Rank One Computing Corp S-1/A, filed Jan 12, 2026
Rank One Computing Corp (ROC)
As filed with the U.S. Securities and Exchange Commission on January 12, 2026.
Registration No. 333-291913
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RANK ONE COMPUTING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Colorado | 7372 | 47-3970528 | ||
| (State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1290 Broadway, Suite 1200
Denver, CO 80203
(303) 317-6118
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
B. Scott Swann
Chief Executive Officer
Rank One Computing Corporation
1290 Broadway, Suite 1200
Denver, CO 80203
(303) 317-6118
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
| Joseph M. Lucosky, Esq. | Richard A. Friedman, Esq. | |
| Lucosky Brookman LLP | Sheppard, Mullin, Richter & Hampton LLP | |
| 101 Wood Avenue South, 5th Floor | 30 Rockefeller Plaza | |
| Woodbridge, NJ 08830 | New York, NY 10112 | |
| Tel. No.: (732) 395-4400 | Tel. No.: (212) 653-8700 | |
| Fax No.: (732) 395-4401 | Fax No.: (212) 653-8701 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ | |||
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED January 12, 2026 |
RANK ONE COMPUTING CORPORATION
3,000,000 Shares
Common Stock
This is a firm commitment initial public offering of 3,000,000 shares of common stock, par value $0.01 per share, of Rank One Computing Corporation (the “Company” and “ROC”), a Colorado corporation.
Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price of our common stock will be between $5.00 and $6.00 per share, with a $5.50 assumed initial public offering price (which is the midpoint of the $5.00 to $6.00 range; this assumption is used throughout this prospectus).
All share and per share information in this prospectus is presented giving effect to a forward stock split, effective January 8, 2026, on the basis of 167 shares of the Company’s common stock for every 1 share of issued and outstanding shares of the Company’s common stock (the “Stock Split”), retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.
We have applied to have our common stock listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “ROC”. No assurance can be given that our application will be approved with Nasdaq. If shares of our common stock are not approved for listing on Nasdaq, we will not consummate this offering.
We are an emerging growth company under the Jumpstart Our Business Startups Act of 2012 and a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and, as such, may elect to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company” and “Prospectus Summary — Implications of Being a Smaller Reporting Company.”
Investing in our common stock is speculative and involves a high degree of risk. Before making any investment decision, you should carefully review and consider all the information in this prospectus, including the risks and uncertainties described under “Risk Factors” beginning on page 10.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
| Per Share | Total Without Over-Allotment Option | Total With Over-Allotment Option | ||||||||||
| Initial public offering price | $ | $ | $ | |||||||||
| Underwriting discounts and commissions(1) | $ | $ | $ | |||||||||
| Proceeds to us, before expenses | $ | $ | $ | |||||||||
| (1) | Please see “Underwriting” beginning on page 97 for additional information regarding underwriters’ compensation. |
We have granted a 30-day option to the representative of the underwriters to purchase up to 450,000 additional shares of common stock solely to cover over-allotments, if any. If the representative of the underwriters exercises the option in full, based on the assumed initial public offering price of $5.50 per share, the additional underwriting discounts and commissions from the over-allotment option exercise will be $173,250 and the additional proceeds to us, before expenses, from the over-allotment option exercise will be $2,301,750.
The underwriters expect to deliver the shares of common stock to purchasers on or about [●], 2026.
The date of this prospectus is [●], 2026.
TABLE OF CONTENTS
You should only rely on the information contained in this prospectus and in any free writing prospectus prepared by or on behalf of us and delivered or made available to you. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus or a free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, operating results, and prospects may have changed since that date.
For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.
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INDUSTRY AND MARKET DATA
Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and research. Some of the industry and market data contained in this prospectus are based on third-party industry publications. This information involves a number of assumptions, estimates and limitations.
The industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on our behalf. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in this prospectus. These and other factors could cause results to differ materially from those expressed in these publications.
TRADEMARKS
We own or have rights to trademarks or trade names that we use in connection with the operation of our businesses, our corporate names, logos and website names. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies. All other trademarks are the property of their respective owners.
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This summary highlights certain information appearing elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. This summary contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions, or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” Before you decide to invest in our common stock, you should also read the entire prospectus carefully, including “Risk Factors” beginning on page 10, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 49, and the financial statements and related notes included in this prospectus.
All share and per share information in this prospectus is presented giving effect to a forward stock split, effective January 8, 2026, on the basis of 167 shares of the Company’s common stock for every 1 share of issued and outstanding shares of the Company’s common stock (the “Stock Split”), retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.
Unless the context indicates otherwise, as used in this prospectus, the terms “we,” “us,” “our,” “our company,” “Rank One Computing,” “ROC,” and “our business” refer to Rank One Computing Corporation and its subsidiaries.
Executive Summary
ROC is an independent American artificial intelligence company redefining the global standard for Vision AI in identity, security, and digital forensics. Our Vision AI platform delivers real-time facial recognition, multimodal biometric verification, video analytics, and AI-powered evidence analysis to mission-critical organizations across both private and public sectors. ROC’s biometric algorithms are routinely ranked by the National Institute of Standards and Technology (“NIST”) as among the most accurate and computationally efficient globally. Our solutions outperform legacy foreign-built systems at a fraction of the cost, with faster deployment and stronger trust. As demand for trusted AI accelerates across law enforcement, defense, and regulated commercial sectors, ROC is scaling rapidly through a growing network of integrators and multi-year deals. We are expanding from a foundation of government leadership into high-growth commercial markets such as access control, physical security, and identity verification. Our international pipeline spans the Middle East, Asia–Pacific (“APAC”), and other strategic regions where national AI and identity investments are surging. With sovereign U.S. development, deep technical leadership, a vertically integrated platform, and proven field results, we believe ROC is positioned to become the category-defining leader in operational Vision AI.
Overview
ROC builds AI that sees, identifies, and interprets the physical world. Our focus is on biometric identity, digital forensics, and real-time video analytics. In a market long dominated by foreign-built legacy platforms, ROC is executing a clear mission: to restore the United States as the global leader in Vision AI. We are displacing outdated, overpriced, foreign systems with American-built solutions that are leaner, more efficient, and more affordable. We believe ROC platforms routinely cost a fraction of legacy alternatives, yet deliver higher accuracy, faster deployment, and superior customer support — all while sustaining strong margins. This operational advantage is rooted in our disciplined model: we’ve never taken outside capital, and we build everything with purpose and precision.
ROC uses the term “Vision AI” as a branch of artificial intelligence focused on transforming unstructured visual data into structured, explainable insight. Vision AI is not generative or conversational. It is operational AI, built for accuracy, speed, and auditability. Whether it is deployed in a military checkpoint, a digital evidence lab, or a financial onboarding workflow, Vision AI enables real-time decisions with transparency and accountability.
ROC’s algorithmic efficiency has long been a strategic advantage. Our AI models typically require only a fraction of the compute power that legacy platforms demand, allowing us to deploy faster, operate leaner, and scale without excess infrastructure. For example, an analysis published on February 20, 2024 of the National Institute of Standards and Technology (NIST) Evaluation of Latent Fingerprint Technologies (ELFT) showed that the ROC’s latent fingerprint algorithm was capable of searching a database more than 500 times faster than every other vendor who was benchmarked. Additionally, an analysis on March 8, 2023 of the NIST Face Recognition Vendor Test (FRVT) showed that the ROC face recognition algorithm ranked 61st out of 338 algorithms in hardware efficiency, while none of our key competitors ranked within the top 150 most efficient algorithms. Further, an analysis performed on February 15, 2023 of the NIST Proprietary Fingerprint Template (PFT) benchmarked that the ROC fingerprint algorithms had template comparison speeds that were the fastest of any vendor, and as much as 1000x faster than certain key competitors.
This advantage has enabled us to simplify system architecture while supporting extremely large deployments through our horizontally and vertically scalable enterprise search infrastructure. ROC is routinely measured by NIST as having the most accurate and computationally efficient facial and fingerprint recognition algorithms in the world — a rare combination that enables both unmatched performance and flexible deployment. We support secure, air-gapped installations as well as cloud-native delivery, and are actively attaining Criminal Justice Information Services (“CJIS”) and related compliance standards to support our growing federal and state customer base. Our engineering team includes experts who have built mission-critical systems for the Federal Bureau of Investigation (the “FBI”) and other agencies, ensuring our platforms are secure, interoperable, and optimized for rapid integration through exposed Application Programming Interfaces (“APIs”) and robust reference applications.
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ROC’s mission and leadership emerged from the U.S. national security community. Prior to creating ROC, our founders, Brendan Klare and Joshua Klontz, worked within the facial recognition research group at Noblis, Inc., which is a science and technology services provider to leading U.S. national security agencies. Our founders’ work included supporting a major case study for the FBI, regarding the deployment of facial recognition technology during the course of the 2013 Boston Marathon Bombing investigation. Our CEO, B. Scott Swann, served an 18-year career with the FBI, where he fulfilled multiple executive roles, advancing technology to include Special Assistant in the FBI Director’s Office for the Science and Technology Executive Assistant Director; Executive Officer in the Office of the Director of National Intelligence; and Unit Chief at the FBI’s Criminal Justice Information Services Division. Mr. Swann led the FBI’s major case study on the Boston Marathon Bombing, through which he first met and worked with Mr. Klare and Mr. Klontz. Mr. Swann worked closely with the FBI’s CJIS division, the FBI’s central repository and search database for fingerprints and other biometric evidence.
As outlined in the chart below, our growth now includes global financial companies, state and local public safety organizations, and large retail enterprises. We are rapidly expanding in access control, identity verification, and physical security applications — particularly in high-assurance and infrastructure-critical sectors. Our commercial business is scaling through an already mature channel network, and we are seeing increasing demand from global integrators who want to deliver ROC’s technology under their own brands. Our international pipeline is significant, with especially strong momentum in the Middle East and APAC regions, where governments are investing in next-generation identity and surveillance systems. These global opportunities are already driving business today and represent a substantial long-term growth vector.
| For the Nine months ended September 30, 2025 | For the Year ended December 31, 2024 | For the Year ended December 31, 2023 | ||||||||||
| Number of customers | 66 | 61 | 59 | |||||||||
| Percent of revenue for each major product | ||||||||||||
| -ROC SDK | 32 | % | 43 | % | 33 | % | ||||||
| -ROC Watch | 37 | % | 10 | % | 6 | % | ||||||
| -ROC ABIS | 2 | % | 3 | % | ||||||||
| Percent of revenue for each principal market | ||||||||||||
| -National Security | 68 | % | 66 | % | 73 | % | ||||||
| -Fintech | 17 | % | 22 | % | 15 | % | ||||||
| -Public Safety | 13 | % | 10 | % | 9 | % | ||||||
| -Commercial Security and Engagement | 2 | % | 2 | % | 1 | % | ||||||
| -Other | 2 | % | ||||||||||
| Percent of revenue from the federal government and government agencies | 81 | % | 76 | % | 82 | % | ||||||
On November 19, 2019, ROC published a Code of Ethics (the “Code of Ethics”) that addressed the use of our face recognition technology. To our knowledge, ROC was the first biometric vendor to adopt such code of ethics addressing the use of face recognition technology. Subsequently, ROC has incorporated the Code of Ethics into our software licensing agreements to provide a contractual means for limiting access to our technology if a licensee violates the Code of Ethics. From the beginning, we believed that transparency, accountability, and technical rigor must go hand in hand. We build with fairness and explainability in mind and design for environments where decisions must be auditable and justifiable. That said, the broader landscape is also shifting. Adoption of face recognition and Vision AI tools is accelerating across law enforcement, defense, and critical infrastructure. Agencies that once hesitated are now embracing these capabilities — supported by clearer governance, better training, and stronger results. This growing acceptance comes at an ideal time for ROC. We are entering the public markets as demand is breaking open, not just for AI, but for trusted, operationally proven AI.
ROC has been deliberately built from the ground up. Every employee has been carefully selected not just for skill but for alignment with our mission. Our team combines rising stars in artificial intelligence and Vision AI with senior engineers and practitioners who have delivered large-scale systems for the U.S. government and enterprise. We believe in talent density, small teams, and high-trust environments. Every contributor matters, and every contributor has a stake in ROC’s equity. This model has not only helped us outperform technically — it has helped us retain culture, focus, and resilience while competing against far larger and better-funded companies.
Recent Developments
Stock Split
Our board of directors and our stockholders approved a ratio of 167-to-1 forward stock split of our issued and outstanding shares of our common stock (the “Stock Split”). On January 8, 2026, we filed the second amended and restated articles of incorporation with the State of Colorado to immediately effect the Stock Split. All share and per share information in this prospectus is presented after giving effect to the Stock Split retrospectively for all periods presented, unless otherwise stated or the context otherwise requires.
Summary Risk Factors
Investing in our common stock is speculative and involves a high degree of risk. These risks are discussed more fully in “Risk Factors” and elsewhere in this prospectus. We urge you to read “Risk Factors” beginning on page 10 and this prospectus in full. Our significant risks may be summarized as follows:
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Risks Related to Our Industry and Business
| ● | As an early-stage company with dynamic growth, our historic performance is not necessarily an indication of future performance. |
| ● | Historically, existing customers have expanded their relationships with us, which has resulted in a limited number of customers accounting for a substantial portion of our revenue. If existing customers do not make subsequent purchases or renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted. |
| ● | Our software is complex and may have a lengthy implementation process, and any failure of our software to satisfy our customers or perform as desired could harm our business, results of operations, and financial condition. |
| ● | If we are unable to successfully deploy our marketing and sales organization in a timely manner, or at all, or to successfully hire, retain, train, and motivate our sales personnel, our growth could be adversely impacted. |
| ● | Certain estimates of market opportunity included in this prospectus may prove to be inaccurate. |
| ● | We face intense competition in our markets, and we may lack sufficient financial or other resources to maintain or improve our competitive position. |
| ● | We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to stockholders, restrict our operations or adversely affect our ability to operate our business. |
| ● | Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to grow our business and negatively affect our results of operations. |
Risks Related to Intellectual Property, Information Technology, Data Privacy and Security
| ● | If our systems, our customers’ environments, or third-party systems we rely on are breached or if unauthorized access to sensitive data occurs, it could harm public perception of our software, result in business losses, and expose us to liability. |
| ● | Issues in the development and use of artificial intelligence (“AI”) in our software may result in reputational harm or liability. |
| ● | Failure to adequately obtain, maintain, protect and enforce our intellectual property and other proprietary rights could adversely affect our business. |
| ● | We may in the future be subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies. |
Risks Related to Regulation and Compliance
| ● | Our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, biometrics, artificial intelligence, technology protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or otherwise harm our business. |
| ● | We may face legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other matters could negatively impact our business, financial conditions, and results of operations. |
| ● | Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects. |
| ● | Our results of operations may be harmed if we are required to collect sales or other related taxes for our license arrangements in jurisdictions where we have not historically done so. |
Risks Related to Our Relationships and Business with the Public Sector
| ● | A significant portion of our business depends on sales to the public/government sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business. |
| ● | Most of our customer contracts may be terminated by the customer at any time for convenience and may contain other provisions permitting the customer to discontinue contract performance, and if terminated contracts are not replaced, our results of operations may differ materially and adversely from those anticipated. |
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General Risk Associated with Our Company
| ● | Natural disasters and other events beyond our control could harm our business. |
| ● | We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations. |
| ● | We are an “emerging growth company,” and the reduced reporting and disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors. |
Risks Related to Our Securities and this Offering
| ● | No active trading market for our common stock currently exists, and an active trading market may not develop or be sustained following this offering. |
| ● | The trading price of our common stock may be volatile, and you could lose all or part of your investment. |
| ● | Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. |
| ● | Our management will have broad discretion in how we use the net proceeds of this offering and might not use them effectively. |
| ● | You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future. |
| ● | An investment in our company may involve tax implications, and you are encouraged to consult your own advisors as neither we nor any related party is offering any tax assurances or guidance on our company or your investment. |
| ● | Anti-takeover provisions in Colorado law could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock. |
| ● | Our executive officers, directors, and principal stockholders will continue to have substantial control over our company after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control. |
| ● | We have never paid dividends on our capital stock, and we do not anticipate to pay for the foreseeable future. |
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), and we may remain an emerging growth company for up to five years following the closing of this offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.
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In addition, the federal securities laws provide that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.
We would cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenue, (ii) the date on which we first qualify as a large accelerated filer under the rules of the U.S. Securities and Exchange Commission, or the SEC, (iii) the date on which we have, in any three-year period, issued more than $1.0 billion in non-convertible debt securities, and (iv) the last day of the fiscal year ending after the fifth anniversary of this offering.
Implications of Being a Smaller Reporting Company
We are a “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenues are less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation and, if we are a smaller reporting company with less than $100 million in annual revenue, we would not be required to obtain an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.
Corporate Information
We were originally incorporated under the laws of the State of Virginia on May 5, 2015, and subsequently converted to a corporation incorporated under the laws of the State of Colorado on September 18, 2018. Our principal executive office is located at 1290 Broadway, Suite 1200, Denver, CO 80203, and our telephone number is (303) 317-6118. Our website is https://roc.ai/. Information contained on, or available through, our website does not constitute part of, and is not deemed incorporated by reference into, this prospectus, and investors should not rely on such information in deciding whether to purchase shares of our common stock.
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| Common Stock Offered by Us | 3,000,000 shares. | |
| Common Stock Outstanding Prior to This Offering (1) | 15,021,650 shares. | |
| Common Stock to Be Outstanding Immediately After Completion of This Offering (1) | 18,021,650 shares (or 18,471,650 shares if the underwriters’ exercise their over-allotment in full). | |
| Over-allotment Option | We have granted the underwriters a 30-day option to purchase up to an additional 450,000 shares of our common stock to cover over-allotments, if any, at the price to the public, less the underwriting discounts and commissions, to cover over-allotments, if any. | |
| Use of Proceeds | We estimate that the net proceeds to us from this offering, after deducting the underwriting discounts and estimated offering expenses payable by us, will be approximately $14.8 million, or approximately $17.1 million if the underwriters exercise their over-allotment option in full, based on the assumed initial public offering price of $5.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.
The net proceeds received by us from this offering will be used (i) to hire key resources that enable growth and support market share capture; (ii) to update and expand our neural-processing infrastructure to accelerate the pace in which we train and deploy Vision AI algorithms; and (iii) for working capital and general corporate purposes. See “Use of Proceeds” for additional information. | |
| Representative’s Warrants | Upon the closing of this offering, we will issue to The Benchmark Company, LLC (“Benchmark”), as representative of the underwriters, warrants entitling the underwriters or their designees to purchase up to seven percent (7%) of the aggregate number of shares of our common stock that we issue to investors in this offering. The warrants are exercisable for a four-and-a-half-year period commencing six months following the closing of this offering. The warrants will have an exercise price per share equal to 100% of the public offering price of our shares of common stock offered hereby. See “Underwriting — Representative’s Warrants.” |
| Proposed Nasdaq Symbol | We have applied to list our common stock on the Nasdaq Capital Market under the symbol “ROC”. No assurance can be given that our listing will be approved by Nasdaq or that a trading market will develop for our common stock. We will not proceed with this offering in the event the common stock is not approved for listing on Nasdaq. | |
| Risk Factors | Investing in our common stock is speculative and involves a high degree of risk. See “Risk Factors” beginning on page 10 and the other information in this prospectus for a discussion of the factors you should consider carefully before you decide to invest in our common stock. | |
| Lock-Up | In connection with this offering, our directors and officers and holders of our common stock as of the effective date of this registration statement will enter into customary “lock-up” agreements in favor of the underwriters for a period of six (6) months from the date of this offering. We have agreed with the underwriters that, for a period of six (6) months from the closing of this offering, we will not (a) offer, sell, or otherwise transfer or dispose of, directly or indirectly, any capital stock or any securities convertible into or exercisable or exchangeable for capital stock; or (b) file or caused to be filed any registration statement with the SEC relating to the offering of any capital stock or any securities convertible into or exercisable or exchangeable for capital stock. See “Underwriting” beginning on page 97 for more information. |
| (1) | Reflects the Stock Split effected by the Company effective January 8, 2026 at a ratio of 167 for 1. Based on 15,021,650 shares of our common stock outstanding as of the date of this prospectus, and excludes: |
| ● | 210,000 shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 9,376,716 shares of common stock issuable under our 2018 Equity Incentive Plan, as amended (the “2018 Plan”), at a weighted average exercise price of $2.16 per share; and | |
| ● | 233,800 shares of common stock to be issued as equity incentives out of the initial share reserve of the 2026 Equity Incentive Plan (“2026 Plan”) as obligated under employee offer letters. |
Unless otherwise indicated, this prospectus reflects and assumes (i) no exercise by the representative of the underwriters of its over-allotment option and (ii) no exercise of the outstanding stock options described above.
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SUMMARY OF FINANCIAL INFORMATION
The following tables set forth summary financial and other data for the periods ended and at the dates indicated below. Our summary balance sheet and statement of income data as of and for the years ended December 31, 2024, and 2023 have been derived from our audited financial statements included in this prospectus. The unaudited balance sheet data as of September 30, 2025 and statement of income data for the nine months ended September 30, 2025 and 2024 have been derived from our unaudited interim financial statements, which are included elsewhere in this prospectus and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position and results of operations for these periods. These interim financial statements reflect the correction of errors related to going concern disclosure and deferred tax asset accounting, and accordingly, the September 30, 2025 comparative financial information has been restated. The financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus.
| September 30, | December 31, | December 31, | ||||||||||
| 2025 | 2024 | 2023 | ||||||||||
| Total Assets | $ | 7,489,324 | $ | 6,445,520 | $ | 7,768,212 | ||||||
| Total Liabilities | $ | 6,179,759 | $ | 4,595,248 | $ | 4,387,332 | ||||||
| Total Stockholder’s Equity | $ | 1,309,565 | $ | 1,850,272 | $ | 3,380,880 | ||||||
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Statement of Operations SUMMARY
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Sales | $ | 13,492,434 | $ | 11,061,778 | ||||
| Cost of sales | 2,777,639 | 1,468,124 | ||||||
| Selling, general, and administrative | 6,162,114 | 6,319,772 | ||||||
| Research and Development | 4,811,387 | 4,629,255 | ||||||
| Total Other (Expense) Income | (49,544 | ) | 2,422 | |||||
| Provision (Benefit) from income taxes | 600,476 | (605,147 | ) | |||||
| Net Income (Loss) | $ | (908,726 | ) | $ | (747,804 | ) | ||
| Earnings (Loss) per Share – Basic | $ | (0.06 | ) | $ | (0.05 | ) | ||
| Earnings (Loss) per Share – Diluted | $ | (0.06 | ) | $ | (0.05 | ) | ||
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Sales | $ | 13,704,702 | $ | 15,410,827 | ||||
| Cost of sales | 1,747,038 | 2,766,639 | ||||||
| Selling, general, and administrative | 7,542,742 | 6,173,689 | ||||||
| Research and Development | 5,683,836 | 4,014,016 | ||||||
| Total Other Expense | 29,241 | 74,156 | ||||||
| Provision from income taxes | (600,477 | ) | - | |||||
| Net Income (Loss) | $ | (697,678 | ) | $ | 2,382,327 | |||
| Earnings (Loss) per Share – Basic | $ | (0.05 | ) | $ | 0.16 | |||
| Earnings (Loss) per Share – Diluted | $ | (0.05 | ) | $ | 0.15 | |||
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Pro forma financial information
The following unaudited pro forma financial information has been prepared to reflect the effects of the reorganization of Rank One Computing Corporation (the “Company”) from a Subchapter S Corporation to a C corporation on January 1, 2024. The pro forma financial information presents the financial results of the Company as if it had been taxed as a C corporation for the years ended December 31, 2023. Management believes that presenting this pro forma information provides investors with a more meaningful basis of comparison for evaluating the Company’s operating results by reflecting the impact of the Company’s election to be taxed as a C corporation as if it had occurred at the beginning of the periods presented.
| Actual | Unaudited Pro forma C Corp with tax accrual | Actual | ||||||||||
| 2023 | 2023 | 2024 | ||||||||||
| ASSETS | ||||||||||||
| Total Current Assets | $ | 6,417,717 | $ | 6,417,717 | $ | 3,883,026 | ||||||
| Net Property and Equipment | 493,193 | 493,193 | 404,482 | |||||||||
| Intangible assets, net | 8,559 | 8,559 | 7,039 | |||||||||
| Operating lease right-of-use asset | 848,743 | 848,743 | 1,363,956 | |||||||||
| Deferred Tax Asset, net | - | 365,645 | 787,017 | |||||||||
| Total Other Assets | 1,350,495 | 1,716,140 | 2,562,494 | |||||||||
| Total Assets | $ | 7,768,212 | $ | 8,133,857 | $ | 6,445,520 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
| Current Liabilities: | ||||||||||||
| Accounts payable and accrued expenses | 2,199,187 | 2,199,187 | 1,202,856 | |||||||||
| Income taxes payable | - | 589,436 | - | |||||||||
| Deferred revenue | 1,228,586 | 1,228,586 | 1,490,949 | |||||||||
| Line of credit | - | - | 431,132 | |||||||||
| Operating lease liabilities short term | 154,200 | 154,200 | 268,508 | |||||||||
| Total Current Liabilities | 3,581,973 | 4,171,409 | 3,393,445 | |||||||||
| Total Long-Term Liabilities | 805,362 | 805,362 | 1,201,803 | |||||||||
| Total Liabilities | 4,387,332 | 4,976,768 | 4,595,248 | |||||||||
| Total Stockholders’ Equity | 3,380,880 | 3,157,089 | 1,850,272 | |||||||||
| Total Liabilities and Stockholders’ Equity | $ | 7,768,212 | $ | 8,133,857 | $ | 6,445,520 | ||||||
Assumptions for each of the pro-forma balance sheets are below:
| a. | The Company was a C corporation as of January 1, 2023. | |
| b. | The pro forma balance sheets include an accrual for federal tax and state corporate taxes at a “blended rate” of 24.5%. |
| Actual | Unaudited Pro forma C Corp with tax accrual | Actual | ||||||||||
| 2023 | 2023 | 2024 | ||||||||||
| Income (loss) before income taxes | 2,382,327 | 2,382,327 | (1,298,155 | ) | ||||||||
| Provision for income taxes | - | 635,950 | (600,477 | ) | ||||||||
| Net income (loss) | $ | 2,382,327 | $ | 1,746,377 | $ | (697,678 | ) | |||||
| Earnings (Loss) per Share – Basic | 0.16 | $ | 0.12 | $ | (0.05 | ) | ||||||
| Earnings (Loss) per Share – Diluted | 0.15 | 0.11 | (0.05 | ) | ||||||||
| Weighted Average Number of Shares – Basic | 14,941,323 | 14,941,323 | 14,985,411 | |||||||||
| Weighted Average Number of Shares – Diluted | 15,952,508 | 15,952,508 | 14,985,411 | |||||||||
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An investment in our securities is speculative and involves a high degree of risk. You should carefully consider the risks described below, which we believe represent certain of the material risks to our business, together with the information contained elsewhere in this prospectus, before you make a decision to invest in our shares of common stock. Please note that the risks highlighted here are not the only ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the following events occur or any additional risks presently unknown to us actually occur, our business, financial condition, and operating results may be materially adversely affected. In that event, the trading price of our securities could decline and you could lose all or part of your investment.
Risks Related to Our Industry and Business
Our recurring losses and negative cash flow from operations, as well as current cash and liquidity projections, raise substantial doubt about our ability to continue as a going concern.
Based on recurring losses from operations and current cash and liquidity projections, we have concluded that there is substantial doubt about our ability to continue as a going concern for the next twelve months. As of September 30, 2025, we had cash of $72,151 and working capital of $327,835. Further, we have incurred and expect to continue to incur significant costs in pursuit of our product development and growth plans. Our consolidated financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. You should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to holders of our common stock, in the event of liquidation.
As an early stage company with dynamic growth, our historic performance is not necessarily an indication of future performance.
Since its inception, our business has expanded organically through the delivery of enhanced solutions and expanded product offerings to our customers. Due to our limited operating history and evolving business, our ability to forecast future results of operations is limited and subject to several uncertainties, including our ability to plan for and model future growth. Our historical revenue growth should not be considered indicative of our future performance. Further, in future periods, our revenue growth could slow. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, and if our assumptions regarding these risks and uncertainties, which we use to plan our business, prove incorrect or we fail to address these risks effectively, our business could be adversely affected.
We may not be able to sustain our revenue growth rate in the future.
Although our revenue has increased in recent periods, there can be no assurances that it will continue to grow or do so at current rates, and past performance should not be seen as an indicator of future results. Our revenue growth rate may decline in future periods due to various factors, such as increased competition, slowing demand for our platforms from existing and new customers, our failure to capitalize on growth opportunities, terminations of existing contracts by our customers, and the maturation of our business, among others. If our revenue growth rate declines, our business, financial condition, and results of operations could be adversely affected.
Historically, existing customers have expanded their relationships with us, which has resulted in a limited number of customers accounting for a substantial portion of our revenue. If existing customers do not make subsequent purchases or renew their contracts with us, or if our relationships with our largest customers are impaired or terminated, our revenue could decline, and our results of operations would be adversely impacted.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy. Our revenue reflects risks from customer concentration. As noted in the table below, we had two customers that accounted for 10% or more of our revenue as of September 30, 2025, accounting for 45% of total revenue, one customer that accounted for 10% or more of annual revenue for the year ended December 31, 2024, accounting for 25% of 2024 annual revenue, and two customers that accounted for more than 10% or more of annual revenue for the year ended December 31, 2023, accounting for 49% of 2023 annual revenue.
| % of Total Revenue | ||||||||||||
| Nine months ended 9/30/25 | Year ended 12/31/2024 | Year ended 12/31/2023 | ||||||||||
| Customer A | 28 | % | - | - | ||||||||
| Customer B | 18 | % | 25 | % | 26 | % | ||||||
| Customer C | - | - | 23 | % | ||||||||
| Total | 45 | % | 25 | % | 49 | % | ||||||
Certain of our customers, including customers that represent a significant portion of our business, have in the past reduced their spending with us or terminated their agreements with us, which has reduced our anticipated future payments or revenue from these customers, and which has required us to refund some previously paid amounts to these customers. We cannot predict future demand from our larger customers for our software and services.
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There are inherent risks when a large percentage of total revenues are concentrated with a limited number of customers, as this increases the risk of quarterly fluctuations in our operating results and heightens our sensitivity to any material adverse developments affecting those key customers. We cannot predict the future level of demand for our products that will be generated by these customers. The terms of our contracts with these significant customers generally allow them to unilaterally terminate the arrangement at any time, subject to notice and other provisions. The terms and conditions under which we do business generally do not include commitments by those customers to purchase any specific quantities of products from us or to renew their contracts after the initial period. Even when we enter into an arrangement under which a significant customer agrees to purchase an agreed portion of its product or service needs from us (provided we meet our contractual obligations), the arrangement often includes pricing schedules with substantial price concessions and does not guarantee expected purchase volumes. If any major customer faces declining or delayed sales due to market, economic, or competitive factors, we may be pressured to lower our prices or risk losing the customer. Any such development could have an adverse effect on our margins, financial position, sales, results of operations, and the trading price of our common stock. We cannot guarantee that our sales will not continue to be sufficiently concentrated among a limited number of customers.
Our customers typically enter into shorter-term contracts, such as 12 months, which may not provide for automatic renewal and may require customer to opt-in to extend the term. Our customers are not obligated to renew, upgrade, or expand their agreements after expiration. In addition, many of our customer contracts allow termination with little or no notice. If our customers terminate their contracts with us, whether for convenience, breach, or other contractual reasons, as applicable; if our customers elect not to renew their contracts with us; if our customers renew their contractual arrangements with us for shorter contract lengths; or if our customers otherwise seek to renegotiate terms of existing agreements on terms less favorable to us, our business and results of operations could be adversely affected. This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations.
Our results of operations are likely to fluctuate significantly on a quarterly basis in future periods and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict and could cause our results of operations to fall below expectations.
Our quarterly results of operations, including cash flows, have fluctuated significantly in the past and are likely to continue to do so in the future. Accordingly, the results of any one quarter should not be seen as indicative of future results. Our quarterly results, financial position, and operations are likely to fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuations in quarterly results may negatively impact the value of our common stock.
The timing of our sales cycles is unpredictable and is impacted by factors such as government budgeting and appropriation cycles, varying commercial fiscal years, and changing economic conditions. This can impact our ability to plan and manage margins and cash flows. Our sales cycles are often long, and it is difficult to predict exactly when, or if, we will make a sale with a potential customer. The loss or delay of one or more large sales transactions in a quarter would impact our results of operations and cash flow for that quarter and any future quarters in which revenue from that transaction is lost or delayed. In addition, downturns in new sales may not be immediately reflected in our revenue because we generally recognize revenue over the term of our contracts. The timing of customer billing and payment varies from contract to contract. A delay in the timing of receipt of such collections, or a default on a large contract, may negatively impact our liquidity for the period and in the future. Because a substantial portion of our expenses is relatively fixed in the short-term and requires time to adjust, our results of operations and liquidity would suffer if revenue falls below our expectations in a particular period.
Other factors that may cause fluctuations in our quarterly results of operations and financial position include, without limitation, those listed below:
| ● | The success of our sales and marketing efforts; |
| ● | Our ability to increase our contribution margins; |
| ● | The timing of expenses and revenue recognition; |
| ● | The timing and amount of payments received from our customers; |
| ● | Termination of one or more large contracts by customers, including for convenience; |
| ● | The time and cost-intensive nature of our sales efforts and the length and variability of sales cycles; |
| ● | The amount and timing of operating expenses related to the maintenance and expansion of our business; |
| ● | The timing and effectiveness of new sales and marketing initiatives; |
| ● | Changes in our pricing policies or those of our competitors; |
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| ● | The timing and success of new products, features, and functionality introduced by us or our competitors; |
| ● | Cyberattacks and other actual or perceived data or security breaches; |
| ● | Our ability to hire and retain employees, especially those in operations and maintenance of and the selling or marketing of our software, and to develop and retain talented sales personnel who are able to achieve desired productivity levels and provide sales leadership in growth areas; |
| ● | Changes in the way we operate and maintain our platforms; |
| ● | Changes in the competitive dynamics of our industry; |
| ● | The cost of and potential outcomes of existing and future claims or litigation, which could have a material adverse effect on our business; |
| ● | Changes in laws and regulations that impact our business, such as the Federal Acquisition Streamlining Act of 1994 (“FASA”); |
| ● | The timing of expenses related to any future acquisitions; and |
| ● | General economic, regulatory, and market conditions. |
In addition, our contracts generally contain termination for convenience provisions, which may require us to refund prepaid amounts or forgo anticipated revenue if we fail to provide future services as anticipated. These factors make it difficult for us to accurately predict financial metrics for future periods.
The variability and unpredictability of our quarterly results of operations, cash flows, or other operating metrics could result in our failure to meet our expectations or those of analysts that may cover us or investors with respect to revenue or other key metrics for a particular period. If we fail to meet these expectations, our stock price may decline and we could face costly litigation, including securities class actions.
Our software is complex and may have a lengthy implementation process, and any failure of our software to satisfy our customers or perform as desired could harm our business, results of operations, and financial condition.
Our software and services are complex and are deployed in a wide variety of environments. Implementing our software can be a complex and lengthy process, as we often configure our software for each customer’s unique environment. Inability to meet the unique needs of our customers may result in customer dissatisfaction and/or damage to our reputation. Proper use of our software may also require customer training and ongoing technical support.
In addition, if our customers misuse our software correctly or as intended, inadequate performance or outcomes may result. It is possible that our software may also be intentionally misused or abused by customers or their employees, or third parties. Similarly, our software is sometimes used by customers with smaller or less sophisticated IT departments, potentially resulting in sub-optimal performance at a level lower than anticipated by the customer. Because our customers rely on our software to address important business goals and challenges, the improper use or configuration of our software, lack of effective training, or inadequate implementation or maintenance support may result in contract terminations or non-renewals, reduced customer payments, negative publicity, or legal claims against us. Furthermore, if there is substantial turnover of the company or customer personnel responsible for procurement and use of our software, our software may go unused or be adopted less broadly, and our ability to make additional sales may be substantially limited, which could negatively impact our business, results of operations, and growth prospects.
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If we do not successfully develop and deploy new technologies to address the needs of our customers, our business and results of operations could suffer.
Our success has been based on our ability to design software that integrates large amounts of data to facilitate advanced data analysis, knowledge management, and decision support in real-time. We invest significant time and resources into developing new technologies and enhancing existing features to meet evolving customer needs. However, there is no guarantee that these enhancements or our new products will be compelling to our customers or gain market acceptance. If our research and development efforts do not align with customer demand or if we fail to develop our software in a timely and cost-effective manner, we may struggle to retain customers or drive new demand.
The introduction of new products by competitors or the development of new technologies to replace existing offerings could make our software obsolete or adversely affect our business, financial condition, and results of operations. We may face difficulties in software development, design, or marketing that could delay the release of new software or features. There can be no assurance that new software, features, or capabilities will be released according to schedule. Any delays could result in adverse publicity, loss of revenue or market acceptance, or claims by customers brought against us, any of which could harm our business. Moreover, the design and development of new software or new features and capabilities to our existing software may require substantial investment, and we cannot ensure that such investments will be successful. If customers do not widely adopt our new software, experiences, features, and capabilities, we may not be able to realize a return on our investment.
