Terrestrial Energy Inc. /DE/ 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ ​ Page Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 1195 ) ​ ​ F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 ​ F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2025 and 2024 ​ F-4 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2025 and 2024 ​ F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024 ​ F-6 Notes to the Consolidated Financial Statements ​ F-7 ​ ​ F-1 ​ Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Terrestrial Energy Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Terrestrial Energy Inc. (the “ Company ” ), as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, changes in stockholders ’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “ consolidated financial statements ” ). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company ’ s management. Our responsibility is to express an opinion on the Company ’ s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ( “ PCAOB ” ) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company ’ s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ UHY LLP We have served as the Company ’ s auditor since 2025 Melville, New York March 30, 2026 ​ ​ ​ F-2 ​ Table of Contents Terrestrial Energy Inc. Consolidated Balance Sheets ( Expressed in U.S. Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2025 ​ 2024 ASSETS ​ ​ ​ ​ Current assets ​ ​ ​ ​ Cash and cash equivalents ​ $ 97,164,391 ​ $ 3,021,795 Short-term investments ​ ​ 200,626,281 ​ ​ — Prepaid expenses and other current assets ​ 1,769,264 ​ 270,091 Total current assets ​ 299,559,936 ​ 3,291,886 ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 834,795 ​ 770,548 Intangible assets, net ​ 707,749 ​ 616,972 Right-of-use assets ​ 1,814,333 ​ 622,450 Other assets ​ 63,611 ​ 29,748 Total Assets ​ $ 302,980,424 ​ $ 5,331,604 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ Accounts payable and accrued expenses ​ $ 5,500,946 ​ $ 748,867 Operating lease liabilities, current ​ 383,223 ​ 114,507 Finance lease liabilities, current ​ 33,362 ​ 140,796 Related party advance (Note 12) ​ — ​ 100,000 Total current liabilities ​ 5,917,531 ​ 1,104,170 ​ ​ ​ ​ ​ ​ ​ Convertible notes, net of debt discount ​ — ​ 13,708,832 Accrued interest on convertible notes ​ — ​ 266,554 Convertible notes, net of debt discount – related parties (Note 11) ​ — ​ 2,371,994 Accrued interest on convertible notes – related parties (Note 11) ​ — ​ 57,116 Operating lease liabilities, noncurrent ​ 1,600,672 ​ 598,493 Finance lease liabilities, noncurrent ​ 55,979 ​ 49,044 Deferred tax liabilities, net ​ — ​ 665,953 Total liabilities ​ 7,574,182 ​ 18,822,156 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies (Note 18) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ Equity (Deficit) ​ ​ ​ ​ Common shares, $ 0.0001 par value; 500,000,000 authorized shares; 81,771,422 and 39,159,901 shares issued and outstanding as of December 31, 2025 and 2024, respectively ​ 8,177 ​ 3,916 Exchangeable shares, $ 0.0001 par value; 24,011,017 shares issued and outstanding as of December 31, 2025 and December 31, 2024 ​ ​ 2,401 ​ ​ 2,401 Additional paid-in-capital ​ 418,814,641 ​ 82,774,184 Accumulated deficit ​ ( 124,624,883 ) ​ ( 96,608,242 ) Accumulated other comprehensive income ​ 1,205,906 ​ 337,189 Total stockholders’ equity (deficit) ​ 295,406,242 ​ ( 13,490,552 ) Total liabilities and stockholders’ equity (deficit) ​ $ 302,980,424 ​ $ 5,331,604 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ F-3 ​ Table of Contents Terrestrial Energy Inc. Consolidated Statements of Operations and Comprehensive Loss For the years ended December 31, 2025 and 2024 (Expressed in U.S. Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 REVENUE ​ ​ ​ ​ Engineering services revenue ​ $ — ​ $ 248,357 TOTAL REVENUE ​ ​ — ​ ​ 248,357 ​ ​ ​ ​ ​ ​ ​ OPERATING EXPENSES ​ ​ ​ ​ Research and development costs ​ 9,767,996 ​ 5,176,932 General and administrative ​ 14,266,775 ​ 4,168,576 Depreciation and amortization ​ 1,161,704 ​ 1,256,391 Total Operating Expenses ​ 25,196,475 ​ 10,601,899 OPERATING LOSS ​ ( 25,196,475 ) ​ ( 10,353,542 ) ​ ​ ​ ​ ​ ​ ​ OTHER (EXPENSE) INCOME ​ ​ ​ ​ Government grants ​ 323,496 ​ 708,004 Interest expense ​ ( 3,900,997 ) ​ ( 1,223,929 ) Interest expense – related party (Note 12) ​ ( 438,214 ) ​ ( 88,906 ) Loss on extinguishment of debt ​ — ​ ( 1,183,289 ) Interest and dividend income ​ 1,270,713 ​ 59,860 Foreign exchange gain (loss) ​ ( 57,214 ) ​ 617,357 OTHER (EXPENSE) INCOME ​ ( 2,802,216 ) ​ ( 1,110,903 ) ​ ​ ​ ​ ​ ​ ​ Net loss before income tax ​ ( 27,998,691 ) ​ ( 11,464,445 ) Income tax expense ​ ( 17,950 ) ​ ( 20,965 ) Net loss ​ ( 28,016,641 ) ​ ( 11,485,410 ) ​ ​ ​ ​ ​ ​ ​ Loss per common share, basic and diluted ​ $ ( 0.39 ) ​ $ ( 0.19 ) Weighted-Average Shares of Common Shares Outstanding, Basic and diluted ​ 71,646,985 ​ 60,414,175 ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 28,016,641 ) ​ $ ( 11,485,410 ) Other comprehensive (loss) income net of tax: ​ ​ ​ ​ Foreign currency translation adjustments ​ ( 260,731 ) ​ 395,525 Change in unrealized gains on short-term investments ​ 1,129,448 ​ — Comprehensive loss ​ $ ( 27,147,924 ) ​ $ ( 11,089,885 ) ​ ​ ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-4 ​ Table of Contents Terrestrial Energy Inc. Consolidated Statements of Changes in Stockholders ’ Equity (Deficit ) For the years ended December 31, 2025 and 2024 (Expressed in U.S. Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ Attributable ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ Terrestrial ​ to ​ ​ ​ ​ ​ Preferred ​ Common ​ Preferred Exchangeable ​ Common Exchangeable ​ Exchangeable Additional ​ Comprehensive ​ ​ ​ ​ Energy Inc. ​ Non- ​ ​ ​ ​ ​ Shares ​ Shares ​ Shares ​ Shares ​ Shares Paid-In- ​ Income (Loss) ​ Accumulated ​ Stockholders’ ​ Controlling ​ ​ ​ ​ ​ Shares* ​ Amount* ​ Shares* ​ Amount* ​ Shares* ​ Amount* ​ Shares* ​ Amount* ​ Shares ​ Amount Capital ​ ​ ​ Deficit ​ Equity (Deficit) ​ Interest ​ Total Balance, January 1, 2024, as previously reported ​ 137,672 ​ ​ 138 ​ 675,281 ​ ​ 675 ​ 6,200 ​ ​ 6 ​ 530,924 ​ ​ 531 ​ — ​ ​ — 79,769,519 ​ ​ ( 58,336 ) ​ ​ ( 85,122,832 ) ​ ​ ( 5,410,299 ) ​ ​ 534,611 ​ ​ ( 4,875,688 ) Retrospective application of recapitalization (Note 3) ​ ( 137,672 ) ​ ​ ( 138 ) ​ 35,666,101 ​ ​ 2,959 ​ ( 6,200 ) ​ ​ ( 6 ) ​ ( 530,924 ) ​ ​ ( 531 ) ​ 24,011,017 ​ ​ 2,401 ( 4,685 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Adjusted balance - January 1, 2024 — ​ $ — 36,341,382 ​ $ 3,634 — ​ $ — ​ — ​ $ — ​ 24,011,017 ​ $ 2,401 79,764,834 ​ $ ( 58,336 ) ​ $ ( 85,122,832 ) ​ $ ( 5,410,299 ) ​ $ 534,611 ​ $ ( 4,875,688 ) Stock-based compensation — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — 670,243 ​ — ​ — ​ 670,243 ​ — ​ 670,243 Acquisition of non-controlling interest — ​ — 2,818,520 ​ 282 — ​ — ​ — ​ — ​ — ​ — 534,329 ​ — ​ — ​ 534,611 ​ ( 534,611 ) ​ — Issuance of warrants in connection with convertible notes, net of tax — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — 2,006,982 ​ — ​ — ​ 2,006,982 ​ — ​ 2,006,982 Loss on extinguishment of debt from related parties — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — ( 202,204 ) ​ — ​ — ​ ( 202,204 ) ​ — ​ ( 202,204 ) Currency translation adjustments — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — — ​ 395,525 ​ — ​ 395,525 ​ — ​ 395,525 Net loss — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — — ​ — ​ ( 11,485,410 ) ​ ( 11,485,410 ) ​ — ​ ( 11,485,410 ) Balance, December 31, 2024 — ​ $ — 39,159,901 ​ $ 3,916 ​ — ​ $ — ​ — ​ $ — ​ 24,011,017 ​ $ 2,401 82,774,184 ​ $ 337,189 ​ $ ( 96,608,242 ) ​ $ ( 13,490,552 ) ​ $ — ​ $ ( 13,490,552 ) Stock-based compensation — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — 3,103,702 ​ — ​ — ​ 3,103,702 ​ — ​ 3,103,702 Issuance of Series A-1 preferred shares for cash* — ​ — 2,812,708 ​ 282 — ​ — ​ — ​ — ​ — ​ — 25,796,919 ​ — ​ — ​ 25,797,201 ​ — ​ 25,797,201 Issuance of warrants in connection with convertible notes, net of tax — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — 2,594,531 ​ — ​ — ​ 2,594,531 ​ — ​ 2,594,531 Shares issued upon exercise of warrants ​ — ​ ​ — ​ 2,011,632 ​ ​ 201 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 4,499,799 ​ ​ — ​ ​ — ​ ​ 4,500,000 ​ ​ — ​ ​ 4,500,000 Shares issued upon exercise of options ​ — ​ ​ — ​ 67,054 ​ ​ 7 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 129 ​ ​ — ​ ​ — ​ ​ 136 ​ ​ — ​ ​ 136 Merger financing ​ — ​ ​ — ​ 28,742,610 ​ ​ 2,874 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 243,064,103 ​ ​ — ​ ​ — ​ ​ 243,066,977 ​ ​ — ​ ​ 243,066,977 Transaction costs ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ( 22,305,729 ) ​ ​ — ​ ​ — ​ ​ ( 22,305,729 ) ​ ​ — ​ ​ ( 22,305,729 ) Conversion of convertible notes to Common Shares ​ — ​ ​ — ​ 3,977,517 ​ ​ 397 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 29,787,503 ​ ​ — ​ ​ — ​ ​ 29,787,900 ​ ​ — ​ ​ 29,787,900 Issuance of shares to PIPE investors ​ — ​ ​ — ​ 5,000,000 ​ ​ 500 ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — 49,499,500 ​ ​ — ​ ​ — ​ ​ 49,500,000 ​ ​ — ​ ​ 49,500,000 Currency translation adjustments — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — — ​ ( 260,731 ) ​ — ​ ( 260,731 ) ​ — ​ ( 260,731 ) Change in unrealized gains on short-term investments ​ ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — — ​ 1,129,448 ​ — ​ 1,129,448 ​ — ​ 1,129,448 Net loss — ​ — — ​ — — ​ — ​ — ​ — ​ — ​ — — ​ — ​ ( 28,016,641 ) ​ ( 28,016,641 ) ​ — ​ ( 28,016,641 ) Balance, December 31, 2025 - ​ $ — 81,771,422 ​ $ 8,177 ​ — ​ $ — ​ — ​ $ — ​ 24,011,017 ​ $ 2,401 418,814,641 ​ $ 1,205,906 ​ $ ( 124,624,883 ) ​ $ 295,406,242 ​ $ — ​ $ 295,406,242 ​ * Share amounts have been retroactively restated to give effect to the Business Combination. ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ ​ ​ ​ F-5 ​ Table of Contents Terrestrial Energy Inc. Consolidated Statements of Cash Flows For the years ended December 31, 2025 and 2024 (Expressed in U.S. Dollars) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Cash flows from operating activities ​ ​ ​ ​ Net loss ​ $ ( 28,016,641 ) ​ $ ( 11,485,410 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation and amortization ​ 1,161,704 ​ 1,256,391 Loss on extinguishment of debt ​ ​ — ​ ​ 1,183,289 Amortization of debt discount ​ 2,137,984 ​ 802,573 Stock-based compensation ​ 3,103,702 ​ 670,243 Unrealized foreign currency transaction gain ​ ( 807,193 ) ​ ( 812,849 ) Noncash lease expense ​ 471,362 ​ 152,086 Deferred income taxes ​ ​ 15,401 ​ ​ ( 15,401 ) Changes in operating assets and liabilities ​ ​ ​ ​ Accounts receivable ​ — ​ 19,163 Prepaid expenses and other current assets ​ ( 1,750,631 ) ​ 166,315 Accounts payable and accrued expenses ​ 5,366,309 ​ ( 196,299 ) Accrued interest ​ ​ 1,847,554 ​ ​ 152,571 Accrued interest - related party ​ ​ 326,047 ​ ​ 37,848 Operating lease payments ​ ( 328,510 ) ​ ( 133,454 ) Net cash used in operating activities ​ ( 16,472,912 ) ​ ( 8,202,934 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ Purchases of intangible assets ​ ( 86,150 ) ​ ( 54,404 ) Purchases of property and equipment ​ ( 1,055,307 ) ​ ( 607,866 ) Purchase of short-term investments ​ ( 199,496,832 ) ​ — Net cash used in investing activities ​ ( 200,638,289 ) ​ ( 662,270 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ Proceeds from issuance of convertible notes ​ 9,335,000 ​ 6,563,000 Proceeds from issuance of convertible notes – related parties ​ 1,650,000 ​ 650,000 Proceeds from Series A-1 preferred shares issuance ​ ​ 25,797,201 ​ ​ — Proceeds from the exercise of stock options for common shares ​ ​ 136 ​ ​ — Proceeds from warrant exercise for common shares ​ ​ 4,500,000 ​ ​ — Proceeds from issuance of shares to PIPE investors ​ ​ 49,500,000 ​ ​ — Proceeds from merger financing ​ ​ 243,066,977 ​ ​ — Payment of merger and recapitalization related transaction costs ​ ​ ( 22,305,729 ) ​ ​ — Proceeds from related party advances ​ ​ — ​ 100,000 Repayment of finance lease liabilities ​ ( 149,138 ) ​ ( 58,732 ) Net cash provided by financing activities ​ 311,394,447 ​ 7,254,268 ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash and cash equivalents ​ ( 140,650 ) ​ 32,201 ​ ​ ​ ​ ​ ​ ​ Increase (decrease) in cash and cash equivalents during the year ​ 94,142,596 ​ ( 1,578,735 ) Cash and cash equivalents, beginning of year ​ 3,021,795 ​ 4,600,530 Cash and cash equivalents, end of year ​ $ 97,164,391 ​ $ 3,021,795 ​ ​ ​ ​ ​ ​ ​ Supplemental cash flow information ​ ​ ​ ​ Interest paid ​ $ — ​ $ 514,431 ​ ​ ​ ​ ​ ​ ​ Supplemental noncash investing and financing activities ​ ​ ​ ​ Conversion of convertible notes to common shares ​ $ 29,787,900 ​ $ — Initial recognition of finance leases ​ $ 42,590 ​ $ — Recognition of warrants in connection with convertible notes, net of tax ​ $ 2,594,531 ​ $ 2,006,982 Related party debt extinguishment ​ $ — ​ $ 202,204 Acquisition of non-controlling interest ​ $ — ​ $ 534,611 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ F-6 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements 1. Organization and Description of Business Terrestrial Energy Inc. (the “ Company ” or “ TEI ” ), a Company incorporated under the laws of the State of Delaware, is a Company developing Generation IV nuclear technology, as defined by the Generation IV International Forum. The Company is committed to delivering reliable, resilient, emission-free, and cost-competitive energy by developing and deploying its patented Integral Molten Salt Reactor ( “ IMSR ” ) for commercial operation. 2024 Redomestication Prior to April 5, 2024, the Company was incorporated under the Business Corporations Act of Ontario and was domiciled in Canada. On December 13, 2023 the Company entered into an agreement with Terrestrial Energy Delaware Inc. ( “ DelawareCo ” ) and Terrestrial Energy Canada (Exchange) Inc. (the “ Arrangement Agreement ” ) pursuant to which TEI completed a corporate redomicile under the laws of the State of Delaware by way of a statutory plan of arrangement under Section 182 of the Business Corporations Act (Ontario) (the “ Arrangement ” ) that provided for, among other things: (a) the issuance to holders of Class A Common Shares, at their election and subject to applicable eligibility criteria, for their Class A Common Shares of either: (i) shares of common stock of Terrestrial Energy Delaware Inc., par value $ 0.001 per share (the “ DelawareCo Common Shares ” ), a corporation existing under the laws of the State of Delaware ( “ DelawareCo ” ), on a one -for-one basis; or (ii) common exchangeable shares in the capital of Terrestrial Energy Canada (Exchange) Inc. (the “ Common Exchangeable Shares ” ), a corporation existing under the laws of the Province of Ontario ( “ ExchangeCo ” ) and a direct wholly-owned subsidiary of Terrestrial Energy Canada (Call) Inc., a corporation existing under the laws of the Province of Ontario and a direct, wholly-owned subsidiary of DelawareCo ( “ CallCo ” ), on a one -for-one basis; (b) the issuance to holders of Series 4 Preferred Shares, at their election and subject to applicable eligibility criteria, for their Series 4 Preferred Shares of either: (i) shares of Series A preferred stock in the capital of DelawareCo, par value $ 0.001 per share (the “ DelawareCo Series A Preferred Shares ” ), on a one -for-one basis, or (ii) Preferred Exchangeable Shares in the capital of ExchangeCo on a one -for-one basis; (c) the issuance to holders of Exchangeable Shares of voting shares in the Company proportionate to their beneficial ownership interest; (d) the entry by DelawareCo, CallCo and ExchangeCo into the Exchange and Support Agreement (the “ Exchange and Support Agreement ” ); (e) the exchange of outstanding warrants issued by Terrestrial Energy (Ontario) Inc. ( “ TEON ” ) for warrants issued by TEI; and (f) the exchange of options exercisable for TEON securities for options exercisable for TEI securities. The Arrangement became effective on April 5, 2024. Based on an assessment of the ownership and control of the Company both prior to and after the reorganization, the reorganization was accounted for as a transaction under common control. As a result, the assets and liabilities of the transferred entities were recognized at their carrying amounts at the date of transfer. In addition, the reorganization has been treated with retrospective application as of the beginning of the reporting period. F-7 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements 2025 Merger Agreement On October 28, 2025 (the “ Closing Date ” ), Terrestrial Energy Inc. (formerly HCM II Acquisition Corp. “ HCM II ” ) consummated the transactions set forth by the Business Combination Agreement dated March 26, 2025 with Terrestrial Energy Development Inc. (formerly Terrestrial Energy, Inc.) ( “ TEDI ” ) and Merger Sub (the “ Business Combination ” ). Upon closing, Merger Sub merged with and into TEDI, with TEDI surviving as a wholly owned subsidiary of Terrestrial Energy Inc. (collectively, the “ Transactions ” ). Under the terms of the Agreement, TEDI ’ s outstanding shares of common stock and convertible notes were exchanged for shares in Terrestrial Energy Inc. at an exchange ratio specified in the Business Combination Agreement. The Business Combination was accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States of America ( “ U.S. GAAP ” ). Under this method of accounting, TEDI was deemed to be the accounting acquirer for financial reporting purposes. Additional information regarding the accounting is included in Note 3, “ Reverse Recapitalization ” . The Business Combination closed on Tuesday, October 28, 2025, with trading commencing on the Nasdaq Stock Market LLC ( “ Nasdaq ” ) on Wednesday, October 29, 2025. Upon closing of the transaction, the combined company became known as Terrestrial Energy Inc. and its securities and warrants were listed on Nasdaq under the symbols “ IMSR ” and “ IMSRW ” , respectively. ​ 2. Significant Accounting Policies Basis of Presentation and Principles of Consolidation These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( “ U.S. GAAP ” ) and are the consolidated financial statements of the Company and its subsidiaries, each of which are controlled, and are based on the financial position and results of operations of the Company as a standalone company. Intercompany balances and transactions between consolidated entities have been eliminated. Emerging Growth Company Status The Company is expected to be an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “ Securities Act ” ), as modified by the Jumpstart Our Business Startups Act of 2012 (the “ JOBS Act ” ). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. F-8 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions. The Company believes that the estimates, judgments and assumptions made when accounting for items and matters such as, but not limited to, revenue recognition, determination of deferred income for government assistance, VIE determination, useful life of property and equipment and intangible assets, fair value of stock options granted, recognition of deferred income tax assets, determination of incremental borrowing rate used to measure lease liabilities, warrants, embedded derivatives in convertible notes, and estimates related to accounting for the merger and reverse recapitalization, are reasonable based on information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as amounts reported on the statements of operations during the periods presented. Actual results could differ from those estimates. Variable Interest Entities The Company determines at the inception of each arrangement whether an entity in which the Company holds an investment or in which the Company has other variable interests is considered a variable interest entity ( “ VIE ” ). The Company consolidates VIEs when it is the primary beneficiary. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. In 2014, the Company agreed to establish Terrestrial Energy USA, Inc. ( “ TEUSA ” ), a Delaware corporation, which was initially majority owned by SWH Capital LLC ( “ SWH ” ), an entity owned and controlled by the Chief Executive Officer of the Company, with the minority interest owned by the Company. TEUSA ’ s purpose was to be an independent entity to commercialize IMSR technology for U.S. market deployment with the support of the U.S. Federal and State governments. The Company and TEUSA had several officers and directors in common. Under mutual licensing agreements between the companies, the Company would receive revenue royalties in the event that the technology was successfully commercialized in the U.S. The Company concluded that the TEUSA was a Variable Interest Entity as defined by ASC 810. On December 23, 2024, the Company entered into an agreement and plan of merger providing for the merger of TEUSA (the “ TEUSA Merger ” ) into a wholly owned subsidiary of the Company. Immediately prior to the TEUSA Merger, TEUSA was 70.1 % owned by SWH and 29.9 % owned by the Company. The effect of the TEUSA Merger is that the Company owns 100 % of TEUSA as of December 23, 2024. In accordance with ASC 810, as the Company maintained controlling financial interest, the acquisition of the noncontrolling interest was accounted for as an equity transaction, consistent with ASC 810-10-45-23. F-9 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Foreign Currency ​ The Company ’ s reporting currency is the United States dollar ( “ USD ” ). The functional currency of each subsidiary is determined by the currency of the primary economic environment in which the entity operates. The functional currency of TEON is the Canadian dollar ( “ CAD ” ), that of Terrestrial Energy Limited, a company incorporated under the laws of England and Wales, the Pound Sterling and that of Terrestrial Energy USA, Inc., the USD. Assets and liabilities of the operating subsidiaries are translated at the spot rate in effect at the applicable reporting date. Revenues and