Revenue recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, which provides a five-step framework through which revenue is recognized when control of promised goods or services is transferred to a customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company concludes are within the scope of ASC 606, management performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract(s); (iii) determines the transaction price, including whether there are any constraints on variable consideration; (iv) allocates the transaction price to the performance obligations; and (v) recognizes revenue when (or as) the Company satisfies a performance obligation.

The Company provides comprehensive security solutions. The company’s flagship offering is a cloud-based Software-as-a-Service (SaaS) that delivers a preventative personal security solution platform. Additionally, the Company offers comprehensive and customized services designed to protect clients. These services include, but not limited to, on/off premise guards, assets protection, threat assessments and monitoring and other tailored made security services. Typically, the on-premise security personnel are stationed at client sites to control access, deter threats and respond to incidents in real time, off-premise guards provide mobile or remote surveillance and rapid response support for properties not requiring constant physical presence, asset protection involves securing high-value items, equipment or sensitive materials and threat assessments and monitoring include identifying potential risks, evaluating vulnerabilities and tracking suspicious activities. Revenue is recognized either over time or at a point in time, depending on the nature of each customer’s agreement. For its subscription-based SaaS solution through the Company’s platform, revenue is typically recognized over time as services are delivered. In contrast, for performance obligations related to the services described above, we generally satisfy our obligations as each action to provide the service to the customer occurs. Because the customers simultaneously receive and consume the benefits from our services, these performance obligations are deemed to be satisfied at a point of time.

The services included in a Bond monthly subscription are: Video Monitor Me, Track Me On The Go, Ready An Agent, Run a Security Check on me, Chat, Audio call, Video call, Activate Siren, Location Services, and Activate the SOS services. Our Physical Bodyguards, Cars To Pick You Up, Roadside Assistance, and Telemedicine services are provided by third parties, and the Company passes the cost of those services (in some cases with a small markup) through to the customers, on top of their membership payment. The Company does not have a revenue sharing arrangement with third-party providers and the revenues generate in financial year 2024 were not substantial and amounted to less than $10,000.

We group the above services offerings into one broad category which generates all of Company’s revenue through, primarily, the following sales:

	●	B2B (or B2G): selling to private or public institutions who use the services in order to protect their people (employees, students, residents, etc.).

	●	B2B2C: selling through or to corporations so they can sell/subsidize/gift Bond services for their own consumers.

	●	DTC: selling directly to consumers. The Company combines and accounts for multiple contracts as a single contract when they are negotiated together with the same customer at or near the same time in order to achieve a single commercial objective, or when the contracts are related in other ways.

Transaction price may be comprised of fixed consideration and variable consideration. The Company’s contracts are typically for fixed consideration. Customers engaging in a B2B or B2G arrangement are not entitled to any refunds and remain contractually obligated for the entire duration specified in the agreement. In DTC offering, if a customer does not wish to continue being charged on a recurring monthly or annual basis, they can cancel the applicable paid service before the end of the current billing term and the member will receive a prorated refund for the unused portion of the subscription.

For all contracts with customers that have more than one performance obligation, the Company allocates the transaction price to each separate performance obligation based on the relative SSP of each performance obligation. The SSP is typically the price at which the Company sells service separately to a customer. The best evidence of an SSP, if available, is the observable price charged in similar circumstances and to similar customers. If an SSP is not directly observable, the Company estimates SSP using various observable inputs including historical internal pricing data and cost-plus expected margin analysis due to the limited standalone sales history.

TG-17 INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, restricted cash and short-term deposit, other accounts receivable, trade payables, other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820, “Fair Value Measurements and Disclosures” establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

	●	Level 1 inputs are quoted prices in active markets for identical assets and liabilities;

	●	Level 2 inputs, inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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; or

	●	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.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Property and Equipment, Net

Property and Equipment, Net

Property and equipment are recorded at cost, net of accumulated depreciation. Expenditures for major additions and improvements to property and equipment are capitalized and repairs and maintenance costs are expensed as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the respective accounts and any related gain or loss are included in loss from operations in the period of disposal.

TG-17 INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment are depreciated using the straight-line method over the estimated useful lives of the property and equipment as follows:

Asset Category		Useful Life (Years)
Computer equipment		3
Furniture and fixtures		14
Electronic equipment		3 – 7
Leasehold improvements		Lesser of estimated useful life or remaining lease term

Estimated useful lives are periodically assessed to determine if changes are appropriate.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company assesses the recoverability of its long-lived assets, including property and equipment and right-of-use assets, for indicators of impairment. If events or changes in circumstances indicate impairment, the Company measures recoverability by a comparison of the asset’s carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. When quoted market prices are not available, the Company uses the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset as an estimate of fair value. No impairment of long-lived assets was identified for the years ended December 31, 2024 and 2023.

Severance Pay

Severance Pay

All the Israeli Company’s employees elected to be included under Section 14 of the Israeli Severance Compensation Act, 1963 (“Section 14”). According to Section 14, these employees are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with Section 14 release the Company from any future severance payments (under the above Israeli Severance Compensation Law) in respect of those employees. These deposits are not recorded as an asset in the Company’s balance sheet.

Stock-Based Compensation

Stock-Based Compensation

The Company adopted the fair value recognition provisions of Accounting Standards Codification No. 718, “Share-Based Payment” (“ASC 718”). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statement of operations.

The Company estimates the fair value of stock options granted using the Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are expected stock price volatility and the expected option term. For employees, the expected term is calculated using the plain vanilla formula as there is not sufficient historical information to provide a clear basis for a different calculation. Expected volatility was calculated based on similar publicly traded companies which operate in the same industry.

The risk-free interest rate is based on the yield from U.S. treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

The fair value for options granted in 2024 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	2024			2023
Risk-free interest		4.57	%		-
Dividend yields		0	%		-
Volatility		45.09-45.81	%		-
Expected option term (years)		5.00-6.12			-

No options were granted in 2023.

Foreign Currency Translation and Transaction Gains and Losses

Foreign Currency Translation and Transaction Gains and Losses

The functional currency of the Company’s wholly owned subsidiaries in Isreal, U.K. and France are the New Israeli Shekel, Pound Sterling and Euro, respectively. Accordingly, asset and liability accounts of the subsidiaries are translated into U.S. dollars using the current exchange rate in effect at the balance sheet date and equity accounts are translated into U.S. dollars using historical rates. The revenues and expenses are translated using the average exchange rates in effect during the period, and gains and losses from foreign currency translation adjustments are included as a component of accumulated other comprehensive income in the consolidated balance sheet. Foreign currency translation adjustments are recorded in other comprehensive loss in the consolidated statements of operations and comprehensive loss and were $32 and $4 during the years ended December 31, 2024 and 2023, respectively.

TG-17 INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Foreign currency transaction gains and losses are included in financial expense, net, in the consolidated statements of operations and comprehensive loss and were not material during the years ended December 31, 2024 and 2023.