Our new and existing software and changes to our existing software could fail to attain sufficient market acceptance for many reasons, including:
| ● | our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; |
| ● | product defects, errors, or failures, or our inability to satisfy customer service level requirements; |
| ● | negative publicity or negative private statements about the security, performance, or effectiveness of our software or product enhancements; |
| ● | delays in releasing to the market our new offerings or enhancements to our existing offerings; |
| ● | introduction or anticipated introduction of competing software or functionalities by our competitors; |
| ● | inability of our software or product enhancements to scale and perform to meet customer demands; |
| ● | receiving qualified or adverse opinions in connection with security or penetration testing, certifications, or audits, such as those related to IT controls and security standards and frameworks or compliance; |
| ● | poor business conditions for our customers, causing them to delay software purchases; |
| ● | reluctance of customers to purchase proprietary software products; and |
| ● | reluctance of customers to purchase products hosted by our vendors and/or service interruption from such providers. |
If we are not able to continue to identify challenges faced by our customers and develop, license, or acquire new features and capabilities to our software in a timely and cost-effective manner, or if such enhancements do not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and our anticipated revenue growth may not be achieved.
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If we fail to manage future growth effectively, our business could be harmed.
Since our founding in 2015, we have experienced rapid growth. We operate in a growing market and have experienced, and may continue to experience, significant expansion. This growth has strained our resources, including employees, management systems, and finances, as we manage larger, more complex deployments. We have increasingly managed larger and more complex deployments of our software and services with a broader base of government and commercial customers. As we continue to grow, we face challenges of integrating, developing, retaining, and motivating our expanding workforce. In the event of continued growth, our operational resources, including IT systems, employee base, and internal controls and procedures, may not be adequate to support our operations and deployments. Managing our growth may require significant investments and management efforts. If we fail to achieve the necessary level of efficiency in our organization as it grows, our business, financial condition, and results of operations would be harmed. Further, we may continue to find it increasingly difficult to maintain the benefits of our traditional company culture, such as our ability to respond quickly to customers and avoid delays associated with a formal corporate structure, which could negatively affect our business performance or ability to hire or retain personnel.
In addition, our rapid growth may make it difficult to evaluate our future prospects. Our ability to forecast our future results of operations is subject to uncertainties, including our ability to effectively plan for and model future growth. We have encountered, and may encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If we fail to achieve the necessary level of efficiency, or if we are not able to accurately forecast future growth, our business, financial condition, and results of operations would be harmed.
If we are unable to hire, retain, train, and motivate qualified personnel and senior management and deploy our personnel and resources to meet customer demand around the world, our business could suffer.
Our ability to compete in the highly competitive technology industry depends upon our ability to attract, motivate, and retain qualified personnel. We are highly dependent on the contributions of our management team, including their customer relationships, expertise in science and technology, business development experience, and innovative management in both public and private sectors. Some of our executive officers and key personnel are at-will employees and may terminate their employment relationship with us at any time. The loss of the services of our key personnel and other executive officers, and our inability to find suitable replacements, could result in a decline in sales, delays in product development, and harm to our business and operations.
We have experienced and may continue to experience difficulty in hiring and retaining personnel with appropriate qualifications, and may not be able to fill positions in a timely manner or at all. Potential candidates may not view our compensation package, including equity awards, as favorably as those hired before our listing. In addition, our recruiting strategies may need to adapt to a changing candidate pool, and we may not be able to make these adjustments quickly. We may also incur significant costs to attract and recruit skilled personnel, and we may lose new personnel before we realize the benefit of our investment in recruiting and training them. As we move into new geographies, we will need to attract and recruit skilled personnel in those geographic areas, but we may face challenges competing with traditional local employers for talent. In addition, certain personnel may be required to receive various security clearances and substantial training to work on certain customer engagements or to perform certain tasks. Necessary security clearances may be delayed or unsuccessful, which may negatively impact our ability to perform on our U.S. and non-U.S. government contracts in a timely manner or at all. Our success depends on our ability to effectively source and staff people with the right mix of skills and experience. If we are unable to effectively utilize our personnel on a timely basis to fulfill the needs of our customers, our business could suffer.
We face intense competition for qualified personnel, especially software engineers and data scientists, in major U.S. markets, where a large portion of our personnel are based. We incur costs related to attracting, relocating, and retaining qualified personnel in these highly competitive markets, including leasing real estate in prime areas in these locations. Many of the companies with which we compete for qualified personnel have greater resources. If we fail to attract new personnel or to retain our current personnel, our business and operations could be harmed.
We seek to retain and motivate existing personnel through our compensation practices, company culture, and career development opportunities. This may require significant investments in cash and equity, which we may never realize returns on these investments. If the perceived value of our equity awards declines, or if the mix of equity and cash compensation we offer is less attractive than that of our competitors, it may adversely affect our ability to recruit and retain highly skilled personnel. Employees may also be more likely to leave us if their stock or equity awards have either significantly appreciated or lost value. In addition, employees receiving substantial proceeds from selling our stock after this offering could become less motivated to stay. Any of these factors could harm our business, financial condition, and results of operations.
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If we are unable to successfully deploy our marketing and sales organization in a timely manner, or at all, or to successfully hire, retain, train, and motivate our sales personnel, our growth could be adversely impacted.
We currently have a growing, but limited, direct sales force, and our sales efforts have historically depended on the significant direct involvement of our senior management team. The successful execution of our strategy to increase our sales to existing customers, engage new customers, and enter new markets will depend, among other things, on our ability to build and expand our sales organization and operations. Recruiting, training, and managing sales personnel requires significant time, expense, and involvement from senior management and other key personnel, which could adversely impact our business, financial condition, and results of operations in the short and long term.
In order to successfully scale our sales model, we must continue to increase the size of our direct sales force, both in the United States and outside of the United States, to generate additional revenue from new and existing customers while maintaining our culture and mission. If we do not hire enough qualified sales personnel, our future revenue growth and business could be adversely impacted. It may take a significant period of time before our sales personnel are fully trained and productive, and there is no guarantee we will be successful in adequately training and effectively deploying our sales personnel. In addition, we may need to invest significant resources to enable our sales organization to run effectively and efficiently, including supporting sales strategy planning, sales process optimization, data analytics and reporting, and administering incentive compensation arrangements. Furthermore, hiring personnel in new countries requires additional setup and upfront costs that we may not recover if those personnel fail to achieve full productivity in a timely manner. Our business would be adversely affected if our efforts to build, expand, train, and manage our sales organization are not successful. We periodically adjust our sales structure in response to market opportunities, competitive threats, management changes, product introductions or enhancements, acquisitions, sales performance, increases in sales headcount, cost levels, and other internal and external considerations, and any such sales organization changes may temporarily reduce productivity and negatively affect our rate of growth. Additionally, any changes in sales compensation structures may be disruptive or ineffective. If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales productivity levels, if our marketing programs are not effective or if we are unable to effectively build, expand, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business may be significantly harmed.
Our ability to sell our software to customers depends on the quality of our offerings, and our failure to maintain the quality of our offerings could have a material adverse effect on our sales and results of operations.
Once our software is deployed and integrated with our customers’ existing information technology investments, our customers depend on our support to resolve any product-related issues. As our software becomes increasingly deployed in large-scale, complex technological environments, our future success will depend on our ability to increase sales of our products within these settings. Our ability to provide timely, efficient, and scalable support may depend in part on our customers’ environments and their ability to maintain and/or modernize their IT infrastructure.
The number of our customers has grown significantly, and increased demand may strain our services teams, and we may not be able to scale quickly enough to meet short-term spikes in demand. In addition, as we continue to grow our operations and expand outside of the United States, we need to be able to provide efficient services that meet our customers’ needs globally at scale, and our services teams may face additional challenges, including those associated with operating the software and delivering support, training, and documentation in multiple languages and providing services across expanded time zones. Failing to do so may hinder our growth, we may need to hire additional service personnel, which could negatively impact our business, financial condition, and results of operations.
Our customers often require proper training to fully realize the benefits and the full potential of our software. If we fail to effectively deploy, update, or upgrade our products, help our customers resolve post-deployment issues, and provide effective ongoing support, it could hinder our ability to sell additional products, damage our reputation, and lead to negative publicity. Many enterprises and government customers require higher levels of services than smaller customers, and failure to meet their requirements could impact our efforts to expand within this segment. As a result, our failure to maintain high-quality services may have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
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If we are not able to grow, maintain, and enhance our brand and reputation, along with the impact of inaccurate and damaging media coverage, our relationships with our customers, partners, and employees may be harmed, and our business and results of operations may be adversely affected.
We believe that growing, maintaining, and enhancing our brand identity and reputation is essential to attracting and retaining customers, partners, investors, and employees. The successful promotion of our brand depends upon our ability to continue to offer high-quality software, maintain strong relationships with our customers, the community, and others, while successfully differentiating our software from that of our competitors. Unfavorable media coverage may adversely affect our brand and reputation. We anticipate that as our market becomes increasingly competitive, maintaining our brand may become more challenging and costly. Brand promotional activities may not yield increased revenue, and even if they do, the increased revenue may not offset the expenses we incur in building our brand and reputation. If we fail to strengthen our brand or are unable to sell legacy products under our name, we may struggle to attract key stakeholders, grow our business, or maintain pricing power, all of which could adversely impact our business, financial condition, results of operations, and growth prospects. Additionally, despite our internal efforts to the contrary, we cannot guarantee that our customers will not ultimately use our software for purposes inconsistent with our company values, and such uses may harm our brand and reputation.
Publicly available information regarding our business has historically been limited, in part due to the sensitivity of our work with customers or contractual restrictions that prevent public disclosure of certain customer relationships and activities. As our business and interest in the broader tech industry have grown, we may attract significant attention from news and social media outlets, including unfavorable coverage or unauthorized coverage. This coverage may include inaccurate or misleading reports about our leadership, employees, or the nature of our work, as well as unfounded speculation. If such coverage contains or relies on damaging or incomplete information, it could harm our reputation with customers, employees, and investors, and adversely affect our business, financial condition, results of operations, and growth prospects. In addition, our relationships with government customers and customers engaged in certain sensitive industries may result in public criticism, including political and social activists, and unfavorable coverage in the media. Criticism of such relationships could potentially engender dissatisfaction among potential and existing customers, investors, and employees with how we address political and social concerns in our business activities. Actions we take in response to the activities of our customers, such as terminating our contracts or refusing a particular product use case, could harm our brand and reputation. In either case, the resulting harm to our reputation could cause certain customers to cease doing business with us, impair our ability to attract new customers or expand our relationships with existing customers, diminish our ability to hire or retain employees, undermine our standing in professional communities, or prompt us to cease doing business with certain customers. Any of these factors could adversely impact our business, financial condition, and results of operations.
Our pricing for our software and services may change to address market conditions.
We expect that we may need to adjust our pricing model in response to general economic conditions, competitor pricing, customer budgets, pricing studies, or how customers use our products and services. Entering new markets may also require tailored pricing strategies. In addition, as competitors introduce new products or services or revise their pricing structures, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. Moreover, as we continue to target selling our software to larger organizations, these larger organizations may demand substantial price concessions, and government contracts may require compliance with specific pricing guidelines. If we fail to modify or develop pricing strategies that are attractive to existing and prospective customers, while enabling us to significantly grow our sales and revenue relative to our associated costs and expenses, our business, financial condition, and results of operations may be adversely impacted.
Certain estimates of market opportunity included in this prospectus may prove to be inaccurate.
This prospectus includes our internal estimates of the addressable market for our software and services. These estimates, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions that may not prove to be accurate. The estimates in this prospectus relating to the size of our target market, market demand and adoption, capacity to address this demand, and pricing may prove to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which we compete meet the size estimates in this prospectus, our business could fail to successfully compete in such markets.
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We face intense competition in our markets, and we may lack sufficient financial or other resources to maintain or improve our competitive position.
The markets for our software are very competitive, and we expect such competition to continue or increase in the future. A significant number of companies are developing products that currently, or in the future may, compete with some or all aspects of our proprietary software. We may not be successful in convincing our potential customers to deploy our software in lieu of existing software solutions or in-house software development projects preferred by internal IT teams or other competitors. In addition, our competitors include large enterprise software companies, government contractors, and system integrators, and we may face competition from emerging companies as well as established companies entering this market. To remain competitive, we may need to make substantial investments in our research, development, services, marketing, and sales functions in order to respond to competition, and there can be no assurance that we will be able to compete successfully in the future. Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:
| ● | greater name recognition, longer operating histories, and larger customer bases; |
| ● | larger sales and marketing budgets and resources, and the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products; |
| ● | broader, deeper, or otherwise more established relationships with technology, channel, and distribution partners, and customers; |
| ● | wider geographic presence or greater access to larger potential customer bases; |
| ● | greater focus on specific geographies; |
| ● | lower labor and research and development costs; |
| ● | larger and more mature intellectual property portfolios; and |
| ● | substantially greater financial, technical, and other resources to provide services, to make acquisitions, and to develop and introduce new products and capabilities. |
In addition, some of our larger competitors have substantially broader and more diverse products and services, allowing them to leverage their relationships with distribution partners and customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages customers from purchasing our software, including by selling at zero or negative margins, product bundling, or offering closed technology platforms. Some customers may also prefer to purchase from their existing provider regardless of software performance or features. As a result, even if the features of our software offer unique advantages, customers may not purchase our software. If we are unable to sufficiently differentiate our software through functionality, performance, or value, we may see a decrease in demand for our offerings. Additionally, innovative start-up companies and larger companies investing heavily in research and development may introduce products that have greater performance or functionality, are easier to implement or use, incorporate new technological advances, or implemented or may invent similar or superior software that competes with our software. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources.
Some of our competitors have made or could make acquisitions of businesses that allow them to offer more competitive and comprehensive solutions. As a result of such acquisitions, our current or potential competitors may be able to accelerate the adoption of new technologies, devote greater resources to bringing these products and services to market, initiate or withstand substantial price competition, or develop and expand their offerings more quickly than we do. These competitive market pressures, or our failure to compete effectively, may result in fewer orders, reduced revenue and margins, and loss of market share. It is also possible that industry consolidation may cause customers to question the viability of smaller or mid-sized software firms, making them less likely to purchase from us.
We may not compete successfully against our current or potential competitors. If we are unable to compete successfully, or if competing successfully requires costly actions, our business, financial condition, and results of operations could be adversely affected. In addition, our competitors may have an entirely different pricing or distribution model. Increased competition could result in fewer customer orders, price reductions, reduced margins, and loss of market share, any of which could harm our business and results of operations.
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We may not enter into relationships in select countries or with potential customers if their activities or objectives are inconsistent with our mission or values. We generally do not enter into business with customers or governments whose positions or actions we consider inconsistent with our mission to support Western liberal democracy and its strategic allies. Our decisions not to enter into these relationships may not produce the long-term financial benefits and results that we expect. Although we endeavor to do business with customers and governments that are aligned with our mission and values, we cannot predict how the activities and values of our government and private sector customers will evolve over time, and they may evolve in a manner inconsistent with our mission.
Joint ventures, channel sales relationships, platform partnerships, strategic alliances, or subcontracting opportunities may have a material adverse effect on our business, results of operations, and prospects.
We expect to continue to enter into joint ventures, channel sales relationships, platform partnerships, or strategic alliances as part of our long-term business strategy. Joint ventures, platform partnerships, strategic alliances, and other similar arrangements involve significant investments of both time and resources, and there can be no assurances that they will be successful. They may present significant challenges and risks, including that they may not advance our business strategy, we may get an unsatisfactory return on our investment or lose some or all of our investment, they may distract management and divert resources from our core business, they may expose us to unexpected liabilities, or we may choose a partner that does not cooperate as we expect them to and that fails to meet its obligations or that has economic, business, or legal interests or goals that are inconsistent with ours. Entry into these partnerships now or in the future may be subject to government regulation, including review by U.S. or foreign government entities related to foreign direct investment. Such regulatory review might limit our ability to enter into the desired strategic alliance and thus our ability to carry out our long-term business strategy.
As our joint ventures, channel sales relationships, platform partnerships, and strategic alliances come to an end, we may be unable to renew or replace them on comparable terms, or at all. These partners may be required to undertake some portion of sales, marketing, implementation services, engineering services, or software configuration that we would otherwise provide. In such cases, our partner may be less successful than we would have otherwise been absent the arrangement. In the event we enter into an arrangement with a particular partner, we may be less likely or unable to work with one or more direct competitors of our partner with which we would have worked absent the arrangement. Our interests may not always align with those of our joint venture or strategic partners, which may affect our ability to successfully collaborate with a given partner. Similarly, one or more of our partners may independently suffer a bankruptcy or other economic hardship that negatively affects their ability to continue as a going concern or perform their obligations under the arrangement. In addition, customer satisfaction with our products provided in connection with these arrangements may be less favorable than anticipated, and some of our strategic partners may offer competing products and services or work with our competitors. As a result of these and other factors, many of the companies with which we have partnerships may choose to pursue alternative technologies and develop alternative products in addition to or in lieu of our platforms, either on their own or in collaboration with others, including our competitors. If we are unsuccessful in establishing or maintaining our relationships with these partners, our ability to compete in a given marketplace or to grow our revenue would be impaired, and our results of operations may suffer. Even if we are successful in establishing and maintaining these relationships with our partners, we cannot assure that these relationships will result in increased customer usage of our platforms or increased revenue, and any negative impact on a partner’s brand or products could affect our outcomes in those markets.
In addition, some of our sales to government entities have been made, and in the future may be made, indirectly through our channel partners. For the nine months ended September 30, 2025, channel partners accounted for 35.2% of overall revenue. For the year ended December 31, 2023, channel partners accounted for 39.4% of overall revenue and for the year ended December 31, 2024, channel partners accounted for 54.2% of overall revenue. In no period has any single channel partner account for 10% or more of overall corporate revenue.
Government entities may have statutory, contractual, or other legal rights to terminate contracts with our channel partners for convenience or due to a default, and, in the future, if the portion of government contracts that are subject to renegotiation or termination, our future results could be negatively impacted. In the event of such termination, it may be difficult for us to arrange for another channel partner to sell our products in a timely manner, and we could lose sales opportunities during the transition. Government entities routinely audit government contractors’ administrative processes, and any unfavorable audit could result in the government entity refusing to renew its subscription for our software, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities. Further, winding down joint ventures, channel sales relationships, platform partnerships, or other strategic alliances can result in additional costs, litigation, and negative publicity. Any of these events could adversely affect our business, financial condition, results of operations, and growth prospects.
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If we are not successful in executing our strategy to increase our sales to larger customers, our results of operations may suffer.
An important part of our growth strategy is to increase sales of our software to large enterprises and government entities, which can involve greater risks than sales to small or mid-sized commercial customers. These risks may include greater leverage held by large customers in negotiating contractual arrangements with us, changes in key decision makers within these organizations that may negatively impact our ability to negotiate in the future, concerns from customers’ IT departments about losing internal control, and the potential for investing resources in prospects that do not convert. Large customers may also impose more stringent contract terms, including stricter service response times, increased penalties for non-compliance. In addition, we may face competition from larger competitors, such as defense contractors, system integrators, or large software companies that traditionally target large enterprises and government entities with existing commitments. Further, large enterprises and government entities often undertake a significant evaluation process that results in a lengthy sales cycle, requiring approvals of multiple management personnel and more technical personnel than would be typical of a smaller organization.
Finally, large enterprises and government entities typically (i) have longer implementation cycles, (ii) require greater product functionality and scalability and a broader range of services, (iii) demand that vendors take on a larger share of risks, (iv) sometimes require acceptance provisions that can lead to a delay in revenue recognition, (v) typically have more complex IT and data environments, and (vi) expect greater payment flexibility from vendors. Customers, and sometimes we, may also engage third parties to be the users of our software, which may result in contractual complexities and risks, require additional investment in time and human resources to train the third parties, and allow them (who may be engaging in various competitive activities) to influence our customers’ perception of our software. All these factors can add further risk to business conducted with these customers. If sales expected from a large customer for a particular quarter are not realized in that quarter or at all, our business, financial condition, results of operations, and growth prospects could be materially and adversely affected.
If the market for our software and services develops more slowly than we expect, our growth may slow or stall, and our business, financial condition, and results of operations could be harmed.
The market for our software is rapidly evolving, and our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors. Factors influencing this growth include customer adoption and demand, changing customer needs, competitive products, and customers’ willingness to invest in new software after significant prior investments in legacy data collection, storage, and processing software. The estimates used to calculate our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of the organizations covered by our market opportunity estimates will pay for our software at all or generate any particular level of revenue for us. Even if the market meets the size estimates and growth forecasts, we may not achieve expected growth due to factors beyond our control, including increased competition in our industry. Further, if we or other data management and analytics providers experience security incidents, loss of or unauthorized access to customer data, disruptions in delivery, or other problems, this market as a whole, including our software, may be negatively affected. If our solutions fail to achieve widespread adoption, or there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing products, decreases in corporate spending, or if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our software, our revenue and overall business performance could be adversely affected.
In the future, we may not be able to secure the financing necessary to operate and grow our business as planned, or to make acquisitions.
In the future, we may seek to raise or borrow additional funds to expand our business development efforts, make acquisitions, or otherwise fund or grow our business and operations. As of September 30, 2025, December 31, 2024, and 2023, we had approximately $1.4 million, $0.4 million, and $0 of indebtedness, respectively. Although we currently anticipate that our existing cash and cash equivalents will be sufficient to meet our cash needs for the next 6 months, additional funds may be required if our commercial sales do not develop as quickly as planned. If we require additional financing, we may not be able to obtain debt or equity financing on favorable terms, if at all. If we raise equity financing to fund operations or on an opportunistic basis, our stockholders may experience significant dilution of their ownership interests. If adequate funds are not available on acceptable terms, or at all, we may be unable to, among other things:
| ● | develop new products, features, capabilities, and enhancements; |
| ● | continue to expand our product development, sales, and marketing organizations; |
| ● | hire, train, and retain employees; |
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| ● | respond to competitive pressures or unanticipated working capital requirements; or |
| ● | pursue acquisition or other growth opportunities. |
Our inability to take any of these actions because adequate funds are not available on acceptable terms could have an adverse impact on our business, financial condition, results of operations, and growth prospects.
We may need to raise additional capital, which may not be available on favorable terms, if at all, and which may cause dilution to stockholders, restrict our operations, or adversely affect our ability to operate our business.
Our ability to raise additional capital may be significantly affected by general market conditions, the market price of our common stock, our financial condition, uncertainty about the future commercial success of our products, regulatory developments, the status and scope of our intellectual property, any ongoing arbitration or litigation, our compliance with applicable laws and regulations and other factors, many of which are outside our control. If we are unable to obtain needed financing on acceptable terms, or otherwise, we may not be able to implement our business plan, which could have a material adverse effect on our business, financial condition, and results of operations, including a decline in the trading price of our common stock. Any additional equity financings could result in additional dilution to our then existing stockholders. In addition, we may enter into additional financings that restrict our operations or adversely affect our ability to operate our business, and if we issue equity, debt or other securities to raise additional capital or restructure or refinance our existing indebtedness, the new equity, debt or other securities may have rights, preferences and privileges senior to those of our existing stockholders.
Our ability to pay interest and principal on any indebtedness and our ability to refinance all or a portion of our indebtedness or obtain additional financing depend on many factors beyond our control.
Our ability to make scheduled payments on, or to refinance our obligations under, any indebtedness depends on our financial performance and prevailing economic conditions. Certain of these financial and business factors, many of which may be beyond our control, are described above. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, raise additional equity capital, or restructure our debt. There is no assurance that such alternative measures may be successful or permitted under the agreements governing our indebtedness, and, as a result, we may not be able to meet our scheduled debt service obligations. Even if successful, actions taken to improve short-term liquidity to meet our debt service and other obligations could harm our long-term business prospects, financial condition, and results of operations. In addition, we cannot guarantee that we will be able to refinance our indebtedness or obtain additional financing on satisfactory terms or at all, due to factors like existing asset guarantees, our level of indebtedness, and the debt incurrence restrictions imposed by the agreements governing our indebtedness. Changes in economic conditions or credit markets could further limit access to financing or increase its cost.
We may acquire or invest in companies and technologies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions or investments.
As part of our business strategy, we have engaged in strategic transactions in the past and expect to evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future. We may also enter into relationships with other businesses to expand our products or our ability to provide services. An acquisition, investment, or business relationship may result in unforeseen risks, operating difficulties, and expenditures, including the following:
| ● | an acquisition may negatively affect our financial results by requiring us to take on significant debt or liabilities, incur changes, face adverse tax consequences or unfavorable accounting treatment, be exposed to third-party claims, or fail to generate sufficient financial return that justify the associated costs; |
| ● | costs and potential difficulties associated with the requirement to test and assimilate the internal control processes of the acquired business; |
| ● | we may encounter difficulties or unforeseen expenditures assimilating or integrating the businesses, technologies, infrastructure, products, personnel, or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us or if we are unable to retain key personnel, if their technology is not easily adapted to work with ours, or if we have difficulty retaining the customers of any acquired business due to changes in ownership, management, or otherwise; |
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| ● | we may not realize the expected benefits of the acquisition; |
| ● | an acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; |
| ● | an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; |
| ● | the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another company or business that competes with or otherwise is incompatible with those existing relationships; |
| ● | the potential that our due diligence of the acquired company or business does not identify significant problems or liabilities, or that we underestimate the costs and effects of identified liabilities; |
| ● | exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to claims from former employees, customers, or other third parties, which may differ from or be more significant than the risks our business faces; |
| ● | potential goodwill impairment charges related to acquisitions; |
| ● | we may encounter difficulties in, or may be unable to, successfully sell any acquired products; |
| ● | an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; |
| ● | an acquisition may require us to comply with additional laws and regulations, or to engage in substantial remediation efforts to cause the acquired company to comply with applicable laws or regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; |
| ● | our use of cash to pay for an acquisition would limit other potential uses for our cash; |
| ● | if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business, as well as financial maintenance covenants; and |
| ● | to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing stockholders may be diluted, and earnings per share may decrease. |
The occurrence of any of these risks could have a material adverse effect on our business, results of operations, and financial condition. Moreover, we cannot assure you that we would not be exposed to unknown liabilities.
Unfavorable conditions in our industry or the global economy, or reductions in IT spending, could limit our ability to grow our business and negatively affect our results of operations.
Our results of operations may vary based on the impact of changes in our industry or the global economy on us or our customers. The revenue growth and potential profitability of our business depend on demand for our platform. Current or future economic uncertainties or downturns could adversely affect our business and results of operations. Negative conditions in the global economy or individual markets, including changes in gross domestic product growth, financial and credit market fluctuations, political turmoil, natural catastrophes, warfare and terrorist attacks on the United States, Europe, Australia, the Asia Pacific region or elsewhere, could cause a decrease in business investments, including spending on IT and negatively affect our business. Political and military events in Ukraine, including the ongoing tensions and state of war between Ukraine and Russia, poor relations between the United States and Russia, and sanctions by the international community against Russia or separatist areas of Ukraine, may also have an adverse impact on our employees, customers, partners, and vendors. In turn, any of these may adversely impact our ability to grow our business and negatively affect our results of operations.
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Significant political, trade, regulatory developments, and other circumstances beyond our control could have a material adverse effect on our financial condition or results of operations.
Significant political, trade, or regulatory developments in the jurisdictions in which we sell our products, such as those stemming from the change in U.S. federal administration, are difficult to predict and may have a material adverse effect on us. Similarly, changes in U.S. federal policy that affect the geopolitical landscape could give rise to circumstances outside our control that could have negative impacts on our business operations. For example, during the prior Trump administration, increased tariffs were implemented on goods imported into the U.S., particularly from China, Canada, and Mexico. Historically, tariffs have led to increased trade and political tensions between not only the U.S. and China, but also between the U.S. and other countries in the international community. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. Any changes in political, trade, regulatory, and economic conditions, including, but not limited to, U.S. and China trade policies, could have a material adverse effect on our financial condition or results of operations.
We develop and use AI in our business, and challenges with properly developing and managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
We develop and incorporate AI solutions into our platform, services, and features, and the development and use of these AI solutions are fundamental to our business and operations. Our competitors or other third parties may develop and incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, if the content, analyses, or recommendations that our AI applications assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected. Our use of AI and machine learning is subject to risks related to flaws in our algorithms and datasets that may be insufficient or contain biased information. The development of AI technologies is complex, and there are challenges associated with achieving the desired level of accuracy, efficiency, and reliability. The algorithms and models used in our AI systems may have limitations, including biases, errors, or an inability to handle certain data types or scenarios. There is a risk of system failures, disruptions, or vulnerabilities that could compromise the integrity, security, or privacy of our platform. These failures could result in reputational damage, legal liabilities, or loss of user confidence, which could materially affect our business.
AI also presents emerging ethical issues, and if our development and use of AI become controversial, we may experience brand or reputational harm, competitive harm, or legal liability. The rapid evolution of AI, including potential government regulation of AI, will require significant resources to develop, test, and maintain our platform, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
Legislative and governmental activity in the privacy area may result in new laws or regulations that are applicable to us and that may hinder our business, for example, by restricting use or sharing of patient data, limiting our ability to provide certain data to our customers, limiting our ability to develop or modify our AI systems, or otherwise regulating AI and machine learning, including the use of algorithms and automated processing in ways that could materially affect our business, or which may lead to significant increases in the cost of compliance.
Risks Related to Intellectual Property, Information Technology, Data Privacy, and Security
If our systems, our customers’ environments, or third-party systems we rely on are breached or if unauthorized access to sensitive data occurs, it could harm public perception of our software, result in business losses, and expose us to liability.
Our success depends on maintaining strong data security for our software and services. Because our software is used by our customers to store, transmit, index, or otherwise process and analyze large data sets that often contain proprietary, confidential, and/or sensitive information (including in some instances personal or identifying information and personal health information), our software is perceived as an attractive target for attacks by computer hackers or others seeking unauthorized access, and our software faces threats of unintended exposure, exfiltration, alteration, deletion, or loss of data. Additionally, many customers rely on our software for mission-critical functions and have a low tolerance for security vulnerabilities, increasing the potential impact of any breach.
We rely on third-party technology, infrastructure, and software applications to support certain key software features or functions of our business, including our cloud-based services, customer relationship management activities, billing and order management, and financial accounting services. Additionally, we rely on computer hardware to deliver our software and services. We do not have control over the operations of the facilities of the third parties that we use, and any disruptions, security issues, or performance deficiencies in these services could impair our systems and negatively impact our software performance, customer experience, and overall operations.
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We and the third-party vendors we rely on may in the future experience cybersecurity threats, including threats or attempts to disrupt our information technology infrastructure and unauthorized attempts to gain access to sensitive or confidential information. These threats may include cyberattacks (including computer viruses, malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, and human error. Such attacks or security breaches may be perpetrated by internal bad actors, such as employees or contractors, or by third parties (including traditional computer hackers, persons involved with organized crime, or foreign state or foreign state-supported actors). Cybersecurity threats are constantly evolving and increasingly sophisticated, often involving social engineering and other complex techniques that are difficult to detect or defend against. Because the techniques used to obtain unauthorized access change frequently and generally are often identified only after an attack, we and our third-party vendors may be unable to anticipate these techniques or implement adequate preventative measures. Although prior cyberattacks directed at us have not had a material impact on our financial results, and we are continuing to bolster our threat detection and mitigation processes and procedures, we cannot guarantee that future cyberattacks, if successful, will not have a material impact on our business or financial results. While we have security measures in place to protect our information and our customers’ information and to prevent data loss and other security breaches, we have not always been able to do so and there can be no assurance that we will be able to anticipate or prevent security breaches or unauthorized access of our information technology systems or the information technology systems of the third-party vendors upon which we rely. Despite our implementation of network security measures and internal information security policies, data stored on personnel computer systems is also vulnerable to similar security breaches, unauthorized tampering, or human error.
Many governments have enacted laws requiring companies to provide notice of data security incidents involving certain types of data, including personal data. In addition, most of our customers, including U.S. government customers, contractually require us to notify them of data security breaches. If an actual or perceived breach of security measures, unauthorized access to our system or the systems of the third-party vendors that we rely upon, or any other cybersecurity threat occurs, we may face direct or indirect liability, costs, contract termination, and reputational harm. Such events may also impact our ability to attract new customers and could materially and adversely affect our business, financial condition, and results of operations.
Unauthorized access to our or our third-party vendors’ information technology systems or data or other security breaches could result in the loss of information; significant remediation costs; litigation, disputes, regulatory action, or investigations that could result in damages, material fines, and penalties; indemnity obligations; interruptions in the operation of our business, including our ability to provide new product features, new software, or services to our customers; damage to our operation technology networks and information technology systems; and other liabilities. Remediation efforts may not be successful, and any or all of these perceived incidents could hinder our ability to obtain and maintain required or desirable cybersecurity certifications, and result in reputational damage, any of which could materially adversely affect our results of operations, financial condition, and future prospects. There can be no assurance that any limitations of liability provisions in our license arrangements with customers or in our agreements with vendors, partners, or others would be enforceable, applicable, or adequate or would otherwise protect us from any such liabilities or damages with respect to any claim.
We maintain cybersecurity insurance and other types of insurance, subject to applicable deductibles and policy limits, but our insurance may not be sufficient to cover all costs, claims, or liabilities associated with a potential data security incident. In addition, our insurance may not protect us against all claims and losses related to our software or a data security incident due to specified exclusions, deductibles, and material change limitations, and it may be difficult to insure against certain risks. We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability or errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could harm our financial condition.
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Our software contains “open source” software, and any failure to comply with the terms of one or more of these open-source licenses could negatively affect our business.
Our software is distributed with software licensed by its authors or other third parties under “open source” licenses. Some of which may require us to make available source code for modifications or derivative works and license these under the same terms, granting third parties certain rights of further use. If we combine our proprietary software with open-source software in certain ways, we may be required to release our proprietary source code under open-source licenses. In addition to risks related to license requirements, usage of open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide updates, warranties, support, indemnities, assurances of title, or controls on origin of the software. Additionally, some open-source projects may have known security vulnerabilities or architectural instabilities, or are otherwise subject to security attacks due to their wide availability, and are provided on an “as-is” basis.
Although we have established processes in place to mitigate these risks, including a review process for screening requests for the use of open-source software, we cannot guarantee that all open-source software is submitted for approval prior to use in our software or that such software tools will be effective. Open-source license terms may be ambiguous, and many associated risks cannot be eliminated, potentially negatively impacting our business if not properly addressed. If we were found to have inappropriately used open-source software, we may be required to re-engineer our software, release proprietary source code, or discontinue the sale of our software in the event re-engineering could not be accomplished on a timely basis. Such actions could divert resources and negatively impact our business, operations, financial condition, and growth prospects. In addition, if the open-source software we use is no longer maintained, it may be more difficult to make the necessary revisions to our software, including modifications to address security vulnerabilities, which could impact our ability to mitigate cybersecurity risks or fulfill contractual obligations to our customers. We may also face claims seeking to enforce open-source license terms, including demands to release the open-source software, derivative works, or proprietary source code developed using such software. Such claims, regardless of merit, could lead to costly litigation, divert resources, or require us to modify our software, potentially harming our business.
Additionally, we have intentionally made certain proprietary software available on an open-source basis, both by modifying existing projects and by making certain internally developed tools available pursuant to open-source licenses, and we plan to continue to do so in the future. While we have established procedures in place to protect competitively sensitive code, we cannot guarantee consistent application. Even when applied, because any software source code we contribute to open-source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely, allowing potential competitors to sue it for competitive or unintended purposes.
Many of these risks associated with the usage of open-source software could be difficult to eliminate or manage, and could, if not properly addressed, negatively affect the performance of our offerings and our business.
Real or perceived errors, failures, defects, or bugs in our software could adversely affect our results of operations and growth prospects.
Given the complexity of our software, undetected issues may arise, especially with new features, versions, or infrastructure updates. Our software is often deployed in large-scale environments with diverse configurations, which may cause errors or failures in our software or may expose undetected errors, failures, or bugs in our software. Despite our testing, some defects may not be found in new software or releases until after commencement of commercial shipments. In the past, errors have affected the performance of our software and can also delay the development or release of new software or capabilities or new versions of software, adversely affect our reputation, and potentially reduce demand for our software.
Many of our customers use our software in applications that are critical to their businesses or missions and may have a lower risk tolerance to defects in our software than to defects in other, less critical, software products. Delays or errors in releasing new software or versions, or allegations of poor performance, defects, or failures in released software, could result in revenue or market share loss, higher service costs, significant redesign expenses, loss of key customers, potential liability for damages, and diversion of resources. Any of these outcomes could materially and adversely impact our business, operating results, and financial condition.
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In addition, our software could be perceived to be ineffective for a variety of reasons outside of our control, such as hackers bypassing security measures or customers misusing our software, resulting in a security breach or perceived product failure. Any real or perceived errors, failures, or bugs in our software and services, or dissatisfaction with our services and outcomes, could result in customer terminations and/or claims by customers for losses sustained. In such an event, we may need, for customer relations or other reasons, to invest additional resources to address these issues. While our customer agreements contain limitation of liability provisions, they may not always be enforceable or sufficient in some circumstances. The sale and support of our products carry risks of product liability claims. Although we maintain insurance to protect against certain claims associated with the use of our software and services, our insurance coverage may not adequately cover all claims and liabilities. In addition, our insurance may not protect us against all losses due to specified exclusions, deductibles, and material change limitations, and it may be difficult to insure against certain risks. Even claims that ultimately are unsuccessful could divert resources and management time.
