positions that would require recognition in the consolidated financial statements. If the Company were to incur an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax would be reported as income taxes. Management’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon on ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 expands the annual disclosure requirements for income taxes, primarily related to the rate reconciliation and income taxes paid. The Company has adopted this guidance on a prospective basis, which did not have a significant impact on the Company’s consolidated financial statements. Common Stock Warrants The Company issued to its lead underwriter in the Company’s IPO warrants to purchase up to 9 shares of the Company’s common stock. In addition, the Company issued 426 common stock warrants as a part of the private placement offering. The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity. The Company determined the fair value of the warrants using the Black-Scholes pricing model and treated the warrants as equity instruments in consideration of the cashless settlement provisions in the warrant agreements. The Company also applied the guidance in ASC 340-10-S99-1, Other Assets and Deferred Costs, that states specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering. The Company treated the valuation of the warrants as directly attributable to the issuance of an equity contract, and accordingly, classified the warrants as additional paid-in capital. The Company issued Series A warrants and Series B warrants in connection with securities purchase agreement on December 20, 2024. The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, depending on the specific terms of the warrant agreement. The estimated fair value of the Company’s warrant agreements has been determined to be Level 3 measurement, as certain inputs used to determine the fair value of these agreements are unobservable. The Company determined the fair value of the warrants using the Monte Carlo pricing model and treated the valuation as a liability in consideration of the variable number of the issuer’s equity shares in the warrant agreements. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s consolidated statements of operations under other income (expense). After shareholder approval on January 30, 2025, the strike price and the number of equity shares are now fixed. The Company concluded that these warrants are indexed to the Company’s own stock, require settlement in a fixed number of shares, and do not contain provisions that could require net cash settlement or settlement in a variable number of shares. Additionally, the warrant agreements do not include provisions that would require the Company to transfer assets. Accordingly, the warrants meet the criteria for equity classification. Therefore, in accordance with ASC 815-40-35-8, Derivatives and Hedging Reclassification of Contracts, the Series A warrants were re-measured utilizing the Black Scholes model and reclassified into equity. The Series A warrants are included in equity in the consolidated balance sheet as of December 31, 2025. The Series B warrants were re-measured utilizing the Black Scholes model immediately before exercise and were fully exercised in February 2025 (see Note 7. Capital Structure). Stock-based Compensation The Company recognizes the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The Company recognizes stock-based compensation cost and reverses previously recognized costs for unvested awards in the period forfeitures occur, if any. The Company determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the fair value of common stock, expected price volatility of common stock, expected term, risk-free interest rates, and expected dividend yield (see Note 9. Stock-based Compensation Expense). Net Loss Per Share Attributable to Common Stockholders The Company computes loss per share attributable to common shareholders by dividing net loss attributable to common shareholders by the weighted-average number of common shares outstanding. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised into shares. In calculating diluted net loss per share, the numerator is adjusted for the change in the fair value of the shares (only if dilutive) and the denominator is increased to include the number of potentially dilutive common shares assumed to be outstanding (see Note 8. Net Loss per Share Attributable to Common Stockholders). Research and Development Expense Research and development expenses consists primarily of outsourced engineering services, internal engineering and development expenses, materials, labor and stock-based compensation of Company personnel involved in the development of the Company’s products and services, and allocated lease costs based on the approximate square footage area used in research and development activities. Research and development costs are expensed as incurred. General and Administrative Expense General and administrative expense consist primarily of personnel costs, facilities expenses, depreciation and amortization, travel, and advertising costs. Advertising costs are expensed as incurred in accordance with ASC 720-35, Other Expense - Advertising Costs, other than trade show expenses which are deferred until occurrence of the future event. Advertising costs for the years ended December 31, 2025 and 2024 were $512,017 and $237,396, respectively. Commitments The Company recognizes a liability with regard to loss contingencies when it believes it is probable a liability has occurred and the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, the Company accrues that amount. When no amount within the range is a better estimate than any other amount the Company accrues the minimum amount in the range (see Note 12. Commitments and Contingencies). Segment Reporting The Company operates as one operating segment. The Company’s chief operating decision maker is the executive