expenses of the operating subsidiaries are translated at the average exchange rates in effect during the applicable period. The resulting foreign currency translation adjustment is recorded as Accumulated other comprehensive income ( loss), which is reflected as a separate component of Stockholders ’ Equity (Deficit). The functional currency is translated into U.S. dollars for balance sheet accounts using currency exchange rates in effect as of the balance sheet date, and for revenue and expense accounts using a weighted-average exchange rate during the fiscal year. The transactions in foreign currency (that is a different currency than the functional currency of the entity) are converted at the exchange rate prevailing to the date of the transaction. The assets and liabilities denominated in foreign currencies are evaluated in the current period on the date of the closing or at the opening rate, when applicable. The translation adjustments are deferred as a separate component of equity in “ Accumulated other comprehensive income (loss) ” . Gains or losses resulting from transactions denominated in foreign currencies and intercompany debt that is not of a long-term investment nature are included in foreign exchange gain (loss) in the consolidated statements of operations and comprehensive loss. ​ Liquidity and Going Concern ​ Historically, the Company ’ s primary sources of liquidity have been cash flows from private fundraising offerings from related parties or other investors and other financing activities to fund operations. For the   years ended December   31, 2025 and 2024, the Company reported operating losses of $ 25.2 and $ 10.4   million, respectively, and negative cash flows from operations of $ 16.5 and $ 8.2   million, respectively. As of December   31, 2025, the Company had $ 97.2 million in cash and cash equivalents and $ 200.6 million in short-term investments. The Company had net working capital of $ 293.6 million and an accumulated deficit of $ 124.6 million. ​ The Company commenced trading on Nasdaq on October 29, 2025, after completing the business combination with HCM II on October 28, 2025. As outlined further below, after completing the transaction the Company received in excess of $ 292 million in gross proceeds before expenses, which included $ 50 million common stock private investment ( “ PIPE ” ) and approximately $ 242 million from HCM II ’ s trust account following redemptions of less than 1 %. Based on this financing, the Company believes that it has sufficient liquidity to support operations for at least the next twelve months following the date of issuance of the consolidated financial statements. This projection is based on the Company ’ s current expectations regarding future sales, cost structure, cash burn rate and other operating assumptions. Cash, Cash Equivalents and Short-Term Investments Cash equivalents represent short-term, highly liquid investments, which are readily convertible to cash and have maturities of 90 days or less at time of purchase. The Company ’ s cash and cash equivalents are held with major financial institutions and earn interest at the prevailing rate for business operating accounts. Short-term investments consist of marketable securities with original maturities greater than three months but less than one year at the time of purchase. These investments may include U.S Treasury securities, government agency securities, commercial paper, and other highly rated debt instruments. Short-term investments are subject to a periodic impairment review. If the Company does not intend to sell and it is not more likely than not that it will be required to sell the investment prior to recovery of its amortized cost basis, it will determine whether a decline in fair value below the amortized cost basis is due to credit-related factors. The credit loss is measured as the amount by which the investment ’ s amortized cost basis exceeds the estimate of the present value of cash flows expected to be collected, up to the difference between the amortized cost basis and the fair value. Impairment is assessed at the individual investment level. Credit-related impairment is recognized as an allowance in the consolidated balance sheets with a corresponding adjustment to interest and dividend income, in the consolidated statements of operations and comprehensive loss. Any impairment that is not credit-related is recognized in accumulated other comprehensive income in the consolidated balance sheets. F-10 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The Company ’ s short-term investments have been classified and accounted for as available-for-sale. The cost of short-term investments is adjusted for accretion of premiums and amortization of discounts to maturity. Such accretion and amortization, as well as interest and dividends, are included in interest and dividend income. The cost of investments sold is determined using the specific identification method. Unrealized gains and losses on short-term investments classified as available-for-sale are recognized in other comprehensive income on the consolidated statements of comprehensive loss. Property and Equipment, Net Property and equipment is stated at cost or deemed at cost less accumulated amortization. Property and equipment is amortized monthly over its useful life on a straight-line basis at the following rates: ​ ​ ​ ​ Computer equipment ​ ​ ​ 2 – 4 years Computer software 1 – 3 years Equipment 5 years Furniture and fixtures 5 years ​ Leasehold improvements are amortized over the shorter of their useful life or remaining lease term. Expenditures for repairs and maintenance, which do not improve or extend the life of the assets, are expensed as incurred. Concentration of Credit Risks The Company ’ s cash accounts in a financial institution may at times exceed the Federal Depository Insurance coverage of $250,000. No losses have been incurred to date on any deposit balance. Intangible Assets, Net Intangible assets consist of intellectual property rights and patents and trademarks related to the IMSR technology. Intangible assets acquired separately are measured on initial recognition at cost. Internally generated intangible assets are initially recognized if they meet certain recognition criteria. Development expenditures not satisfying the above criteria, and expenditure on the research phase of internal projects, are expensed as incurred and are included in research and development costs in the consolidated statement of operations and comprehensive loss. The Company amortizes intangible assets with finite lives over their estimated useful lives of 20 years using a straight-line amortization method, which the Company believes is the best estimate to reflect the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized and reviews them for impairment whenever an impairment indicator exists. Impairment of Long-lived Assets Management reviews each asset or asset group for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. The Company measures the recoverability of the assets by comparing the carrying amount of such asset or asset group to the future undiscounted cash flows it expects the asset or asset group to generate. If the Company considers the asset or asset group to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset or asset group exceeds its fair value. No impairment losses were recorded by the Company during the years ended December 31, 2025 and 2024. F-11 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Revenue Recognition The Company determines revenue recognition through the following steps: a) identification of the contract with a customer, b) identification of the performance obligations in the contract, c) determination of the transaction price, d) allocation of the transaction price to the performance obligations in the contract and e) recognition of revenue when the Company satisfies a performance obligation. The Company carries out engineering services for customers with revenue recognized typically on an over time basis. The Company ’ s contracts with the customer are to provide a significant service of integrating a complex set of tasks and components into a single deliverable. Consequently, the entire contract is accounted for as one performance obligation. The Company recognizes revenue from engineering services over time using an input method as performance obligations have no alternative use for the Company and the contracts would require payment to be received for the time and effort spent by the Company on progressing the contracts in the event of the customer cancelling the contract prior to completion for any reason other than the Company ’ s failure to perform its obligations under the contract. Specifically, labor hours incurred are used to measure progress towards complete satisfaction of the service. This is considered a faithful depiction of the transfer of services as the contracts are initially priced on the basis of anticipated hours to complete the projects and, therefore, also represents the amount to which the Company would be entitled based on its performance to date. The Company defers incremental costs of obtaining a customer contract and amortizes the deferred costs over the period that the related revenue is recognized. The Company had no material incremental costs to obtain customer contracts in any period presented. The Company intends to disaggregate revenue into categories to provide useful information to the users of the consolidated financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows as the Company ’ s customer base expands. Leases All leases are accounted for by recognizing a right-of-use asset and a lease liability except for leases with a duration of 12 months or less. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case the Company ’ s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: ● amounts expected to be payable under any residual value guarantee; ● the exercise price of any purchase option granted in favor of the Company if it is reasonably certain to assess that option; ● any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. F-12 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: ● lease payments made at or before commencement of the lease; ● initial direct costs incurred; and ● the amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis over the remaining term of the lease. When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases, an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognized in profit or loss. Fair Value Measurements Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are from sources independent of the Company. Unobservable inputs reflect the Company ’ s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels: ● Level 1: Inputs are quoted prices in active markets for identical assets or liabilities. ● Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. ● Level 3: Inputs are unobservable for the asset or liability. The carrying amounts of certain financial instruments, such as cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses, approximate fair value due to their relatively short maturities. The Company ’ s short-term investments are classified as Level 1 (as described in Note 7). Convertible Notes The Company may enter into convertible notes, certain of which contain, predominantly, fixed rate conversion features, whereby the outstanding principal and accrued interest may be converted by the holder, into common shares at a fixed discount to the market price of the common stock at the time of conversion. The Company ’ s convertible notes outstanding represent a financial instrument other than an outstanding share that embodies a conditional obligation that the issuer must or may settle by issuing a variable number of its equity shares. The Company records the convertible note liability at its fixed monetary amount by measuring and recording a premium, as applicable, on the convertible notes date in accordance with ASC Topic 480, Distinguishing Liabilities from Equity ( “ ASC 480 ” ). F-13 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Warrants The Company reviews the terms of warrants to purchase its common stock to determine whether warrants should be classified as liabilities or stockholders ’ deficit in its consolidated balance sheets. In order for a warrant to be classified in stockholders ’ deficit, the warrant must be (i) indexed to the Company ’ s equity and (ii) meet the conditions for equity classification. If a warrant does not meet the conditions for stockholders ’ deficit classification, it is carried on the consolidated balance sheets as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in other income (expense) in the consolidated statements of operations and comprehensive loss. If a warrant meets both conditions for equity classification, the warrant is initially recorded, at its relative fair value on the date of issuance, in stockholders ’ deficit in the consolidated balance sheets, and the amount initially recorded is not subsequently remeasured at fair value. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of 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 those temporary differences are expected to be recovered or settles. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that is it more likely than not that some portion of the deferred tax asset will not be realized. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount with a greater than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50 percent or less likely of being sustained upon audit, the Company does not recognize any portion of that benefit in the financial statements. Stock-Based Compensation The Company accounts for stock-based compensation arrangements granted to employees in accordance with ASC 718, “ Compensation: Stock Compensation ” , by measuring the grant date fair value of the award and recognizing the resulting expense over the period during which the employee is required to perform service in exchange for the award. Equity-based compensation expense is only recognized for awards subject to performance conditions if it is probable that the performance condition will be achieved. The Company accounts for forfeitures when they occur. The Company uses the Black-Scholes option pricing model to determine the grant date fair value of its stock options granted. This model requires the Company to estimate the expected volatility and the expected term of the stock options, which are highly complex and subjective variables. The Company uses an expected volatility of its stock price during the expected life of the options that is based on the historical performance of the Company ’ s stock price as well as including an estimate using similar companies. The expected term is computed using the simplified method as the Company ’ s best estimate given its lack of actual exercise history. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury securities with a maturity equivalent to the expected exercise term of the stock option. F-14 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The Company grants restricted stock units ( “ RSUs ” ) to employees and non-employee directors as part of its equity-based compensation program. RSUs represent the right to receive shares of the Company ’ s common stock upon vesting, subject to specified service. RSUs do not have voting or dividend rights prior to the issuance of shares, except for dividend equivalents if and when declared, as applicable under the terms of the award agreements. The Company accounts for RSUs in accordance with ASC 718, Compensation — Stock Compensation. Compensation expense for RSUs is measured at the grant-date fair value, which is equal to the closing market price of the Company ’ s common stock on the date of grant. For RSUs subject solely to service-based vesting conditions, compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The Company accounts for forfeitures as they occur. Upon vesting, each RSU is converted into one share of the Company ’ s common stock. The Company may withhold shares to satisfy statutory tax withholding requirements. The issuance of shares upon vesting results in an increase to common stock and additional paid-in capital. Advertising Advertising costs are expensed as incurred and are recognized as a component of general and administrative expenses on the consolidated statement of operations and comprehensive loss. Advertising costs expensed were approximately $ 0.1 million and $ 0.2 million for the years ended December 31, 2025 and 2024, respectively. Government Grants Government grants are recognized where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, the grant is recognized in other income as government grants, deferred over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income, and then recognized as income over the useful life of the related depreciable asset. Research and Development Research and development expenditures are expensed as incurred for designing and engineering products, including the costs of developing design tools. All research and development costs related to product development are expensed as incurred. Research and Development Tax Credits Research and development expenditures are expensed as incurred. The Company claims investment tax credits as a result of incurring scientific research and experimental development expenditures. Investment tax credits are recognized when the related expenditures are incurred, and there is reasonable assurance of their realization. Management has made a number of estimates and assumptions in determining the expenditures eligible for the investment tax credit claim. The Company ’ s claim is subject to audit by Canada Revenue Agency who may disallow all or a portion of the amount recorded. For the years ended December 31, 2025 and 2024, the Company earned $ 0.0 million and $ 0.2 million of research and development tax credits. F-15 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Net Loss Per Share Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to shares in undistributed earnings as if all income (loss) for the period had been distributed. The Company ’ s preferred stock does not contractually require the holders of such stock to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, such losses are not allocated to such participating securities. Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of this calculation, stock options, warrants, and restricted stock units have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for all periods presented. Segment reporting The Company has a single operating and reportable segment. The Company ’ s Chief Executive Officer ( “ CEO ” ) is its Chief Operating Decision Maker ( “ CODM ” ), who reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09 (Topic 740), Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The Company has adopted this guidance on a retrospective basis, which did not have an impact on its financial position, results of operations, or cash flows, although it did result in expanded disclosures which are included in Note 16 of the consolidated financial statements. Issued in November 2024, ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40), requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures. In March 2025, the FASB issued ASU No. 2025-03 (Topics 805 and 810), Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The ASU modifies the guidance for identifying the accounting acquirer in business combinations involving a variable interest entity (VIE) by requiring entities to evaluate the existing business combination indicators when the VIE is a business and equity interests are exchanged. The ASU is effective on a prospective basis for annual reporting periods beginning after December 15, 2026. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures. F-16 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU introduces a practical expedient that allows entities to assume current economic conditions remain unchanged over the life of an asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions under ASC 606, Revenue from Contracts with Customers. The guidance is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. The amendments are applied prospectively to eligible assets existing on or arising after the date of adoption. The Company does not currently have accounts receivable or contract assets arising from ASC 606 transactions. Accordingly, the adoption of ASU 2025-05 is not expected to have a material impact on the Company ’ s financial position, results of operations, or cash flows. The Company will continue to monitor future activity and evaluate the applicability of this guidance if accounts receivable or contract assets arise in future periods. In December 2025, the FASB issued ASU 2025-10, “ Accounting for Government Grants Received by Business Entities ” ( “ ASU 2025-10 ” ), which establishes the accounting and presentation for government grants received by a business entity. ASU 2025-10 is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted. ASU 2025-10 permits an entity to apply the new guidance using a modified prospective basis, a modified retrospective basis, or a full retrospective basis. The Company is currently evaluating the impact from ASU 2025-10 on its consolidated financial statements. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (ASU 2025-11). ASU 2025-11 is intended to improve the clarity and navigability of interim reporting guidance by (i) specifying the required form and content of interim financial statements, (ii) consolidating and organizing interim disclosure requirements across the Codification, and (iii) introducing a disclosure principle requiring entities to describe events occurring after the end of the most recent annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for public business entities for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2025-11 on its consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements ("ASU 2025-12"). ASU 2025-12 adds clarification, corrects errors, or makes minor improvements. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual reporting period and adoption can be applied on prospectively or retrospectively. The Company is currently evaluating the impact of ASU 2025-12 on its consolidated financial statements and disclosures. Other than as described above, no accounting pronouncements issued or effective during the year ended December 31, 2025, has had or is expected to have a material impact on the consolidated financial statements. ​ 3. Reverse Recapitalization ​ On the Closing Date, HCM II consummated the transactions set forth by the Business Combination Agreement dated March 26, 2025 with TEDI and Merger Sub. Upon closing, Merger Sub merged with and into TEDI, with TEDI surviving as a wholly owned subsidiary of the Company. The Transactions were accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting: ​ ● TEDI is treated as the accounting acquirer. ● The transaction is equivalent to the issuance of shares by TEDI for the net monetary assets of the Company, accompanied by a recapitalization. ● No goodwill or other intangible assets were recorded. The net assets of the Company were recorded at historical cost. ​ F-17 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements HCM II did not meet the definition of a “business” pursuant to ASC 805-10-55, Business Combinations (“ASC 805”), and thus, for accounting purposes, the Business Combination was accounted for as a reverse recapitalization, within the scope of ASC 805. The net assets of HCM II were stated at historical cost, with no goodwill or other intangible assets recorded. There was no excess of the fair value of shares issued to HCM II over the fair value of HCM II’s identifiable net assets acquired. ​ Accordingly the consolidated financial statements prior to the Closing Date represent those of TEDI, while the equity structure (i.e., number and type of shares outstanding) reflects the legal capital structure of the Company after the Business Combination, retroactively adjusted to reflect the Exchange Ratio of 44.7029 as of the earliest presented period, in this case, January 1, 2024. ​ Upon closing of the Business Combination: ​ ● An aggregate of 48,028,812 shares of common stock were issued to TEDI securityholders, including holders of convertible notes. ● Preferred shares of TEDI converted into common stock pursuant to the terms of TEDI’s governing documents. ● TEDI’s convertible notes were converted into common stock in accordance with their contractual terms. ● Outstanding options, warrants, and restricted stock units of TEDI were assumed and converted into comparable awards exercisable for or settled in common stock based on the Exchange Ratio. ● In connection with the shareholder vote approving the Business Combination, 7,390 public shares were redeemed for approximately $ 77,890 . ​ PIPE Financing ​ Concurrently with the closing of the Business Combination, the Company consummated a private placement (the “PIPE”) pursuant to which it issued 5,000,000 shares of common stock at $ 10.00 per share, resulting in gross proceeds of $ 50.0 million. ​ The following table reconciles the elements of the Business Combination to the consolidated statements of cash flows for the year ended December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash-trust and cash, net of redemptions ​ $ 243,066,977 ​ ​ Add: proceeds from issuance of shares from PIPE investors ​ ​ 49,500,000 ​ ​ Less: transaction costs and professional fees, paid ​ ( 22,305,729 ) ​ ​ Net proceeds from the Business Combination ​ $ 270,261,248 ​ ​ ​ ​ F-18 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The following table provides a reconciliation of the common and exchangeable shares as of December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TEDI existing shares at closing date: ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Series A shares ​ ​ 200,592 ​ ​ Common shares ​ ​ 784,831 ​ ​ Total TEDI shares at closing date ​ ​ 985,423 ​ ​ Total TEDI shares at closing date - recasted ​ ​ 44,051,295 ​ ​ Conversion of convertible notes to common shares ​ ​ 3,977,517 ​ ​ Issuance of shares to PIPE investors ​ ​ 5,000,000 ​ ​ Issuance of shares to HCM II ​ ​ 28,742,610 ​ ​ Total recapitalized common shares at December 31, 2025 ​ ​ 81,771,422 ​ ​ ​ ​ ​ ​ ​ ​ TEDI existing exchangeable shares at closing date: ​ ​ ​ ​ ​ ​ ​ Preferred exchangeable shares ​ ​ 6,200 ​ ​ Common exchangeable shares ​ 530,924 ​ ​ Total TEDI exchangeable shares at closing date ​ ​ 537,124 ​ ​ Total TEDI exchangeable shares at closing date - recasted ​ ​ 24,011,017 ​ ​ ​ ​ ​ ​ ​ ​ Conversion of preferred exchangeable shares to exchangeable shares ​ ​ 277,158 ​ ​ Conversion of common exchangeable shares to exchangeable shares ​ ​ 23,733,859 ​ ​ Total recapitalized exchangeable shares at December 31, 2025 ​ ​ 24,011,017 ​ ​ ​ The below table represents the amount of the Company’s transaction expenses included in the financial statements for the year ended December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ ​ ​ Professional fees ​ $ 14,324,981 ​ ​ Legal expenses ​ ​ 7,980,748 ​ ​ Total transaction costs ​ $ 22,305,729 ​ ​ ​ ​ ​ ​ 4. Prepaid Expenses and Other Current Assets The components of prepaid expenses and other current assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Sales tax receivable ​ $ 92,547 ​ $ 82,924 Government grants receivable ​ — ​ 45,991 Prepaid software costs ​ 490,907 ​ 15,462 Prepaid insurance ​ ​ 1,007,243 ​ ​ — Other prepaid expenses ​ 178,567 ​ 125,714 Total ​ $ 1,769,264 ​ $ 270,091 ​ ​ F-19 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements ​ 5. Property and Equipment, Net The components of property and equipment, net were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Computer equipment ​ $ 738,809 ​ $ 1,548,538 Computer software ​ 1,199,373 ​ 5,123,755 Equipment ​ 22,869 ​ 4,827 Furniture and fixtures ​ 3,233 ​ 163,756 Leasehold improvements ​ 140,881 ​ 687,024 Total ​ 2,105,165 ​ 7,527,900 Less: Accumulated depreciation and amortization ​ ( 1,270,370 ) ​ ( 6,757,352 ) Total ​ $ 834,795 ​ $ 770,548 ​ Depreciation and amortization expense on property and equipment for the years ended December 31, 2025 and 2024 was $ 1,012,872 and $ 1,206,215 , respectively. 6. Intangible Assets, Net The components of intangible assets, net were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Useful life ​ December 31, ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Intellectual property rights 20 years ​ $ 22,800 ​ $ 21,718 Patents and trademarks 20 years ​ 991,930 ​ 865,682 Total ​ ​ 1,014,730 ​ 887,400 Less: Accumulated amortization ​ ​ ( 306,981 ) ​ ( 270,428 ) Total ​ ​ $ 707,749 ​ $ 616,972 ​ Amortization expense relating to the intangible assets for the years ended December 31, 2025 and 2024 was $ 25,254 and $ 50,176 , respectively. Estimated future amortization of intangibles is as follows: ​ ​ ​ ​ ​ Year ending December 31, ​ ​ ​ Amount 2026 ​ $ 43,417 2027 ​ 43,417 2028 ​ 43,417 2029 ​ 43,417 2030 ​ 43,417 Thereafter ​ 490,664 ​ ​ $ 707,749 ​ ​ ​ F-20 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements 7. Financial Instruments The following table shows the Company ’ s cash, cash equivalents and short-term investments by significant investment category as of December 31, 2025. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and Cash ​ Short-Term ​ ​ ​ ​ ​ ​ Amortized Cost ​ Unrealized Gains ​ Fair Value ​ Equivalents ​ Investments ​ ​ Cash ​ $ — $ — $ — $ 3,266,974 $ — ​ ​ Level 1: ​ — ​ — ​ — ​ — ​ — ​ ​ Money market funds ​ ​ — ​ — ​ — ​ 93,897,417 ​ — ​ ​ U.S. Treasury securities ​ 199,496,833 ​ 1,129,448 ​ 200,626,281 ​ — ​ 200,626,281 ​ ​ Total ​ $ 199,496,833 $ 1,129,448 $ 200,626,281 $ 97,164,391 $ 200,626,281 ​ ​ ​ As of December 31, 2024, the Company ’ s cash and cash equivalents were $ 3,021,795 . 8. Accounts Payable and Accrued Expenses The components of accounts payable and accrued expenses were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Trade payables ​ $ 4,478,088 ​ $ 366,321 Accrued salaries and benefits ​ 87,360 ​ 54,569 Accrued contractor expense ​ 92,593 ​ 47,956 Government grant repayment accrual ​ — ​ 10,274 Other accrued expenses ​ 842,905 ​ 269,747 Total ​ $ 5,500,946 ​ $ 748,867 ​ ​ 9. Leases The Company leases office spaces and office equipment from various lessors. Some property leases contain extension options exercisable by the Company up to one year before the end of the non-cancellable contract period. The lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease cost for the year ended December 31, 2025 and 2024 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Operating lease cost 296,466 218,886 Finance lease cost 148,537 62,453 Total lease cost 445,003 281,339 ​ Operating lease costs are included under “ general and administrative ” in the consolidated statements of operations. Interest on finance leases are included under “ interest expense ” in the consolidated statements of operations, with amortization of finance leases included under “ depreciation and amortization ” in the consolidated statements of operations. F-21 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Other information — operating leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Weighted-average remaining lease term (in years) ​ 4.28 ​ 5.00 ​ Weighted-average discount rate ​ 4.22 % ​ 4.38 % Cash paid for amounts included in the measurement of operating lease liabilities ​ $ 328,496 ​ $ 218,886 ​ ​ Right-of-use assets obtained in exchange for operating lease liabilities for the year ended December 31, 2025 and 2024 were $ 970,279 and $ 144,978 , respectively. The following table reconciles the future undiscounted cash flows of operating leases to the operating and finance lease liabilities recorded on the consolidated balance sheet as of December 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating ​ ​ ​ Finance Period range ​ leases ​ leases 0 – 1 years ​ $ 458,502 ​ $ 37,831 1 – 2 years ​ 511,596 ​ 37,831 2 – 3 years ​ 521,179 ​ 12,153 3 – 4 years ​ 530,970 ​ 8,999 4 – 5 years ​ 148,235 ​ — Total undiscounted lease payments ​ 2,170,482 ​ 96,814 Less: imputed interest ​ ( 186,587 ) ​ ( 7,473 ) Total lease liabilities ​ 1,983,895 ​ 89,341 Less current portion ​ ( 383,223 ) ​ ( 33,362 ) Noncurrent portion ​ $ 1,600,672 ​ $ 55,979 ​ ​ 10. Government Grants ​ On September 2, 2020, the Ministry of Innovation, Science and Economic Development Canada ( “ ISED ” ) agreed to provide the Company with a conditionally repayable contribution of up to $ 20,000,000 CAD ( “ Contribution Agreement ” ) through the Strategic Innovation Fund ( “ SIF ” ) to fund eligible expenditures incurred from April 1, 2019 through December 31, 2021 related to the development of the Company ’ s patented IMSR reactor ( “ the “ SIF Project ” ). ​ The contribution is repayable annually at 3.00 % of Gross Business Revenues ( “ GBR ” ), as defined in the Contribution Agreement, for