Further, our software integrates a wide variety of other elements and must successfully interoperate with products from other vendors and our customers’ internally developed software, which can make it difficult to identify the source of issues when problems arise. We may be blamed for security or compliance failures caused by other vendors’ and customers’ systems. The occurrence of software errors in data, whether or not caused by our software, could delay or reduce market acceptance of our software and have an adverse effect on our business and financial performance, and any necessary revisions may incur significant expenses. If an actual or perceived breach occurs in one of our customers’ systems, regardless of whether the breach is attributable to our software, the market perception of the effectiveness of our software could be harmed. Alleviating any of these problems could require significant expenditures of our capital and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and could adversely affect our business, financial condition, results of operations, and growth prospects.
Issues in the development and use of artificial intelligence (“AI”) in our software may result in reputational harm or liability.
Our core business consists of the development and use of AI in our software products. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient, of poor quality, or contain biased information. Inappropriate or controversial data practices by data scientists, engineers, and end-users of our systems could impair the acceptance of AI solutions. If the recommendations, forecasts, or analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. Though our technologies and business practices are designed to mitigate many of these risks, if we enable or offer AI solutions that are controversial because of their purported or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm.
Our policies regarding confidential customer information and support for individual privacy and civil liberties could cause us to experience adverse business and reputational consequences.
We strive to protect our customers’ confidential information and individuals’ privacy consistently in accordance with applicable laws. Government entities may occasionally request customer information or modifications to our software to enable access or monitoring. In light of our confidentiality and privacy commitments, we may legally challenge such requests to uphold our privacy commitments. To the extent that we do not provide assistance to or comply with requests from government entities, or if we challenge those requests publicly or in court, we may experience adverse political, business, and reputational consequences among certain customers or portions of the public. Conversely, to the extent that we do provide such assistance or do not challenge those requests publicly in court, we may experience adverse political, business, and reputational consequences from other customers or portions of the public arising from concerns over privacy or the government’s activities.
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Failure to adequately obtain, maintain, protect, and enforce our intellectual property and other proprietary rights could adversely affect our business.
Our success and ability to compete depend in part on our ability to protect our proprietary methods and technologies in the United States and other jurisdictions outside the United States. Despite our efforts, third parties may attempt to disclose, obtain, copy, or use our intellectual property or other proprietary information or technology without our authorization, and our efforts to protect our intellectual property and other proprietary rights may not prevent such unauthorized disclosure or use, misappropriation, infringement, reverse engineering or other violation of our intellectual property or other proprietary rights.
We have devoted substantial resources to the development of our proprietary software. To protect our proprietary technologies and processes, we rely in part on trade secret laws and confidentiality agreements with our employees, consultants, and third parties. These agreements may not effectively prevent unauthorized disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights or develop similar technologies and processes.
We rely on the availability of third-party technology license, and if we are unable to maintain or secure them on reasonable terms, it could lead to errors or delays in our software and service implementation.
Our software may include intellectual property licensed from third parties, and we may need to renew or seek new licenses for existing or new software in the future. There can be no assurance that the necessary licenses would be available on commercially acceptable terms, if at all. Third parties may choose to terminate or renew them for a variety of reasons, including actual or perceived failures or breaches of security or privacy, or reputational concerns. In addition, we may be subject to liability if third-party software that we license is found to infringe, misappropriate, or otherwise violate the intellectual property or privacy rights of others. The inability to obtain certain third-party licenses or the need to engage in litigation regarding these matters could result in product roll-backs, delays in product releases until equivalent technology can be identified, licensed, or developed and integrated into our software, and may have a material adverse effect on our business, financial condition, and results of operations. Moreover, the use of nonexclusive third-party components may limit product differentiation and our ability to maintain service levels.
In addition, any data that we license from third parties for potential use in our software may contain errors or defects, which could negatively impact the analytics that our customers perform on or with such data. This may have a negative impact on how our software is perceived by our customers and could materially damage our reputation. Changes in or the loss of third-party licenses could lead to our software becoming inoperable or the performance of our software being materially reduced, resulting in our potentially needing to incur additional research and development costs to ensure continued performance of our software or a material increase in the costs of licensing, and we may experience decreased demand for our software.
We may in the future be subject to intellectual property rights claims, which are extremely costly to defend, could require us to pay significant damages, and could limit our ability to use certain technologies.
Our success depends on operating without infringing, misappropriating, or otherwise violating the intellectual property or other proprietary rights of third parties. The software industry frequently faces intellectual property litigation, and many companies, including our competitors and patent assertion entities, hold extensive intellectual property portfolios and have aggressively enforced their rights. Such litigation may also involve non-practicing patent assertion entities who use their patents to extract license fees by threatening costly litigation or that have minimal operations or relevant product revenue, and against whom our patents may provide little or no deterrence or protection. Further, laws in certain jurisdictions may afford little or no trade secret protection, and any changes in, or unexpected interpretations of, the intellectual property laws in any jurisdiction in which we operate may compromise our ability to enforce our rights. Enforcing our proprietary rights may require costly litigation, and inadequate protection could diminish the value of our software, brand, and intangible assets. We may also face intellectual property infringement claims, which could be expensive and time-consuming, divert management’s attention, and result in significant liability or the need to rebrand our software.
While we have not received any notices to date, we may receive notices in the future that claim we have infringed, misappropriated, misused, or otherwise violated other parties’ intellectual property rights. As we become exposed to greater visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation, or other violation claims, which is not uncommon with respect to software technologies. There may be third-party intellectual property rights, including patents and trademarks, that cover significant aspects of our technologies, business methods, or the products and services we offer in certain regions. We may face increased risk of intellectual property claims due to acquisitions or the integration of open source and other third-party software, as we have less visibility into the development process and safeguards against infringement or misappropriation risks.
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In addition, former employers of our current, former, or future employees may assert claims that such employees have improperly disclosed to us confidential or proprietary information of these former employers. Any intellectual property claims, with or without merit, are difficult to predict, could be time-consuming and expensive to settle or litigate, could divert our management’s attention and other resources, and may not be covered by our insurance. They may result in significant liability for damages, potentially including treble damages if we are found to have willfully infringed a third party’s intellectual property rights. These claims could also result in our having to stop using technology, branding, or marks found to be in violation of a third party’s rights, and any necessary rebranding could result in the loss of goodwill. If we can’t secure necessary licenses or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of one or more of our software or features, we could lose existing customers, and we may be unable to compete effectively.
Further, some of our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of third-party claims of intellectual property infringement, misappropriation, or other violations of intellectual property rights, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services, or other contractual obligations. Large indemnity payments could harm our business, financial condition, and results of operations. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.
Risks Related to Regulation and Compliance
Our business is subject to complex and evolving U.S. and non-U.S. laws and regulations regarding privacy, data protection and security, biometrics, artificial intelligence, technology protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or otherwise harm our business.
We are subject to a variety of local, state, national, and international laws and directives and regulations in the United States and abroad that involve matters central to our business, including privacy and data protection, data security, data storage, retention, transfer, and deletion, biometrics, artificial intelligence, technology protection, and personal information. Foreign data protection, data security, privacy, biometrics, artificial intelligence, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations, which, depending on the regime, may be enforced by private parties or government entities, are constantly evolving and can be subject to significant change, and they are likely to remain uncertain for the foreseeable future. In addition, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving software and technology industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices.
The California state legislature passed the California Consumer Privacy Act (the “CCPA”) in 2018 and took effect January 1, 2020. The CCPA requires covered businesses that process personal information of California residents to disclose their data collection, use, and sharing practices. Further, the CCPA provides California residents with new data privacy rights (including the ability to opt out of certain disclosures of personal data), imposes new operational requirements for covered businesses, provides for civil penalties for violations as well as a private right of action for data breaches and statutory damages (which is expected to increase data breach class action litigation and result in significant exposure to costly legal judgements and settlements). Aspects of the CCPA and its interpretation and enforcement remain uncertain. In addition, the California Privacy Rights Act of 2020 (the “CPRA”), which took effect January 1, 2023, expanded the CCPA. The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal information, further restricts the use of cross-contextual advertising, establishes restrictions on the retention of personal information, expands the types of data breaches subject to the CCPA’s private right of action, provides for increased penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the CPRA.
The CCPA and other similar laws could impact our business activities depending on how they are interpreted. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. For example, Virginia recently passed its Consumer Data Protection Act, and Colorado recently passed the Colorado Privacy Act, both of which differ from the CPRA and became effective in 2023. Additional states, including Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee, Texas and Utah, have since also passed comprehensive privacy laws with additional obligations and requirements on businesses. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive, and personal information than federal, international, or other state laws, and such laws may differ from each other, which may complicate compliance efforts. Additionally, all U.S. states and the District of Columbia have enacted breach notification laws that may require us to notify customers, employees, or regulators in the event of unauthorized access to or disclosure of personal or confidential information experienced by us or our service providers. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states have been frequently amending existing laws, requiring attention to changing regulatory requirements. We also may be contractually required to notify customers of a security breach.
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U.S. and non-U.S. laws and regulations related to biometric technology and products are at a maturing stage of development and still evolving. The effects of such laws and regulations may impose limitations and add uncertainties to the development and operation of our biometric-related business. For example, the European Union(“EU”)’s General Data Protection Regulation (the “GDPR”) classifies biometric data as “sensitive data” which is subject to heightened protection and its processing is generally prohibited unless specific legal grounds, like explicit consent, are met. As another example, the Illinois Biometric Information Privacy Act (“BIPA”) prohibits the collection of biometric data without individualized notice and consent. Laws and regulations focused on the collection, use, and processing of biometric data could result in monetary penalties or other regulatory actions. Several states and municipalities are considering enacting or have already enacted statutes and regulations specifically concerning the collection, use and processing of biometric data, including those focused on consumer privacy and consumer protection. In addition, state data privacy laws and foreign data privacy laws often include heightened protections for biometric data, which may include individualized notice and/or consent requirements. These federal, state, municipal and foreign laws and regulations may impact our ability to deploy biometric software products in certain markets, and may increase our compliance costs.
U.S. and non-U.S. laws and regulations related to AI technology and products are at an early stage of development and still evolving. The effects of such laws and regulations remain unclear and may add uncertainties to the development and operation of our AI-related business. For example, the EU AI Act became effective on August 1, 2024 and will be fully applicable after a two-year transitional period (although certain obligations will take effect at an earlier or later time). The EU AI Act introduces various requirements for AI systems and models placed on the market or put into service in the EU and may impact our ability to train, deploy, or release AI models in the EU. Among other limitations, the EU AI Act prohibits marketing and use of “AI systems that create or expand facial recognition databases through the untargeted scraping of facial images from the internet or CCTV footage.” Laws and regulations focused on the development, use, and provision of AI technologies could result in monetary penalties or other regulatory actions. In the U.S., there is increasing uncertainty as to the federal government’s approach to AI regulation going forward, as the continued applicability of the White House’s 2023 Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, which lays out a framework for the U.S. government, among other things, to monitor private sector development of certain foundation models, remains subject to regulatory development. Several states are considering enacting or have already enacted statutes and regulations concerning the use of AI technologies, including those focused on consumer protection, and depending on the scope of AI regulation at the federal level, some states may move to regulate AI model development and deployment. As an example, the Colorado AI Act is scheduled to go into effect on June 30, 2026, which introduces various requirements for “high-risk” AI systems that make or significantly influence consequential decisions involving education, employment, financial services, housing, health care or legal services. Several other U.S. states are considering enacting or have already enacted regulations concerning AI technologies, which may impact our ability to train, deploy, or release AI models and our software products, and increase our compliance costs. Further, at the federal and state level, there have been various proposals (and in some cases laws enacted) addressing “deepfakes” and other AI-generated synthetic media.
We cannot yet fully predict the impact of these regulations on our business or operations, but developments regarding these privacy and data protection laws and regulations around the world may require us to modify our data processing practices and incur substantial costs in an effort to maintain compliance on an ongoing basis. Outside of the United States, virtually every jurisdiction in which we operate has established its own legal framework relating to privacy, data protection, and information security matters with which we and/or our customers must comply. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, retention, disclosure, security, transfer, and other processing of data that identifies or may be used to identify or locate an individual. Some countries and regions, including the European Union, are considering or have passed legislation that imposes significant obligations in connection with privacy, data protection, and information security that could increase the cost and complexity of delivering our software and services, including the GDPR which took effect in May 2018. Complying with the GDPR or other data protection laws and regulations as they emerge may cause us to incur substantial operational costs or require us to modify our data handling practices. Non-compliance with the GDPR specifically may result in administrative fines or monetary penalties of up to 4% of worldwide annual revenue in the preceding financial year or €20 million (whichever is higher) for the most serious infringements and could result in proceedings against us by governmental entities or other related parties and may adversely impact our business, financial condition, and results of operations.
In addition to government regulation, self-regulatory and industry standards may legally or contractually apply to us, be argued to apply to us, or we may elect to comply with such standards or to facilitate our customers’ compliance with such standards. Because privacy, data protection, and information security are critical competitive factors in our industry, we may make public statements about our data security measures and our compliance with, or our ability to facilitate our customers’ compliance with, these standards. We expect continued developments in privacy and data protection laws, and we cannot determine the impact of future laws, regulations, and standards, or re-interpretations of existing laws and regulations, industry standards, or other obligations may have on our business. Compliance with existing laws and regulations, industry standards, and contractual and other obligations may require additional costs and could restrict our business operations. As these legal regimes continue to evolve, they may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions. Furthermore, uncertainty in how these laws and obligations are interpreted and applied may result in alleged or actual non-compliance with our practices or product features. If so, in addition to the possibility of fines, lawsuits, and other claims, we could be required to fundamentally change our business practices or modify our software, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to fulfill existing obligations, make enhancements, or develop new software and features could be limited.
These existing and proposed laws and regulations can be costly to comply with and can make our software and services less effective or valuable, delay or impede the development of new products, result in negative publicity, increase our operating costs, require us to modify our data handling practices, limit our operations, impose substantial fines and penalties, require significant management time and attention, or put our data or technology at risk. Any failure or perceived failure by us or our software to comply with applicable laws, regulations, directives, policies, industry standards, or legal obligations or any security incident involving unauthorized access to or use of sensitive data, could lead to government investigations, enforcement actions, private litigation, contractual liabilities, fines, business restrictions, reputational harm, and other significant costs and adverse effects on our business and operations.
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Failure to comply with governmental laws and regulations could harm our business, and we may be the subject of legal and regulatory inquiries, which may result in monetary payments or may otherwise negatively impact our reputation, business, and results of operations.
Our business is subject to regulation by various federal, state, local, and foreign governments in which we operate. Non-compliance with applicable regulations or requirements could subject us to investigations, administrative proceedings, sanctions, enforcement actions, disgorgement of profits, fines, damages, litigation, civil and criminal penalties, termination of contracts, exclusion from sales channels or sales opportunities, injunctions, or other consequences. Such matters may include claims, disputes, allegations, or investigations related to alleged violations of laws or regulations relating to anti-corruption requirements, lobbying or conflict-of-interest requirements, export or other trade controls, data privacy or data protection requirements, or laws or regulations relating to employment, procurement, cybersecurity, securities, or antitrust/competition requirements. The effects of imposed and proposed actions are uncertain because of the dynamic nature of governmental action and responses.
We may be subject to government inquiries that drain our time and resources, tarnish our brand reputation, prevent us from doing business with certain customers or markets, including government customers, affect our ability to hire and maintain qualified employees, or require us to take remedial action or pay penalties. We may receive formal and informal inquiries from government agencies and regulators regarding our compliance relating to our business or transactions. Any negative outcome from such investigations or failure to prevail in any possible civil or criminal litigation could adversely affect our business, financial condition, and results of operations.
We may face legal, regulatory, and administrative inquiries and proceedings, and unfavorable outcomes in litigation or other matters could negatively impact our business, financial conditions, and results of operations.
We may be, from time to time, involved in and subject to litigation or proceedings for a variety of claims or disputes, or regulatory inquiries related to employment, discrimination, intellectual property, contracts, data privacy, securities laws, antitrust, or other matters. Derivative claims, lawsuits, and proceedings, which may, from time to time, be asserted against our directors by our stockholders, could involve breach of fiduciary duty, failure of oversight, corporate waste claims, and other matters. In addition, our business and results may be adversely affected by the outcome of currently pending and any future legal, regulatory, and/or administrative claims or proceedings, including monetary damages or injunctive relief.
Additionally, if customers fail to pay us under the terms of our agreements, we may be adversely affected due to the cost of enforcing our contract terms through litigation. Litigation or other proceedings can be expensive and time consuming, and can divert our resources and attention from our primary business operations. The results of our litigation also cannot be predicted with certainty. If we are unable to prevail in litigation, we could incur payments of substantial monetary damages or fines, or undesirable changes to our software or business practices. Furthermore, if we accrue a loss contingency for pending litigation and determine that it is probable, any disclosures, estimates, and reserves we reflect in our financial statements about these matters may not reflect the ultimate disposition or financial impact of litigation or other such matters. These proceedings could also result in negative publicity, which could harm customer and public perception of our business, regardless of the validity of the claims or the outcome.
Failure to comply with anti-bribery and anti-corruption laws could subject us to adverse consequences.
Since we may operate and sell our software around the world, we will be subject to the United States Foreign Corrupt Practices Act (“FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the United States Travel Act, and other anti-corruption and anti-bribery laws and regulations in the jurisdictions in which we currently or may do business, both domestic and abroad, including potentially the U.K. Bribery Act. These laws and regulations generally prohibit improper payments or offers of improper payments to government officials, political parties, or commercial partners for the purpose of obtaining or retaining business or securing an improper business advantage.
Corruption issues pose a risk in every country and jurisdiction, but in many countries, particularly in countries with developing economies, it may be more common for businesses to engage in practices that are prohibited by the FCPA or other applicable laws and regulations, and our activities in these countries pose a heightened risk of unauthorized payments or offers of payments by one of our employees or third-party business partners, representatives, and agents that could be in violation of various laws including the FCPA. The FCPA and other applicable anti-bribery and anti-corruption laws also may hold us liable for acts of corruption and bribery committed by our third-party business partners, representatives, and agents. We and our third-party business partners, representatives, and agents may have direct or indirect interactions with officials and employees of government agencies, or state-owned or affiliated entities, and we may be held liable for the corrupt or other illegal activities of our employees or such third parties, even if we do not explicitly authorize such activities. The FCPA or other applicable laws and regulations also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent improper payments. While we have implemented policies and procedures to address compliance with such laws, we cannot assure you that our employees or other third parties working on our behalf will not engage in conduct in violation of our policies or applicable law for which we might ultimately be held responsible. Violations of the FCPA and other applicable anti-corruption laws may result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, as well as severe criminal or civil sanctions, including suspension or debarment from U.S. government contracting, and we may be subject to other liabilities and adverse effects on our reputation, which could negatively affect our business, results of operations, financial condition, and growth prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant legal defense costs, and other professional fees.
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Governmental trade controls, including export and import controls, sanctions, customs requirements, and related regimes, may subject us to liability or loss of contracting privileges or limit our ability to compete in certain markets.
Our offerings are subject to U.S. export controls, including with respect to encryption technology incorporated into certain of our offerings. Certain of our controlled software offerings and the underlying technology may be exported outside of the United States or accessed by non-U.S. persons (wherever located) only with the required export authorizations, which may include license requirements in some circumstances. Additionally, our current or future products or services may be classified under the Export Administration Regulations (“EAR”) administered by the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”) or as defense articles subject to the International Traffic in Arms Regulations (“ITAR”) administered by the U.S. Department of State, Directorate of Defense Trade Controls. In July 2024, the BIS published proposed rulemaking that exports of facial recognition systems and technology would require an export license for certain countries and that export license requirements would expand for fingerprint and voice biometric technologies. If a product, or component of a product, is classified under the ITAR, or is ineligible for an encryption license exception under the EAR, then the product or component could be exported outside the United States (or accessed by non-U.S. persons) only if we obtain the applicable export license or qualify for a different license exception. In certain contexts, the services we provide might be classified as defense services subject to the ITAR separately from the products we provide. Compliance with the EAR, ITAR, and other applicable regulatory requirements regarding the export or deemed export of our products, including new releases of our products and/or the performance of services, may create delays in or increase the cost of the introduction of our products in non-U.S. markets, prevent our customers with non-U.S. operations from deploying our products throughout their global systems or, in some cases, prevent the export of our products to some countries altogether.
Our activities are also subject to the economic sanctions laws and regulations administered by the U.S. Department of the Treasury, Office of Foreign Assets Control, and U.S. Department of State, and other jurisdictions. Such controls prohibit the shipment or transfer of certain products and services without the required export authorizations or export to countries, governments, and persons targeted by applicable sanctions. We take precautions to prevent our offerings from being exported in violation of these laws, including: (i) seeking to proactively classify our software and obtain authorizations for the export and/or import of our software where appropriate, (ii) implementing certain technical controls and screening practices to reduce the risk of violations, and (iii) requiring compliance with U.S. export control and sanctions obligations in customer and vendor contracts. However, we cannot guarantee the precautions we take will prevent violations of export control and sanctions laws.
As discussed above, if we misclassify a product or service, export or provide access to a product or service in violation of applicable export control or sanctions laws or regulations or otherwise fail to comply with export or sanctions laws or regulations, we may be denied export privileges or subjected to significant per violation fines or other penalties, and our software may be denied entry into other countries. Any decreased use of our software or limitation on our ability to export or sell our software would likely adversely affect our business, results of operations, and financial condition. Violations of U.S. sanctions or export control laws can result in fines or penalties, including civil penalties of up to $300,000 or twice the value of the transaction, whichever is greater, per EAR violation and a civil penalty that could exceed $1,000,000 for ITAR violations, depending on the circumstances of the violation or violations. In the event of criminal knowing and willful violations of these laws, fines of up to $1,000,000 per violation and possible incarceration for responsible employees and managers could be imposed.
We also note that if we or our business partners or counterparties, including licensors and licensees, prime contractors, subcontractors, sub-licensors, vendors, customers, contractors, or agents fail to obtain appropriate import, export, or re-export licenses or permits, notwithstanding regulatory requirements or contractual commitments to do so, or if we fail to secure such contractual commitments where necessary, we may also be adversely affected, through reputational harm as well as other negative consequences, including government investigations and penalties. For instance, violations of U.S. sanctions or export control laws can result in fines or penalties, including significant civil and criminal penalties per violation, depending on the circumstances of the violation or violations. Negative consequences for violations or apparent violations of trade control laws or regulations may include the absolute loss of the right to sell our software or services to the government of the United States, or to other public bodies, or a reduction in our ability to compete for such sales opportunities. Further, complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities.
Many countries, in addition to the United States, regulate the import and export of certain encryption and other dual-use or defense technology or services, including import and export permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our software or could limit our customers’ abilities to implement our software in those countries. Any such new restrictions, changes in economic sanctions, or shifting approaches in the enforcement of existing regulations, or in the countries, persons, or technologies targeted by such regulations, could result in decreased use of our software by existing customers with non-U.S. operations, declining adoption of our software by new customers with non-U.S. operations, and limitation of our expansion into new markets.
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Changes in accounting principles or their application to us could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects.
We prepare our financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). We make certain estimates and assumptions related to the adoption and interpretation of these principles, including the recognition of our revenue and the accounting of our stock-based compensation expense with respect to our financial statements. If these assumptions turn out to be incorrect, our financial results and position could materially differ from our expectations and could be materially adversely affected. A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements.
We could be subject to additional tax liabilities.
We are subject to federal, state, and local income taxes in the United States. Determining our provision for income taxes requires significant management judgment, and the ultimate tax outcome may be uncertain. Our provision for income taxes is subject to volatility and could be adversely affected by many factors, such as changes to our operating or holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in U.S. tax laws. Tax authorities may disagree with our calculation of research and development tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest, or penalties. While we regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income taxes and we believe that our financial statements reflect adequate reserves to cover such contingencies, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. If tax authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations may be adversely impacted.
In addition, there is a risk that certain U.S. state tax authorities, where we do not currently file a state income tax return, could assert that we are liable for state and local income taxes based upon income or gross receipts allocable to such states. States are becoming increasingly aggressive in asserting a nexus for state income tax purposes. If a state tax authority successfully asserts that our activities give rise to a nexus, we could be subject to state and local taxation, including penalties and interest attributable to prior periods, which may adversely impact our results of operations.
Our results of operations may be harmed if we are required to collect sales or other related taxes for our license arrangements in jurisdictions where we have not historically done so.
States and some local taxing jurisdictions have differing rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. We collect and remit U.S. sales and use tax, value-added tax (“VAT”), and goods and services tax (“GST”) in several jurisdictions. It is possible, however, that we could face sales tax, VAT, or GST audits and that our liability for these taxes could exceed our estimates, as state tax authorities could still assert that we are obligated to collect additional tax amounts from our customers and remit those taxes to those authorities. We could also be subject to audits for which we have not accrued tax liabilities. Jurisdictions may seek to impose incremental or new sales, use, or other tax collection obligations on us or may determine that such taxes should have, but have not been, paid by us.
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Risks Related to Our Relationships and Business with the Public Sector
A significant portion of our business depends on sales to the public/government sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.
We derive a significant portion of our revenue from contracts with the federal government and government agencies, and we believe that the growth of our business will continue to depend on our successful procurement of government contracts. For example, we have historically derived, and expect to continue to derive, a significant portion of our revenue from sales to agencies of the U.S. federal government, either directly by us or through other government contractors. Our perceived relationship with the U.S. government could adversely affect our business prospects in certain non-U.S. geographies or with certain non-U.S. governments. Sales to government agencies are subject to a number of challenges and risks. The process can be highly competitive, expensive, and time-consuming, often requiring significant upfront time and expense without guaranteed sales. We must also comply with laws and regulations relating to the formation, administration, and performance of contracts, which grant public sector customers rights not typically found in commercial agreements.
Governmental and highly regulated entities may demand contract terms that differ from our standard arrangements and may be less favorable than terms agreed with private sector customers. These government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts. For instance, most U.S. government agencies include provisions that allow the government to unilaterally terminate contracts, in whole or in part, for convenience, and in that event, the counterparty to the contract may generally recover only its incurred or committed costs and settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, the defaulting party may be liable for any extra costs incurred by the government in procuring undelivered supplies or services from another source. Government entities also tend to require shorter subscription terms, longer implementation cycles, more complex IT and data environments, and may include acceptance provisions that delay revenue recognition. Contracts with governmental entities may include preferential pricing terms, including, but not limited to, “most favored customer” pricing. Even if we are awarded a government contract, such an award may be subject to appeals, disputes, or litigation, including but not limited to bid protests by unsuccessful bidders.
In addition, government contracts are also generally subject to greater scrutiny by the government, which can initiate reviews, audits and investigations regarding our compliance with government contract requirements. In addition, if we fail to comply with government contracting laws, regulations and contract requirements, our contracts may be subject to termination, and we may be subject to financial and/or other liability under our contracts, the Federal Civil False Claims Act (including the possibility of treble damages and significant penalties), or criminal law. In particular, the False Claims Act’s “whistleblower” provisions also allow private individuals, including present and former employees, to sue on behalf of the U.S. government. Any penalties, damages, fines, suspension, or damages could adversely affect our ability to operate our business and our financial results.
Accordingly, our business, financial condition, results of operations, and growth prospects may be adversely affected by certain events or activities, including, but not limited to:
| ● | changes in fiscal or contracting policies or decreases in available government funding; |
| ● | changes in government programs or applicable requirements; |
| ● | restrictions in the grant of personnel security clearances to our employees; |
| ● | ability to maintain facility clearances required to perform on classified contracts for U.S. federal government agencies; |
| ● | changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting changes in policy or priorities and resultant funding; |
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| ● | changes in the government’s attitude towards our capabilities, especially in the areas of national defense, cybersecurity, and critical infrastructure like financial, energy, telecommunications, and healthcare sectors; |
| ● | changes in the government’s attitude towards us as a company or our software as a viable or acceptable software solution; |
| ● | appeals, disputes, or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government; |
| ● | the adoption of new laws or regulations or changes to existing laws or regulations; |
| ● | budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by any lapses in appropriations for the federal government or certain of its departments and agencies; |
| ● | influence by, or competition from, third parties with respect to pending, new, or existing contracts with government customers; |
| ● | changes in political or social attitudes with respect to security or data privacy issues; |
| ● | potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the COVID-19 outbreak; and |
| ● | increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our subcontractors. |
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from purchasing our software and services, reduce the size or payment amounts of purchases from existing or new government customers, or have an adverse effect on our business, results of operations, and financial condition.
We have contracts with government agencies that involve classified programs, which may limit investor insight into portions of our business.
We derive a portion of our revenue from programs with government agencies that are subject to security restrictions (e.g., contracts involving classified information, classified contracts, and classified programs), which preclude the dissemination of information and technology under applicable law and regulation. In general, access to classified information, technology, facilities, or programs requires appropriate personnel security clearances, is subject to additional contract oversight and potential liability, and may also require appropriate facility clearances and other specialized infrastructure. In the event of a security incident involving classified information, technology, facilities, or programs or personnel holding clearances, we may be subject to legal, financial, operational, and reputational harm. We are limited in our ability to provide specific information about these classified programs, their risks, or any disputes or claims relating to such programs. As a result, investors have less insight into our classified programs than our other businesses and therefore have less ability to fully evaluate the risks related to our classified business or our business overall. However, historically, the business risks associated with our work on classified programs have not differed materially from those of our other government contracts.
Government contracts differ materially from standard commercial contracts, involve competitive bidding and may be subject to cancellation or delay without penalty.
Government contracts frequently include provisions that are not standard in private commercial transactions and are subject to laws and regulations that give the U.S. Government rights and remedies not typically found in commercial contracts, including provisions permitting the U.S. Government to:
| ● | terminate our existing contracts; |
| ● | reduce potential future income from our existing contracts; |
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| ● | modify some of the terms and conditions in our existing contracts; |
| ● | suspend or permanently prohibit us from doing business with the U.S. Government or with any specific government agency; |
| ● | impose fines and penalties; |
| ● | subject us to criminal prosecution; |
| ● | suspend work under existing multiple year contracts and related task orders if the necessary funds are not appropriated by Congress; |
| ● | decline to exercise an option to extend an existing multiple year contract; and |
| ● | claim rights in technologies and systems invented, developed, or produced by us. |
In addition, government contracts are frequently awarded only after formal competitive bidding processes, which have been and may continue to be protracted and typically impose provisions that permit cancellation in the event that necessary funds are unavailable to the government agency. Competitive procurements impose substantial costs and managerial time and effort in order to prepare bids and proposals for contracts that may not be awarded to us. In many cases, unsuccessful bidders for government contracts are provided the opportunity to formally protest certain contract awards through various agencies, administrative, and judicial channels. The protest process may substantially delay a successful bidder’s contract performance, result in cancellation of the contract award entirely, and distract management. We may not be awarded contracts for which we bid, and substantial delays or cancellation of purchases may follow our successful bids as a result of such protests.
Certain of our government contracts also may contain “organizational conflict of interest” clauses that could limit our ability to compete for certain related follow-on contracts. While we actively monitor our contracts to avoid these conflicts, we cannot guarantee that we will be able to avoid all organizational conflicts of interest issues.
If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business may be adversely affected.
Our reputation and relationship with the U.S. Government are key factors in maintaining and developing new business opportunities. In addition, we often act as a subcontractor or in “teaming” arrangements in which we and other contractors bid together on particular contracts or programs for the U.S. Government or government agencies. We expect to continue to depend on relationships with other prime contractors for a portion of our revenue for the foreseeable future. Negative press reports regarding conflicts of interest, poor contract performance, employee misconduct, information security breaches, or other aspects of our business, regardless of accuracy, could harm our reputation. Additionally, as a subcontractor or team member, we often lack control over fulfillment of a contract, and poor performance on the contract could tarnish our reputation, even when we perform as required. As a result, we may be unable to successfully maintain our relationships with government agencies or prime contractors, and any failure to do so could adversely affect our ability to maintain our existing business and compete successfully for new business.
Our business could be adversely affected if our employees cannot obtain and maintain required personnel security clearances, or we cannot establish and maintain the required facility security clearance.
Certain government contracts may require our employees to maintain various levels of security clearances and may require us to maintain a facility security clearance to comply with U.S. and international government agency requirements. Obtaining and maintaining security clearances for employees typically involves a lengthy process, and it can be difficult to identify, recruit, and retain employees who already hold security clearances. If our employees are unable to obtain security clearances in a timely manner, or at all, or if our employees who hold security clearances are unable to maintain their clearances or terminate employment with us, then we may be unable to comply with relevant requirements, or our customers requiring classified work could choose to terminate or decide not to renew one or more contracts. To the extent we are not able to obtain or maintain a facility security clearance, we may not be able to bid on or win new classified contracts, and existing contracts requiring a facility security clearance could be terminated, either of which would have an adverse impact on our business, financial condition, and results of operations.
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Most of our customer contracts may be terminated by the customer at any time for convenience and may contain other provisions permitting the customer to discontinue contract performance, and if terminated contracts are not replaced, our results of operations may differ materially and adversely from those anticipated.
Most of our contracts, including government contracts, contain termination for convenience provisions. Customers who terminate such contracts may be entitled to a pro rata refund of the amount of the customer deposit for the period of time remaining in the contract term after the applicable termination notice period expires. Government contracts often contain provisions and are subject to laws and regulations that provide government customers with additional rights and remedies not typically found in commercial contracts. These rights and remedies allow government customers, among other things, to:
| ● | terminate existing contracts for convenience with short notice; |
| ● | reduce orders under or otherwise modify contracts; |
| ● | for contracts subject to the Truth in Negotiations Act, reduce the contract price or cost where it was increased because a contractor or subcontractor furnished cost or pricing data during negotiations that was not complete, accurate, and current; |
| ● | for some contracts, (i) demand a refund, make a forward price adjustment, or terminate a contract for default if a contractor provided inaccurate or incomplete data during the contract negotiation process and (ii) reduce the contract price under triggering circumstances, including the revision of price lists or other documents upon which the contract award was predicated; |
| ● | cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; |
| ● | decline to exercise an option to renew a multi-year contract or issue task orders in connection with indefinite delivery/indefinite quantity contracts; |
| ● | claim rights in solutions, systems, or technology produced by us, appropriate such work-product for their continued use without continuing to contract for our services, and disclose such work-product to third parties, including other government agencies and our competitors, which could harm our competitive position; |
| ● | prohibit future procurement awards with a particular agency due to a finding of organizational conflicts of interest based upon prior related work performed for the agency that would give a contractor an unfair advantage, or the existence of conflicting roles that might bias a contractor’s judgment; |
| ● | subject the award of contracts to protest by competitors, which may require the contracting federal agency to suspend our performance pending the outcome of the protest and may also result in a requirement to resubmit offers for the contract or in the termination, reduction, or modification of the awarded contract; |
| ● | suspend or debar us from doing business with the applicable government agency; and |
| ● | control or prohibit the export of our services. |
If a customer were to unexpectedly terminate, cancel, or decline to exercise an option to renew with respect to one or more of our significant contracts, or if a government were to suspend or debar us from doing business with such government, our business, financial condition, and results of operations would be materially harmed.
Evolving government procurement policies and increased emphasis on cost over performance could adversely affect our business.
Federal, state, local, and foreign governments and government agencies may adopt procurement policies that negatively impact our profitability. Changes favoring more non-commercial purchases, different pricing, or evaluation criteria, or government contract negotiation offers based upon the customer’s view of what our pricing should be, may affect the predictability of our margins on such contracts or make it more difficult to compete on certain types of programs. Governments and government agencies are continually evaluating their contract pricing and financing practices, and we have no assurance regarding the full scope and recurrence of any study and what changes will be proposed, if any, and their impact on our financial position, cash flows, or results of operations.
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The U.S. government may procure non-commercial developmental services rather than commercial products, which could materially impact our future U.S. government business and revenue.
U.S. government agencies, including our customers, often award large developmental item and service contracts to build custom software rather than firm fixed-price contracts for commercial products. The U.S. government is required to procure commercial items and services to the maximum extent practicable in accordance with FASA, 10 U.S.C. § 2377; 41 U.S.C. § 3307, and the U.S. government may instead decide to procure non-commercial developmental items and services if commercial items and services are not practicable.
In order to challenge a government decision to procure developmental items and services instead of commercial items and services, we would be required to file a bid protest at the agency level and/or with the Government Accountability Office. This can result in contentious communications with government agency legal and contracting offices and may escalate to litigation in federal court. The results of any future challenges or potential litigation cannot be predicted with certainty, however, and any dispute or litigation with the U.S. government may not be resolved in our favor; moreover, whether or not it is resolved in our favor, such disputes or litigation could result in significant expense and divert the efforts of our technical and management personnel. These proceedings could adversely affect our reputation and relationship with government customers and could also result in negative publicity, which could harm customer and public perception of our business. Any change in or repeal of FASA, or a contrary interpretation of FASA by a court of competent jurisdiction, could adversely affect our competitive position for U.S. federal government contracts.