management team, its Chief Executive Officer and Chief Financial Officer. The executive management team manages operations and business as one operating segment for the purposes of allocating resources, making operating decisions and evaluating financial performance. The one operating segment generates revenues from subscriptions to its Enterprise Autonomy Service (“EAS”), product sales or leases of hardware, and other professional services (i.e., deployment costs) and fixed-price NRE contracts related to customer-specific configuration that consist of several independent phases and include design, data gathering, hardware installation on an industrial vehicle, customer-specific configuration of the DriveMod software, and demonstrations. For the Company’s one segment, the executive management team use revenue and net loss to allocate resources, both reported on the Consolidated Statement of Operations as Revenue and Net loss. The executive management team also uses revenue and net loss, along with non-financial inputs and qualitative information, to evaluate the Company’s performance, establish compensation, monitor budget versus actual results, and decide the level of investment in various operating activities and other capital allocation activities. The measure of segment assets is reported on the Consolidated Balance Sheet as Total assets. Revenue Recognition The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company generates revenue from vehicle units, including tuggers equipped with DriveMod Kits (“DMKs”), which are integrated with the Company’s proprietary Enterprise Autonomy Suite (“EAS”) software, or leases of hardware, and other professional services. These offerings are highly interdependent and integrated to provide customers with a fully functional autonomous industrial vehicle solution. Because these components are not separately identifiable from one another in the context of the contract, the Company accounts for these combined goods and services as a single performance obligation. General Recognition Principle. The Company recognizes revenue when control of the combined autonomous vehicle and software solution is transferred to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the goods and services. Method of Measuring Progress. Revenue associated with the Company’s integrated autonomous vehicle solution is generally recognized over time because the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are performed. The Company measures progress toward satisfaction of the performance obligation using an output method based on the passage of time, recognizing revenue ratably over the contractual term, which is typically three years. In accordance with ASC 606-10-55-17 through 55-18, the output method reflects the pattern in which control of the promised goods and services is delivered to the customer, who receives continuous access to the integrated autonomous vehicle functionality, including the software-enabled operation, monitoring, updates, and support necessary for the system to function as intended. Management believes that recognizing revenue on a straight-line basis over the contract period faithfully depicts the Company’s performance in transferring control of the integrated solution, as the customer receives and consumes the benefits of the solution evenly throughout the contract term. Payment Terms. Payment terms vary by customer and contract but generally do not exceed 90 days. Discounts. The Company may offer pricing discounts to certain customers, primarily to establish relationships with new customers. These discounts are reflected in the contractual transaction price at contract inception. Revenue is recognized based on the discounted contract price and is accounted for in the same manner as other contracts. The Company recognizes revenue from these arrangements ratably over the contract term, consistent with the pattern in which the customer receives and consumes the benefits of the integrated autonomous vehicle solution. Stand-Alone Selling prices. The Company also applies judgment in estimating stand-alone selling prices when allocating the transaction price to performance obligations. Stand-alone selling prices are generally determined based on observable prices when available or, when not directly observable, are estimated using management’s assessment of expected pricing for similar goods and services and market conditions. Material Rights and Renewal Options. The Company’s contracts with customers may include renewal or other options at stated prices. Determining whether these options provide the customer with a material right, and therefore represent a separate performance obligation, requires judgment. The Company evaluates the pricing of each option to determine whether it reflects the stand-alone selling price for the underlying goods or services or whether it provides the customer with a discount that would not be available without entering into the initial contract. In certain legacy customer contracts, the Company has provided customers with the option to extend the contract term for an additional one-year period. Management evaluates these renewal provisions to determine whether they provide a material right by comparing the renewal pricing to the expected stand-alone selling price of the services at the time of renewal. This assessment requires judgment and includes consideration of expected pricing for similar services, historical pricing practices, and market conditions. If a material right exists, the Company allocates a portion of the transaction price to the option and recognizes the related revenue when the option is exercised or expires. Significant financing component. In certain arrangements, the Company receives payment from a customer either before or after the performance obligation has been satisfied. The Company’s contracts with customer prepayment terms do not include a significant financing component