a period of 25 years beginning at the start of the Company ’ s second fiscal year following completion of the SIF Project, or until total repayments reach up to 1.75 times the actual amount received from ISED, whichever occurs first. Repayments are calculated based on GBR earned during the Canadian government fiscal year (April 1 to March 31) and are due no later than April 30 following the end of the applicable government fiscal year. If no GBR is earned in a given government fiscal year, no repayment is required for that period. The repayment period expires on the later of April 30, 2048, or the date of the final repayment. ​ The Company recognized the benefit of the contribution as government grant income in other income on a systematic basis as the related eligible expenditures were incurred (see Note 2, Significant Accounting Policies). Future repayments are contingent on the generation of GBR, and management is not able to reasonably estimate the timing or amount of such repayments as of December 31, 2025. Accordingly, no liability has been recognized for contingent future repayments beyond amounts accrued for repayments triggered by revenues earned to date. ​ As of December 31, 2025, the Company has received total contributions of $ 14,925,373 . The Company has recorded $ 0 and $ 10,274 as a repayment accrual as of December 31, 2025 and 2024, respectively, which is included in accounts payable and accrued expenses on the consolidated balance sheets. ​ F-22 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements 11. Convertible Notes and Convertible Notes — Related Parties 2024 Bridge Round Offering ​ From April 2024 through December 2024, the Company entered into subscription and exchange agreements for an offering of units with various investors, including related parties (the “ Bridge Round Offering ” ). Each unit was comprised of (i) a convertible note and (ii) ten warrants expiring July 31, 2028 to buy common stock of the Company at $ 2.24 exercisable in cash or by cashless exercise based on the market price of shares in the specified manner. Each convertible note was a secured convertible note of the Company in the principal amount of $ 1,000 per unit due July 31, 2026 with a principal amount of $ 1,000 bearing interest at 8 %. The convertible notes (including unpaid interest) were automatically convertible prior to maturity into (i) (a) the shares of the surviving entity following a SPAC (Special Purpose Acquisition Company) merger at a conversion price equal to 75 % of the issue price of the securities issued by such surviving entity and (b) certain limited rights to the issue of additional surviving entity securities 21 days after the expiry of the lock ups associated with the SPAC merger transaction to compensate for any price evolution in the trading price of such securities below the issue price down to $ 5.00 ; (ii) the Company ’ s common or preferred stock in the case of a $ 50.0 million issuance of common or preferred stock (excluding units or monies raised in connection with a SPAC merger) at a conversion price equal to 75 % of the issue price of such securities, or (iii) the same class of shares of the Company issued in connection with an IPO shares at a conversion price equal to 75 % of the price of such shares immediately post IPO. The Company ’ s obligations under the convertible notes, are secured in favor of each convertible note holder by a guaranty made by the Company and a security interest in all present and after acquired personal property and assets of the Company. The convertible notes include a prohibition on the Company granting liens or security interests on its assets outside the ordinary course of business. Additionally, the Company entered into exchange agreements with each of the previously outstanding Convertible Note holders whereby the holders received similar rights as investors in the Bridge Round Offering. The Company evaluated the exchange agreement and determined it was not required to be accounted for as a Troubled Debt Restructuring under ASC 470-60 as no concession was granted to the Company. The Company then evaluated the exchange under ASC 470-50, Debt — Modifications and Extinguishment. The 2024 Bridge Round Convertible Notes are required to be accounted for as an ASC 480-10 liability as a result of the Variable Share Settlement provisions. The warrants issued in the Bridge Round Offering (the “ Bridge Warrants ” ) qualified as permanent equity under ASC 815-40; therefore, the Bridge Warrants were recognized within paid-in capital and measured at relative fair value. When estimating the fair value of the Bridge Warrants, the Company has followed the guidance in ASC 820 Fair Value Measurement. The value of the Bridge Warrants was based on Black-Scholes pricing model based on the following inputs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 Bridge ​ ​ Round Offering Stock price ​ $ 1.16 ​ Exercise (Strike) price ​ $ 2.24 ​ Time to maturity (years) ​ 4.1 ​ Annualized risk-free rate ​ 4.3 % Annualized volatility ​ 63.0 % ​ F-23 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements February 2025 Bridge Round Offering ​ During February 2025 the Company entered into subscription and exchange agreements for an offering of units with various investors, including related parties (the “February 2025 Offering”) providing for proceeds of $ 11.0 million. Each unit was comprised of (i) a convertible note and (ii) ten warrants expiring July 31, 2028 to buy common stock of the Company at $ 2.24 exercisable in cash or by cashless exercise based on the market price of shares in the specified manner. ​ Each convertible note was a secured convertible note of the Company in the principal amount of $ 1,000 per unit due July 31, 2026 with a principal amount of $ 1,000 bearing interest at 8 %. The convertible notes (including unpaid interest) were automatically convertible prior to maturity into (i) (a) the shares of the surviving entity following a Special Purpose Acquisition Company (“SPAC”) merger at a conversion price equal to 75 % of the issue price of the securities issued by such surviving entity and (b) certain limited rights to the issue of additional surviving entity securities 21 days after the expiry of the lock ups associated with the SPAC merger transaction to compensate for any price evolution in the trading price of such securities below the issue price down to $ 5.00 ; (ii) the Company’s common or preferred stock in the case of a $ 50.0 million issuance of common or preferred stock (excluding units or monies raised in connection with a SPAC merger) at a conversion price equal to 75 % of the issue price of such securities, or (iii) same class of shares of the Company issued in connection with IPO shares at a conversion price equal to 75 % of the price of such shares immediately post IPO. The Company’s obligations under the convertible notes, are secured in favor of each convertible note holder by a guaranty made by the Company and a security interest in all present and after acquired personal property and assets of the Company. The convertible notes include a prohibition on the Company granting liens or security interests on its assets outside the ordinary course of business. The February 2025 Offering convertible notes are required to be accounted for as an ASC 480-10 liability as a result of the Variable Share Settlement provisions. The warrants qualified as permanent equity under ASC 815-40; therefore, the warrants were recognized within paid-in capital and measured at relative fair value. When estimating the fair value of the warrants, the Company has followed the guidance in ASC 820 Fair Value Measurement. The fair value of the warrants issued with the February 2025 Offering was based on Black-Scholes pricing mode l based on the following inputs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ February 2025 ​ ​ Bridge Round ​ ​ Offering Stock price ​ $ 1.45 ​ Exercise (Strike) price ​ $ 2.24 ​ Time to maturity (years) ​ 3.4 ​ Annualized risk-free rate ​ 4.2 % Annualized volatility ​ 51.3 % ​ Each convertible note that was outstanding immediately prior to the Effective Time of the close was cancelled and automatically converted pursuant to its terms, and the holder thereof became entitled to receive, a number of shares of common stock equal to (A) the outstanding amount of such convertible note, including any accrued and unpaid interest, divided by (B) $ 7.91 (seventy-five percent ( 75 %) of the redemption price). F-24 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Rollforward of Convertible Notes and Convertible Notes-Related Party ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Convertible ​ ​ Convertible ​ Notes – Related ​ ​ Notes ​ Party Balance at January 1, 2024 ​ $ 7,918,528 ​ $ 2,032,017 Bridge Round Offering proceeds ​ 6,563,000 ​ 650,000 Loss on extinguishment of debt ​ 1,183,289 ​ 202,204 Recognition of debt discount ​ ( 2,173,509 ) ​ ( 514,827 ) Foreign currency translation adjustment ​ ( 369,323 ) ​ ( 130,898 ) Amortization of debt discount ​ 586,847 ​ 133,498 Balance at December 31, 2024 ​ ​ 13,708,832 ​ ​ 2,371,994 February 2025 Offering proceeds ​ ​ 9,335,000 ​ 1,650,000 Recognition of debt discount ​ ( 2,323,073 ) ​ ( 271,458 ) Amortization of debt discount ​ 1,698,368 ​ 439,616 Conversion of convertible notes to common shares, exclusive of accrued interest converted ​ ( 22,419,127 ) ​ ​ ( 4,190,152 ) Balance at December 31, 2025 ​ $ — ​ $ — ​ ​ 12. Related Party Balances and Transactions The following table summarizes the Company ’ s related party transactions for the year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Professional fees and expenses paid to companies controlled by officers included in general and administrative ​ $ 249,323 ​ $ 442,110 Research and development expenses paid to companies controlled by officers included in general and administrative ​ $ — ​ $ 42,212 Accounts payable due to related parties ​ $ — ​ $ 9,010 ​ These transactions are in the normal course of operations and are measured at fair value, which is the amount of consideration established and agreed to by the related parties. During the year ended December 31, 2024, the Company issued 2,818,520 shares of Common Stock to SWH Capital LLC, an entity controlled and owned by the Chief Executive Officer of the Company, as consideration for all of the shares of common stock of TEUSA owned by SWH. In December 2024, the Company received $ 100,000 in advance from a related party as an advance of the February 2025 Bridge Round Offering. The Company had issued convertible notes to certain related parties, which included accrued interest prior to automatic conversion to common shares following the SPAC merger, refer Note 3 and 11 for further detail. All convertible notes converted as of December 31, 2025. ​ 13. Stockholders ’ Equity (Deficit) ​ Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock, par value $ 0.0001 per share. The Company ’ s Board of Directors is authorized, without further