General Risk Associated with Our Company
Adverse economic conditions or reduced technology spending may adversely impact our business.
Our business depends on the economic health of current and prospective customers and overall demand for technology. Purchasing decisions for our software and services are often discretionary and require significant investments. A further downturn in economic conditions, global political and economic uncertainty, a lack of availability of credit, a reduction in business confidence and activity, the curtailment of government or corporate spending, public health concerns or emergencies, financial market volatility, and other factors have in the past and may in the future lead to delayed or canceled purchases, extended sales cycles, and pricing pressure from competitors. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery. While such events may present some opportunities, their overall impact could be materially negative. If economic conditions worsen, our business, financial condition, and results of operations could be adversely affected.
Compliance with the laws and regulations affecting public companies could adversely affect our business, results of operations, and financial condition.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Nasdaq listing standards, and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources. The complexity of complying with these rules may divert management’s attention from other business matters, potentially harming our operations and financial results. Although we have hired additional employees to assist with compliance, we may need to hire more or engage consultants in the future, further increasing our operating expenses. As a public company subject to additional oversight, we may not have the same flexibility we had as a private company.
Additionally, changing laws, regulations, and governance standards, which are subject to varying interpretations, are creating uncertainty for public companies, which may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. We also expect that being a public company will make it more expensive for us to obtain director and officer liability insurance, which may result in reduced coverage or higher premiums, and could make it more difficult to attract and retain qualified directors and officers.
Public disclosures required as a public company may increase our exposure to actual or threatened litigation from competitors and other third parties. Even if these claims do not result in litigation or are resolved in our favor, the time and resources spent on resolving them could harm our business.
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Failure to establish and maintain effective internal control in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
Prior to the completion of this offering, we have been a private company with limited accounting personnel and limited supervisory resources with which to address our internal control over financial reporting. As such, we have not designed nor maintained an effective control environment as required under the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and have not been required to assess the effectiveness of our internal control over financial reporting. Specifically, we lack a sufficient professionals with the necessary accounting expertise to timely and accurately analyze, record, and disclosure financial matters while maintaining appropriate segregation of duties.
Following the offering, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual assessment of our internal controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, our first formal internal control assessment under Section 404 will be required after our first full fiscal year as a public company.
Establishing and maintaining effective internal controls is critical. However, we may face challenges in doing so, particularly as we transition to operating as a publicly reporting company. Without robust internal controls, we may be unable to reliably gather and report financial information, which could impair our ability to detect errors or prevent fraud. Moreover, we do not expect that disclosure control or internal control over financial reporting, even if established, will prevent all error and all fraud. Because of the inherent limitations in the control system, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control system to prevent error or fraud could materially adversely impact us.
Natural disasters and other events beyond our control could harm our business.
Our operations are vulnerable to disruption from natural disasters, climate-related events, cyberattacks, pandemics, geopolitical instability, and other events beyond our control. While we maintain crisis and disaster response plans, such events could hinder our ability to deliver services, reduce customer demand, or impair customers’ ability to meet contractual obligations. These disruptions may result in significant costs, data loss, operational delays, and potential legal liabilities. Our insurance coverage may not fully offset these impacts, which could adversely affect our financial condition and results of operations.
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We are subject to income taxes in the United States and other jurisdictions, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
| ● | changes in the valuation of our deferred tax assets and liabilities; |
| ● | expected timing and amount of the release of any tax valuation allowances; |
| ● | tax effects of stock-based compensation; |
| ● | changes in tax laws, regulations or interpretations thereof; or |
| ● | lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates. |
In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
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We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
We may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in losses. Even though these charges may be non-cash items, the fact that we report charges of this nature could lead to negative market perceptions and make it more difficult to obtain future financing on favorable terms or at all.
We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations.
As a public company, we will incur significant legal, accounting, and compliance costs associated with the Exchange Act, Sarbanes-Oxley Act, Dodd-Frank Wall Street Reform and Consumer Protection Act, and regulations subsequently implemented by the SEC. These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We will also need to hire additional staff with accounting and financial staff with appropriate public company expertise. We also expect that operating as a public company will make it more expensive for us to obtain director and officer liability insurance, and we may face challenges attracting and retaining qualified directors and executives.
Once we no longer qualify as an “emerging growth company,” as defined in the JOBS Act, we expect to incur additional management time and cost to comply with the more stringent reporting requirements, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We are in the early stages of preparing necessary systems and documentation and may not complete this work in a timely fashion. The full extent and timing of these added costs remain uncertain.
We are an “emerging growth company,” and the reduced reporting and disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from reporting requirements. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have also elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to those of other public companies, which may make our common stock less attractive to investors. If we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.
We are a “smaller reporting company,” and the reduced reporting and disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
We are a “smaller reporting company,” as defined in Section 12 of the Exchange Act. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding non-binding advisory votes on executive compensation, and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
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If we fail to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, we will not be able to compete effectively.
We operate in a highly competitive, quickly changing environment, and our future success depends on our ability to develop or acquire and introduce new products and services that achieve broad market acceptance. Because we have a limited operating history and the market for our products, including newly acquired or developed products, is rapidly evolving, it is difficult to predict our operating results, particularly with respect to any new products that it may introduce. Our future success will depend in large part upon our ability to identify demand trends in the market in which we operate and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner.
To stay competitive, we will need to increase focus and capital investment in research and development. If our current or new offerings fail to gain market acceptance or if we miss opportunities in the market, our growth and financial performance could be materially adversely affected. It is also challenging to predict the impact of new products or services on existing sales, and we may not be able to quickly respond to competitors’ product announcements with competitive offerings.
In addition, we may acquire companies and technologies in the future. In these circumstances, the combined company may not be able to successfully manage integration of the new product and service lines with the combined company’s existing suite of products and services. Failure to effectively develop or integrate these new product and service lines could hinder our ability to grow sales or maintain margins.
The occurrence of one or more of the foregoing factors may result in lower quarterly revenue than expected, and we may in the future experience product or service introductions that fall short of our projected rates of market adoption.
If our products fail to achieve and sustain sufficient market acceptance, our revenue will be adversely affected.
Our success will depend on our ability to develop and market products that are recognized and accepted as reliable, enabling and cost-effective. Our potential customers may already use products similar to what we currently offer and similar to what we may offer in the future and may be reluctant to replace those products with what we currently offer or which we may offer in the future. Market acceptance of our products and technology will depend on many factors, including our ability to convince potential customers that our products and technology are an attractive alternative to existing products and technology. Prior to adopting our products and technology, some potential customers may need to devote time and effort to testing and validating our systems. Any failure of our systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than the Company’s.
Risks Related to Our Securities and this Offering
No active trading market for our common stock currently exists, and an active trading market may not develop or be sustained following this offering.
Prior to this offering, there has not been an active trading market for our common stock. If an active trading market for our common stock does not develop following this offering, you may not be able to sell your shares quickly or at the market price. Our ability to raise capital to continue to fund operations by selling shares of our common stock and our ability to acquire other companies or technologies by using shares of our common stock as consideration may also be impaired. The initial public offering price of our common stock will be determined by negotiations between us and the underwriters and may not be indicative of future market prices of our common stock.
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The trading price of our common stock may be volatile, and you could lose all or part of your investment.
Prior to this offering, there has been no public market for shares of common stock. The initial public offering price of our common stock will be determined through negotiations between us and the underwriters. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our common stock following this offering. In addition, the trading price of our common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock as you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the trading price of our common stock include the following:
| ● | price and volume fluctuations in the overall stock market from time to time; |
| ● | volatility in the trading prices and trading volumes of technology stocks; |
| ● | changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; |
| ● | sales of shares of our common stock by us or our stockholders; |
| ● | failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
| ● | the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; |
| ● | announcements by us or our competitors of new products, features, or services; |
| ● | the public’s reaction to our press releases, other public announcements, and filings with the SEC; |
| ● | rumors and market speculation involving us or other companies in our industry; |
| ● | actual or anticipated changes in our results of operations or fluctuations in our results of operations; |
| ● | actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; |
| ● | litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; |
| ● | developments or disputes concerning our intellectual property or other proprietary rights; |
| ● | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
| ● | changes in accounting standards, policies, guidelines, interpretations, or principles; |
| ● | any significant change in our management; and |
| ● | general economic conditions and slow or negative growth of our markets. |
In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention.
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Certain recent initial public offerings of companies with public floats comparable to our anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our common stock.
In addition to the risks addressed above in “Risks Related to Our Securities and this Offering — The trading price of our common stock may be volatile, and you could lose all or part of your investment,” our common stock may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable public floats and initial public offering sizes have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective company’s underlying performance. Although the specific cause of such volatility is unclear, our anticipated public float may amplify the impact the actions taken by a few stockholders have on the price of our common stock, which may cause the price of our common stock to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Should our common stock experience run-ups and declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our common stock. In addition, investors of shares of our common stock may experience losses, which may be material, if the price of our common stock declines after this offering or if such investors purchase shares of our common stock prior to any price decline.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
Future sales of our common stock or securities convertible into our common stock may depress our stock price.
Sales of a substantial number of shares of our common stock or securities convertible into our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the market price of our common stock and impair our ability to raise capital through equity offerings in the future.
The common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing stockholders may also be sold in the public market in the future subject to the restrictions in Rule 144 under the Securities Act and the applicable lock-up agreements. Following the consummation of our initial public offering, there will be 18,471,650 shares of common stock outstanding immediately after this offering assuming full exercise of the underwriters’ over-allotment option, and 18,021,650 shares of common stock assuming no exercise of the underwriters’ over-allotment option. In connection with this offering, we and each of our directors, officers and existing securityholders have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for 6 months after the closing of this offering without the prior written consent of the underwriters, subject to customary exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. (or FINRA). We cannot predict what effect, if any, market sales of securities held by our significant stockholders or any other shareholder or the availability of these securities for future sale will have on the market price of our common stock. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.
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Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.
We cannot assure you that our securities will continue to be listed on Nasdaq even if our securities are listed on Nasdaq. Following this offering, in order to maintain our listing, we will be required to comply with certain Nasdaq continuing listing rules, including those regarding minimum stockholders’ equity, minimum share price, minimum market value of publicly held shares, corporate governance and various additional requirements. If we are unable to satisfy Nasdaq criteria for maintaining our listing, our securities could be subject to delisting. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.
Our management will have broad discretion in how we use the net proceeds of this offering and might not use them effectively.
Our management will have considerable discretion over the use of proceeds from this offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used in a manner which you may consider most appropriate. Our management might spend a portion or all of the net proceeds from this offering in ways that our stockholders do not desire or that do not necessarily improve our operating results or enhance the value of our common stock. The failure of our management to apply these proceeds effectively could, among other things, result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.
You will experience immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
You will incur immediate and substantial dilution as a result of this offering. After giving effect to the sale by us of 3,000,000 shares in this offering at an assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), and after deducting underwriting discounts and estimated offering expenses payable by us, investors in this offering can expect an immediate dilution of $4.70 per share at the assumed initial public offering price. Issuances of common stock or voting preferred stock would reduce your influence over matters on which our stockholders vote and, in the case of issuances of preferred stock, would likely result in your interest in us being subject to the prior rights of holders of that preferred stock. See the section entitled “Dilution.”
An investment in our company may involve tax implications, and you are encouraged to consult your own advisors as neither we nor any related party is offering any tax assurances or guidance on our company or your investment.
An investment in our company generally involves complex federal, state and local income tax considerations. Neither the Internal Revenue Service nor any state or local taxing authority has reviewed the transactions described herein and may take different positions than the ones contemplated by management. You are strongly urged to consult your own tax and other advisors prior to investing, as neither we nor any of our officers, directors or related parties is offering you tax or similar advice, nor are any such persons making any representations and warrants regarding such matters.
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Anti-takeover provisions in Colorado law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.
Some of the provisions of Colorado law may have the effect of delaying, deferring or discouraging another person from acquiring control of our company or removing our incumbent officers and directors. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection against an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals.
Our executive officers, directors, and principal stockholders will continue to have substantial control over our company after this offering, which could limit your ability to influence the outcome of key transactions, including a change of control.
As of the date of this prospectus, our executive officers, directors, and principal stockholders and their affiliates beneficially own an aggregate of approximately 92.1% of our outstanding shares of common stock. Upon completion of this offering, our executive officers, directors and principal stockholders and their affiliates will own 16,993,085 shares of our common stock, or approximately 79.2% of the outstanding shares of our common stock, based on the number of shares outstanding as of the date of this prospectus and assuming the sale of 3,000,000 shares of common stock in this offering at an assumed initial public offering price of $5.50 per share of common stock (the midpoint of the estimated price range set forth on the cover page of this prospectus), and assuming the underwriters’ over-allotment option is not exercised. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree, which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
We have never paid dividends on our capital stock, and we do not anticipate to pay for the foreseeable future.
We have never declared or paid any cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends, if any, in the future is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business. Accordingly, you must rely on the sale of your common stock after price appreciation, which may never occur, as the only way to realize any future gain on your investment.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information in this prospectus contains “forward-looking statements,” which we intend to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “could,” “would,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “project,” “target,” “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this prospectus are only predictions and are based largely on our current expectations and projections about future events and financial trends that we reasonably believe may affect our business, financial condition, and results of operations. Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.
These forward-looking statements present our estimates and assumptions only as of the date of this prospectus and are subject to several known and unknown risks, uncertainties, and assumptions. Accordingly, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether because of any new information, future events, changed circumstances or otherwise. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
| ● | Our ability to develop and sell our proposed products. |
| ● | Our ability to source, retain, and expand our technical and business staff to meet the demands of our expanding and diversifying business. |
| ● | Our ability to raise the substantial amount of additional funds that will be necessary for our business to succeed, which funds may not be available on acceptable terms or available at all. |
| ● | Assumptions relating to the size of the market for our products. |
| ● | Unanticipated regulations of our products that add barriers to our business and have a negative effect on our operations. |
| ● | Our estimates of expenses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing. |
| ● | Our status of an early-stage pre-net income company with a business model and marketing strategy still being developed and largely untested. |
| ● | Our ability to avoid a significant disruption in our information technology system, including security breaches, or our ability to implement new system and software successfully. |
| ● | Our ability to obtain and maintain intellectual property protection for our products. |
| ● | The other risks identified in this prospectus including, without limitation, those under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” as such factors may be updated from time to time in our other filings with the SEC. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with. Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors, including those set forth above under “Risk Factors” and elsewhere in this prospectus. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this prospectus. Prior to investing in our common stock, you should read this prospectus and the documents we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we currently expect.
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We estimate that we will receive net proceeds from this offering of approximately $14.8 million, after deducting estimated underwriting discounts, the non-accountable expense allowance and the estimated offering expenses payable by us, and based upon an assumed initial public offering price of $5.50 per share (excluding any exercise of the underwriters’ over-allotment option), the midpoint of the estimated price range set forth on the cover page of this prospectus.
We intend to use the net proceeds of this offering as follows:
| ● | $7.4 million to hire key resources that enable growth and support market share capture, which include additional engineers & scientists to accelerate product development and operational personnel to better support delivery of large and complex contracts. |
| ● | $2.2 million to update and expand our neural-processing infrastructure to accelerate the pace in which we train and deploy Vision AI algorithms. |
| ● | $5.2 million for working capital and general corporate purposes. |
We may change the amount of net proceeds to be used specifically for any of the foregoing purposes. The amounts and timing of our actual expenditures will depend upon numerous factors. We may also use a portion of the net proceeds to acquire, license and invest in complementary products, technologies or additional businesses; however, we currently have no agreements or commitments with respect to any such transaction.
A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by approximately $2.8 million, after deducting the estimated underwriting discounts, non-accountable expense allowance and estimated aggregate offering expenses payable by us and assuming no change to the number of shares of common stock offered by us as set forth on the cover page of this prospectus.
The foregoing represents our current intentions based upon our present plans and business conditions to allocate and use the net proceeds of this offering. However, the nature, amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management has and will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments, and U.S. government securities.
We have never declared or paid any cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.
The payment of dividends, if any, in the future is within the discretion of our board of directors and will depend on our earnings, capital requirements and financial condition and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.
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The following table sets forth our cash and equivalents and capitalization as of September 30, 2025:
| ● | on an actual basis giving retroactive effect to the Stock Split; | |
| ● | on a pro forma as adjusted basis to give further effect to our issuance and sale of 3,000,000 shares of our common stock in this offering at the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses payable by us. |
The information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering as determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and related notes and unaudited interim financial statements and related notes thereto included elsewhere in this prospectus.
| Actual | Pro Forma as Adjusted | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash and cash equivalents | $ | 72,151 | $ | 14,857,712 | ||||
| Total long-term liabilities | 977,831 | 977,831 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock, $0.01 par value, 100,000,000 shares authorized, 15,021,650 and 18,021,650 shares issued and outstanding, actual and pro forma as adjusted, respectively | 150,217 | 180,217 | ||||||
| Additional paid-in capital | 4,060,171 | 18,815,732 | ||||||
| Accumulated Deficit | (2,900,823 | ) | (2,900,823 | ) | ||||
| Total stockholders’ equity | 1,309,565 | 16,095,126 | ||||||
| Total capitalization | $ | 2,287,396 | $ | 17,072,957 | ||||
The number of shares of our common stock to be outstanding upon completion of this offering is based on 15,021,650 shares of our common stock outstanding as of September 30, 2025, and excludes:
| ● | 210,000 shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 9,376,716 shares of common stock issuable under the 2018 Plan at a weighted average exercise price of $2.16 per share; and | |
| ● | 233,800 shares of common stock to be issued as equity incentives out of the initial share reserve of the 2026 Equity Incentive Plan (“2026 Plan”) as obligated under employee offer letter. |
Each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) would increase (decrease) the amount of cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization on a pro forma as adjusted basis by approximately $2.8 Million, assuming the number of shares, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and estimated offering expenses payable by us. Similarly, each increase (decrease) of 500,000 shares offered by us would increase (decrease) cash, total stockholders’ equity (deficit) and total capitalization on a pro forma as adjusted basis by approximately $2.6 Million, assuming the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
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If you purchase shares of our common stock in this offering, your interest will be diluted immediately to the extent of the difference between the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) and the pro forma as adjusted net tangible book value per share of our common stock immediately upon the consummation of this offering. Net tangible book value per share of common stock is determined by dividing our total tangible assets less total liabilities by the number of outstanding shares of our common stock. As of September 30, 2025, we had a historical net tangible book value of $(347,893), or $(0.02) per share of common stock. Our historical net tangible book value per share represents total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding as of September 30, 2025.
After giving further effect to our sale of 3,000,000 shares of common stock in this offering at an assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), and after deducting underwriters’ discounts and estimated offering expenses, upon the completion of this offering, our pro forma as adjusted net tangible book value as of September 30, 2025 would have been $14.4 million, or $0.80 per share of common stock. This represents an immediate increase in net tangible book value of $0.82 per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $4.70 per share to new investors of shares in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock in this offering.
The following table illustrates this dilution on a per share of common stock basis, assuming the underwriters (i) do not exercise their option to purchase additional shares of common stock and (ii) exercise their option to purchase additional shares of common stock in full:
| Offering Without Over-Allotment | Offering With Over-Allotment | |||||||
| Assumed public offering price per share | $ | 5.50 | $ | 5.50 | ||||
| Historical net tangible book value (deficit) per share as of September 30, 2025 | $ | (0.02 | ) | $ | (0.02 | ) | ||
| Increase in net tangible book value (deficit) per share attributable to new investors in this offering | $ | 0.82 | $ | 0.94 | ||||
| Pro forma as adjusted net tangible book value per share after giving effect to the offering | $ | 0.80 | $ | 0.92 | ||||
| Dilution per share to new investors in the offering | $ | (4.70 | ) | $ | (4.58 | ) | ||
The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering.
Assuming the underwriters’ over-allotment option is not exercised, each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to this offering by $2.8 million, or by $0.15 per share of common stock and the dilution to new investors purchasing our common stock in this offering by $5.54 per share, assuming the number of shares offered by us remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us. In addition, to the extent any stock options that we granted to certain of our officers, directors, employees and permitted consultants under the 2018 Plan, new investors would experience further dilution.
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If the underwriters exercise their option in full to purchase 450,000 additional shares of common stock in this offering at the assumed initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), the pro forma as adjusted net tangible book value per share after this offering would be $0.92 per share of common stock, the increase in the pro forma as adjusted net tangible book value per share to existing stockholders would be $0.94 per share of common stock and the dilution to new investors purchasing securities in this offering would be $4.58 per share of common stock.
The following charts illustrate our pro forma proportionate ownership upon completion of this offering, based on the assumed initial public offering price of $5.50 per share, by present stockholders and investors in this offering, compared to the relative amounts paid by each. The charts reflect payment by present stockholders as of the date the consideration was received and by investors in this offering at the public offering price. The charts further assume no changes in net tangible book value other than those resulting from the offering.
| Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
| Number | Percent (%) | Amount ($) | Percent (%) | Per Share ($) | ||||||||||||||||
| Existing stockholders | 15,021,650 | 83.4 | % | - | - | % | $ | - | ||||||||||||
| New investors | 3,000,000 | 16.6 | % | 16,500,000 | 100 | % | $ | 5.50 | ||||||||||||
| Total | 18,021,650 | 100.0 | % | 16,500,000 | 100.0 | % | $ | 1.09 | ||||||||||||
The table above assumes no exercise of the underwriters’ option to purchase up to 450,000 additional shares in this offering. If the underwriters’ over-allotment option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to 81.3% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors participating in the offering would be increased to 18.7% of the total number of shares outstanding after this offering.
The number of shares of our common stock to be outstanding upon completion of this offering is based on 15,021,650 shares of our common stock outstanding as of September 30, 2025, and excludes:
| ● | 210,000 shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 9,376,716 shares of common stock issuable under the 2018 Plan at a weighted average exercise price of $2.16 per share; and |
| ● | 233,800 shares of common stock to be issued as equity incentives out of the initial share reserve of the 2026 Equity Incentive Plan (“2026 Plan”) as obligated under employee offer letters. |
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MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Summary of Financial Information” and our audited financial statements and unaudited interim financial statements and related notes, each included elsewhere in this prospectus. Data as of and for the years ended December 31, 2024 and 2023 have been derived from our audited financial statements appearing at the end of this prospectus. Data as of September 30, 2025 and for the nine months ended September 30, 2025 and 2024 have been derived from our unaudited interim financial statements appearing at the end of this prospectus. These interim financial statements reflect the correction of errors related to going concern disclosure and deferred tax asset accounting, and accordingly the September 30, 2025 financial information has been restated. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period. This discussion and other parts of this prospectus contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks, uncertainties and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this prospectus.
Overview
Founded in 2015, ROC is a consistently top-tier rated U.S.-built, U.S.-owned, and U.S.-operated provider of advanced biometric, facial recognition, and Vision AI solutions. We develop and deploy innovative technologies that enhance safety, security, and convenience globally, while upholding principles of fairness and privacy. Our solutions are trusted by U.S. and international military branches, law enforcement agencies, financial technology firms, and commercial enterprises, with our multimodal capabilities consistently demonstrating robust performance in rigorous government evaluations and in over 300 million annual identity verification transactions for major financial institutions. We believe our customer-centric approach and superior algorithms allow us to displace foreign incumbents and offer a transparent alternative to address the growing threat of “Poison AI” as discussed below.
Factors and Trends Affecting Our Business and Results of Operations
Several factors and trends affect our business and results of operations. These include the increasing importance of identity solutions, the evolving nature of biometric technologies, and our strategic approach to market opportunities.
Financial Considerations and Strategic Investments
We are making strategic investments to capitalize on market opportunities. ROC’s expenses reflect these investments, which are aimed at driving future growth and enabling us to provide a platform that supports a wide range of identity-related needs.
Government Policy and Geopolitical Factors
We believe ROC is also well-positioned to benefit from U.S. federal government policies focused on greater efficiency through technology, and our unique placement as a U.S.-based provider. Additionally, there is a general aversion to Chinese and Russian technology around the globe, which creates opportunities for ROC. We believe ROC is particularly well-positioned for winning automated biometric identification system (“ABIS”) contracts around the world, where there are clear indications of aversion to legacy Western players, primarily due to a history of vendor lock-in and poor service.
The Growing Importance of Identity Solutions
Identity is becoming a critical global currency, with increasing recognition that robust identity management is essential for security, efficiency, and trust. The increasing focus on digital identity initiatives highlights the growing significance of effective and comprehensive identity management systems. This trend increases the demand for effective and comprehensive identity management systems.
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Evolution of Biometric Technologies
While specific biometric modalities are becoming more commoditized, the focus is shifting towards efficiency, plug-and-play capabilities, and multi-biometric systems. The differentiators around specific accuracy algorithms are becoming less important, with efficiency and the ability to integrate various technologies becoming key. This shift favors companies like us that offer versatile, data-agnostic, and privacy-protecting solutions. We believe that our ability to provide a “Swiss Army knife” of identity solutions, capable of addressing diverse use cases, positions us for success in this evolving market.
Poison AI
“Poison AI” is a shorthand term that refers to the practice of data poisoning, a type of machine learning attack where malicious data is deliberately introduced into an AI model’s training dataset to manipulate its behavior or outputs, causing it to malfunction or become biased. An illustrative example of Poison AI is the Nightshade tool offered by the University of Chicago (https://nightshade.cs.uchicago.edu/whatis.html). Nightshade allows creators to prevent their digital artwork from being fed into generative AI models without consent by “turn[ing] any image into a data sample that is unsuitable for model training. More precisely, Nightshade transforms images into “poison” samples, so that models training on them without consent will see their models learn unpredictable behaviors that deviate from expected norms.” In the national security field, we believe Poison AI poses a serious and growing risk wherein adversarial state actors seek to intentionally create security vulnerabilities in AI models that are used in critical U.S. national security missions. As a solution provider to the U.S. national security community, we believe that our ability to closely manage our training data to prevent the introduction of “poison” samples would mitigate the risk of Poison AI and differentiate our offerings for our prospective government customers.
Our Strategic Response
ROC’s strategy is aligned with these trends. We recognize that having a great algorithm alone is no longer sufficient. Customers demand a full stack of capabilities, the ability to turn features on and off, and accommodation of complex demands. Our approach involves:
| ● | Full-Stack Capability: We are focused on owning the full stack of identity capabilities, offering comprehensive platforms that address a wide range of customer needs. This approach is evident in our development of products like ROC ABIS, ROC Watch, ROC ID, and ROC Enroll. |
| ● | Modularity and Configurability: We design our systems to be modular and configurable, allowing us to adapt to specific customer requirements and integrate seamlessly with other technologies. This is crucial in a market where identity solutions must be flexible and adaptable. |
| ● | Broad View of Identity: Unlike competitors who view identity narrowly as biometrics, we adopt a broader perspective that includes biometrics, license plates, person entities, and real-time video. This comprehensive view enables us to provide more holistic solutions and address a wider range of use cases. |
| ● | Platform Approach: We are building a platform that offers both comprehensive solutions and individual components, recognizing that customers have diverse needs and require varying levels of integration. This strategy allows us to compete effectively with “all or nothing” approaches. |
Revenue
Our revenue consists of the sale of access to its software platforms, maintenance services and professional services.
Cost of Sales
Cost of sales consists primarily of the purchase price of goods and cost of services rendered.
Operating Expenses
Research and Development
Research and development represent costs incurred by us for the discovery and development of our product and include:
| ● | external research and development expenses incurred under agreements with third party independent contractors and consultants; |
| ● | salaries, payroll taxes, employee benefits expenses for individuals involved in research and development efforts; and | |
| ● | research supplies |
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General and Administrative Expenses
General and administrative expenses consist of personnel-related costs, including salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, human resources, business operations and other administrative functions, investor relations activities, legal fees related to corporate matters, fees paid for accounting and tax services, consulting fees and facility-related costs.
Other Income
Other income consists primarily of interest income earned on our cash, cash equivalents and short-term investments.
Results of Operations
Revenue
Comparison of the Nine Months Ended September 30, 2025 and 2024
The following table sets forth our financial results for the periods indicated. All information is derived from the statements of earnings for the nine months ended September 30, 2025 and September 30, 2024.
| Nine Months Ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| ROC SDK | $ | 4,263,378 | $ | 4,107,801 | $ | 155,577 | 4 | % | ||||||||
| ROC Watch | 4,948,879 | 911,997 | 4,036,882 | 443 | % | |||||||||||
| ROC ABIS | 326,108 | 332,588 | (6,480 | ) | (2 | )% | ||||||||||
| ROC Enroll | 312,573 | - | 312,573 | - | ||||||||||||
| R&D Contracts | 3,641,496 | 5,709,392 | (2,067,896 | ) | (36 | )% | ||||||||||
| Total Revenue | $ | 13,492,434 | $ | 11,061,778 | $ | 2,430,656 | 22 | % | ||||||||
| Cost of sales | 2,777,639 | 1,468,124 | 1,309,515 | 89 | % | |||||||||||
| Gross Profit | $ | 10,714,795 | $ | 9,593,654 | $ | 1,121,141 | 12 | % | ||||||||
| Gross Margin | 79 | % | 87 | % | ||||||||||||
Revenue increased by $2,430,656 or 22%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. This increase in revenue can all be attributed to growth in product revenues, primarily ROC Watch, and partially offset by a decrease in Government services Revenue.
Operating Expenses
The following table sets forth selected operating data for the periods indicated. All information is derived from the statements of earnings for the nine months ended September 30, 2025, and September 30, 2024, and we provide additional explanation below.
| Nine months Ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Selling, general and administrative | $ | 6,162,114 | $ | 6,319,772 | $ | (157,658 | ) | (2 | )% | |||||||
| Research and development | 4,811,387 | 4,629,255 | 182,132 | 4 | % | |||||||||||
| Operating Expenses | $ | 10,973,501 | $ | 10,949,027 | $ | 24,474 | 0 | % | ||||||||
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Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $157,658, or 2%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily driven by lower business development costs, partially offset by an increase in G&A labor costs. The change is reflective of organizational refinements within the business development and G&A functions. We have focused resources on higher-performing personnel and initiatives while maintaining our commitment to strategic growth and operational excellence.
Research and Development
Research and development expenses increased by $182,132, or 4%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024. The increase was primarily driven by higher R&D labor costs from growth in R&D headcount, partially offset by capitalization of costs for internally developed software.
Other Income and Expenses
| Nine Months ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Interest income | $ | 1 | $ | 141 | $ | (140 | ) | (99 | )% | |||||||
| Interest expense | (49,545 | ) | - | (49,545 | ) | - | ||||||||||
| Other Expense | - | (878 | ) | 878 | 100 | % | ||||||||||
| Other income | - | 3,159 | (3,159 | ) | (100 | )% | ||||||||||
| Total Other Income (Expense) | $ | (49,544 | ) | $ | 2,422 | $ | (51,966 | ) | (2,146 | )% | ||||||
Total other expenses increased by $51,966 for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, primarily due to an increase of $49,545 in interest expense.
Net Loss Attributable to Common Stockholders. Loss for the nine months ended September 30, 2025, and 2024 was $908,726 and $747,804, respectively, primarily attributable to the items discussed above, and a $600,476 provision for income taxes during the nine months ended September 30, 2025, as a result of recording a full valuation allowance on our net deferred tax asset.
Comparison of the Years Ended December 31, 2024 and 2023
The following table sets forth our financial results for the periods indicated. All information is derived from the statements of earnings for the fiscal years ended December 31, 2024 and December 31, 2023.
| Year Ended December 31, | Change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| ROC SDK | $ | 5,958,212 | $ | 5,125,163 | $ | 833,049 | 16 | % | ||||||||
| ROC Watch | 1,326,607 | 980,377 | 346,230 | 35 | % | |||||||||||
| ROC ABIS | 352,692 | - | 352,692 | - | ||||||||||||
| ROC Enroll | 40,200 | - | 40,200 | - | ||||||||||||
| R&D Contracts | 6,026,991 | 9,055,287 | (3,028,296 | ) | (33 | )% | ||||||||||
| Other | - | 250,000 | (250,000 | ) | (100 | )% | ||||||||||
| Total Revenue | 13,704,702 | 15,410,827 | $ | (1,706,125 | ) | (11 | )% | |||||||||
| Cost of sales | 1,747,038 | 2,766,639 | (1,019,601 | ) | (37 | )% | ||||||||||
| Gross Profit | $ | 11,957,664 | $ | 12,644,188 | $ | (686,524 | ) | (5 | )% | |||||||
| Gross Margin | 87 | % | 82 | % | ||||||||||||
Revenue decreased by $1,706,125, or 11%, for the year ended December 31, 2024 compared to the year ended December 31, 2023. This decrease in revenue can all be attributed to year over year fluctuations in our revenue from Government R&D Services, while the revenue performance for our core product lines each increases from 2023 to 2024.
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Government Services Revenue
In prior years, a significant portion of our revenue has been derived from research and development “services” contracts with the U.S. government and quasi-governmental entities. These services have been funded through mechanisms such as U.S. Army Small Business Innovation Research (SBIR) awards and Other Transaction Agreement (OTA) vehicles. These engagements have supported foundational advancements in our core biometric and AI technologies and continue to serve as an important avenue for innovation.
The variable nature of this funding can obscure trends in our revenue growth. While total revenue declined from $15.4 million in 2023 to $13.7 million in 2024, this was due to a decrease in R&D services revenue. This decrease in R&D services revenue from $9.1 million in 2023 to $6.0 million in 2024 reflects variations in the timings of Congressional budget approvals as well as lengthy government procurement cycles. Our R&D services contracts have fixed terms of typically 12 to 24 months to deliver a specific R&D result. The reduction in revenues from R&D services contracts stems primarily from a recent trend in Congressional delays in passing a federal budget bill. Congressionally approved budgets for the federal government’s fiscal year, which runs from Oct 1 to Sept 30, were delayed (A) for FY 2023 by 3 months until December 29, 2022 and (B) for FY 2024 by 6 months until Mar. 23, 2024. For FY 2025, Congress was unable to pass an appropriations bill. The federal government remains funded via a full-year continuing resolution that continues the FY 2024 budget through the end of FY 2025. Delays and obstructions in Congressional approval of appropriations bills, as well as lengthy government procurement cycles, pose a risk to our ability to win new R&D services contracts. We believe these budget delays and obstructions primarily present timing challenges as opposed to loss of business opportunities. Excluding these government service engagements, product-driven revenue increased from $6.1 million in 2023 to $7.7 million in 2024, representing an increase of 26% over the period.
This growth demonstrates the increasing market traction of our core software products, independent of government R&D support, and provides a clearer picture of our trajectory as we scale our enterprise and public sector deployments.
Product Revenue Growth
We continue to experience strong growth across our core product lines. Revenue from our flagship ROC software development kit (“SDK”) product increased year-over-year from $5.1 million in 2023 to $6.0 million in 2024, reflecting a growth rate of 16% over the period. This growth has been driven primarily by increased adoption within the fintech sector, where reliable identity verification solutions are in high demand.
Similarly, our ROC Watch product, a real-time video analytics solution, has shown meaningful traction since its initial release. Revenue increased from $1.0 million in 2023 to $1.3 million in 2024, as we expanded customer adoption in the public safety and transportation sectors.
Operating Expenses
The following table sets forth selected operating data for the periods indicated. All information is derived from the statements of earnings for the fiscal years ended December 31, 2023 and December 31, 2024 and we provide additional explanation below.
| Year Ended December 31, | Change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Selling, general and administrative | $ | 7,542,742 | $ | 6,173,689 | $ | 1,369,053 | 22 | % | ||||||||
| Research and development | 5,683,836 | 4,014,016 | 1,669,820 | 42 | % | |||||||||||
| Loss from Operations | $ | 13,226,578 | $ | 10,187,705 | $ | 3,038,873 | 30 | % | ||||||||
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $1,369,053, or 22%, for the year ended December 31, 2024 compared to year ended December 31, 2023. This was primarily due to an increase in business development labor of $636,746 and an increase of $554,690 in selling, general and administrative labor costs. Both of these expense lines represent our investment in the continued growth of our business and market development functions as we expand our product lines and the markets that we serve.
Research and Development
Research and development expenses increased by $1,669,820, or 42%, for the year ended December 31, 2024 compared to year ended December 31, 2023. The increase was primarily due to increases of $1,647,784 in R&D labor expense. This increase in R&D personnel represents an ongoing and consistent commitment to continued growth of our R&D personnel.
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Other Income and Expenses
| Year Ended December 31, | Change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Interest income | $ | 644 | $ | 54 | $ | 590 | 1,093 | % | ||||||||
| Interest expense | (1,594 | ) | - | (1,594 | ) | - | ||||||||||
| Other Expense | (43,134 | ) | (93,815 | ) | 50,681 | -54 | % | |||||||||
| Other income | 14,843 | 19,605 | (4,762 | ) | -24 | % | ||||||||||
| Total Other Income (Expense) | $ | (29,241 | ) | $ | (74,156 | ) | $ | 44,915 | -61 | % | ||||||
Total other expenses decreased by $44,915 for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to decrease of $50,681 in Provision for credit losses and discounts in Accounts Receivable.
Net Income (Loss) Attributable to Common Stockholders. Income (Loss) for the year ended December 31, 2024, and 2023 was $(697,678), and $2,382,327, respectively, primarily attributable to the items discussed above offset by a $600,475 benefits for income taxes during the year ended December 31, 2024.