because the prepayment terms are designed to provide customers with contractual protections and billing convenience, not to provide financing to the customer or receive financing from the customer. Contract modifications. The Company may modify contracts to offer customers additional products or services. Each of the additional products and services is evaluated to determine whether it is distinct from the goods or services transferred prior to the modification. The Company evaluates whether the contract price for the additional products and services reflects the stand-alone selling price as adjusted for facts and circumstances applicable to that contract. In these cases, the Company accounts for the additional products or services as a separate contract. In other cases where the pricing in the modification does not reflect the stand-alone selling price for the modified goods or services, the Company accounts for the modification either (i) on a prospective basis if the remaining goods and services are distinct from those already transferred, or (ii) on a cumulative catch-up basis if the remaining goods and services are not distinct from those already transferred. Principal vs. Agent Considerations. Judgment is required in determining whether we are the principal or agent in transactions with dealers, OEMs and end-users. We evaluate the presentation of revenue on a gross or net basis based on whether we control the service provided to the end-user and are the principal (i.e., “gross”), or we arrange for other parties to provide the service to the end-user and are an agent (i.e., “net”). In making this determination, the Company considers several factors, including whether the Company is primarily responsible for fulfilling the promise to provide the specified goods or services, bears inventory risk before the goods are transferred, and has discretion in establishing pricing for the specified goods or services. This determination also impacts the presentation of incentives provided to dealers and OEMs and discounts and promotions offered to end-users to the extent they are not customers. In dealer transactions where the Company’s role is to supply hardware to the dealer, the Company does not obtain control of the hardware before it is transferred to the end-user and is not primarily responsible for the dealer’s fulfillment to end-users. Accordingly, hardware revenue in these arrangements is recorded on a net basis. In dealer and OEM transactions where our role is to provide the software subscription to the end-user, we are primarily responsible for the services and present the respective subscription revenue on a gross basis. Payments to dealers in exchange for their services are recorded as cost of revenue. Cost to Obtain a Contract. The Company capitalizes incremental costs incurred to obtain contracts, principally sales commissions and third-party referral fees. These costs are amortized on a straight-line basis over the contractual term and recognized in general and administrative expenses. Costs to Fulfill a Contract. The Company capitalizes such costs when they are (i) incremental to obtaining that specific contract, (ii) expected to be recovered, and (iii) subject to an amortization period exceeding one year. Capitalized fulfillment costs are amortized on a straight-line basis over the expected period of benefit, which corresponds to the contractual term, and are recognized in cost of revenue. The Company evaluates capitalized fulfillment costs for impairment at each reporting date. Deferred contract costs totaled $767,007 and $120,793 as of December 31, 2025 and 2024, respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheets. Amortization of deferred contract costs recognized in cost of revenue during the years ended December 31, 2025 and 2024 was $106,480 and $21,413, respectively. No impairment losses were recognized in either period. Taxes collected from customers. The Company collects and remits certain taxes assessed by governmental authorities on its revenue transactions, including sales, use, value-added, and excise taxes. These taxes are presented on a net basis and excluded from reported revenue. Shipping and handling fees billed to customers are included in net sales; the related costs are included in cost of revenue. Judgments and estimates. Accounting for contracts recognized over time requires judgment in estimating the transaction price, the measure of progress, and expected contract costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation will be revised in the near term. The Company reviews and updates its contract-related estimates regularly, and records adjustments as needed. Concentration of Credit Risk The following table sets forth the percentages of total revenue for customers that represent 10% or more of the respective amounts for the year ended December 31, 2025 and 2024, respectively.
|  | 2025 |  |  | 2024 |
Customer A |  |  | 17.1 | % |  |  | * |
Customer B |  |  | 36.8 | % |  |  | * |
Customer C |  |  | 11.5 | % |  |  | 73.2 | %
Customer D |  |  | 19.1 | % |  |  | * |
Customer E |  |  | 12.3 | % |  |  | * |
| * | Below 10%
There was $209,452 from these customers in accounts receivable as of December 31, 2025 and $274,699 from these customers in accounts receivable as of December 31, 2024. Cost of Revenue Cost of revenue consists primarily of direct labor and related fringe benefits for internal engineering resources, and deployment related travel costs incurred for the completion of the contracts and hardware costs. Recent Accounting Standards In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses,” which requires the disaggregated disclosure of certain income statement items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company has not adopted this standard early and is currently evaluating the impact of this amendment on its consolidated financial statements.

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