stockholder action, to issue preferred stock in one or more series and to establish the designations, powers, preferences and rights of each such series and the qualifications, limitations and restrictions thereof. F-25 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements No shares of preferred stock were issued or outstanding as of December 31, 2025 or 2024 on a post-Reverse Recapitalization basis. Immediately prior to the Reverse Recapitalization described in Note 3, the Company had 6,154,342 shares of Series A Preferred Stock outstanding as of December 31, 2024 and issued an additional 2,812,708 shares of Series A-1 Preferred Stock during 2025. In connection with the Reverse Recapitalization, all 8,967,050 outstanding shares of preferred stock were converted into common stock. Common Stock The Company ’ s Board of Directors has authorized 500,000,000 shares of common stock, par value $ 0.0001 . Holders of common stock are entitled to one vote per share. Subject to the rights of any series of preferred stock that may be outstanding, holders of common stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available. In the event of liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in the Company ’ s remaining assets after the satisfaction of liabilities and subject to any preferential rights of preferred stock. par value of Common Stock. As of December 31, 2025 and 2024, the Company has 81,771,422 and 39,159,901 shares of common stock issued and outstanding, respectively. In connection with the Reverse Recapitalization, outstanding share amounts as of December 31, 2024 have been retrospectively restated to give effect to the Business Combination. Common Stock Warrants As of December 31, 2025, the Company had 30,276,119 of outstanding warrants to purchase common stock at an average exercise price of $ 8.24 per share. As of December 31, 2024, the Company had 7,759,535 of outstanding warrants to purchase common stock at an average exercise price of $ 2.24 per share. Call Options Pursuant to various call option agreements entered into with certain stockholders prior to the Company ’ s April 5, 2024 redomicile and corporate reorganization and the Business Combination, the Company retains the right to repurchase up to an aggregate of 6,124,297 shares of its outstanding common stock at fixed exercise prices ranging from $ 1.12 CAD to $ 2.24 per share. These call options are exercisable at the Company ’ s discretion and expire at various dates ranging from December 31, 2035, through March 7, 2043. The call options are not subject to any service, performance, or market-based vesting conditions and are not transferable without Company consent. The Company has not exercised any of these call options as of December 31, 2025. The call option agreements continue to be valid and enforceable following the redomicile and corporate reorganization and consummation of the business combination. These instruments are presented within stockholders ’ equity (deficit) at the original consideration price per share and are not remeasured unless exercised. Exchangeable Shares As of both December 31, 2025 and 2024, the Company had 24,011,017 exchangeable shares outstanding on a post-Reverse Recapitalization basis. Immediately prior to the Reverse Recapitalization, the December 31, 2024 balance consisted of 277,158 preferred exchangeable shares and 23,733,859 common exchangeable shares. These shares are legally issued by Terrestrial Energy Canada (Exchange) Inc., a wholly-owned subsidiary of the Company ( “ ExchangeCo ” ). In connection with the closing of the Business Combination, ExchangeCo exchangeable preferred shares and exchangeable common shares that existed prior to the Business Combination were recapitalized into a single class of exchangeable shares as of the Business Combination. F-26 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Each exchangeable share is convertible on a 1 -for-1 basis into the Company ’ s common shares, either at the option of the holder or upon the occurrence of certain events. The exchangeable shares carry economic rights and dividend entitlements equivalent to the Company ’ s corresponding equity instruments and participate in Company-level voting through a special voting mechanism. Exchangeable shares hold limited economic rights with respect to ExchangeCo and are not entitled to dividends of ExchangeCo; provided that holders of exchangeable shares are entitled to dividends paid on Company shares. The Company has entered into an amended and restated support and exchange agreement with the ExchangeCo and a trustee to guarantee all obligations associated with the exchangeable shares and ensure that holders receive equivalent rights that are intended to be substantively equivalent to direct shareholders of the Company. As such, these instruments are treated as equity of the Company, and not reported as noncontrolling interests. No exchange of shares occurred during the years ended December 31, 2025 or 2024. 14. Net Loss Per Share of Common Share Prior to the Merger, the Company used the two-class method required for participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to shares in undistributed earnings as if all income (loss) for the period had been distributed. The Company ’ s preferred stock that was outstanding prior to the Merger contractually entitled the holders of such stock to participate in dividends but did not contractually require the holders of such stock to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss attributable to common stockholders, such losses were not allocated to the preferred stock. The Company may be required to issue additional common shares pursuant to contingent value rights ( “ CVRs ” ) issued in connection with the Business Combination. The number of shares issuable is contingent upon the Company ’ s future stock price performance over a specified measurement period. As the contingency has not been met as of December 31, 2025, these shares have not been included in the calculation of basic or diluted net loss per share. After the Merger, the Company applied the treasury stock method to determine the dilutive effect of potentially dilutive securities, and the if-converted method to determine the dilutive effect of any potentially dilutive convertible securities, as post-merger, the Company ’ s only participating securities were shares of the Company ’ s common stock, and any dividends declared on the common stock would be forfeitable if not vested. Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common stock outstanding during the period, without consideration of potentially dilutive securities. There are no potentially dilutive securities included in the Company ’ s diluted net loss per share calculation for the years ended December   31, 2025 and 2024, as the effect of any potentially dilutive security is anti-dilutive due to the net losses in those periods. The table below sets forth the computation of basic and dilutive net loss per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Numerator: ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 28,016,641 ) ​ $ ( 11,485,410 ) Denominator: ​ ​ ​ ​ Weighted-average shares outstanding, basic and diluted ​ 71,646,985 ​ 60,414,175 Net loss per share, basic and diluted ​ $ ( 0.39 ) ​ $ ( 0.19 ) ​ F-27 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The weighted-average shares outstanding above include both common shares and exchangeable shares outstanding at December 31, 2025 and 2024 as these shares are exchangeable one -for-one basis into the Company ’ s common shares and are therefore economically equivalent to common shares outstanding. The table below sets forth a listing of potentially dilutive securities that were excluded from the calculation of diluted net loss per share attributable to common shareholders because the impact of including them would have been anti-dilutive or out-of-the-money. Potentially dilutive securities include stock options, restricted stock units, warrants, and other share-settled instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Stock options ​ ​ 17,691,184 ​ ​ 18,951,539 RSUs ​ 1,232,794 ​ — Warrants (public and private) ​ 30,276,119 ​ 7,759,535 Total ​ ​ 49,200,097 ​ ​ 26,711,074 ​ ​ 15. Stock-Based Compensation In 2014, the Company adopted the amended and restated Terrestrial Energy Inc. 2014 Stock Options Plan A (the “ 2014 Plan ” ). In connection with the Company ’ s redomestication to Delaware, outstanding awards under the 2014 Plan were assumed by the Terrestrial Energy Delaware Inc. 2024 Stock Option Plan, which was most recently amended and restated in October 2024, as the Terrestrial Energy Inc. Second Amended and Restated 2024 Stock Option Plan. In October 2025, the Company adopted the 2025 Equity Incentive Plan, effective immediately prior to the closing of the Business Combination (the “ Current Plan ” ). As of December 31, 2025, the Current Plan authorizes the Company to award equity awards resulting in the issuance of up to 38,741,269 shares of common stock. The Current Plan provides for grants of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other awards to employees, non-employee directors, consultants and advisors of the Company. The Current Plan is designed to promote the interests of the Company using equity investment interests to attract, motivate, and retain individuals. The Current Plan is administered by the Board of Directors. The Board determines the type, number, vesting requirements and other features and conditions of such awards. Generally, stock options granted from the Current Plan have a contractual term of twenty years from the date of the grant and vest over one to three years . Stock option transactions and the number of stock options outstanding are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ December 31, 2024 ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ Number ​ ​ ​ Exercise Price ​ ​ ​ Number ​ ​ ​ Exercise Price Outstanding, beginning of year 19,018,593 ​ $ 1.01 18,249,971 ​ $ 1.00 Granted 1,167,819 ​ 4.83 768,622 ​ 2.24 Exercised ( 67,054 ) ​ 0.09 — ​ — Forfeited ( 2,428,174 ) ​ 1.47 — ​ — Outstanding, end of year 17,691,184 ​ 1.34 19,018,593 ​ 1.01 Less: Options not vested ( 2,339,259 ) ​ 4.18 ( 2,154,905 ) ​ 2.17 Exercisable at year end 15,351,925 ​ $ 0.89 16,863,688 ​ $ 0.49 ​ The Company recorded stock-based compensation expense for options of $ 1,323,108 and $ 670,243 for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, total compensation expense related to awards not yet recognized (except those with performance conditions that are not yet probable) was $ 2.0 million which is expected to be recognized over a weighted average period of 1.7 years. F-28 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The Company used the Black-Scholes option-pricing model to estimate the fair value of the options granted at the grant date using the following data and assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Risk-free interest rate ​ 4.56 % ​ 3.87 % Exercise price ​ $ 4.83 ​ $ 2.24 ​ Share price ​ $ 3.99 ​ $ 1.16 ​ Expected life of options ​ 3 Years ​ 3 Years ​ Annualized volatility ​ 86.0 % 63.0 % ​ As there is insufficient historical share price data of the Company from which to estimate future share price volatility, the Company has estimated expected share price volatility based on the historical share price volatility of comparable entities. The expected life of the share options is based on the expectation that investors will exercise their rights as certain Company milestones are met as well as review of comparable companies. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company has not paid and does not anticipate paying cash dividends on shares of common stock; therefore, the expected dividend yield is assumed to be zero . ​ Restricted stock unit transactions and the number of RSUs outstanding are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Number ​ ​ ​ Grant-Date Fair Value Outstanding, beginning of year — ​ $ — Granted 1,232,794 ​ 10.56 Vested — ​ — Forfeited/Expired — ​ — Outstanding, end of year 1,232,794 ​ $ 10.56 ​ ​ The Company recorded stock-based compensation expense for RSU awards of $ 1,780,594 and $ 0 for the years ended December 31, 2025 and 2024, respectively ​ The total unrecognized RSU expense as of December 31, 2025 was $ 11,258,886 with a weighted-average period over which it is to be recognized of 1.4 years. ​ F-29 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements 16. Income Taxes The income tax expense (benefit) for 2025 and 2024 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Current: ​ ​ ​ ​ Federal ​ $ — ​ $ 35,088 State ​ 700 ​ — Foreign ​ 1,849 ​ 1,278 Total current income tax ​ 2,549 ​ 36,366 ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ ​ ​ Federal ​ 15,401 ​ ( 15,401 ) State ​ — ​ — Foreign ​ — ​ — Total deferred tax ​ 15,401 ​ ( 15,401 ) Total income tax expense ​ $ 17,950 ​ $ 20,965 ​ A reconciliation between domestic and international earnings (loss) before income taxes is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Domestic ​ $ ( 17,127,042 ) ​ $ ( 1,374,250 ) International ​ ( 10,871,649 ) ​ ( 10,090,195 ) Net loss before income taxes ​ $ ( 27,998,691 ) ​ $ ( 11,464,445 ) ​ A reconciliation between the effective income tax rate and the federal statutory income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ 2024 Federal tax at statutory rate $ ( 5,879,725 ) ​ 21.0 % ​ $ ( 2,407,533 ) ​ 21.0 % Permanent book/tax differences 1,317,897 ​ ( 4.7 ) ​ 676,297 ​ ( 5.9 ) ​ Return to provision adjustments 1,392,136 ​ ( 5.0 ) ​ ( 65,996 ) ​ 0.6 ​ Difference in tax rates ( 539,994 ) ​ 1.9 ​ ( 586,767 ) ​ 5.1 ​ Impact of Canadian dollar exchange rate changes ( 1,013,116 ) ​ 3.6 ​ 1,560,416 ​ ( 13.6 ) ​ Change in valuation allowance 4,740,752 ​ ( 16.9 ) ​ 844,548 ​ ( 7.4 ) ​ Total tax expense $ 17,950 ​ ( 0.1 ) % ​ $ 20,965 ​ ( 0.2 ) % ​ ​ F-30 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements Deferred Income Tax The significant components of the deferred tax assets and liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Deferred tax assets: ​ ​ ​ ​ R&D expenses ​ $ 3,485,406 ​ $ 3,380,350 Net operating loss carryforwards ​ 17,547,661 ​ 13,401,755 Tax credit carryforwards ​ 2,445,772 ​ 3,133,678 Operating lease liabilities ​ 498,400 ​ 239,253 Stock based compensation ​ 502,016 ​ — R&D intangible tax pool section 174 ​ 622,270 ​ — Other ​ 93,988 ​ 73,668 Total gross deferred tax assets ​ 25,195,513 ​ 20,228,704 Valuation allowance ​ ( 24,640,726 ) ​ ( 19,821,008 ) Total deferred tax assets, net of valuation allowance ​ 554,787 ​ 407,696 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities ​ ​ ​ ​ Property and equipment ​ ( 94,585 ) ​ ( 60,460 ) Intangible assets ​ ( 27,892 ) ​ ( 96,660 ) Right of use assets ​ ( 432,310 ) ​ ( 176,333 ) Convertible debt ​ — ​ ( 740,196 ) Total gross deferred tax liabilities ​ ( 554,787 ) ​ ( 1,073,649 ) Net deferred tax liabilities ​ $ — ​ $ ( 665,953 ) ​ In assessing the realizability of deferred tax assets, management considers all positive and negative evidence to determine whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Due to the uncertainty of the Company ’ s ability to realize the benefit of the deferred tax assets, primarily related to the history of cumulative operating losses, the net deferred tax assets are offset by a valuation allowance at December 31, 2025 and 2024. As of December 31, 2025, the Company recorded a valuation allowance of $ 24,640,726 compared to $ 19,821,008 as of December 31, 2024. As of December 31, 2025 and 2024, the Company had no unrecognized tax benefits. The Company ’ s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of both December 31, 2025 and December 31, 2024, the Company had no accrual for any for net interest and penalties. As of December 31, 2025 and 2024, the Company had net operating loss carryforwards ( “ NOLs ” ) of $ 67,261,109 and $ 50,927,528 , respectively, comprised of $ 62,233,225 Canadian NOLs which have a 20-year expiration period and will begin to expire in 2035 and $ 5,027,884 U.S NOLs with indefinite carryforward period, Canadian federal tax credit carryforwards of $ 2,197,097 and $ 3,187,456 , respectively, that have a 20-year expiration period and will begin to expire in 2039, Canadian state tax credit carryforwards of $ 830,310 and $ 790,898 , respectively, that have a 20-year expiration and will begin to expire in 2035, and foreign tax credit carryforwards of $ 0 and $ 7,136 , respectively, that have a 20-year expiration period and will begin to expire in 2041. The Company is subject to U.S. federal and state income tax, Canadian federal and provincial income tax, as well as various other foreign jurisdictions that impose an income tax. The years that remain subject to examination are primarily 2021 and later. F-31 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements On July 4, 2025, the One Big Beautiful Bill Act ( “ OBBBA ” ) was enacted in the United States. The OBBBA includes significant tax law changes, including the permanent extension of certain provisions from the U.S. Tax Cuts and Jobs Act, modifications to the international tax framework, and the reinstatement of favorable business tax provisions. These include 100% bonus depreciation, immediate expensing of Section 174 domestic research and experimental expenditures, and revised limitations under Section 163(j) on the deductibility of business interest expense. The legislation has multiple effective dates, with certain provisions effective beginning in 2025, and others implemented through 2027. We evaluated the impact of the OBBBA and determined its provisions do not have a material impact on our overall tax liability both for the current year and in the succeeding years. ​ 17. Segment Information ASC Topic 280, “ Segment Reporting, ” establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company ’ s chief operating decision maker, or group, in deciding how to allocate resources and assess performance. The Company ’ s chief operating decision maker ( “ CODM ” ) has been identified as the Chief Executive Officer in accordance with ASC 280-10-50-5, who reviews the assets, operating results, and financial metrics for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that there is only one reportable segment. The CODM assesses performance for the single segment and decides how to allocate resources based on net income or loss that also is reported on the consolidated statement of operations as net income or loss. The measure of segment assets is reported on the consolidated balance sheet as total assets when evaluating the Company ’ s performance and making key decisions regarding resource allocation the CODM reviews several key metrics, which include the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Research and development costs ​ $ 9,767,996 ​ $ 5,176,932 General and administrative expenses ​ 14,266,775 ​ 4,168,576 Other significant non-cash items: ​ ​ ​ ​ Depreciation and amortization ​ 1,161,704 ​ 1,256,391 Total Operating Expenses ​ ​ 25,196,475 ​ ​ 10,601,899 Revenue ​ ​ — ​ ​ 248,357 Total other (expense) income ​ ​ ( 2,802,216 ) ​ ​ ( 1,110,903 ) Income tax expense ​ ​ ( 17,950 ) ​ ​ ( 20,965 ) Net loss ​ $ ( 28,016,641 ) ​ $ ( 11,485,410 ) ​ As the Company has not earned significant revenue yet, the key measures of segment profit or loss reviewed by the Company ’ s CODM are research and development costs and general and administrative expenses to monitor, manage and forecast cash to ensure enough capital is available for working capital needs. The CODM also reviews research and development costs and general and administrative costs to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget. ​ ​ F-32 ​ Table of Contents Terrestrial Energy Inc. Notes to the Consolidated Financial Statements The geographic location of long-lived assets is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 United States ​ $ 1,231,273 ​ $ 14,853 Canada ​ 2,189,215 ​ 2,024,865 Total ​ $ 3,420,488 ​ $ 2,039,718 ​ ​ 18. Commitments and Contingencies Litigation and loss contingencies From time to time, the Company may be subject to other legal proceedings, claims, investigations, and government inquiries (collectively, legal proceedings) in the ordinary course of business. It may receive claims from third parties asserting, among other things, infringement of their intellectual property rights, defamation, labor and employment rights, privacy, and contractual rights. There are no currently pending legal proceedings that the Company believes will have a material adverse impact on the business or consolidated financial statements. ​ 19. Subsequent Events The Company evaluated subsequent events from December 31, 2025 through March 30, 2026, the issuance date of these consolidated financial statements, for events requiring recognition or disclosure in the consolidated financial statements as of and for the year ended December 31, 2025. On March 3, 2026, the Company received a demand letter from a former employee of one of the Company ’ s subsidiaries over his efforts to exercise certain stock option agreements. Specifically, the dispute centers on whether this former employee has or is willing to address certain potential tax obligations in order to allow the option exercise to be affected. The demand letter seeks enforcement of the option agreements, but no litigation has commenced. The Company is currently evaluating the matter in consultation with legal counsel. Based on the information available as of the issuance date of these consolidated financial statements, the Company has not recorded a liability related to this matter as it has not concluded that a loss is probable. The ultimate outcome of this matter is uncertain and, if the outcome was unfavorable to the Company, could have a material effect on the Company ’ s financial position, results of operations, or cash flows in a future period. ​ ​ F-33 ​ Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.