Long-Term Liquidity and Capital Resources
Beyond the next 12 months, our long-term capital requirements will primarily be driven by continued strategic investments in R&D, aimed at maintaining our technological leadership and expanding the capabilities of our ABIS and AFIS solutions. We also anticipate potential expansion into new domestic and international markets, and opportunistic strategic initiatives such as acquisitions that align with our core competencies. We intend to use a significant portion of the net proceeds from this public offering to fund these long-term growth initiatives.
Our capital resources are expected to evolve significantly with this public offering. Historically, we have relied on internal cash generation and our line of credit. Post-offering, equity will become a substantial component of our capital structure, providing a stable and scalable funding source for future growth without incurring additional debt. This shift is expected to improve our financial flexibility and reduce our reliance on debt financing. While we may consider additional debt or equity financing in the future to support material growth opportunities or strategic acquisitions, our immediate focus is on leveraging the proceeds from this offering to accelerate the delivery of our new ABIS and AFIS products and services to the marketplace and enhance our market penetration. We anticipate favorable trends in our capital resources as we mature as a public company, with enhanced access to capital markets to support our long-term strategic objectives.
As of September 30, 2025, our cash and cash equivalents, accounts receivable, availability under our line of credit, and committed customer contracts are expected to fund our planned operations for approximately 4 to 6 months. As a result, our existing liquidity resources are not sufficient to meet our obligations over the twelve-month look-forward period without the successful conversion of pipeline opportunities, financing, or other liquidity-enhancing actions, the outcomes of which are not fully within our control. Based on our current operating plan, we expect to require approximately $10 million of additional funding to support planned operations and meet minimum liquidity needs over the twelve-month look-forward period from the date the financial statements are issued. Given our limited runway and the uncertainty surrounding the timing or execution of potential liquidity-enhancing actions, management has concluded that substantial doubt exists regarding our ability to continue as a going concern for the twelve-month period following the issuance of these financial statements.
Cash flow activity below is a vital financial metric that represents the net amount of cash moving into and out of a business. The table below provides details about cash flow performance for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
| Nine Months ended September 30, | Change | |||||||||||||||
| 2025 | 2024 | Amount | % | |||||||||||||
| Net cash used in: | ||||||||||||||||
| Operating activities | $ | (1,156,974 | ) | $ | (366,329 | ) | $ | (790,645 | ) | (216 | )% | |||||
| Investing activities | (490,761 | ) | - | (490,761 | ) | - | ||||||||||
| Financing activities | 993,450 | (21,731 | ) | 1,015,181 | 4,672 | % | ||||||||||
| Net decrease in cash | $ | (654,285 | ) | $ | (388,060 | ) | $ | (266,225 | ) | (69 | )% | |||||
Operating Activities
Net cash used in operating activities was $1,156,974 and $366,329 for the nine months ended September 30, 2025, and 2024, respectively. This increase is primarily due to the increase in accounts receivable in the nine months ended September 30, 2025 compared to September 30, 2024.
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Investing Activities
Net cash used in investing activities was $490,761 and $0 for the nine months ended September 30, 2025, and nine months ended September 30, 2024, respectively. The increase in cash used in investing activities was primarily due to a increase in spending related to Capitalized software in the nine months ended September 30, 2025, as compared to September 30, 2024.
Financing Activities
Net cash provided by (used in) financing activities was $993,450 and $(21,731) for the nine months ended September 30, 2025, and nine months ended September 30, 2024, respectively. The increase in cash provided from financing activities is primarily attributable to $985,343 of net proceeds from the line of credit.
Cash flow activity below is a vital financial metric that represents the net amount of cash moving into and out of a business. The table below provides details about cash flow performance for the year ended December 31, 2024 compared to year ended December 31, 2023.
| Year Ended December 31, | Change | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Net cash provided by (used in): | ||||||||||||||||
| Operating activities | $ | 21,428 | $ | 1,918,864 | $ | (1,897,436 | ) | (99 | )% | |||||||
| Investing activities | (46,825 | ) | (270,047 | ) | 223,222 | (83 | )% | |||||||||
| Financing activities | (863,287 | ) | (1,008,345 | ) | 145,058 | (14 | )% | |||||||||
| Net increase (decrease) in cash | $ | (888,684 | ) | $ | 640,471 | $ | (1,529,155 | ) | (239 | )% | ||||||
Operating Activities
Net cash provided by operating activities was $21,428 and $1,918,864 for the year ended December 31, 2024 and year ended December 31, 2023, respectively. The decrease was primarily driven by the slight decrease in revenue but high operating expenses results in a transition from net profit for the year ended December 31, 2023 to net loss in year ended December 31, 2024.
Investing Activities
Net cash used in investing activities was $46,825 and $270,047 for the year ended December 31, 2024 and year ended December 31, 2023, respectively. The decrease in cash used in investing activities was primarily due to decrease in spending over fixed assets in year ended December 31, 2024 compared to the prior year.
Financing Activities
Net cash used by financing activities was $863,287 and $1,008,345 for the year ended December 31, 2024 and year ended December 31, 2023, respectively, each of which primarily consisted of distributions. During the year ended December 31, 2024, these were partially offset by net increase of $431,132 from funds borrowed through the line of credit.
Critical Accounting Policies and Estimates
Revenue Recognition
The Company generates revenue from the sale of access to its software platforms, maintenance services and, professional services.
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company applies the following five-step revenue recognition model in accounting for its revenue arrangements:
| ● | Identification of the contract(s) with the customer, including whether collectability of the consideration is probable by considering the customers’ ability and intention to pay; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
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Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances, including criteria such as their age, amount, and client standing.
Stock-Based Compensation
The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company utilized a 409A valuation to determine the value of the Company’s common stock on the date of issuance. The Company has a relatively low forfeiture rate of stock-based compensation, and forfeitures are recognized as they occur.
The valuation methodology used to determine the fair value of options issued during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions, including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Due to the Company’s limited historical data related to employee share option exercise behavior, the Company has elected to use the “simplified” method as permitted by Staff Accounting Bulletin No. 110 for its “plain vanilla” stock option grants. Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its common stock. The expected forfeiture rate is estimated based on management’s best assessment.
Estimated volatility is a measure of the amount by which the Company’s asset price is expected to fluctuate each year during the expected life of the award. ROC did not have sufficient history as it was a private company and therefore utilized the volatility of peer companies
Emerging Growth Company Accounting Election
Section 102(b)(1) of the Jumpstart Our Business Startups Act (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect not to take advantage of the extended transition period and to comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. Following this offering, we expect to be an emerging growth company and will have the benefit of the extended transition period. We intend to take advantage of the benefits of this extended transition period.
Recent Accounting Pronouncements
In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” The new accounting rules require that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements to the common control group (regardless of the lease term) as long as the lessee controls the use of the underlying asset (the leased asset) through a lease. These leases should also be accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The Company adopted ASU 2023-01 and it did not have a material impact to its financial statements.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements primarily through expanded disclosures around significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU and expects to include updated income tax disclosures.
In November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or a retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements and related disclosures.
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Executive Summary
ROC is an independent American artificial intelligence company redefining the global standard for Vision AI in identity, security, and digital forensics. Our Vision AI platform delivers real-time facial recognition, multimodal biometric verification, video analytics, and AI-powered evidence analysis to mission-critical organizations across private and public sectors. ROC’s biometric algorithms are routinely ranked by National Institute of Standards and Technology (“NIST”) as among the most accurate and computationally efficient globally. Our solutions outperform legacy foreign-built systems at a fraction of the cost, with faster deployment and stronger trust. As demand for trusted AI accelerates across law enforcement, defense, and regulated commercial sectors, ROC is scaling rapidly through a growing network of integrators and multi-year deals. We are expanding from a foundation of government leadership into high-growth commercial markets such as access control, physical security, and identity verification. Our international pipeline spans the Middle East, Asia–Pacific (“APAC”), and other strategic regions where national AI and identity investments are surging. With sovereign U.S. development, deep technical leadership, a vertically integrated platform, and proven field results, we believe ROC is positioned to become the category-defining leader in operational Vision AI.
Overview
ROC builds AI that sees, identifies, and interprets the physical world. Our focus is biometric identity, digital forensics, and real-time video analytics. In a market long dominated by foreign-built legacy platforms, ROC is executing a clear mission: to restore the United States as the global leader in Vision AI. We are displacing outdated, overpriced, foreign systems with American-built solutions that are leaner, more efficient, and more affordable. We believe ROC platforms routinely cost a fraction of legacy alternatives, yet deliver higher accuracy, faster deployment, and superior customer support — all while sustaining strong margins. This operational advantage is rooted in our disciplined model: we’ve never taken outside capital, and we build everything with purpose and precision.
ROC uses the term “Vision AI” as a branch of artificial intelligence focused on transforming unstructured visual data into structured, explainable insight. Vision AI is not generative or conversational. It is operational AI, built for accuracy, speed, and auditability. Whether it is deployed in a military checkpoint, a digital evidence lab, or a financial onboarding workflow, Vision AI enables real-time decisions with transparency and accountability. ROC’s product portfolio includes the following:
| ● | ROC SDK: All ROC Products are built on the foundation of the ROC’s Software Development Kit (ROC SDK). ROC SDK offers ROC’s ever-growing library of AI / ML developed Vision AI algorithms, including biometrics (Face, Fingerprint, & Iris) and object detection models (Automated License-Plate Recognition (ALPR), Pedestrian, Vehicles, Optical Character Recognition (OCR), Weapon, and more). ROC SDK is widely used within Public Security, National Security, and Fintech use-cases. A complete list of computer vision modalities includes: Face Recognition, Fingerprint Recognition, Iris Recognition, Latent Fingerprint Recognition, Age Estimation, Face Analytics, Deepfake and Liveness Detection, Weapon Detection, Tattoo Matching, Object Detection, License Plate Recognition and Vehicle Recognition. |
| ● | ROC ABIS: ROC ABIS, ROC’s newest go-to-market product, is an enterprise-grade biometric identity system. Law enforcement can accelerate investigations with real-time matching of faces, latent prints, and ten-prints in seconds.. Modern, streamlined workflows empower examiners to tackle complex forensic challenges and ensure rapid case resolution. |
| ● | ROC Watch: ROC Watch is a real-time or post-event video analytics platform that delivers multimodal video analytics, visitor management, and threat detection in a single pane of glass. ROC Watch is utilized within Federal agencies such as DOD, Police Departments, Airports, Schools, and Commercial Safety & Security. |
| ● | ROC Enroll: ROC Enroll is a remote Identity Verification solution that enforces high-quality and compliant selfie facial capture, spoof-prevention (Liveness), face to ID matching, and can support an identity document verification plugin (provided by third-party providers). It can also be utilized as an extension of ROC Watch for access management or gallery enrollment. ROC Enroll is widely used by MTN (telcom) in South Africa for SIM card registration. |
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ROC’s algorithmic efficiency has long been a strategic advantage. Our AI models typically require only a fraction of the compute power that legacy platforms demand, allowing us to deploy faster, operate leaner, and scale without excess infrastructure. For example, an analysis published on February 20, 2024 of the National Institute of Standards and Technology (NIST) Evaluation of Latent Fingerprint Technologies (ELFT) showed that the ROC’s latent fingerprint algorithm was capable of searching a database more than 500 times faster than every other vendor who was benchmarked. Additionally, an analysis on March 8, 2023 of the NIST Face Recognition Vendor Test (FRVT) showed that the ROC face recognition algorithm ranked 61st out of 338 algorithms in hardware efficiency, while none of our key competitors ranked within the top 150 most efficient algorithms. Further, an analysis performed on February 15, 2023 of the NIST Proprietary Fingerprint Template (PFT) benchmarked that the ROC fingerprint algorithms had template comparison speeds that were the fastest of any vendor, and as much as 1000x faster than certain key competitors.
This advantage has enabled us to simplify system architecture while supporting extremely large deployments through our horizontally and vertically scalable enterprise search infrastructure. ROC is routinely measured by NIST as having the most accurate and computationally efficient facial and fingerprint recognition algorithms in the world — a rare combination that enables both unmatched performance and flexible deployment. We support secure, air-gapped installations as well as cloud-native delivery, and are actively attaining Criminal Justice Information Services (“CJIS”) and related compliance standards to support our growing federal and state customer base. Our engineering team includes experts who have built mission-critical systems for the Federal Bureau of Investigation (the “FBI”) and other agencies, ensuring our platforms are secure, interoperable, and optimized for rapid integration through exposed Application Programming Interfaces (“APIs”) and robust reference applications.
ROC’s mission and leadership emerged from the U.S. national security community. Prior to creating ROC, our founders, Brendan Klare and Joshua Klontz, worked within the facial recognition research group at Noblis, Inc., which is a science and technology services provider to leading U.S. national security agencies. Our founders’ work included supporting a major case study for the FBI, regarding the deployment of facial recognition technology during the course of the 2013 Boston Marathon Bombing investigation. Our CEO, B. Scott Swann, served an 18-year career with the FBI, where he fulfilled multiple executive roles, advancing technology to include Special Assistant in the FBI Director’s Office for the Science and Technology Executive Assistant Director; Executive Officer in the Office of the Director of National Intelligence; and Unit Chief at the FBI’s Criminal Justice Information Services Division. Mr. Swann led the FBI’s major case study on the Boston Marathon Bombing, through which he first met and worked with Mr. Klare and Mr. Klontz. Mr. Swann worked closely with the FBI’s CJIS division, the FBI’s central repository and search database for fingerprints and other biometric evidence.
As outlined in the chart below, our growth now includes global financial companies, state and local public safety organizations, and large retail enterprises. We are rapidly expanding in access control, identity verification, and physical security applications — particularly in high-assurance and infrastructure-critical sectors. Our commercial business is scaling through an already mature channel network, and we are seeing increasing demand from global integrators who want to deliver ROC’s technology under their own brands. Our international pipeline is significant, with especially strong momentum in the Middle East and APAC regions, where governments are investing in next-generation identity and surveillance systems. These global opportunities are already driving business today and represent a substantial long-term growth vector.
| For the Nine months ended September 30, 2025 | For the Year ended December 31, 2024 | For the Year ended December 31, 2023 | ||||||||||
| Number of customers | 66 | 61 | 59 | |||||||||
| Percent of revenue for each major product | ||||||||||||
| -ROC SDK | 32 | % | 43 | % | 33 | % | ||||||
| -ROC Watch | 37 | % | 10 | % | 6 | % | ||||||
| -ROC ABIS | 2 | % | 3 | % | ||||||||
| Percent of revenue for each principal market | ||||||||||||
| -National Security | 68 | % | 66 | % | 73 | % | ||||||
| -Fintech | 17 | % | 22 | % | 15 | % | ||||||
| -Public Safety | 13 | % | 10 | % | 9 | % | ||||||
| -Commercial Security and Engagement | 2 | % | 2 | % | 1 | % | ||||||
| -Other | 2 | % | ||||||||||
| Percent of revenue from the federal government and government agencies | 81 | % | 76 | % | 82 | % | ||||||
On November 19, 2019, ROC published the Code of Ethics that addressed the use of our face recognition technology. To our knowledge, ROC was the first biometric vendor to adopt such code of ethics addressing the use of face recognition technology. Subsequently, ROC has incorporated the Code of Ethics into our software licensing agreements to provide a contractual means for limiting access to our technology if a licensee violates the Code of Ethics. From the beginning, we believed that transparency, accountability, and technical rigor must go hand in hand. We build with fairness and explainability in mind and design for environments where decisions must be auditable and justifiable. That said, the broader landscape is also shifting. Adoption of face recognition and Vision AI tools is accelerating across law enforcement, defense, and critical infrastructure. Agencies that once hesitated are now embracing these capabilities — supported by clearer governance, better training, and stronger results. This growing acceptance comes at an ideal time for ROC. We are entering the public markets as demand is breaking open, not just for AI, but for trusted, operationally proven AI.
ROC has been deliberately built from the ground up. Every employee has been carefully selected not just for skill but for alignment with our mission. Our team combines rising stars in artificial intelligence and Vision AI with senior engineers and practitioners who have delivered large-scale systems for the U.S. government and enterprise. We believe in talent density, small teams, and high-trust environments. Every contributor matters, and every contributor has a stake in ROC’s equity. This model has not only helped us outperform technically — it has helped us retain culture, focus, and resilience while competing against far larger and better-funded companies.
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Corporate History
In 2015, ROC’s three co-founders filed the initial Articles of Incorporation as a Subchapter S Corporation with the State of Virginia as Rank One Computing Corporation. In 2018, ROC filed a Statement of Conversion with updated Articles of Incorporation with the State of Colorado and issued 10,000 shares of common stock. In 2021, ROC hired B. Scott Swann as ROC’s CEO. In 2022, ROC filed an Amended and Restated Articles of Incorporation with the State of Colorado to effect a 10 for 1 forward stock split and increase the authorized number of shares of common stock to 200,000. In 2024, ROC revoked its Subchapter S election. In 2025, ROC formed a wholly owned single member limited liability company, ROC Federal LLC, in the State of West Virginia. In 2026, ROC filed a Second Amended and Restated Articles of Incorporation with the State of Colorado to, among others, effect a 167 for 1 forward stock split, increase the authorized number of shares of common stock to 100,000,000 shares of common stock, and authorize 1,000,000 shares of preferred stock.
Vision, Industry, and Market Opportunity
ROC’s Vision
We believe the most important artificial intelligence systems of the next decade will not be conversational — they will be operational. They will see. They will identify. They will act. ROC was founded on the belief that artificial intelligence must be built to serve real-world missions — missions where decisions must be made quickly, accurately, and with full accountability. While others have chased generative hype, we have focused on the harder, deeper problem: making Vision AI fast, auditable, and reliable enough to operate at the tactical edge, under real-world constraints, in the most critical environments on earth.
But ROC is not only built for the edge. Our platform is architected to handle nation-scale challenges — from civil identity and immigration systems to criminal repositories, border control infrastructure, and secure digital evidence networks. We are already proving our ability to support sovereign-level operations across public safety, national identity, and defense. At the same time, our platform is powering commercial identity and analytics systems in banking, telecommunications, and e-commerce sectors where fraud prevention, compliance, and high-speed onboarding demand accuracy, trust, and scale. And while identity is often implemented nation by nation, the future of security and digital trust will also depend on global cooperation. ROC’s platform is designed for both — scalable enough to serve entire countries, flexible enough to bridge allies, and precise enough to power the most sensitive investigations or financial transactions.
We are not just building AI. We are rebuilding the global infrastructure for identity and evidence. From facial recognition to forensic video triage, from multimodal biometrics to AI-assisted digital casework, our platform is consolidating what today exists as a fragmented patchwork of vendors into one unified capability. What used to require multiple tools, complex integrations, and manual handoffs is now becoming a single, seamless user experience. This is more than a product shift — it is a platform transformation. And unlike the bloated, foreign-built legacy systems we are replacing, ROC’s solutions are built to be affordable, efficient, and accessible without compromising performance. We believe the current generation of overpriced, siloed, and opaque platforms is collapsing under its own weight. What comes next must be leaner, faster, and far more transparent. ROC is building the platform that defines the next era.
Today, ROC operates at the intersection of several large and fast-growing technology markets – computer vision (Vision AI), biometrics, video analytics, and digital evidence management. These segments are each experiencing robust growth from 2023 through 2025 and beyond, driven by advances in artificial intelligence (AI), increasing security and efficiency demands, and expanding government and commercial use cases. Below we present an analysis of each market, including U.S. and global market size estimates, growth projections, key demand drivers, emerging use cases, and relevant regulatory or technology trends. Our discussion also highlights how ROC’s strategic strengths – alignment with national security needs, efficiency in edge computing, and a multimodal AI platform – position us to capitalize on these industry dynamics.
ROC calculates our total addressable market (TAM) on a global basis, rather than limiting it to specific geographies, because its products and services address a fundamental and universal need that isn’t geographically constrained. Our digital business model allows for seamless expansion into new regions with minimal capital expenditure, making the entire global market addressable over time. This approach is consistent with industry practice for technology companies with scalable offerings but does present some uncertainties with respect to localized market opportunities. Based on market research provided by leading market researchers, including Fortune Business Insights, Straits Research, Grand View Horizon, and the Edge AI and Vision Alliance, the total addressable market in 2025 for ROC products and services, collectively, is approximately $106 billion, globally:
| ● | Vision AI: $23.7 billion |
| ● | Biometrics: $60.3 billion |
| ● | Video Analytics: $12.3 billion |
| ● | Digital Evidence: approximately $9.4 billion |
Vision AI Market
The global Vision AI market is expanding rapidly as AI-powered image and video understanding becomes mainstream across industries. In 2024, the global Vision AI market was estimated at approximately $15.85 billion. By 2025, it is forecasted to reach roughly $24 billion in value. Longer-term projections show continued high growth: for example, one study projects the global market to grow from about $23.7 billion in 2025 to $108.9 billion by 2033, a Compound Annual Growth Rate (“CAGR”) of roughly 24.1%. Despite variations in forecasts, there is a broad consensus that Vision AI is a high-growth segment, with double-digit annual expansion expected through the decade.
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The U.S. Vision AI market represents a significant portion of this opportunity. North America holds the largest regional share of the Vision AI market, with the United States alone accounting for an estimated 30.6% of global revenue in 2024. U.S. market size is substantial and growing and is driven by strong investment in AI across government and commercial sectors. Notably, North America has recently overtaken Asia-Pacific as the dominant force in the Vision AI market, reflecting increased adoption in the U.S. across applications from defense to retail.
Despite the United States leading the world in AI adoption and infrastructure, some of its biometric screening systems used by government agencies still rely heavily on foreign Vision AI algorithms. A French biometrics company provides fingerprint and facial recognition technology for the FBI’s NGI program, the DOD ABIS, Department of State consular systems, NCTC watchlisting, and many state and local systems. A Japanese biometrics company delivers facial biometric software for DHS entry and exit programs and CBP passenger matching, while another French biometrics company supports additional DHS identity operations. Chinese biometrics companies have significant market presence in Southeast Asia and Africa, often providing technology at extremely low cost or even free in exchange for influence and control over national security systems. Russian companies provide high accuracy facial recognition tools that are deployed globally.
Key growth drivers in Vision AI include:
| ● | Automation and Industry 4.0: Manufacturers and enterprises are investing in vision-based automation (for quality inspection, robotics, etc.), spurred by the need for efficiency and the maturation of deep learning. Government programs promoting automation in industries are further boosting adoption of machine vision systems. |
| ● | Cross-sector AI Integration: Vision AI is being deployed in an expanding range of sectors – from healthcare (medical imaging diagnostics) to automotive (autonomous driving and advanced driver assistance), retail (inventory management and shopper analytics), and security (surveillance and threat detection). This broad applicability drives robust demand globally. |
| ● | Advances in AI Technology: Ongoing improvements in algorithms (e.g., convolutional neural networks, deep learning) and the availability of large training datasets have significantly improved accuracy, enabling new use cases and better performance in challenging conditions. These technical advances continually expand what Vision AI systems can reliably do, encouraging further investments. |
| ● | National Security and Defense Needs: Defense, intelligence, and law enforcement agencies are major adopters of Vision AI for applications such as aerial reconnaissance, autonomous drones, and video surveillance analytics. Government demand for domestically developed, secure Vision AI solutions is rising in light of national security concerns and restrictions on foreign-made AI technology. Public-sector use (alongside smart city initiatives and border security programs) contributes substantially to U.S. market growth, aligning with ROC’s focus on U.S. national security customers. |
Emerging use cases are driving incremental growth. For example, in smart cities, Vision AI systems monitor traffic, detect accidents, and enhance public safety. In retail, Vision AI is used for frictionless checkout and shelf stock analysis. Facial recognition and object detection in live video streams are now deployed for access control and threat monitoring in airports, schools, and businesses. Such applications illustrate the proliferation of Vision AI into everyday infrastructure. Notably, the object detection sub-segment is expected to be one of the fastest-growing in coming years, as organizations seek real-time situational awareness from video data.
Technology and regulatory trends are shaping the Vision AI landscape. One significant trend is the shift toward edge computing – moving vision AI processing from cloud data centers to local devices and cameras for lower latency and improved privacy. Modern deployments often demand runtime efficiency on edge hardware (such as surveillance cameras, drones, or mobile devices) rather than reliance on constant cloud connectivity. This plays to ROC’s strength in efficiency at the edge, as our algorithms are optimized for high performance on-device. Indeed, the edge-enabled portion of the video analytics market is projected to grow at approximately 34% annually, far outpacing overall market growth, as organizations embrace on-premise and on-device AI to reduce bandwidth costs and address data sovereignty concerns. Another trend is convergence of multimodal AI – combining Vision AI with other sensor inputs (such as audio or biometrics) to enrich analysis. Our multimodal platform approach aligns with this, allowing clients to integrate face recognition, object tracking, and other modalities in one solution.
Regulatory factors are also coming into focus. There is increasing scrutiny on the use of AI and surveillance. For example, the European Union’s proposed AI Act and various state-level laws in the U.S. aim to ensure transparency and accountability in AI systems, especially those used for facial recognition or security monitoring. Privacy regulations (like the GDPR and U.S. state privacy acts) impose requirements on handling image data, requiring vendors to build compliance (data anonymization, consent management, etc.) into their vision solutions. While such regulations could moderate certain uses (e.g., restricting facial recognition in public spaces), they are also expected to favor vendors with trustworthy practices and high accuracy. ROC’s focus on accuracy and its U.S.-made, trusted technology is a strategic asset as customers navigate these regulatory expectations. Overall, the Vision AI market’s growth trajectory remains strong, underpinned by technological advancement and expanding use cases, and our edge-efficient, security-aligned platform is well positioned to benefit from these trends.
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Biometrics Market
The global biometrics market – which includes facial recognition, fingerprint, iris, voice recognition and other identity technologies – is experiencing robust expansion, underpinned by rising security demands and widespread adoption in both government and consumer applications. In 2024, the global biometrics market reached an estimated $50.08 billion in revenue and is predicted to increase from $60.32 billion in 2025 to approximately $307.24 billion by 2034, expanding at a CAGR of 19.89% from 2025 to 2034. This sustained growth outlook reflects how integral biometrics have become in modern security, fintech, and identity systems worldwide.
The U.S. biometrics market is one of the leading national markets, fueled by strong government and commercial uptake of biometric technologies. In 2023, the U.S. biometric technology market generated approximately $7.6 billion in revenue, accounting for about 18% of the global market. U.S. biometrics spending is forecast to accelerate with roughly 18% CAGR through 2030, reaching an estimated $24+ billion by 2030. This suggests the U.S. market could approach an approximately $10 billion annual run-rate by the mid-2020s, given current growth rates. North America as a whole is currently the largest regional market for biometrics, ahead of Asia-Pacific. Key U.S. growth drivers include federal and local government programs (e.g., enhanced border control systems, FBI Next Generation Identification upgrades), financial services deploying biometrics for fraud prevention, and the private sector’s embrace of biometric access control and authentication. ROC’s national security alignment is pertinent here – U.S. government and defense agencies are major buyers of biometric solutions for homeland security and military applications, and there is increasing preference for American-made, reliable technology in these sensitive deployments.
Key demand drivers in biometrics include:
| ● | Security and Fraud Prevention Needs: Heightened security concerns globally – from identity theft and cybercrime to terrorism – are driving organizations to adopt biometrics as a more secure alternative to passwords, PINs, or ID cards. Governments have initiated programs for e-passports, national ID systems, and border security that rely on fingerprint and facial recognition at scale. Financial institutions and enterprises are similarly integrating biometric authentication (fingerprint, face or voice ID) to secure banking apps, payment systems, and physical access, responding to rising cyber threats and fraud attempts. This fundamental need for robust identity verification underpins steady demand growth. |
| ● | Government Programs and Regulation: Many governments are actively investing in biometric deployments for public safety and administrative efficiency. Examples include nationwide digital ID initiatives (such as India’s Aadhaar program or biometric voter registration in various countries), as well as mandates for stronger identity checks in immigration and air travel. In the U.S., government initiatives and funding (e.g., through the U.S. Department of Homeland Security or Department of Defense) have expanded the use of biometrics in law enforcement and military contexts. These public-sector programs not only contribute directly to market growth but also build public acceptance of biometrics. |
| ● | Consumer Electronics Integration: The incorporation of biometric sensors in consumer devices has exploded – nearly all modern smartphones now include fingerprint scanners or facial recognition for user authentication. This trend normalized biometrics for millions of consumers and has significantly enlarged the market. The low cost of these sensors and the convenience of biometric unlocking have driven adoption in phones, laptops, smart home devices, and even vehicles. As a result, biometric technology in consumer electronics has become a major segment, contributing to market scale and habituating users to biometric security in other domains (banking apps, building entry, etc.). |
| ● | Multimodal Biometrics for Accuracy: Organizations are increasingly deploying multimodal biometric systems– using a combination of biometric modalities (e.g., face + fingerprint, or voice + iris) – to achieve higher accuracy and reliability. Combining modalities can compensate for limitations of any single method (for instance, if a face image is of poor quality, a fingerprint can verify identity, and vice versa). This approach is especially favored in high-security environments. According to industry research, adoption of multimodal biometric solutions is on the rise, increasing from 16% of organizations in 2023 to 22% in 2024. The growing interest in multimodal systems plays to ROC’s strength in multimodal platform delivery, as our software natively supports face, fingerprint, and iris recognition in one unified solution. |
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With these drivers in place, emerging use cases for biometrics are expanding beyond traditional security. In financial services, biometrics are used for seamless customer onboarding (eKYC) and transaction authentication (e.g., facial recognition for mobile payments). In healthcare, hospitals use biometrics to verify patient identity and secure access to health records. Workplaces are replacing badge swipes with facial or iris scans for attendance and secure entry. Even the travel industry is rolling out biometric boarding gates and luggage drop-offs to improve passenger flow. Each new application domain introduces biometrics to a wider user base, reinforcing the overall market growth.
Several market dynamics and trends are notable in biometrics. One is the emphasis on privacy and data protection. As biometric data (like fingerprints or face templates) becomes widespread, regulators are enacting laws to protect it. For example, the BIPA in the U.S. imposes strict requirements on private companies collecting biometrics, and Europe’s GDPR treats biometrics as sensitive data. These regulations are prompting the industry to adopt privacy-by-design practices – e.g., on-device processing (so raw biometrics are not sent to the cloud), data encryption, and user consent frameworks. ROC’s efficient edge algorithms are able to address these concerns by enabling biometric matching to occur locally on devices or secure servers, minimizing data exposure. Likewise, accuracy and bias mitigation have become crucial: there is growing regulatory and public scrutiny to ensure facial recognition algorithms are unbiased and accurate across demographics. ROC’s top-tier accuracy (as evidenced by NIST evaluations) and demographic benchmarking (as evidenced by NIST evaluations) position us well as clients demand high-performing solutions.
Another trend is Biometrics-as-a-Service (BaaS) and cloud platforms for biometrics. Enterprises that do not want on-premise infrastructure are turning to cloud-based biometric APIs for functions like identity verification. This is expanding the market to new users (e.g., online retailers adding fingerprint login via a service). ROC’s flexible deployment models – on-premise for sensitive government clients or cloud/containerized for commercial clients – align with this shift. Finally, the convergence of biometrics with broader digital identity ecosystems is accelerating. Biometrics are increasingly used alongside digital wallets and identity documents for a holistic ID solution (for instance, using face recognition to unlock a mobile driver’s license app). This convergence is creating opportunities for platforms that can handle multimodal inputs and integrate with various identity data sources. Overall, the biometrics market’s strong growth is underpinned by its central role in security and convenience, and ROC’s strengths in multimodal, high-accuracy and edge-capable biometrics align tightly with where the industry is headed.
Video Analytics Market
The video analytics market – comprising AI-driven analysis of video feeds for security, surveillance, and business intelligence – is experiencing rapid growth as organizations increasingly seek to extract actionable insights from the vast amounts of video data being collected. Globally, the video analytics market was valued at around $10.25 billion in 2024. This market is on a steep upward trajectory: it is projected to reach approximately $12.29 billion in 2025, and further to about $48.94 billion by 2032 according to various forecasts. For example, Fortune Business Insights estimates the global market will grow at a 21.8% CAGR from 2025 to 2032, reaching $48.9 billion by 2032. An even longer-range analysis by Precedence Research projects the market to expand at roughly 22.6% CAGR through 2034, ultimately hitting $94.5 billion by 2034. In summary, industry analysts expect roughly a 20–23% annual growth rate in the video analytics sector over the next several years, making it one of the fastest-growing areas of the AI market.
Within this, the U.S. video analytics market is particularly significant and is growing briskly. North America led the world with about 40% of the global video analytics market share in 2024. The United States, as the largest contributor in North America, had an estimated market size of $3.45 billion in 2024. U.S. video analytics revenue is forecast to grow at approximately 22–23% CAGR going forward, in line with global trends, reaching around $7–8+ billion by 2027 and approximately $27 billion by 2034. This high growth is fueled by the widespread deployment of AI analytics in security systems across U.S. cities, airports, retail stores, and federal projects. In fact, the United States currently utilizes video analytics more than any other country, thanks to strong enterprise investment and public sector spending on smart surveillance. Major U.S.-based technology players and defense integrators in this space (e.g., Cisco, IBM, Motorola Solutions/Avigilon) further catalyze domestic adoption through innovation and large project rollouts. ROC’s close alignment with the U.S. government and law enforcement needs – a segment that heavily uses video analytics for threat detection and situational awareness – gives us strategic advantage in this growing home market.
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Key demand drivers in video analytics include:
| ● | Security and Public Safety Requirements: Security is the original and still primary driver for video analytics adoption. Government agencies, law enforcement, and private enterprises are increasingly relying on AI to monitor surveillance cameras in real time for threats – such as detecting intruders, unattended packages, or anomalous behaviors automatically. The government sector holds a major share of the video analytics market, as public safety initiatives (smart city surveillance, border security cameras, etc.) invest heavily in AI-driven video monitoring. Likewise, critical infrastructure (airports, transit systems, utilities) and commercial buildings are deploying video analytics for intrusion detection and incident response. This pervasive need for enhanced security and rapid incident detection is a fundamental growth engine for the industry. |
| ● | Proliferation of Video Data and Cameras: The sheer number of video cameras in use (from Closed Circuit Television (“CCTV”) networks to body-worn cameras and mobile devices) has exploded, creating massive volumes of video data that far exceed humans’ capacity to monitor in real time. Estimates suggest tens of millions of surveillance cameras are active globally, generating an ever-growing stream of footage. Organizations are turning to AI analytics to filter and interpret video data at scale, whether it’s for identifying traffic congestion on city streets or analyzing shopper movements in a store. The need to derive value from this data deluge – turning raw video into actionable alerts or business intelligence – is a core market driver. In the U.S., for example, it’s noted that 80% of all criminal cases involve video evidence in some form, underscoring the demand for tools to efficiently analyze video. |
| ● | Advancements in AI Accuracy: Recent advances in Vision AI algorithms (e.g., deep learning-based object recognition) have greatly improved the accuracy and reliability of video analytics, making them more viable to deploy. Modern systems can track individuals across multiple cameras, recognize faces or license plates with high accuracy, and even detect behaviors (fights, falls, etc.) that previously would have been too complex to automate. These improvements reduce false alarms and build end-user trust in automated analytics, encouraging wider adoption in security operations centers and beyond. Key companies in the field continuously refine algorithms for scenarios like low-light or crowded environments, expanding the range of deployable use cases. |
| ● | Operational Insights and ROI: Beyond security, many organizations are adopting video analytics for the operational and business insights they provide. For instance, retailers use video analytics to measure foot traffic patterns, dwell times, and product engagement in stores to optimize layouts and marketing. Transportation authorities apply analytics for traffic flow management and incident detection on roads. Healthcare facilities use them to monitor patient falls or identify when sanitation is needed in a room. These use cases deliver tangible ROI by improving efficiency, safety, or customer experience. The rising demand for such real-time insights – e.g., using cameras not just as passive recorders but active sensors for data – is broadening the market. One key trend is the growth of behavioral analytics that go beyond simple motion detection to interpret complex behaviors (for example, identifying if someone is loitering versus simply passing by). This new frontier of value extraction from video is convincing more enterprises to invest in AI analytics. |
In terms of emerging trends and use cases, an important development is the integration of video analytics with cloud and edge computing architectures. Many organizations are shifting from purely on-premise video management to hybrid models where some analytics run on camera devices or edge gateways (for immediate response), while heavier processing or aggregated trend analysis runs in cloud platforms. This allows scalability and flexibility – routine tasks can be handled at the edge, reducing bandwidth usage, while cloud systems can apply deeper analytics or archival searches. ROC’s strength in delivering efficient analytics on the edge (e.g., on cameras or mobile devices) aligns with this trend; our solutions can run AI on low-power devices, enabling real-time alerts even when connectivity is limited. Industry forecasts specifically highlight edge-enabled video analytics as a high-growth subsegment (projected to reach approximately $75 billion by 2030 from just $5 billion in 2021), reflecting how vital edge computing is becoming in this market.
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Another trend is consolidation and platformization. Initially, the video analytics space saw many niche vendors offering point solutions (license plate recognition, people counting, etc.), but we are now seeing consolidation into more comprehensive platforms. Customers (especially large city or enterprise deployments) prefer integrated suites that can handle multiple analytics functions and camera types under one umbrella. This favors companies like ROC that offer a broad multimodal analytics platform – for example, our software can perform facial recognition, object detection, and forensic video search in one system, whereas a piecemeal approach would require several separate tools. The trend toward unified video analytics and evidence platforms (often tying into video management systems, VMS, used by security teams) plays to our advantage as a one-stop provider.
Regulatory and societal factors also affect the video analytics domain. Public privacy concerns are leading to calls for transparency in how video AI is used. Cities deploying facial recognition in cameras, for instance, have encountered pushback leading to moratoriums in some jurisdictions. We anticipate regulations may require measures like bias testing of algorithms, audit logs for how AI alerts are generated, and perhaps restrictions on certain uses (e.g., real-time face ID in public without warrants). At the same time, regulatory mandates can drive adoption: a growing number of local laws require retention and review of surveillance footage (for accountability), which in practice necessitates intelligent video management. For example, several U.S. states now mandate police body-worn cameras and proper handling of the footage, greatly expanding the volume of video that departments must review and store – a challenge that practically demands advanced video analytics and evidence management tools. ROC’s audit capabilities and high-accuracy algorithms to minimize misidentifications and our strong public safety domain knowledge position us to navigate these regulatory trends. In summary, the video analytics market is expected to continue its strong growth, driven by security imperatives and expanding analytic applications, and ROC’s efficient, comprehensive edge analytics platform is aligned with the key technological and market shifts in this sector.
Digital Evidence Management Market
The digital evidence management market involves software and cloud solutions used by law enforcement, legal agencies, and enterprises to store, manage, analyze, and secure digital evidence. This includes handling data such as surveillance videos, body-camera footage, audio recordings, photos, and electronic documents in a manner that preserves integrity for investigations and court proceedings. With the surge of digital data in policing and compliance, this market has grown into a substantial segment on its own. In 2023, the global digital evidence management (“DEM”) market was valued at around $7.5–7.7 billion. It has been growing at a healthy pace and is expected to reach roughly $8.4–8.5 billion in 2024 and $9.4 billion in 2025. The short-term growth from 2024 to 2025 is estimated at about 12%, and this strong momentum is projected to continue. Looking further out, forecasts predict the global DEM market to climb to approximately $13–15 billion by 2028–2029, and around $19 billion by the early 2030s, equating to a solid double-digit CAGR in the 10–12% range over the next decade. For example, The Business Research Company projects the market to grow at 11.9% CAGR through 2029, reaching $14.8 billion in 2029, while other analysts looking out to 2032–2033 see growth continuing at similar rates to over $19 billion. This indicates a steady and resilient expansion, as managing digital evidence has become mission-critical for modern policing and regulatory compliance.
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The U.S. market for digital evidence management is a major component of the global total, given the large number of law enforcement agencies and the early adoption of body cameras and digital forensic tools in the United States. North America is currently the largest regional market for digital evidence management solutions. This leadership is due in part to U.S. public safety agencies investing heavily in body-worn cameras, dashcams, and cloud-based evidence systems in recent years. While exact U.S.-only market size figures for 2023–2025 are less reported, North America’s dominance suggests the U.S. accounts for a significant share (likely on the order of one-third to half of global demand). For context, industry reports note that the global body-worn camera and DEM market reached about $1.85 billion in 2023, much of which is U.S.-driven. Eight U.S. states now have laws mandating police use of body cameras, which directly expands the need for digital evidence storage and analysis. Moreover, leading vendors in this space are U.S.-based (for example, Axon (formerly Taser International) provides the dominant cloud evidence platform for police, and companies like Motorola Solutions and Safe Fleet are key providers), underscoring U.S. market strength. We expect the U.S. will remain a growth engine for DEM, as more agencies phase out old manual evidence processes in favor of modern digital management systems. ROC’s national security alignment and relationships in U.S. law enforcement technology position us well in this regard – our solutions can complement and integrate with digital evidence platforms, adding AI-driven analysis (e.g., face recognition in forensic video) to the evidence management workflow.
Demand drivers in digital evidence management are primarily rooted in the increasing volume and importance of digital evidence in both criminal justice and corporate settings:
| ● | Proliferation of Digital Media in Policing: Police and investigative agencies are collecting far more digital evidence than ever before – including high-definition video from body-worn cameras, CCTV footage from crime scenes, audio recordings of interviews, smartphone data extractions, and digital photos. This surge is straining traditional methods of managing evidence (like manual cataloguing or local DVDs). There is a critical need for scalable systems to ingest, catalog, securely store, and easily retrieve this data. For instance, each police officer with a body camera can generate several gigabytes of video per shift, and investigations often involve pulling footage from numerous cameras. Digital evidence management solutions meet this need by providing centralized, searchable repositories and ensuring chain-of-custody tracking for each file. The push for transparency and accountability in law enforcement (e.g., documenting encounters via video) further accelerates this trend, as evidenced by the widespread adoption of body cams across departments. |
| ● | Cybercrime and Digital Investigations: Beyond physical-world video, cybercrime investigations produce large quantities of digital evidence – such as logs, emails, and seized device data – that must be managed and analyzed. The rise in cyber fraud and incidents (for example, financial cybercrime losses in the U.S. hit $8.8 billion in 2022, up over 30% from the prior year) is driving demand for systems to handle digital forensic evidence. Law enforcement agencies and even private enterprises need platforms to organize evidence from computer forensics (hard drives, cloud accounts) in a way that maintains evidentiary integrity for court. This convergence of cyber/digital forensics with traditional evidence management is expanding the market’s scope. |
| ● | Regulatory Compliance and Legal Requirements: Stricter regulations and standards regarding evidence handling are compelling agencies to upgrade their capabilities. Courts and prosecutors now expect video and digital evidence to be readily accessible and properly authenticated. In many jurisdictions, there are mandates on how long certain recordings (e.g., police footage) must be retained and how they should be redacted for privacy when released. Failing to manage digital evidence properly can result in legal challenges or lost cases. Therefore, agencies invest in DEM solutions to ensure compliance with evidence laws and data retention policies, and to produce audit trails that demonstrate evidence has not been tampered with. Similarly, in corporate settings (like financial institutions or companies subject to e-discovery), compliance requirements drive adoption of secure digital evidence archiving. |
| ● | Efficiency and Interagency Collaboration: Modern DEM systems greatly improve efficiency by allowing quick search and sharing of evidence among authorized parties. This is a driver as agencies grapple with labor-intensive manual evidence review. For example, instead of an officer spending hours reviewing footage for an incident, video analytics (a feature of some DEM systems) can automatically flag relevant segments. Additionally, large investigations often involve multiple agencies – a digital evidence platform enables seamless (and logged) sharing of files between police, prosecutors, and defense attorneys in a secure manner. The push for interagency data sharing in the justice system (for instance, cloud-based evidence portals accessible by both police and prosecutors) is encouraging agencies to adopt standardized digital evidence solutions. This demand for efficiency and collaboration is increasing, especially as high-profile cases often require sifting through terabytes of video or data. |
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Given these drivers, emerging use cases and trends in the DEM market include the integration of advanced analytics and cloud technologies. There is a trend toward embedding AI analytics within evidence management platforms – for example, using face recognition or object detection to automatically index video evidence so investigators can quickly search for a suspect across hours of footage. ROC’s technology contributes here: our algorithms can process video evidence within these systems to identify persons of interest or to redact faces for privacy when releasing footage, adding significant value to the raw storage function of DEM. Another trend is the migration to cloud-based evidence management. Traditionally, evidence was stored on DVDs or on-premises servers, but now many agencies are moving to CJIS-compliant cloud solutions (such as Axon Evidence.com or similar) that offer scalability and remote access. Cloud deployments allow evidence to be accessible “anytime, anywhere” with proper credentials, which proved especially useful during the pandemic and continues to be attractive for distributed law enforcement operations. This has been a major driver for market growth as well, since cloud-based models often operate on subscription, making it easier for smaller agencies to come on board without large upfront IT investments. However, this shift also raises the importance of data security – DEM vendors emphasize encryption and compliance to ensure evidence is secure in the cloud. We anticipate continued growth in cloud and hybrid evidence management models, and ROC’s software is designed to integrate with both on-premise and cloud workflows, aligning with this trend.
On the regulatory side, as mentioned, mandates like body-worn camera requirements in various states directly boost this market. There is also likely to be increasing standardization and certification around digital evidence handling (for example, standards for hashing evidence files to verify integrity, or accreditation of cloud evidence systems for law enforcement use). These create a need for vendors to meet high reliability and security benchmarks. ROC’s focus on national security and law enforcement means we are attuned to these requirements – for instance, our software can operate within air-gapped secure networks and produce logs that support evidentiary standards, which is attractive to government clients facing stringent regulations.
Finally, a noteworthy trend is the convergence of digital evidence management with biometrics and video analytics – essentially building end-to-end solutions from evidence capture to analysis. Agencies increasingly seek a unified platform where, for example, a piece of video evidence can be instantly analyzed for faces or objects and then tagged for easy retrieval in an investigation. ROC’s multimodal analytics abilities position us well in this converging landscape. We can augment digital evidence systems with face recognition (one of our core offerings) to automatically identify individuals across an archive of video evidence, or with AI object search to find vehicles, etc., thereby significantly enhancing the utility of stored evidence. We view this convergence as a key opportunity: the industry is moving toward comprehensive digital policing platforms that incorporate collection, management, and analytic exploitation of evidence. Our edge-efficient algorithms and multimodal approach can plug into these systems, fulfilling agencies’ desire for one integrated solution that covers everything from capturing evidence to drawing investigative insights from it.
In summary, across all four segments – Vision AI, biometrics, video analytics, and digital evidence management – the market dynamics from 2023 through 2025 are characterized by strong growth and evolving needs that align closely with ROC’s strengths. Global and U.S. market sizes in each area are expanding at double-digit CAGRs, fueled by technological advancements and urgent demand for AI-driven security and automation solutions. Key drivers (security requirements, data proliferation, automation, and efficiency imperatives) and emerging uses (from smart cities to forensic analytics) are creating a fertile environment for growth. We expect regulatory developments to continue shaping these markets, with increasing emphasis on trusted and high-performance solutions – precisely the space where ROC focuses. With our American-made, security-centric approach, edge computing efficiency, and multimodal AI platform, we believe we are uniquely positioned to capitalize on these trends. We can serve the growing call for AI at the edge in vision applications, deliver the multi-biometric capabilities that customers increasingly require, and integrate into the digital evidence ecosystems that law enforcement and others are building. This alignment with market direction provides a strong foundation for our growth as we pursue an IPO and beyond, giving investors insight into the considerable market opportunity we are targeting and our strategic fit within it.
Sources: Global and U.S. market size estimates and CAGRs are drawn from industry research and forecasts for 2023–2025 and beyond. Key trends and drivers are supported by recent analyses highlighting technology adoption and sector demand factors. These data points underscore the robust growth and dynamic environment in which ROC operates, as detailed in the above industry analysis.
Our Competitive Strengths
Our greatest strength is the caliber of our team - executive leadership (with decades of experience in computer vision and machine learning algorithms, software engineering, and national security), our career professionals (Ph.D.’s in Computer Science and software engineers with multi-decade careers in systems deployment and government research), and our junior team members (elite talent with demonstrated capacity to become future organizational leaders). Our team is built on connections that have spanned long before ROC was ever founded. There is trust and deep connection across our team, which has resulted in the long-term 90% retention of our key talent. Our team further offers us an extreme edge in the recruitment of additional talent as ROC grows.
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The byproduct of the caliber of our team is a compounding set of additional competitive strengths that grow each year through the strategic knowledge of customer requirements in national security and public safety sectors possessed by our Chief Executive Officer (“CEO”) and others key leaders. In turn, these requirements and roadmaps fuel our product features which are executed by the research and engineering teams (led by our cofounders and other key leaders). Together, we have been able to build products from the ground up that are designed for mission impact and deliver products that work in the environments where it matters most. Our ability to consistently outperform incumbent vendors, integrate across use cases, and remain cost-efficient gives us a unique position as both a category leader and category disruptor. Across sectors and continents, we are earning trust not just for our performance, but for the way we operate — with precision, accountability, and integrity.
More specifically, there are five key competitive strengths of our business.
First, our products are differentiated through architectural and algorithmic efficiency that directly translates into operational and economic advantages. ROC’s AI models consistently rank among the most accurate and efficient in global government benchmarks, enabling our solutions to perform under constraints where others cannot. Our software can run on smaller, lower-power devices — including mobile systems and edge appliances — without sacrificing performance. That means ROC can deliver identity and visual intelligence at the point of capture, in the field, without relying on constant cloud access or expensive infrastructure. This capability is critical to our customers in defense, public safety, and frontline commercial operations, where connectivity is limited and real-time decision-making is essential. It also translates into lower infrastructure costs, making our solutions attractive not just for their speed and accuracy, but for their long-term affordability and efficiency.
Second, we are not simply a software vendor — we are a platform company. Our system is built from the ground up to unify what has long been fragmented use cases in identity systems and analytics. In the past, for example, governments and enterprises needed one or more vendors for multi-biometrics algorithms (face, finger, iris), another vendor for computer vision algorithms such as license plate recognition or threat detection (e.g., weapons detection). Further, the application systems to deploy these core algorithms are often fragmented across different vendor. ROC consolidates all of these capabilities into a single growing platform that enables wide ranging use-cases from real-time video analytics, national and enterprise scale identification systems, mobile identity verification, and analysis of forensic evidence. Further, our software is designed to easily integrate and operate alongside legacy technologies and systems. Altogether, this means fewer contracts, fewer integration headaches, and a dramatically improved user experience for mission operators. Our modular platform can be deployed on the cloud, on-premises, or on the tactical edge, and integrates easily with existing systems. For many customers, this is the first time they can manage identity, video, and investigative intelligence from a single pane of glass. Most importantly, this architecture is built to scale. ROC powers large-scale enterprise deployments across private and public cloud environments with significantly less infrastructure overhead than our competitors. Whether supporting a single agency or an entire nation, our platform offers the flexibility, performance, and efficiency to meet the mission at any scale.
Third, we are proudly and entirely U.S.-built. While we license our technology globally, our primary customer markets are in the U.S., and these markets have long been dominated by foreign providers and black-box AI models. ROC offers an alternative that is transparent, accountable, and aligned with U.S. national security priorities. Our software is developed and maintained in the United States, with no offshore dependencies. We have earned the trust of customers who operate in the most sensitive environments in the world, including, but not limited to, major components of the U.S. Department of Defense. These institutions do not just buy software; they invest in partners who can meet the highest bars for explainability, privacy, and lawful deployment. We do not take that responsibility lightly. To our knowledge, ROC was the first facial recognition company in the United States to publish a code of ethics addressing the use of face recognition technology. We believe transparency builds trust, and trust builds markets.
Fourth, we are designed to be affordable — not by compromising on performance, but by eliminating unnecessary bloat. ROC has never taken venture capital or debt financing. Unlike many competitors weighed down by too much reliance on investor capital, inflated overhead, or long repayment schedules, our organic growth has allowed us to stay lean, generally profitable, and focused on delivering maximum value to our customers. The efficiency required to operate our business in a cashflow positive manner for the last decade means we know we can generally build our software at less cost and higher effectiveness than our competitors. And this allows us to deliver enterprise-grade systems at a fraction of the cost of legacy vendors. Combined with our algorithmic efficiency, which minimizes compute requirements and infrastructure overhead, ROC delivers one of the lowest total costs of ownership in the market. That matters not only to resource-constrained government agencies and mid-sized enterprises, but also to global partners building large-scale identity and evidence ecosystems. We give our customers more performance, more transparency, and more control — for less.
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Finally, we believe that competitive strength starts with people. ROC was built by engineers and practitioners who have spent their careers designing and delivering mission-critical systems. Many of our team members come from the FBI, the military, and top AI research labs. Nearly half of our Company consists of software engineers, with more than 20% holding advanced degrees in artificial intelligence related specialties like machine learning. That technical density enables us to move fast, build securely, and outperform on the hardest problems. Our leadership team combines startup grit with government credibility, and our culture emphasizes shared mission, long-term thinking, and operational discipline. We have remained profitable without raising outside capital and have maintained extremely low turnover, even while scaling. This is not accidental — it’s a reflection of the purpose and pride that defines our work. Our customers feel that difference in every interaction.
Taken together, these strengths — technical, architectural, operational, and cultural — give us a unique and defensible position in the rapidly expanding market for identity and visual intelligence. We are not chasing hype cycles. We are building the infrastructure of trust in the AI era.
Our Challenges
As ROC scales from an organically grown, component-led company into a platform leader in operational AI, we face a series of strategic, operational, and financial challenges that must be addressed with discipline and foresight. While we are confident in the strength of our technology, culture, and customer relationships, we also recognize that our next phase of growth brings new complexities that demand focus and agility.
1. Navigating Rapid Growth While Preserving Culture and Performance
ROC has grown significantly in recent years, and we expect this acceleration to continue. Our transition from a lean, component-driven company to a full-stack platform provider — with global customers and increasingly large contracts — is putting pressure on our internal systems, processes, and team dynamics. As we scale our product offerings and customer base, we must continue to invest in infrastructure, hire talent at a high bar, and maintain the cultural DNA that has powered our success to date. Failure to do so could lead to operational inefficiencies, talent dilution, or delays in execution.
Managing this growth requires thoughtful organizational design. We must preserve the responsiveness and technical rigor that define ROC, even as we adopt more formal structures around delivery, compliance, and quality assurance. We believe we can scale without becoming bureaucratic, but this will require continual calibration of our processes and priorities.
2. Scaling Revenue Across Government and Commercial Sectors
To date, much of ROC’s revenue has been earned through a high volume of smaller contracts — pilot programs, phased deployments, or integrations scoped to single use cases or agencies. While this approach has built strong technical credibility and fostered deep customer relationships across multiple government segments, it has also led to lumpy, non-recurring revenue streams that limit predictability and scale.
We believe the next stage of ROC’s growth will be driven by larger, multi-year government contracts. These engagements will provide stronger revenue foundations, longer contract terms, and higher dollar values per customer. However, a key challenge remains: securing our first wave of anchor reference accounts for full-scale national systems. While we are deeply embedded with many government customers today, these engagements have yet to convert into the flagship, multi-year programs that will define our revenue trajectory. Winning that first set of major, referenceable deployments — particularly in civil ID, public safety, and defense intelligence — is a strategic imperative.
We do not believe this opportunity lies solely in the commercial sector. We anticipate that our federal sector — particularly at the intersection of national security, digital evidence, and identity infrastructure — will unlock larger and more sustained revenue opportunities than any we have seen before. In anticipation of this growth, in 2025, we launched ROC Federal LLC, a wholly owned subsidiary designed to manage sensitive U.S. government programs with enhanced focus and operational discipline. ROC Federal allows us to better isolate classified or sensitive workstreams, maintain rigorous security controls, and operate with the dedicated compliance posture expected by U.S. federal customers. This structure positions us to pursue larger federal contracts with greater agility, scalability, and assurance.
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At the same time, our commercial sector brings a different set of challenges. As we transition from selling high-performance biometric components to offering complete platforms — for access control, identity verification, and digital case management — we must compete against both incumbent vendors and internal development teams within large enterprises. Commercial customers often evaluate pricing, integration ease, and support differently than public sector clients. Many of our commercial wins to date have come through channels and integrators, which we will continue to support. But to scale recurring revenue, we must evolve our go-to-market model, emphasize product-led growth strategies, and invest in post-sales success and renewal. The shift from component licensing to full solution sales — and from upfront fees to SaaS and managed services — is an organizational and operational transformation that will take time to fully realize.
3. Winning in a Fragmented and Competitive Market
We operate across several highly competitive technology segments, including biometrics, computer vision, and digital evidence management. Many of our competitors are significantly larger, have deeper entrenchment in government contracts, and/or have operated for years with limited competition due to inertia in procurement processes. While these incumbents have long dominated identity infrastructure and surveillance markets, they are increasingly vulnerable, and ROC is well positioned to challenge them.
In many ways, the legacy players have made our opportunity easier. Several have significantly reduced investment in research and innovation. Their product portfolios are aging, and many rely on monolithic architectures that are expensive to scale and difficult to integrate. Customer satisfaction across these legacy platforms is declining — with persistent complaints around licensing complexity, slow delivery timelines, poor support, and outdated UI/UX design. We are regularly approached by former customers of these providers looking for faster, more transparent, and mission-aligned alternatives.
Yet even in this environment, displacing an incumbent remains difficult. Government agencies and large enterprises often favor the status quo, especially when switching platforms requires retraining, re-certification, or data migration. In the public sector in particular, change requires leadership — and in many cases, courage. Despite clear performance and cost advantages, ROC still encounters instances where agencies bypass competitive bidding in favor of sole-source justifications to foreign providers. These decisions often reflect outdated assumptions or perceived risk mitigation, but they have real consequences: reinforcing dependency on foreign black-box systems and denying emerging U.S. platforms the opportunity to compete on merit.
We do not accept this dynamic as inevitable. ROC is committed to working constructively with government buyers and procurement officers to advocate for open competition, transparency, and accountability. We are not asking for special treatment — only for a fair chance to compete. And in the current political environment, where there is growing bipartisan support for domestic technology alternatives and supply chain sovereignty, we believe this message is resonating.
Winning in this market will require more than technical superiority. It will require strategic persistence, policy engagement, and active partnership with customers willing to lead transformation. We are ready for that challenge — and increasingly, so are our customers.
4. Balancing Focus Across Government, Commercial, and International Markets
Unlike many peers who serve only one sector, ROC is positioned to lead in public sector, commercial, and international markets simultaneously. This is a strength but also a challenge. Each vertical has unique customer expectations, procurement models, pricing sensitivities, and compliance requirements.
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Nowhere is this challenge more evident than in our international expansion strategy. Historically, ROC’s global footprint has been anchored by high-performance component sales — primarily SDKs and algorithms integrated by international partners. These wins have built brand recognition across multiple continents, but they did not demand the same level of delivery complexity or support infrastructure required by full-system deployments.
Today, we are seeing robust global demand not only for our multimodal biometric capabilities, but also for ROC’s video analytics platform, particularly in use cases involving border surveillance, forensic triage, and real-time threat detection. Across regions including Southeast Asia, the Middle East, Africa, Canada, and Mexico, governments and integrators are seeking full-stack identity and video solutions that combine ROC’s core engines with complete user-facing systems and infrastructure integration. These markets represent a highly qualified near-term pipeline, but they also require a step-change in how we deliver, support, and maintain our offerings across borders.
Delivering turnkey solutions — including hardware-integrated appliances, cloud or air-gapped deployment, on-site installation, and multiyear support — will require scaling international teams, building regional partnerships, and evolving our internal structures for global compliance and operations. This is a meaningful expansion of our current model. Corporate entity creation, export controls, data sovereignty, channel coordination, and multi-lingual support each add complexity. Moreover, while many of these international opportunities are with allied governments and trusted integrators, geopolitical considerations and regional stability risks must be carefully managed.
If we are to become the global alternative to legacy biometric and surveillance incumbents, we must invest heavily in our international operating model. That includes building delivery infrastructure abroad while preserving our commitment to accuracy, transparency, and ethical deployment at a global scale.
5. Preparing for Public Market Scrutiny and Infrastructure Demands
As we enter the public markets, we must adapt to a new level of transparency and operational discipline. This includes building and maintaining Sarbanes–Oxley Act of 2002–compliant internal controls, maturing our financial systems, and expanding our compliance functions. Our leadership team will need to allocate time and resources to these areas, while continuing to drive growth and innovation.
We have already begun the process of hiring finance, legal, and compliance experts with public company experience, and we are investing in the tools and infrastructure to support this transition. Nonetheless, the demands of public company governance, investor relations, and quarterly reporting represent a meaningful shift in how ROC operates. Our ability to meet these expectations, without compromising on speed or customer intimacy, is essential to our long-term success.
6. Navigating Ethical Expectations and AI Risk Perception
We operate in one of the most scrutinized sectors of artificial intelligence. The use of facial recognition, video analytics, and other identity technologies — including automated license plate recognition (“ALPR”) — carries real societal impact and is subject to evolving legal, ethical, and political scrutiny. These technologies, when improperly deployed, raise complex questions about civil liberties, surveillance, and bias. While our products are designed for responsible use, the public discourse surrounding them is often shaped by misinformation, lack of context, or high-profile misuse by others.
We have taken early leadership in articulating clear boundaries and safeguards around how our technologies should be deployed. ROC was an early advocate of the ethical development and use of AI for facial recognition and published the Code of Ethics in November 2019. We continue to build systems that prioritize transparency, explainability, and privacy-by-design principles. But expectations are growing — not just from our customers, but from the public and regulators worldwide.
Laws such as the BIPA in Illinois and the GDPR in the European Union impose stringent requirements on the collection, storage, and use of biometric and personally identifiable information. These laws, along with emerging frameworks in Canada, the U.K., and California (under the CPRA), are shaping how ROC must operate across jurisdictions. While our systems are engineered to comply with these frameworks — including audit logging, access controls, and data minimization features — compliance is not static. As regulation continues to evolve, we must stay ahead of shifting legal interpretations and invest proactively in adaptable architecture and documentation.
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In addition, ALPR — one of our fast-growing computer vision capabilities — presents its own set of public acceptance challenges. In some jurisdictions, plate recognition has faced backlash over perceptions of overreach, profiling, or lack of oversight. While ROC’s ALPR technology is built with safeguards and settings parameters, its inclusion in broader surveillance systems may raise questions for civil liberties groups or the press. It is our responsibility to ensure that these technologies are used for legitimate, narrowly defined public safety purposes, and that our customers understand how to deploy them responsibly.
Ultimately, we must continue to lead not just technically, but morally — ensuring that our technology is used responsibly and that we are prepared to respond to any reputational or regulatory challenges. This includes investing in transparency, auditability, and partnerships with stakeholders who shape policy and public trust. The companies that thrive in this space will be those that treat ethical leadership as a competitive advantage. We intend to be one of them.
Competition
We operate in intensely competitive markets that span biometric identity, computer vision, digital evidence, public safety, defense, and identity verification. These sectors are occupied by multinational incumbents, highly capitalized startups, and integrated platform providers with decades-long relationships in both public and commercial sectors, including IDEMIA, NEC, Tech 5, and Paravision. Many benefit from scale and name recognition, but also carry the weight of legacy systems, foreign-sourced AI components, and architectures that no longer meet the evolving standards of performance, security, and transparency.
Ironically, in many cases, these industry giants have made our job easier. Their retreat from sustained research investment, shrinking support teams, and reduced delivery performance have left a noticeable void. Customers often describe stagnant roadmaps, weak responsiveness, or hidden model behaviors that erode trust. As these shortcomings have become more visible, the opportunity for ROC to emerge as a reliable, modern, and mission-aligned alternative has accelerated.
In biometric identity, where precision and speed matter most, ROC delivers top-tier algorithmic performance validated through independent testing—all while maintaining low computational overhead. Our solutions are built to run on edge devices, integrate flexibly with existing infrastructure, and adapt quickly to changing operational conditions. In the realm of video analytics and digital evidence, we deliver unified capabilities—real-time facial recognition, object and license plate detection, threat alerting, and post-event forensic search—in a single, streamlined software stack. These tools are optimized for the frontline user, not just for performance benchmarks.
Public safety deployments are a clear example of where ROC’s simplicity, accuracy, and cost-efficiency have outperformed slower, more complex alternatives. While others require proprietary hardware or siloed platforms to enable their solutions, ROC deploys on existing networks and infrastructure, reducing total cost of ownership and accelerating time to value. We offer edge deployment and local data governance to meet the privacy needs of communities and institutions alike.
In the federal space, we do not view the large systems integrators as competitors, but as vital partners. Most federal programs award implementation and delivery to major integrators who then rely on best-in-class technologies to fulfill mission objectives. ROC is often selected in this capacity—trusted to deliver U.S.-made, testable, and secure AI capabilities that support national security, intelligence, and defense missions. Our alignment with federal objectives and our proven record of operating in classified environments continue to strengthen our position across the government ecosystem.
In the commercial sector, we are seeing growing demand for ROC’s biometric and AI solutions in industries such as financial services, healthcare, logistics, retail, and telecommunications. As identity verification becomes central to digital onboarding, fraud prevention, and customer trust, organizations are moving away from black-box third-party platforms toward solutions that offer transparency, modularity, and compliance. Early commercial providers in this space are now facing mounting pressure from customers who expect significantly lower transaction costs—something these bloated providers struggle to deliver due to complex architectures and deep reliance on third-party components. Many of their systems are cobbled together from multiple vendors, making cost reduction and performance optimization difficult.
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By contrast, ROC owns and controls nearly the entire AI stack that powers its biometric and computer vision solutions, with the sole exception of document verification. As discussed above, certain customers who utilize ROC Enroll may choose to offer Identity Document Verification. ROC allows for these COTS products to be integrated into the workflow by third-party providers. Today, ROC purchases and resells these licenses through a single vendor but could support other vendors if required. Our ability to deliver high-accuracy biometrics, privacy-conscious deployments, and flexible integration options makes us a preferred partner for enterprises seeking performance without compromise. Our modular architecture allows commercial clients to adopt ROC components within their existing platforms, helping them meet regulatory, operational, and user experience goals.
Rather than compete on size or brand, we lead with performance, adaptability, and values. We win by solving hard problems with speed, accuracy, and trust. As public scrutiny of AI intensifies and national security concerns escalate, the importance of sovereign, American-made technology has never been more urgent. The United States has, for too long, relied on foreign-built systems for core elements of its identity and biometric infrastructure—leaving critical vulnerabilities in place across both commercial and government applications.
ROC is directly addressing this gap. We develop our AI, algorithms, and biometric systems entirely within the United States, with no dependency on foreign components or opaque model development. This not only enhances trust and transparency but ensures that our customers—whether commercial enterprises or federal agencies—are investing in resilient, future-proof infrastructure that aligns with national interests.
We believe our momentum, mission clarity, and sovereign foundation position us not just as a credible alternative—but as the next-generation leader at the intersection of AI, identity, and public safety.
Intellectual Property
ROC’s primary business activity is creating high value, highly differentiable intellectual property in the form of computer vision and machine learning models, software libraries, applications, and systems, as well as trade secret methodologies for developing and deploying these models and various forms of software. Our secondary activities are marketing, licensing, and deploying this intellectual property.
As of September 30, 2025, our registered intellectual property portfolio consisted of nonprovisional (utility) U.S. patents US 10,839,251 B2 and US 11,354,422 B2 and US trademarks in “ROC”, “RANK ONE”, “ROC ENROLL”, “ROC EXPLORE”, “ROC EXAMINE”, “ROC WATCH”, the “caret design to the left of the stylized word “ROC” and the “caret design” alone, which we use in our branding.
Intellectual property laws, procedures and restrictions provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed, misappropriated or otherwise violated (see “Business - Legal Proceedings”). Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same extent as the laws of the United States, and we therefore may be unable to protect our proprietary technology in certain jurisdictions.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or obtain and use our technology to develop products and services with the same functionality as our products. Policing unauthorized use of our technology is difficult. Our competitors could also independently develop technologies like ours, and our intellectual property rights may not be broad enough for us to prevent competitors from selling products and services incorporating those technologies. For more information regarding the risks relating to intellectual property, see “Risk Factors - Risks Related to Intellectual Property, Information Technology, Data Privacy and Security.”
Research and Development
ROC is fundamentally an engineering- and research-led organization. Since our founding, innovation has been at the core of our identity. The Company was established by a team of machine learning scientists committed to advancing the frontiers of artificial intelligence, Vision AI, and biometric recognition. Today, approximately 50% of ROC’s technical workforce holds advanced degrees in computer science or closely related fields, underscoring our deep expertise and technical leadership.
Our R&D efforts are centered around the development of proprietary Vision-AI technology, built entirely in-house using advanced machine learning and deep learning methodologies. ROC’s commitment to core research and technical excellence has resulted in significant advancements in the field of biometrics, culminating in our algorithms achieving top-tier rankings in independent evaluations conducted by NIST.
In addition to biometrics, our R&D initiatives extend to adjacent areas such as object detection and license plate recognition, where we leverage our foundational AI capabilities to address critical needs in security, identity, and data analytics markets. These capabilities enable us to deliver differentiated, high-performance solutions across a variety of applications and industries.
Looking forward, ROC plans to continue scaling its research and development investments. We intend to grow our R&D team significantly to accelerate innovation, expand our portfolio of AI-driven technologies, and maintain a competitive advantage in a rapidly evolving technological landscape. We believe that sustained investment in research and development will be critical to driving future growth, meeting the emerging needs of our customers, and maintaining our leadership in Vision-AI solutions.
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Employees
As of September 30, 2025, we had 63 full-time and 14 part-time employees, all employed in the United States. We also engage contractors and consultants.
Description of Properties
Our corporate headquarters is located at 1290 N Broadway, Suite 1200, Denver, CO 80203 in leased office. The facility incorporates 5892 square feet of office space at a current monthly rent of $14,484.50 and a term running through June 2029.
We also maintain leased office facilities in West Virginia and Michigan. The WV office is located at 525 Suncrest Town Center Drive, Morgantown, WV 26505 and occupies 6,600 square feet. The lease has a term that runs through December 2035 with a current monthly rent of $11,335.50. The MI office occupies 1546 sq feet at a monthly rent of $2705.50 with a term that runs through Dec 2030. ROC does not currently lease or own any facilities outside the United States.
All of our facilities are leased, and we do not own any real property. As we continue to grow and expand geographically, we expect to secure additional office space to support our increasing workforce and operational needs. We believe that our current facilities are adequate and appropriate for our existing operations, and that, if needed, additional or alternative facilities will be readily available to accommodate future expansion.
Legal Proceedings
To date, we have not been involved in any legal proceedings or claims. However, from time to time, we may become involved in legal proceedings and claims that arise in the ordinary course of business.
The outcome of litigation is inherently uncertain. An unfavorable resolution of one or more proceedings could materially impact our future business, operating results, or financial condition. In addition, regardless of the outcome, litigation may result in significant costs, diversion of management attention, and other adverse effects.
Corporate Information
We were originally incorporated under the laws of the State of Virginia on May 5, 2015 and subsequently converted to a corporation incorporated under the laws of the State of Colorado on September 18, 2018. Our principal executive office is located at 1290 Broadway, Suite 1200, Denver, CO 80203, and our telephone number is (303) 317-6118. Our website is https://roc.ai/. Information contained on, or available through, our website does not constitute part of, and is not deemed incorporated by reference into, this prospectus, and investors should not rely on such information in deciding whether to purchase shares of our common stock.
Government Regulation
ROC is subject to complex and evolving laws and regulations in the United States and abroad relating to privacy, data protection, data security, biometrics, artificial intelligence, technology protection, and other matters. These laws and regulations are often subject to change, varying interpretation, and inconsistent enforcement, and could result in claims, modifications to our business practices, monetary penalties, increased operational costs, or other adverse impacts on our business.
We are subject to a range of local, state, federal, and international laws governing the collection, storage, use, transfer, and protection of personal information and data, including privacy and cybersecurity regulations. Foreign data protection laws, in particular, often impose stricter requirements than U.S. laws. These regulatory frameworks are constantly evolving and remain uncertain for the foreseeable future, especially in the rapidly changing fields of software, technology, and artificial intelligence where we operate. Inconsistent interpretation and application of these laws across jurisdictions further complicate compliance efforts.
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Several legislative and regulatory developments could significantly impact our operations. For example, ongoing legal challenges in Europe regarding cross-border data transfer mechanisms may restrict the ability to transfer personal data from the European Economic Area to other jurisdictions, including the United States, unless new agreements are reached. In the United States, the CCPA, effective January 1, 2020, imposes significant requirements regarding the processing of personal information of California residents and creates new consumer rights. Enforcement began on July 1, 2020, and additional changes, such as those introduced by the CPRA, may increase compliance obligations and costs. While we are committed to compliance with applicable data privacy laws, the full impact of these laws on our business and operations remains uncertain.
Outside the United States, jurisdictions worldwide are increasingly enacting and enforcing comprehensive data protection laws. For example, the European Union’s GDPR, which took effect in May 2018, imposes strict requirements on the collection, processing, and transfer of personal data, with significant penalties for noncompliance—up to the greater of €20 million or 4% of annual global revenues. Compliance with the GDPR and other emerging laws may require substantial investment in operational changes and ongoing diligence.
The complex and evolving nature of global privacy and data protection laws presents significant compliance challenges. Any failure, whether by us, our employees, our business partners, or our customers, to comply with these laws and regulations—or perceived failures—could result in regulatory investigations, private litigation, reputational damage, and significant financial liabilities.
In addition to formal regulations, we may also be subject to industry standards, self-regulatory frameworks, and contractual obligations related to privacy, security, and data protection. We may make public commitments regarding our data protection practices, and any failure to meet those commitments could expose us to legal and reputational risks.
We expect the regulatory landscape to continue to evolve, with new and amended privacy and data protection laws and standards emerging in the U.S. and internationally. Future changes may require further investment, operational adjustments, and could restrict certain business activities or otherwise adversely affect our operations. In addition, heightened scrutiny, expanding regulatory enforcement, and increasing public attention to privacy and security issues could further impact our business, even where we strive to maintain compliance.
Failure or perceived failure to comply with applicable laws, regulations, contractual requirements, or industry standards—or the occurrence of any security incident involving personal or sensitive data—could result in substantial penalties, adverse publicity, restrictions on our operations, or other negative consequences that could materially and adversely affect our business, financial condition, and results of operations.
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Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors as of the date of this prospectus.
| Name | Age | Position | ||
| B. Scott Swann | 51 | Chief Executive Officer and Director | ||
| Brendan Klare | 44 | President, Chief Scientist, and Board Chairman | ||
| Joshua Klontz | 37 | Chief Technology Officer and Director | ||
| J. Blake Moore | 43 | Chief Operating Officer | ||
| Cody Barnes | 39 | Chief Financial Officer | ||
| Anthony Brown | 57 | Chief of Staff | ||
| Edward Davis | 69 | Director Nominee | ||
| Brian Hibbeln | 58 | Director Nominee | ||
| Steven Martinez | 67 | Director Nominee | ||
| Dawn Meyerriecks | 66 | Director Nominee |
B. Scott Swann – Chief Executive Officer, Director
B. Scott Swann has served as our Chief Executive Officer since January 2021. Mr. Swann has over 25 years of leadership experience spanning both government and private sector organizations, with a focus on driving innovation and growth in the biometrics and computer vision sectors. Prior to joining ROC, Mr. Swann held multiple key leadership positions, including President and Chief Executive Officer at IDEMIA National Security Solutions from 2017 to 2020, Vice President of Federal Operations & Innovation and Senior Director of Innovation at Safran Morpho-Morphotrak, LLC from 2014 to 2017, Special Assistant at the FBI Director’s Office from 2011 to 2014, and Unit Chief at the FBI’s Criminal Justice Information Services Division from 2009 to 2011. Mr. Swann holds a bachelor’s degree in business from Salem-Teikyo University and a master’s degree in software engineering from West Virginia University.
We believe that Mr. Swann is well qualified to serve as our CEO and director because of his extensive leadership experience in the biometrics and computer vision sector, his track record of driving innovation across federal and commercial markets, and his background in managing large-scale operations and coordination with government agencies. His experience includes leading teams to deliver cloud-based SaaS solutions, commercializing video analytics portfolios, and driving innovation across both public and private sectors. Mr. Swann’s extensive expertise aligns with the Company’s growth strategy in regulated and security-sensitive markets.
Brendan Klare – President, Chief Scientist, Board Chairman
Brendan Klare co-founded ROC in 2015 and has been a key contributor to the Company’s technological advancements since its inception. Dr. Klare was named Chief Scientist and Board Chair in 2020. As Chief Scientist, he leads the development of ROC’s advanced algorithms for face, fingerprint, and iris recognition, consistently achieving top global rankings in NIST evaluations for accuracy and efficiency. He also played a key role in launching ROC SDK 3, which features these industry-leading modalities. Dr. Klare’s technical expertise and commitment to research and development, supported by the Company’s substantial investment in R&D, have advanced ROC’s biometric technology offerings.
Dr. Klare earned a Ph.D. in Computer Science with a specialization in pattern recognition and biometrics from Michigan State University in 2012, where his doctoral research focused on computer vision and machine learning algorithms for automatically searching databases of face photographs using query images from alternate modalities, such as hand drawn sketches or infrared imagery. Additional research measured the impact of different covariates (age, gender, race, time lapse, feature representations) on face recognition algorithm accuracy, and he has published dozens of highly cited peer-reviewed academic articles. Prior to co-founding ROC, Dr. Klare was Manager of the Vision Analytics Lab at Noblis, Inc. from 2012 to 2015, where he was the Principal Investigator for testing and evaluation of the Intelligence Advanced Research Projects Activity (“IARPA”) JANUS program on unconstrained face recognition and a Lead Investigator on the FBI’s Video Analytics Major Issues Study. Dr. Klare’s contributions to the field have been recognized by the biometrics research community through frequent requests to deliver keynote and thought leader presentations from organizations, including the Institute of Electrical and Electronics Engineers (“IEEE”) International Conference on Biometrics: Theory, Applications, and Systems in 2019, and he received the Distinguished Alumni Award from Michigan State University in 2023. As of March 30, 2025, he has garnered 5,178 citations for his research publications.
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We believe that Dr. Klare is well qualified to serve as our director because of his extensive expertise in the biometrics and computer vision sector, his leadership in advancing ROC’s technologies, and his deep understanding of the Company’s strategic direction as a co-founder.
Joshua Klontz – Chief Technology Officer, Director
Joshua Klontz has been our Chief Technology Officer and Director since 2020. Mr. Klontz co-founded the Company in 2015 and has played an instrumental role in shaping its technology strategy and direction. As Chief Technology Officer, he oversees ROC’s technology strategy and R&D initiatives and has contributed significantly to the Company’s product offerings. Under Mr. Klontz’s technical leadership, ROC has consistently achieved top-tier rankings in NIST evaluations for accuracy and efficiency in face, fingerprint, and iris recognition.
Prior to founding ROC, Mr. Klontz served as a Computer Vision Software Engineer at Noblis and played a critical role in the IARPA Janus program from 2013 to 2015. His work focused primarily on face detection and recognition, including the development of the APIs for Janus. He has a Bachelor of Science in Computer Science from Harvey Mudd and was invited by Michigan State Professor Anil Jain (nationally renowned leader in Computer Vision and Pattern Recognition) to design unconstrained face recognition algorithms in the Pattern Recognition and Image Processing lab. Mr. Klontz’s academic background is further highlighted by his contributions to the field through numerous publications. As of March 30, 2025, he has garnered 1240 citations for his work, with 630 received since 2020. Notable publications include “Face recognition performance: Role of demographic information” which has been cited 637 times, and “A case study of automated face recognition: The Boston marathon bombings suspects” with 182 citations.
We believe that Mr. Klontz is well qualified to serve as our director because of his extensive technical experience in biometric systems, his leadership in developing key technologies like the OpenBR framework and ROC SDK, and his role in shaping the Company’s technology strategy since its founding. His commitment to research and development is a driving force behind ROC’s success as a leading provider of American-made biometric technology.
J. Blake Moore – Chief Operating Officer
J. Blake Moore has been our Chief Operating Officer since October 2024. He previously served as Senior Vice President Product & Customer Success at the Company from 2022 to 2024, where he gained direct knowledge of the Company’s operations and customer base.
Prior to joining ROC, Mr. Moore held various leadership roles at IDEMIA National Security Solutions, a global leader in identity solutions and an authorized enrollment provider for TSA PreCheck. At IDEMIA National Security Solutions, he served as Senior Director of New Product Introduction from 2020 to 2021. At IDEMIA Identity & Security USA LLC (and its predecessor MorphoTrust USA, Inc.), Mr. Moore served as Senior Director of U.S. Business Operations for Enrollment Services from 2017 to 2020, and at MorphoTrust USA, he served as Director of Customer & Business Services, Business Analysis, and Financial Operations. He has an undergraduate degree from Saint Louis University and an MBA from Washington University, along with certifications in SAFe Agile, Lean Six Sigma, Certified Public Accountant, and Certified Internal Auditor.
We believe that Mr. Moore is well qualified to serve as our Chief Operating Officer because of his diverse leadership and operational experience across multiple functions, including operational strategy, cross-functional team management, innovation, and scalability, all of which are essential for a rapidly growing technology company like ROC.
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Cody Barnes – Chief Financial Officer
Cody Barnes has been our Chief Financial Officer since December 2021. Earlier in his career at ROC, Mr. Barnes held the position of Director of Finance & Operations from 2016 to 2021, where he developed a strong understanding of the Company’s financial and operational dynamics.
Prior to joining ROC, Mr. Barnes worked as Vice President in Liquidity Reporting at Citigroup Inc. (“Citi”) from 2011 to 2016, where he gained significant experience in financial markets, cash flow management, and regulatory compliance. His experience at Citi, a publicly traded company, provides insight into public company financial operations and regulatory requirements. Mr. Barnes has an undergraduate degree from the University of South Florida and is a licensed Certified Public Accountant with expertise in accounting principles and financial reporting standards.
We believe that Mr. Barnes is well qualified to serve as our Chief Financial Officer because of his proven experience managing the financial operations and growth of the Company, his understanding of the organization’s operational dynamics, and his background at Citi.
Anthony Brown – Chief of Staff
Anthony brown has been our Chief of Staff since October 2024. Prior to this, he was our Chief Operating Officer from January 2023 to October 2024, where he oversaw all operations of the company and managed the growth of personnel, product lines, and internal corporate processes. Prior to joining ROC as the Chief Operating Officer, he served as the strategic advisor to the ROC executive team from March 2021 to January 2023, providing strategic input to the market, team, and product development of the company.
Prior to his tenure at ROC, Mr. Brown created and grew a consulting company focused on corporate strategy and organizational development, where he advised senior corporate, federal civilian, and military leaders in building programs to commercialize emerging technologies. Mr. Brown has experience managing both startup companies and large teams within both public and private companies. He holds an undergraduate degree from Cornell University and an MBA from Georgetown University.
We believe that Mr. Brown is well qualified to serve as our Chief of Staff based on his decades of experience managing operations and building organizations in both the private and public sectors as they navigate growth.
Edward Davis – Director Nominee
Edward Davis will join ROC’s Board of Directors as an independent director upon the effectiveness of the registration statement of which this prospectus is a part. Mr. David served as Commissioner at the Boston Police Department for seven years and in leadership positions in local law enforcement departments for over 20 years. He is a public safety leader with 35+ years in law enforcement and has been nationally recognized for crisis leadership during the Boston Marathon bombing, pioneering community policing, and advising both government and private sector on security, intelligence, and resilience.
Mr. Davis has a master’s degree in criminal justice and corrections from Anna Maria College, a fellowship in political science and government from the Harvard Kennedy School, and a bachelor’s degree in criminal justice from Southern New Hampshire University
Brian Hibbeln – Director Nominee
Brian Hibbeln will join ROC’s Board of Directors as an independent director upon the effectiveness of the registration statement of which this prospectus is a part. Currently, Mr. Hibbeln serves as a senior fellow at the Potomac Institute for Policy Studies, a senior advisor for Blackstone Private Equity, and a venture partner for SineWave Ventures, LLC. Other key roles include serving as Chief Innovation Officer for NineTwelve, an accelerator connecting innovators with certified demonstration labs and co-founder of the United States Technology Leadership Council, advancing U.S. technology leadership.
Prior to entering the private sector, Mr. Hibbeln served over three decades in the U.S. Defense Department and Intelligence Community, with senior roles including Assistant Deputy Undersecretary of Defense for Special Capabilities in the Office of the Secretary of Defense; First Director of the Special Capabilities Office where he oversaw $2B+ in resources and leading Joint Capability Technology Demonstrations for intelligence, space, airborne, and other remote-sensing operations; Director of the Remote Sensing Center-National Capital Region, where he managed $8B+ in government contracts, while delivering tech demonstrations and operational support to combatant commanders globally; and Chief Scientist and Chief Systems Engineer of Measurement and Signature Intelligence (MASINT) Staff at the National Reconnaissance Office (NRO), where he developed methods to address hard intelligence problems and advanced space based MASINT architectures, while providing recommendations to the Director of Central Intelligence, Congressional staffs, senior policy decisionmakers, and numerous operational and intelligence customers.
Mr. Hibbeln earned a Master of Science degree in Physics from the Air Force Institute of Technology and a Bachelor of Science degree in Physics from the United States Air Force Academy.
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Steven Martinez – Director Nominee
Steven Martinez will join ROC’s Board of Directors as an independent director upon the effectiveness of the registration statement of which this prospectus is a part. Mr. Martinez is a veteran intelligence leader with 25+ years at the FBI, where he oversaw the Bureau’s Science & Technology Branch, including the Laboratory, Operational Technology, and Criminal Justice Information Services divisions. He has been recognized for advancing biometric innovation, forensic science, and national-scale identity systems across U.S. and allied missions.
Since leaving public service, Mr. Martinez served as Head of Global Security, MGM Resorts International, where he oversaw all activities undertaken by the MGM Resorts International Corporate Security Department and coordinated the comprehensive security function for the enterprise. Mr. Martinez has a Master of Arts degree in political science from the University of California, Berkeley, and a Bachelor of Arts degree in government from Saint Mary’s College of California.
Dawn Meyerriecks – Director Nominee
Dawn Meyerriecks will join ROC’s Board of Directors as an independent director upon the effectiveness of the registration statement of which this prospectus is a part. Ms. Meyerriecks is a former Deputy Director of the Central Intelligence Agency (“CIA”) for Science and Technology and is a mission-driven technologist with 40+ years in CIA & national programs. She has led the development and execution of numerous new technology products that support the CIA mission, and she brings both technical and operational experience, aligning innovation and engineering with national security imperatives.
Ms. Meyerriecks has a Master of Science degree in computer science from Loyola Marymount University and a Bachelor of Science degree in Electrical Engineering & Business from Carnegie Mellon University.
Family Relationships
There are no family relationships between or among any of the current directors, executive officers or persons nominated or charged to become directors or executive officers.
Number and Terms of Office of Officers and Directors
Our business and affairs are organized under the direction of our board of directors. Upon the effectiveness of the registration statement of which this prospectus is a part, our board of directors will consist of 7 directors, including 3 executive directors and 4 independent directors. Our bylaws, amended, provide that the number of directors will be fixed by the board of directors or shareholders and that the directors need not be shareholders.
Our officers are appointed by the board of directors and shall hold office at the discretion of the board of directors until their successors are duly appointed and qualified, until the expiration of their term in office if appointed for a specified period of time, or until their earlier death, resignation or removal. Our board of directors is authorized to appoint officers to the offices set forth in our bylaws, as amended.
Director Independence
The Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person who has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with our company). Upon the effectiveness of the registration statement of which this prospectus is a part, we will have four “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules prior to completion of this offering.
Our board of directors has determined that Edward Davis, Brian Hibbeln, Steven Martinez, and Dawn Meyerriecks would be independent directors under applicable Nasdaq and SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
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Board Committees
Prior to the completion of this offering, our board of directors will establish an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our board of directors will adopt a charter for each of these three committees. Copies of each committee’s charter will be posted on the Investor Relations section of our website, https://investors.roc.ai/. Each of the committees of our board of directors shall have the composition and responsibilities described below. Our board of directors may, from time to time, establish other committees as it deems appropriate.
Audit Committee
Upon the effectiveness of the registration statement of which this prospectus is a part, Edward Davis, Brian Hibbeln, and Steven Martinez will serve as members of our Audit Committee, with Edward Davis serving as the chairman of the Audit Committee. Each of our Audit Committee members satisfies the “independence” requirements of the Nasdaq listing rules and meets the independence standards under Rule 10A-3 under the Exchange Act. Our board of directors has determined that Edward Davis possesses accounting or related financial management experience that qualifies him as an “audit committee financial expert” as defined by the rules and regulations of the SEC. Our Audit Committee oversees our accounting and financial reporting processes and the audits of our financial statements. Our Audit Committee performs several functions, including:
| ● | evaluating the performance, independence and qualifications of our independent registered public accounting firm and determining whether to retain our existing independent registered public accounting firm or engage new independent registered public accounting firm; | |
| ● | reviewing and approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services; |
| ● | reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent registered public accounting firm and management; | |
| ● | reviewing with our independent registered public accounting firm and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls; | |
| ● | reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management are implemented; and | |
| ● | reviewing and evaluating on an annual basis the performance of the audit committee, including compliance of the audit committee with its charter. |
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Compensation Committee
Upon the effectiveness of the registration statement of which this prospectus is a part, Brian Hibbeln, Edward Davis, and Steven Martinez will serve as members of our Compensation Committee, with Brian Hibbeln serving as the chairman of the Compensation Committee. All of our Compensation Committee members satisfy the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. The functions of this committee include, among other things:
| ● | reviewing, modifying and approving (or, if deemed appropriate, making recommendations to the full board of directors regarding) our overall compensation strategy and policies; | |
| ● | reviewing and approving the compensation, the performance goals and objectives relevant to the compensation, and other terms of employment of our executive officers; | |
| ● | reviewing and approving (or if it deems appropriate, making recommendations to the full board of directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs; | |
| ● | reviewing and approving the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers; | |
| ● | reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC; and | |
| ● | preparing the report that the SEC requires in our annual proxy statement. |
Nominating and Corporate Governance Committee
Upon the effectiveness of the registration statement of which this prospectus is a part, Steven Martinez and Ed Davis will serve as members of our Nominating and Corporate Governance Committee, with Steven Martinez serving as the chairman of the Compensation Committee. All of our Nominating and Corporate Governance Committee members satisfy the “independence” requirements of the Nasdaq listing rules and meet the independence standards under Rule 10A-3 under the Exchange Act. The functions of this committee include, among other things:
| ● | identifying, reviewing and evaluating candidates to serve on our board of directors consistently with criteria approved by our board of directors; | |
| ● | evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board of directors is appropriate; | |
| ● | evaluating, nominating and recommending individuals for membership on our board of directors; and | |
| ● | evaluating nominations by stockholders of candidates for election to our board of directors. |
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The nominating and corporate governance committee takes into account many factors in determining recommendations for persons to serve on the board of directors, including the following:
| ● | personal and professional integrity, ethics and values; | |
| ● | experience in corporate management, such as serving as an officer or former officer of a publicly-held company; | |
| ● | experience as a board member or executive officer of another publicly-held company; | |
| ● | strong finance experience; | |
| ● | diversity of expertise and experience in substantive matters pertaining to our business relative to other board members; | |
| ● | diversity of background and perspective including, without limitation, with respect to age, gender, race, place of residence and specialized experience; | |
| ● | experience relevant to our business industry and with relevant social policy concerns; and | |
| ● | relevant academic expertise or other proficiency in an area of our business operations. |
Role of Board in Risk Oversight Process
Our Chief Executive Officer, President, and Chief Technology Officer positions are held by B. Scott Swann, Brendan Klare, and Joshua Klontz, respectively, who currently beneficially own approximately 8.0% , 30.2%, and 30.2%, respectively, of the voting power of our outstanding common stock and will beneficially own approximately 6.7% , 25.3%, and 25.3% , respectively, of the voting power of our outstanding common stock after the closing of this offering. Periodically, our board of directors assesses these roles and the board of directors leadership structure to ensure the interests of our company and our stockholders are best served. Our board of directors has determined that our current leadership structure is appropriate. Each of B. Scott Swann, Brendan Klare, and Joshua Klontz has extensive knowledge of all aspects of our company, our business and risks.
While management is responsible for assessing and managing risks to our company, our board of directors is responsible for overseeing management’s efforts to assess and manage risk. This oversight will be conducted primarily by our full board of directors, which has responsibility for general oversight of risks, and standing committees of our board of directors. Our board of directors will satisfy this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our company. Our board of directors believes that full and open communications between management and the board of directors are essential for effective risk management and oversight.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee will be, or will have ever been, an officer or employee of our company.
Code of Business Conduct and Ethics
Upon the effectiveness of the registration statement of which this prospectus is a part, we will adopt a written code of business conduct and ethics that applies to our employees, officers, and directors. A current copy of the code will be posted on the Governance sub-section of the Investor Relations section of our website, https://investors.roc.ai/. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and our directors, on our website identified above or in filings with the SEC.
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Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, by any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
| ● | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
From time to time, we may be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our company’s resources, including our company’s management’s time and attention.
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EXECUTIVE AND DIRECTOR COMPENSATION
The following table sets forth the aggregate compensation paid to our named executive officers for the fiscal years ended December 31, 2025 and 2024. Individuals we refer to as our “named executive officers” include our Chief Executive Officer and any other highly compensated executive officers whose salary and bonus for services rendered in all capacities equaled or exceeded $100,000 during the fiscal years ended December 31, 2025 and 2024.
Summary Compensation Table
| Salary | Bonus | Option Awards | Non-equity incentive plan compensation | All Other Compensation | Total | |||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||
| Brendan Klare | 2025 | 251,267 | 100,507 | 26,087 | - | - | 377,861 | |||||||||||||||||||
| President, Chief Scientist, and Board Chairman | 2024 | 246,340 | - | 26,159 | - | - | 272,499 | |||||||||||||||||||
| Joshua Klontz | 2025 | 233,478 | 93,391 | 26,087 | - | - | 352,956 | |||||||||||||||||||
| Chief Technology Officer and Director | 2024 | 228,900 | - | 26,159 | - | - | 255,059 | |||||||||||||||||||
| B. Scott Swann | 2025 | 316,889 | 253,511 | 31,423 | - | - | 601,823 | |||||||||||||||||||
| Chief Executive Officer and Director | 2024 | 310,675 | - | 45,798 | - | - | 356,473 | |||||||||||||||||||
| J. Blake Moore | 2025 | 225,720 | 54,173 | 10,518 | - | - | 290,411 | |||||||||||||||||||
| Chief Operating Officer | 2024 | 205,200 | - | 11,893 | - | - | 217,093 | |||||||||||||||||||
| Cody Barnes | 2025 | 228,800 | 54,912 | 4,174 | - | - | 287,886 | |||||||||||||||||||
| Chief Financial Officer | 2024 | 220,000 | - | 4,185 | - | - | 224,185 | |||||||||||||||||||
| Anthony Brown | 2025 | 236,385 | 56,732 | 31,266 | - | - | 324,383 | |||||||||||||||||||
| Chief of Staff | 2024 | 231,750 | - | 31,352 | - | - | 263,102 | |||||||||||||||||||
Employment Arrangements with our Executive Officers and Directors
B. Scott Swann
In January 2021, we entered into an employment agreement with B. Scott Swann (the “Swann Employment Agreement”) in connection with his appointment as our Chief Executive Officer. The material terms of the Swann Employment Agreement are as follows: (i) an annual base salary of $250,000; (ii) eligibility for an annual, performance-based cash bonus of up to 100% of Mr. Swann’s base salary subject to achievement of certain financial performance goals; (iii) an option grant to purchase 501,000 shares of our common stock that was granted at the our first board meeting following the completion of the third-party valuation of our common stock; and (iv) eligibility to participate in our retirement or benefit plans and arrangements that may be made available to our employees.
The above description of the Swann Employment Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Swann Employment Agreement, a copy of which is included as Exhibit 10.3 to the registration statement of which this prospectus forms a part.
Equity Compensation Plan Information
Our equity compensation program focuses the efforts of our named executive officers on the achievement of long-term objectives and aligns the interests of our named executive officers with those of our shareholders through the grant of equity awards, the value of which depends on our stock performance, to achieve strong long-term performance. In addition, our equity compensation program is intended to allow the Company to recruit and retain exceptional employees, officers, directors and consultants and to provide incentives for such individuals to perform at the highest levels for the benefit of the Company. We have historically granted limited equity awards to motivate and retain key executive talent and align their interests with the long-term interests of shareholders. Tony Brown received stock options under the 2018 Plan exercisable into 250,500 shares of common stock in fiscal year 2023, and J. Blake Moore received stock options under the 2018 Plan exercisable into 75,150 shares of common stock in fiscal year 2024. None of our other named executive officers received equity awards in fiscal years 2023 or 2024.
2018 Equity Incentive Plan
On September 18, 2018, our Board adopted and our shareholders approved the 2018 Equity Incentive Plan (as amended, “2018 Plan”), which will terminate automatically on September 18, 2028, unless terminated earlier by the Company, and no grants may be granted under the 2018 Plan following such termination. The 2018 Plan provides for (a) the grant of incentive stock options, (b) nonstatutory stock options, (c) stock appreciation rights, and (d) restricted stock.
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As of the date of this prospectus, stock options representing a total of 9,752,466 shares of common stock were authorized for issuance pursuant to the 2018 Plan, out of which:
| ● | stock options representing 375,750 shares were exercised and are included in the 15,021,650 shares of our common stock outstanding as of September 30, 2025; |
| ● | stock options representing 9,376,716 shares of common stock remain outstanding, reserved and available for issuance pursuant to the 2018 Plan, with a weighted average exercise price of $2.16 per share; and |
| ● | no additional shares are currently available for issuance under the 2018 Plan that have not already been exercised or reserved for outstanding stock options. |
Any shares subject to an outstanding grant made under the 2018 Plan will be returned to the 2018 Plan’s share reserve and will be available for issuance in connection with subsequent grants under the 2018 Plan to the extent: (a) any option expires or otherwise terminates, in whole or in part, without having been exercised in full; (b) any shares of common stock issued under a restricted stock award or option are subsequently repurchased by the Company; or (c) any stock appreciation rights expire or otherwise terminate, in whole or in part, without having been realized.
In the event that the Company is subject to a change in control, merger, consolidation or similar transaction, the board of directors may (i) arrange for the surviving corporation or acquiring corporation to assume the equity incentives; (ii) arrange for lapse of or assignment to the surviving corporation or acquiring corporation of any reacquisition or repurchase rights held by the Company; (iii) accelerate vesting of the equity incentives; (iv) cancel or arrange for cancellation of the equity incentives or (v) make a payment equal to the value of the property the participant would have received upon exercise of the equity incentive immediately prior to the transaction over any exercise price payable in connection with such exercise.
The 2018 Plan will be administered by the Board, acting subject to the 2018 Plan. Subject to the general purposes, terms, and conditions of the 2018 Plan, and any charter adopted by the Board governing the actions of the Compensation Committee, the Compensation Committee will have full power to implement and carry out the 2018 Plan, including determining the terms and conditions of, and to institute, any exchange program (including an option repricing without shareholder approval) and delegate any of its duties under the 2018 Plan to one or more officers or employees pursuant to a specific delegation as permitted by the terms of the 2018 Plan and applicable law.
The Company may amend the 2018 Plan or any grant in any respect the Company deems necessary or advisable, subject to the limitations of applicable law and the 2018 Plan.
Subsequent to the initial public offering, the Company does not intend to make further grants under the 2018 Plan.
2026 Equity Incentive Plan
On January 8, 2026, our Board adopted and our shareholders approved the 2026 Equity Incentive Plan (“2026 Plan”), which will terminate automatically on January 7, 2036, unless terminated earlier by the Company, and no grants may be granted under the 2026 Plan following such termination. The 2026 Plan provides for (a) the grant of incentive stock options, (b) nonstatutory stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) restricted stock unit awards, (f) performance awards and (g) other stock awards.
The total number of shares of common stock reserved and available for issuance pursuant to the 2026 Plan will not exceed the initial share reserve of 1,000,000 shares plus an annual automatic increase on January 1, 2027 and each year thereafter equal to the lesser of (i) 3% of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares of common stock as may be determined by the Board. If any equity incentive under the 2026 Plan (i) expires or otherwise terminates without all of the shares of common stock having been issued or (ii) is settled in cash, such expiration, termination or settlement will not reduce the number of shares available for issuance under the 2026 Plan. If any shares of common stock issued pursuant to any form of stock award under the 2026 Plan are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the 2026 Plan. Any shares reacquired by or withheld by the Company in satisfaction of tax withholding obligations on any form of stock award or as consideration for the exercise or purchase price of any form of stock award will again become available for issuance under the 2026 Plan.
As of the date of this prospectus, 233,800 shares of common stock are obligated to be issued as equity incentives out of the 2026 Plan’s initial share reserve pursuant to employee offer letters.
In the event that the Company is subject to a change in control, merger, consolidation or similar transaction, the board of directors may (i) arrange for the surviving corporation or acquiring corporation to assume or continue the equity incentives under the 2026 Plan or substitute a similar equity incentive; (ii) arrange for lapse of or assignment to the surviving corporation or acquiring corporation of any reacquisition or repurchase rights held by the Company; (iii) accelerate vesting of the equity incentives; (iv) cancel or arrange for cancellation of the equity incentives or (v) make a payment equal to the value of the property the participant would have received upon exercise of the equity incentive immediately prior to the transaction over any exercise price payable in connection with such exercise.
The 2026 Plan will be administered by the Board, acting subject to the 2026 Plan. Subject to the general purposes, terms, and conditions of the 2026 Plan, and any charter adopted by the Board governing the actions of the Compensation Committee, the Compensation Committee will have full power to implement and carry out the 2026 Plan, including determining the terms and conditions of, and to institute, any exchange program (including an option repricing without shareholder approval) and delegate any of its duties under the 2026 Plan to one or more officers or employees pursuant to a specific delegation as permitted by the terms of the 2026 Plan and applicable law.
The Company may amend the 2026 Plan or any grant in any respect the Company deems necessary or advisable, subject to the limitations of applicable law and the 2026 Plan.
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Compensation of Directors
We have no formal plan for compensating our directors for their service in their capacity as directors, although our directors may receive stock options to purchase common stock as awarded by our board of directors or (as to future stock options) a compensation committee which will be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any cash compensation for their services as a director, including committee participation and/or special assignments.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding outstanding options to acquire our common stock held by each of the named executive officers as of December 31, 2025 including the vesting dates for the portions of these awards that had not vested as of that date. The named executive officers did not hold any other outstanding equity awards as of that date.
| Option Awards | ||||||||||||||||||
| Equity | ||||||||||||||||||
| Incentive | ||||||||||||||||||
| Plan Awards: | ||||||||||||||||||
| Number of | Number of | Number of | ||||||||||||||||
| Securities | Securities | Securities | ||||||||||||||||
| Underlying | Underlying | Underlying | ||||||||||||||||
| Unexercised | Unexercised | Unexercised | Option | Option | ||||||||||||||
| Options (#) | Options (#) | Unearned | Exercise | Expiration | ||||||||||||||
| Name | Exercisable | Unexercisable | Options (#) | Price ($) | Date | |||||||||||||
| B. Scott Swann(1) | 501,000 | - | - | 0.22 | 1/14/2031 | |||||||||||||
| B. Scott Swann(2) | 801,600 | 200,400 | - | 2.40 | 4/18/2032 | |||||||||||||
| Joshua Klontz(3) | 668,000 | 167,000 | - | 2.40 | 4/18/2032 | |||||||||||||
| Brendan Klare(4) | 668,000 | 167,000 | - | 2.40 | 4/18/2032 | |||||||||||||
| Anthony Brown(5) | 250,500 | - | - | 2.40 | 3/9/2033 | |||||||||||||
| J. Blake Moore(6) | 25,050 | - | - | 2.40 | 9/6/2032 | |||||||||||||
| J. Blake Moore(7) | 32,565 | 42,585 | - | 2.40 | 5/3/2034 | |||||||||||||
| Cody Barnes(8) | 25,050 | - | - | 0.11 | 11/4/2029 | |||||||||||||
| Cody Barnes(9) | 16,700 | - | - | 0.22 | 9/23/2030 | |||||||||||||
| Cody Barnes(10) | 106,880 | 26,720 | - | 2.40 | 4/18/2032 | |||||||||||||
| (1) | Represents 501,000 options held by B. Scott Swann, which have fully vested as of December 31, 2024. |
| (2) | Represents 1,002,000 options held by B. Scott Swann, of which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (3) | Represents 835,000 options held by Joshua Klontz, of which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (4) | Represents 835,000 options held by Brendan Klare, of which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (5) | Represents 250,500 options held by Anthony Brown, of which 25% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 3 year term. |
| (6) | Represents 25,050 options held by J. Blake Moore, which have fully vested as of December 31, 2025. |
| (7) | Represents 75,150 options held by J. Blake Moore, of which 2% vest each month after the vesting commencement date. |
| (8) | Represents 25,050 options held by Cody Barnes, which have fully vested as of December 31, 2024. |
| (9) | Represents 16,700 options held by Cody Barnes, which have fully vested as of December 31, 2024. |
| (10) | Represents 133,600 options held by Cody Barnes, of which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
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The following table sets forth certain information concerning the ownership of our common stock as of the date of this prospectus, with respect to: (i) each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our common stock; (ii) each of our directors; (iii) each of our named executive officers; and (iv) all of our current directors and executive officers as a group.
Applicable percentage ownership is based on 15,021,650 shares of common stock outstanding as of the date of this prospectus. The percentage of beneficial ownership after this offering assumes the sale and issuance of shares of common stock in this offering and no exercise by the underwriters of their over-allotment option to purchase additional shares of common stock.
We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting or investment power with respect to such securities. In addition, pursuant to such rules, we deemed outstanding shares of common stock subject to options, warrants, and other securities held by that person that are exercisable or convertible currently or within 60 days of the date of this prospectus, if any. We did not deem such shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the beneficial owners named in the table below have sole voting and investment power with respect to all shares of our common stock that they beneficially own, subject to applicable community property laws.
| Shares of Common Stock Beneficially Owned Prior to Offering | Shares of Common Stock Beneficially Owned After Offering | |||||||||||||||
| Name and Address of Beneficial Owner(1) | Number | Percentage | Number | Percentage | ||||||||||||
| 5% or Greater Stockholders | ||||||||||||||||
| Scott Klum | 3,036,060 | (2) | 20.1 | % | 3,036,060 | 16.8 | % | |||||||||
| Benjamin Klein | 1,414,490 | (3) | 9.3 | % | 1,414,490 | 7.8 | % | |||||||||
| David Ray | 831,660 | (10) | 5.5 | % | 831,660 | 4.6 | % | |||||||||
| Executive Officers, Directors and Director Nominees | ||||||||||||||||
| Brendan Klare | 4,737,790 | (4) | 30.2 | % | 4,737,790 | 25.3 | % | |||||||||
| Joshua Klontz | 4,737,790 | (5) | 30.2 | % | 4,737,790 | 25.3 | % | |||||||||
| B. Scott Swann | 1,302,600 | (6) | 8.0 | % | 1,302,600 | 6.7 | % | |||||||||
| J. Blake Moore | 57,615 | (7) | 0.4 | % | 57,615 | 0.3 | % | |||||||||
| Cody Barnes | 624,580 | (8) | 4.1 | % | 624,580 | 3.4 | % | |||||||||
| Anthony Brown | 250,500 | (9) | 1.6 | % | 250,500 | 1.4 | % | |||||||||
| Edward Davis | - | * | % | - | * | % | ||||||||||
| Brian Hibbeln | - | * | % | - | * | % | ||||||||||
| Steven Martinez | - | * | % | - | * | % | ||||||||||
| Dawn Meyerriecks | - | * | % | - | * | % | ||||||||||
| All directors and executive officers as a group (10 individuals) | 11,710,875 | 64.6 | % | 11,710,875 | 55.5 | % | ||||||||||
| * | Less than 1%. |
| (1) | Except as otherwise indicated, the business address of our directors and executive officers is 1290 Broadway, Suite 1200, Denver, CO 80203. |
| (2) | Scott Klum’s beneficial ownership consists of 2,952,560 shares of our common stock owned directly and 83,500 shares of common stock issuable pursuant to presently exercisable options. |
| (3) | Benjamin Klein’s beneficial ownership consists of 1,307,610 shares of our common stock owned directly and 106,880 shares of common stock issuable pursuant to presently exercisable options. |
| (4) | Brendan Klare’s beneficial ownership consists of 4,069,790 shares of our common stock owned directly and 668,000 shares of common stock issuable pursuant to presently exercisable options. |
| (5) | Joshua Klontz’s beneficial ownership consists of 4,069,790 shares of our common stock owned directly and 668,000 shares of common stock issuable pursuant to presently exercisable options. |
| (6) | B. Scott Swann’s beneficial ownership consists of 1,302,600 shares of our common stock issuable pursuant to presently exercisable options. |
| (7) | J. Blake Moore’s beneficial ownership consists of 57,615 shares of common stock issuable pursuant to presently exercisable options. |
| (8) | Cody Barnes’s beneficial ownership consists of 475,950 shares of our common stock owned directly and 148,630 shares of common stock issuable pursuant to presently exercisable options. |
| (9) | Anthony Brown’s beneficial ownership consists of 250,500 shares of common stock issuable pursuant to presently exercisable options. |
| (10) | David Ray’s beneficial ownership consists of 693,050 shares of our common stock owned directly and 138,610 shares of common stock issuable pursuant to presently exercisable options. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
During the period from January 1, 2022 to the date of this prospectus, we have not entered into or participated in any Related Party Transactions (as defined below) except as disclosed below.
On September 18, 2018, we entered into a stockholders agreement, as amended and restated on January 18, 2024, with all of the current holders of our common stock, which include Brendan Klare, our President, Chief Scientist, and Board Chairman, Joshua Klontz, our Chief Technology Officer and Director, and Cody Barnes, our Chief Financial Officer. The amended and restated stockholders agreement includes restrictions on sale or transfer that are not subject to a registration statement, confidentiality requirements, limitations on new issuances of capital stock, approval requirements for stockholders disproportionately affected by any amendment, a drag-along right in the event of a supermajority-approved change of control transaction, and commitments to enter 180 day market stand-off agreements in connection with any public offering. The amended and restated stockholders agreement automatically terminates pursuant to its terms upon the closing of this offering, and we currently do not intend to replace it with any new stockholders agreement following this offering. The amended and restated stockholders agreement does not include any voting agreement provisions.
Company Policies on Related Party Transactions
A “Related Party Transaction” is a transaction, arrangement, or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any Related Person (as defined below) had, has or will have a direct or indirect material interest. A “Related Person” means:
| ● | any person who is, or at any time during the applicable period was, one of our executive officers, one of our directors, or a nominee to become one of our directors; | |
| ● | any person who is known by us to be the beneficial owner of more than 5.0% of any class of our voting securities; | |
| ● | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5.0% of any class of our voting securities, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5.0% of any class of our voting securities; or | |
| ● | any firm, corporation, or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. |
Our board of directors intends to adopt a related party transactions policy. Pursuant to this policy, our Audit Committee will review all material facts of all Related Party Transactions and either approve or disapprove entry into the Related Party Transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a Related Party Transaction, our Audit Committee shall consider, among other factors, the following: (i) whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and (ii) the extent of the Related Person’s interest in the transaction. Further, the policy will require that all Related Party Transactions required to be disclosed in our filings with the SEC be so disclosed in accordance with applicable laws, rules and regulations.
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In connection with this offering, we will secondly amend and restate our articles of incorporation and amend and restate our bylaws. Where applicable, the following description summarizes the material terms of our second amended and restated articles of incorporation and amended and restated bylaws, which will be in effect prior to the completion of this offering. The following summary of the capital stock and our articles of incorporation and bylaws does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and our articles of incorporation and bylaws, as amended, which are filed as exhibits to the registration statement of which this prospectus is a part.
The aggregate number of shares that we are authorized to issue is 101,000,000 consisting of 100,000,000 shares of common stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share. As of the date of this prospectus, there were 15,021,650 shares of common stock outstanding and 0 shares of our preferred stock outstanding.
Quorum. Our articles of incorporation and bylaws, as amended, provide that shares representing a majority of the total number of votes attributable to all shares entitled to vote constitute a quorum.
Common Stock
Voting Rights. Holders of shares of common stock are entitled to one vote per share held of record on all matters to be voted upon by the stockholders, except that in the election of directors, such shareholder shall have the right to vote the number of votes equal to the number of shares of common stock such shareholder owns for each director to be elected.
Dividend Rights. Holders of shares of common stock are entitled to ratably receive dividends when and if declared by the board of directors out of funds legally available for that purpose, subject to the provisions of our articles of incorporation and bylaws, as amended, any statutory or contractual restrictions on the payment of dividends, and any prior rights and preferences that may be applicable to any outstanding preferred stock.
Liquidation Rights. Upon liquidation, dissolution, distribution of assets or other winding up of the Company, the holders of common stock are entitled to receive ratably the assets available for distribution to the holders after payment of liabilities and the liquidation preference of any of our outstanding shares of preferred stock.
Other Matters. The shares of common stock have no preemptive or preferential right to acquire any of our shares or securities, including shares or securities held in our treasury. All outstanding shares of our common stock are fully paid and non-assessable.
Preferred Stock
Our articles of incorporation, as amended, give the board of directors the power to issue shares of preferred stock in one or more series without stockholder approval. The board of directors has the discretion to determine the designations, rights, qualifications, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. The purpose of authorizing the board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from acquiring, a majority of our outstanding voting stock.
Stock Options
As of the date of this prospectus, stock options representing a total of 9,752,466 shares of common stock were authorized for issuance pursuant to the 2018 Plan, out of which:
| ● | stock options representing 375,750 shares were exercised and are included in the 15,021,650 shares of our common stock outstanding as of September 30, 2025; |
| ● | stock options representing 9,376,716 shares of common stock remain outstanding, reserved and available for issuance pursuant to the 2018 Plan, with a weighted average exercise price of $2.16 per share; and |
| ● | no additional shares are currently available for issuance under the 2018 Plan that have not already been exercised or reserved for outstanding stock options. |
1,920,500 of the 9,376,716 shares of common stock issuable under our 2018 Plan (the “Performance-Based Options”) are subject to vesting conditions based on achieving revenue targets for designated market segments and/or directly attributable to the recipient’s efforts (“Target Revenue”), as follows:
| ● | 1,670,000 of the Performance-Based Options vest if the Company achieves $100 million of annual applicable Target Revenue prior to September 2030, with smaller portions thereof achievable at lower Target Revenue amounts. |
| ● | 167,000 of the Performance-Based Options vest if the Company books and collects $40 million of cumulative applicable Target Revenue prior to November 2027, with smaller portions achievable at lower Target Revenue amounts. |
| ● | 83,500 of the Performance-Based Options vest if the Company collects $20 million of cumulative applicable Target Revenue prior to July 2029, with smaller portions achievable at lower Target Revenue amounts. |
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Representative’s Warrants
We have agreed to issue the Representative’s Warrants to the representative of the underwriters of this offering as a portion of the underwriting compensation payable in connection with this offering. The Representative’s Warrants shall be exercisable for 210,000 shares of our common stock (or 7.0% of the shares of common stock sold in this offering). The Representative’s Warrants shall contain customary “cashless exercise” provisions and shall be exercisable at any time, and from time to time, in whole or in part, for the four-and-a-half-year period commencing six months after the closing of this offering at an exercise price of 100% of the initial public offering price of the shares of common stock. Please see “Underwriting — Representative’s Warrants” for further information.
Lock-Up Agreements
Pursuant to certain “lock-up” agreements, our executive officers, directors and holders of our common stock and securities exercisable for or convertible into our common stock outstanding immediately upon the closing of this offering, have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, or, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of 6 months following the closing of the offering.
In addition, we have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, or, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of 6 months following the closing of the offering.
See “Underwriting — Lock-Up Agreements” for additional information.
Anti-Takeover Effects of Colorado Law and Our Articles of Incorporation and Bylaws
Provisions of the Colorado Revised Statutes and our articles of incorporation and bylaws, as amended, could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions would be expected to discourage certain types of takeover practices and takeover bids our board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us will outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
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Articles of Incorporation and Bylaw Provisions
Our purpose is to engage in any lawful act or activity for which a corporation may be organized under the Colorado Business Corporation Act (the “CBCA”).
Board of Directors
Our bylaws, as amended, provide that the number of directors will be fixed by the board of directors or shareholders and that the directors need not be shareholders.
Authorized but Unissued Capital Stock
Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without stockholder approval, except as may be required under the listing rules of any stock exchange on which our common stock is then listed. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Stockholder Action by Written Consent
Any action required or permitted by Articles 101 to 117 of the CBCA to be taken at a meeting of shareholders may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by the shareholders holding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted.
Limitations on Liability and Indemnification of Officers and Directors
Under our articles of incorporation, as amended, to the fullest extent allowable under the CBCA, our directors have no personal liability to us or our stockholders for monetary damages for breach of fiduciary duty as a director.
Transfer Agent and Registrar
The transfer agent and registrar of our common stock is VStock Transfer, LLC. The transfer agent and registrar’s address is 18 Lafayette Place, Woodmere, NY 11598.
Listing
We plan to have our common stock listed on Nasdaq under the symbol “ROC”. The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application, and there is no guarantee or assurance that our common stock will be approved for listing on Nasdaq.
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there has been no market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market prices for the shares of our common stock and our ability to raise equity capital in the future.
Based on the number of shares outstanding as of the date of this prospectus, upon the closing of this offering, approximately 18,021,650 shares of common stock will be outstanding, assuming an initial public offering price of $5.50 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) and further assuming no exercise of the underwriters’ over-allotment option. Of the shares to be outstanding immediately after completion of the offering, all 3,000,000 shares sold in this offering will be freely tradable except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act, which rules are summarized below. In addition, certain of our security holders have entered into market standoff agreements with us or lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 6 months following the closing of this offering, as described below. As a result of these agreements, subject to the provisions of Rule 144 or Rule 701, shares will be available for sale in the public market as follows:
| ● | beginning on the date of this prospectus, all of the shares sold in this offering will be immediately available for sale in the public market (except as described above); and | |
| ● | beginning 6 months and 1 day after the closing of this offering, additional shares will become eligible for sale in the public market, of which shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below. |
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, any person who is not an affiliate of ours and has held their shares for at least six months, as measured by SEC rule, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, provided current public information about us is available. In addition, under Rule 144, any person who is not an affiliate of ours and has held their shares for at least one year, as measured by SEC rule, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares immediately upon the closing of this offering without regard to whether current public information about us is available. Beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours and who has beneficially owned restricted securities for at least six months, as measured by SEC rule, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of restricted shares within any three-month period that does not exceed the greater of:
| ● | 1% of the number of shares of our common stock then outstanding, which will equal approximately 180,217 shares immediately after this offering; and | |
| ● | the average weekly trading volume of our common stock on Nasdaq during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
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Sales of restricted shares under Rule 144 held by our affiliates are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement. Notwithstanding the availability of Rule 144, the holders of 15,021,650 shares of our restricted shares have entered into lock-up agreements as described below and their restricted shares will become eligible for sale at the expiration of the restrictions set forth in those agreements.
Rule 701
Under Rule 701 under the Securities Act, shares of our common stock acquired upon the exercise of currently outstanding options or pursuant to other rights granted under our stock plans may be resold, by:
| ● | persons other than affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject only to the manner-of-sale provisions of Rule 144; and | |
| ● | our affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject to the manner-of-sale and volume limitations, current public information and filing requirements of Rule 144, in each case, without compliance with the six-month holding period requirement of Rule 144. |
Notwithstanding the foregoing, all of our Rule 701 shares are subject to lock-up agreements as described below and in the section titled “Underwriting” and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
Lock-Up Agreements
Pursuant to certain “lock-up” agreements, our executive officers, directors and holders of our common stock and securities exercisable for or convertible into our common stock outstanding immediately upon the closing of this offering, have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, or, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of 6 months following the closing of the offering.
In addition, we have agreed, subject to certain exceptions, not to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into any swap, hedge or similar agreement or arrangement that transfers, in whole or in part, the economic risk of ownership of, or, directly or indirectly, engage in any short selling of any common stock or securities convertible into or exchangeable or exercisable for any common stock, whether currently owned or subsequently acquired, without the prior written consent of the underwriters, for a period of 6 months following the closing of the offering.
See “Underwriting — Lock-Up Agreements” for additional information.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax consequences of the ownership and disposition of our common stock acquired in this offering by a “non-U.S. holder” (as defined below), but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the United States Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought, and do not intend to seek, any ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.
This summary also does not address the tax considerations arising under the laws of any state or local or non-U.S. jurisdiction or under U.S. federal gift and estate tax rules, or rising out of other non-income tax rules, except to the limited extent set forth below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
| ● | banks, insurance companies, regulated investment companies, real estate investment trusts or other financial institutions; | |
| ● | persons subject to the alternative minimum tax or the tax on net investment income; | |
| ● | persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement; | |
| ● | tax-exempt organizations or governmental organizations; | |
| ● | pension plans and tax-qualified retirement plans; | |
| ● | controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; | |
| ● | partnerships or other entities or arrangements treated as partnership for U.S. federal income tax purposes (and investors therein); | |
| ● | brokers or dealers in securities or currencies; | |
| ● | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; | |
| ● | persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below); | |
| ● | certain former citizens or long-term residents of the United States; | |
| ● | persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment; | |
| ● | persons who hold or receive our common stock pursuant to the exercise of any option or otherwise as compensation; | |
| ● | persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment); and | |
| ● | persons deemed to sell our common stock under the constructive sale provisions of the Code. |
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In addition, if a partnership, entity or arrangement classified as a partnership or flow-through entity for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership or other entity. A partner in a partnership or other such entity that will hold our common stock should consult his, her or its own tax advisor regarding the tax consequences of the ownership and disposition of our common stock through a partnership or other such entity, as applicable.
This summary is for informational purposes only and is not tax advice. Each non-U.S. holder is urged to consult its own tax advisor with respect to the application of the U.S. federal income tax laws to its particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal gift or estate tax rules or under the laws of any state, local, non-U.S. or other taxing jurisdiction or under any applicable tax treaty.
Non-U.S. Holder Defined
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is neither a “U.S. person” nor an entity (or arrangement) treated as a partnership. A “U.S. person” is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
| ● | an individual who is a citizen or resident of the United States; | |
| ● | a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or any political subdivision thereof, or otherwise treated as such for U.S. federal income tax purposes; | |
| ● | an estate whose income is subject to U.S. federal income tax regardless of its source; or | |
| ● | a trust (x) whose administration is subject to the primary supervision of a U.S. court and that has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) that has made a valid election under applicable Treasury Regulations to be treated as a U.S. person. |
Distributions
As described in the section titled “Dividend Policy,” we have never declared or paid cash dividends on our common stock. However, following the completion of this offering, if we do make distributions of cash or property on our common stock to non-U.S. holders, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, the excess will first constitute a return of capital and will reduce each non-U.S. holder’s adjusted tax basis in our common stock, but not below zero. Any additional excess will then be treated as capital gain from the sale of stock, as discussed under “Gain on Disposition of Common Stock.”
Subject to the discussions below on effectively connected income, backup withholding and the Foreign Account Tax Compliance Act, or FATCA, any dividend paid to a non-U.S. holder generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty between the United States and such non-U.S. holder’s country of residence. In order to receive a reduced treaty rate, such non-U.S. holder must provide the applicable withholding agent with an IRS Form W-8BEN or W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced treaty rate. A non-U.S. holder of shares of our common stock eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. If such non-U.S. holder holds our common stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to such agent, which then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. Each non-U.S. holder should consult its own tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Dividends received by a non-U.S. holder that are treated as effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States (and, if an applicable income tax treaty so provides, such non-U.S. holder maintains a permanent establishment or fixed base in the United States to which such dividends are attributable) are generally exempt from the 30% U.S. federal withholding tax, subject to the discussion below on backup withholding and FATCA withholding. To claim this exemption, a non-U.S. holder must provide the applicable withholding agent with a properly executed IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits, subject to an applicable income tax treaty providing otherwise. In addition, if a non-U.S. holder is a corporation, dividends such non-U.S. holder receives that are effectively connected with its conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty between the United States and such non-U.S. holder’s country of residence. Each non-U.S. holder should consult its own tax advisor regarding the tax consequences of the ownership and disposition of our common stock, including any applicable tax treaties that may provide for different rules.
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Gain on Disposition of Common Stock
Subject to the discussion below regarding backup withholding and FATCA withholding, a non-U.S. holder generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:
| ● | the gain is effectively connected with such non-U.S. holder’s conduct of a U.S. trade or business (and, if an applicable income tax treaty so provides, such non-U.S. holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable); | |
| ● | such non-U.S. holder is an individual who is present in the United States for an aggregate of 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or | |
| ● | our common stock constitutes a United States real property interest, or USRPI, by reason of our status as a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes. |
We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our U.S. and worldwide real property interests plus our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, your common stock will be treated as U.S. real property interests only if you actually (directly or indirectly) or constructively hold more than 5% of such regularly traded common stock at any time during the shorter of the five-year period preceding your disposition of, or your holding period for, our common stock.
A non-U.S. holder described in the first bullet above will be required to pay U.S. federal income tax on the gain derived from the sale (net of certain deductions and credits) under regular graduated U.S. federal income tax rates. In addition, a non-U.S. holder that is a corporation may be subject to the branch profits tax at a 30% rate on a portion of its effectively connected earnings and profits for the taxable year that are attributable to such gain, as adjusted for certain items. A lower rate may be specified by an applicable income tax treaty.
A non-U.S. holder described in the second bullet above will be subject to tax at 30% (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses of such non-U.S. holder for the taxable year, provided such non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
Each non-U.S. holder should consult its own tax advisor regarding any applicable income tax or other treaties that may provide for different rules.
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Information Reporting and Backup Withholding
Generally, we or an applicable withholding agent must report annually to the IRS the amount of dividends paid to a non-U.S. holder, such non-U.S. holder’s name and address, and the amount of tax withheld, if any. A similar report is sent to such non-U.S. holder. Pursuant to any applicable income tax treaty or other agreement, the IRS may make such report available to the tax authority in such non-U.S. holder’s country of residence.
Dividends paid by us (or our paying agent) to a non-U.S. holder may also be subject to backup withholding at a current rate of 24%.
Such information reporting and backup withholding requirements may be avoided, however, if such non-U.S. holder establishes an exemption by providing a properly executed, and applicable, IRS Form W-8, or otherwise establishes an exemption. Generally, such information reporting and backup withholding requirements will not apply to a non-U.S. holder where the transaction is effected outside the United States, through a non-U.S. office of a non-U.S. broker. Notwithstanding the foregoing, backup withholding and information reporting may apply, however, if the applicable withholding agent has actual knowledge, or reason to know, that such non-U.S. holder is a U.S. person.
Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act (FATCA)
Sections 1471 to 1474 of the Code, Treasury Regulations issued thereunder and related official IRS guidance, commonly referred to as FATCA, generally impose a U.S. federal withholding tax of 30% on dividends on our common stock paid to a “foreign financial institution” (as defined under FATCA, and which may include banks, traditional financial institutions, investment funds, and certain holding companies), unless such institution enters into an agreement with the U.S. Department of the Treasury to, among other things, identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined under FATCA), report annually substantial information about such accounts, and withhold on certain payments to non-compliant foreign financial institutions and certain other account holders. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on our common stock paid to a “non-financial foreign entity” (as specially defined under FATCA), unless such entity provides identifying information regarding each of its direct or indirect “substantial United States owners” (as defined under FATCA), certifies that it does not have any substantial United States owners, or otherwise establishes an exemption. Accordingly, the institution or entity through which our common stock is held will affect the determination of whether such withholding is required.
The withholding obligations under FATCA generally apply to dividends on our common stock. Such withholding will apply regardless of whether the beneficial owner of the payment otherwise would be exempt from withholding pursuant to an applicable tax treaty with the United States, the Code, or other exemptions described above. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes.
Under proposed regulations, FATCA withholding on payments of gross proceeds has been eliminated. These proposed regulations are subject to change.
An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this section. Prospective investors are encouraged to consult with their own tax advisors regarding the application of FATCA withholding to their investment in, and ownership and disposition of, our common stock.
The preceding discussion of U.S. federal tax considerations is for general information only. It is not tax advice to investors in their particular circumstances. Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.
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In connection with this offering, we will enter into an underwriting agreement with The Benchmark Company, LLC (“Benchmark”) (the “representative”) as representative of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement, dated [●], 2026, each underwriter named below has severally, and not jointly, agreed to purchase from us, on a firm commitment basis, the number of shares of our common stock set forth opposite its name below, at the public offering price, less the underwriting discount set forth on the cover page of this prospectus.
| Underwriter | Number
of |
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| The Benchmark Company, LLC | ||||
| Total | ||||
The underwriters are committed to purchase all of the shares of common stock offered by us other than those covered by the option to purchase additional securities described below, if they purchase any such securities. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
The underwriters are offering the shares of common stock, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Over-Allotment Option
We have granted the underwriters an option, which is exercisable for up to 30 days after the closing date of the offering, that permits the underwriters to purchase up to an additional 450,000 shares of common stock on the same terms as the other shares being purchased by the underwriters from us. If the underwriters exercise this option in whole or in part, then the underwriters will be committed, subject to the conditions described in the underwriting agreement, to purchase the additional offered securities in proportion to each of their commitments set forth in the prior table.
Discounts
We have agreed to sell the shares of common stock to the underwriters at the initial public offering price of the shares set forth on the cover page of this prospectus, less a seven percent (7%) underwriting discount.
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The following table shows the assumed public offering price, total underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
| Per Share | Total
Without Over-Allotment Option |
Total
With Over-Allotment Option |
||||||||||
| Initial public offering price | $ | $ | $ | |||||||||
| Underwriting discount (7%) | $ | $ | $ | |||||||||
| Proceeds, before expenses, to us | $ | $ | $ | |||||||||
The underwriters propose to offer the shares of common stock offered by us to the public at the public offering price per share of common stock set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares of common stock to other securities dealers at such price less a concession of $[●] per share. If all of the shares of common stock offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplement to this prospectus.
We will pay the out-of-pocket accountable expenses of the underwriters in connection with this offering. The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriters will be returned to the extent that offering expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).
We have agreed to pay the underwriters’ non-accountable expenses allowance equal to 1.0% of the aggregate gross proceeds of this offering. We have also agreed to pay for a certain amount of the underwriter’s accountable expenses including actual accountable road show expenses for the offering; prospectus tracking and compliance software for the offering; the reasonable and documented fees and disbursements of the underwriter’s counsel; and the costs associated with receiving commemorative mementos and lucite tombstones; provided that these actual accountable expenses of the underwriter shall not exceed $175,000 in the aggregate, including the fees and disbursements of the underwriter’s counsel. In addition to the foregoing, we shall be responsible for the costs and expenses of background checks on its senior management and directors in an amount not to exceed $7,500.
We estimate that the total expenses of the offering payable by us, excluding underwriting discounts, commissions and non-accountable expense allowance, will be approximately $447,848.
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Discretionary Accounts
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Lock-Up Agreements
In connection with this offering, our directors and officers and holders of our common stock as of the effective date of this registration statement will enter into customary “lock-up” agreements in favor of the underwriters for a period of six (6) months from the date of this offering. We have agreed with the underwriters that, for a period of six (6) months from the closing of this offering, we will not (a) offer, sell, or otherwise transfer or dispose of, directly or indirectly, any capital stock or any securities convertible into or exercisable or exchangeable for capital stock; or (b) file or caused to be filed any registration statement with the SEC relating to the offering of any capital stock or any securities convertible into or exercisable or exchangeable for capital stock.
Representative’s Warrants
We have agreed, upon the closing of this offering, including upon the closing of any offering of shares of common stock sold to cover over allotments, to issue to the underwriters warrants, or the representative’s warrants, to purchase a number of shares of common stock equal to seven percent (7%) of the total number of shares of common stock sold in this public offering. The representative’s warrants will be exercisable at a price equal to $5.50 per share (100% of the assumed initial public offering price). The representative’s warrants are also exercisable on a cashless basis. The representative’s warrants are exercisable at any time and from time to time, in whole or in part, during the four-and-a-half year period commencing six months after the closing of this offering. The representative’s warrants also provide for customary anti-dilution provisions and demand and “piggyback” registration rights with respect to the registration of the shares of common stock underlying the representative’s warrants. The sole demand registration right provided will not be greater than five years from the commencement of sales of the securities issued in this offering in compliance with FINRA Rule 5110(g)(8)(B) and 5110(g)(8)(C). The piggyback registration rights provided will not be greater than two years from the initial exercise date in compliance with FINRA Rule 5110(g)(8)(D).
The representative’s warrants and the shares of common stock underlying the representative’s warrants have been deemed compensation by the Financial Industry Regulatory Authority, or FINRA, and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e) of FINRA. The representatives, or permitted assignees under such rule, may not sell, transfer, assign, pledge, or hypothecate the representative’s warrants or the securities underlying the representative’s warrants, nor will the representative engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the representative’s warrants or the underlying shares for a period of 180 days from the effective date of the registration statement. Additionally, the representative’s warrants may not be sold transferred, assigned, pledged or hypothecated for a 180-day period following the effective date of the registration statement except to any underwriter and selected dealer participating in this offering and their bona fide officers or partners. The representative’s warrants will provide for adjustment in the number and price of the representative’s warrants and the shares of common stock underlying such representative’s warrants in the event of recapitalization, merger, stock split or other structural transaction, or a future financing undertaken by us.
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Right of First Refusal
We have granted Benchmark, as representative of the underwriters, a right of first refusal, for a period of twelve (12) months from the closing of this offering, to act as lead or join investment banker, lead or joint book-runner, lead or joint placement agent, and/or investment banker/advisor for each and every future public and private equity or debt offering, including all equity linked financings, and for each proposed or completed merger or acquisition transaction whereby we would be merged into or acquired by another company or entity during such 12 month period, of ours, or any successor to or subsidiary of us.
Determination of Offering Price
The public offering price of the securities we are offering was negotiated between us and the underwriters. Factors considered in determining the public offering price of the shares of common stock include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant. An active trading market for our common stock may not develop. It is also possible that after the offering, our common stock will not trade in the public market at or above the public offering price.
Stabilization
In connection with this offering, the underwriters may engage in stabilizing transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
| ● | Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum and are engaged in for the purpose of preventing or retarding a decline in the market price of the securities while the offering is in progress. |
| ● | Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriters will consider, among other things, the price of securities available for purchase in the open market as compared with the price at which they may purchase securities through exercise of the option. If the underwriters sell more securities than could be covered by exercise of the option and, therefore, have a naked short position, the position can be closed out only by buying securities in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the securities in the open market that could adversely affect investors who purchase in the offering. | |
| ● | Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the securities originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of its securities. As a result, the price of our securities in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our securities. These transactions may be effected on Nasdaq, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
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Passive Market Making
In connection with this offering, the underwriters may engage in passive market making transactions in our common stock. Passive market making consists of displaying bids limited by the prices of independent market makers and effecting purchases limited by those prices in response to order flow. Rule 103 of Regulation M promulgated by the SEC limits the amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of the common stock at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time.
Affiliations
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and their affiliates may from time to time in the future engage with us and perform services for us or in the ordinary course of their business for which they will receive customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of us. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of these securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments.
Other Relationships
The underwriters and their respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees. However, except as disclosed in this prospectus, we have no present arrangements with the underwriters for any further services.
Indemnification
We have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.
Electronic Distribution
A prospectus in electronic format may be made available on the internet sites or through other online services maintained by one or more of the underwriters participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares of common stock for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.
Offer Restrictions Outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
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The validity of the shares of common stock offered hereby will be passed upon for us by Lucosky Brookman LLP, Woodbridge, New Jersey. Certain legal matters relating to Colorado law will be passed upon for us by KO Law PC. Sheppard, Mullin, Richter & Hampton LLP, New York, New York, is acting a counsel to the underwriters.
Rosenberg Rich Baker Berman, P.A., our independent registered public accounting firm, has audited our balance sheets as of December 31, 2024 and 2023, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended, as set forth in their report dated August 14, 2025, except for the effects of the restatement and revisions discussed in Notes 2, 6, and 11 to the consolidated financial statements and for the effect of a forward 167-to-1 stock split as noted on Note 2, to which the date is January 12, 2026. We have included our financial statements in this prospectus and in this registration statement in reliance on their report given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete; thus, please see the copy of the contract or document that has been filed for the complete contents of that contract or document. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be reviewed for the complete contents of these contracts and documents.
We currently do not file periodic reports with the SEC. Upon the completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
We also maintain a website at https://roc.ai/. Upon completion of this offering, you may access these materials at our website free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this prospectus.
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F-1
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2025 (Restated) (Unaudited) | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 72,151 | $ | 726,436 | ||||
| Accounts receivable net of allowance for credit losses of $220,538 and $60,040, respectively | 5,186,573 | 2,765,786 | ||||||
| Prepaid expenses and other current assets | 271,039 | 390,804 | ||||||
| Total Current Assets | 5,529,763 | 3,883,026 | ||||||
| Net Property and Equipment | 302,103 | 404,482 | ||||||
| Intangible assets, net | 5,899 | 7,039 | ||||||
| Operating lease right-of use asset | 1,160,798 | 1,363,956 | ||||||
| Deferred Tax Asset, net | - | 787,017 | ||||||
| Capitalized Software | 490,761 | - | ||||||
| Total Other Assets | 1,959,561 | 2,562,494 | ||||||
| Total Assets | $ | 7,489,324 | $ | 6,445,520 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 2,079,223 | $ | 1,202,856 | ||||
| Deferred revenue | 1,412,593 | 1,490,949 | ||||||
| Line of credit | 1,416,476 | 431,132 | ||||||
| Operating lease liabilities short term | 293,636 | 268,508 | ||||||
| Total Current Liabilities | 5,201,928 | 3,393,445 | ||||||
| Operating lease liabilities | 977,831 | 1,201,803 | ||||||
| Total Long-Term Liabilities | 977,831 | 1,201,803 | ||||||
| Total Liabilities | 6,179,759 | 4,595,248 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock, par value $0.01; 100,000,000 shares authorized; 15,021,650 and 14,985,411 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | 150,217 | 149,854 | ||||||
| Additional paid-in capital | 4,060,171 | 3,692,515 | ||||||
| Accumulated Deficit | (2,900,823 | ) | (1,992,097 | ) | ||||
| Total Stockholder’s Equity | 1,309,565 | 1,850,272 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 7,489,324 | $ | 6,445,520 | ||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-2
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 (Restated) | 2024 | |||||||
| Sales | $ | 13,492,434 | $ | 11,061,778 | ||||
| Cost of sales | 2,777,639 | 1,468,124 | ||||||
| Gross profit | 10,714,795 | 9,593,654 | ||||||
| Operating Expenses | ||||||||
| Selling, general and administrative | 6,162,114 | 6,319,772 | ||||||
| Research and development | 4,811,387 | 4,629,255 | ||||||
| Loss from Operations | (258,706 | ) | (1,355,373 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | 1 | 141 | ||||||
| Interest expense | (49,545 | ) | - | |||||
| Other expense | - | (878 | ) | |||||
| Other income | - | 3,159 | ||||||
| Total Other Income (Expense) | (49,544 | ) | 2,422 | |||||
| Loss before benefit from income taxes | (308,250 | ) | (1,352,951 | ) | ||||
| Provision (Benefit) from income taxes | 600,476 | (605,147 | ) | |||||
| Net Loss | $ | (908,726 | ) | $ | (747,804 | ) | ||
| Loss per Share – Basic | $ | (0.06 | ) | $ | (0.05 | ) | ||
| Loss per Share – Diluted | (0.06 | ) | (0.05 | ) | ||||
| Weighted Average Number of Shares – Basic | 15,002,111 | 14,985,411 | ||||||
| Weighted Average Number of Shares – Diluted | 15,002,111 | 14,985,411 | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-3
RANK ONE COMPUTING CORPORATION
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025, AND 2024
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Par | Capital | Deficit | Equity | ||||||||||||||||
| Balance, January 1, 2025 | 14,985,411 | $ | 149,854 | $ | 3,692,515 | $ | (1,992,097 | ) | $ | 1,850,272 | ||||||||||
| Stock-based compensation | — | — | 359,913 | — | 359,913 | |||||||||||||||
| Issuance of common shares through options | 36,239 | 363 | 7,743 | — | 8,106 | |||||||||||||||
| Net Loss | — | — | — | (908,726 | ) | (908,726 | ) | |||||||||||||
| Balance, September 30, 2025 (Restated) | 15,021,650 | $ | 150,217 | $ | 4,060,171 | $ | (2,900,823 | ) | $ | 1,309,565 | ||||||||||
| Common Stock | Additional Paid-in | Retained Earnings | Total Stockholders’ | |||||||||||||||||
| Shares | Par | Capital | (Deficit) | Equity | ||||||||||||||||
| Balance, January 1, 2024 | 14,985,411 | $ | 149,854 | $ | 795,019 | $ | 2,436,007 | $ | 3,380,880 | |||||||||||
| Stock-based compensation | — | — | 226,124 | — | 226,124 | |||||||||||||||
| Termination of S Corporation upon reorganization | — | — | 2,436,007 | (2,436,007 | ) | — | ||||||||||||||
| Distributions | — | — | — | (21,731 | ) | (21,731 | ) | |||||||||||||
| Net Loss | — | — | — | (747,804 | ) | (747,804 | ) | |||||||||||||
| Balance, September 30, 2024 | 14,985,411 | $ | 149,854 | $ | 3,457,150 | $ | (769,535 | ) | $ | 2,837,469 | ||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-4
RANK ONE COMPUTING CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2025 (Restated) | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Loss | (908,726 | ) | $ | (747,804 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | 359,913 | 226,124 | ||||||
| Depreciation | 102,379 | 101,430 | ||||||
| Amortization | 1,140 | 1,140 | ||||||
| Amortization of ROU assets | 203,158 | 108,651 | ||||||
| Change in expected credit losses | 160,498 | — | ||||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts receivable | (2,581,285 | ) | 123,980 | |||||
| Prepaid expenses and other current assets | 119,765 | (236,504 | ) | |||||
| Deferred tax asset | 787,017 | (605,147 | ) | |||||
| Accounts payable and accrued expenses | 876,367 | 15,564 | ||||||
| Deferred revenue | (78,356 | ) | 759,426 | |||||
| Lease liability | (198,844 | ) | (113,189 | ) | ||||
| Net Cash Used In Operating Activities | (1,156,974 | ) | (366,329 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Capitalized software | (490,761 | ) | — | |||||
| Net Cash Used in Investing Activities | (490,761 | ) | — | |||||
| Cash Flows from Financing Activities: | ||||||||
| Distributions | — | (21,731 | ) | |||||
| Option exercises | 8,106 | — | ||||||
| Repayments to the line of credit | (9,322,656 | ) | — | |||||
| Proceeds from the line of credit | 10,308,000 | — | ||||||
| Net Cash provided by (used in) Financing Activities | 993,450 | (21,731 | ) | |||||
| Net Decrease In Cash | (654,285 | ) | (388,060 | ) | ||||
| Cash, Beginning of Year | 726,436 | 1,615,120 | ||||||
| Cash, End of Year | 72,151 | $ | 1,227,060 | |||||
| Supplemental Disclosures: | ||||||||
| Cash paid for interest | $ | 61,321 | $ | 34,876 | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-5
RANK ONE COMPUTING CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 (Restated) AND 2024
Note 1 – Organization and Nature of Business
Rank One Computing Corporation (the “Company” or “ROC”) was incorporated in 2015 in the state of Virginia and subsequently converted to a corporation incorporated under the laws of the State of Colorado in 2018. We are an independent American artificial intelligence company developing Vision AI in identity, security, and digital forensics. The Company’s Vision AI platform delivers real-time facial recognition, multimodal biometric verification, and AI-powered evidence analysis.
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, consisting of (i) Rank One Computing Corporation, a State of Colorado corporation (“ROC”); (ii) ROC Federal, LLC, a State of West Virginia limited liability corporation, its wholly-owned subsidiary.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles as applied in the United States (“US GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for financial information.
These unaudited condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the nine months ended September 30, 2025 and 2024 are not necessarily indicative of results that can be expected for a full year. These unaudited condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the fiscal year ended December 31, 2024.
On January 8, 2026, the Company effected a stock split of the Company’s issued and outstanding Common Shares, by a ratio of 167-to-1 (the “Forward Stock Split”). Accordingly, all Common Shares, stock options, warrants, as well as per share information, for all periods presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this Stock Split.
Restatement of Previously Issued Financial Statements
In connection with the preparation of our unaudited condensed consolidated financial statements as of September 30, 2025 and for the nine months ended September 30, 2025 and 2024, the Company identified and corrected errors in its going concern disclosure and deferred tax asset accounting. The adjustments include: (i) disclosure that management has concluded there is substantial doubt about the Company’s ability to continue as a going concern without additional funding, and (ii) recognition of a full valuation allowance on the Company’s deferred tax assets. The valuation allowance reflects the impacts of the July 2025 enactment of the One Big Beautiful Bill Act, including permanent bonus depreciation and immediate expensing of domestic research costs under Section 174, together with further analysis of the reversal of temporary differences in 2025. Taken together with the substantial doubt regarding the Company’s ability to continue as a going concern, management determined it is more likely than not that the Company will be unable to realize the income tax benefits associated with its deferred tax assets.
The Company has corrected these errors in its unaudited condensed consolidated financial statements as of September 30, 2025 and for the nine months ended September 30, 2025 and 2024. No corrections were required to previously issued annual financial statements for the year ended December 31, 2024, and therefore no cumulative adjustment to the opening balance of retained earnings was necessary.
F-6
A summary of the adjustments is as follows:
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Balance Sheet as of September 30, 2025 (unaudited) | ||||||||||||
| Deferred Tax Asset, Net | $ | 881,024 | $ | (881,024 | ) | $ | - | |||||
| Total Other Assets | $ | 2,840,585 | $ | (881,024 | ) | $ | 1,959,561 | |||||
| Total Assets | $ | 8,370,348 | $ | (881,024 | ) | $ | 7,489,324 | |||||
| Accounts Payable And Accrued Expenses | $ | 2,265,763 | $ | (186,540 | ) | $ | 2,079,223 | |||||
| Total Current Liabilities | $ | 5,388,468 | $ | (186,540 | ) | $ | 5,201,928 | |||||
| Total Liabilities | $ | 6,366,299 | $ | (186,540 | ) | $ | 6,179,759 | |||||
| Accumulated Deficit | $ | (2,206,339 | ) | $ | (694,484 | ) | $ | (2,900,823 | ) | |||
| Total Shareholders’ Equity | $ | 2,004,049 | $ | (694,484 | ) | $ | 1,309,565 | |||||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statement of Operations as of September 30, 2025 (unaudited) | ||||||||||||
| Provision (Benefit) from income taxes | $ | 94,008 | $ | (694,484 | ) | $ | (600,476 | ) | ||||
| Net Loss Attributable To Common Stockholders | $ | (214,242 | ) | $ | (694,484 | ) | $ | (908,726 | ) | |||
| Earnings Per Share – Basic And Diluted | $ | (0.01 | ) | $ | (0.05 | ) | $ | (0.06 | ) | |||
| As Previously Reported | Adjustment | As Restated | ||||||||||
| Statements of Cash Flows as of September 30, 2025 (unaudited) | ||||||||||||
| Net Loss | $ | (214,242 | ) | $ | (694,484 | ) | $ | (908,726 | ) | |||
| Change In Deferred Tax Asset | $ | (94,007 | ) | $ | 881,024 | $ | 787,017 | |||||
| Accounts Payable And Accrued Expenses | $ | 1,062,907 | $ | (186,540 | ) | $ | 876,367 | |||||
Going Concern
Management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern within one year after the date that the accompanying financial statements are issued. As of September 30, 2025, the Company’s existing liquidity resources, including cash, accounts receivable, committed customer contracts, and availability under its line of credit, are only expected to fund operations for approximately four to six months. Based on its current operating plan, the Company expects to require approximately $10 million of additional funding to support planned operations and meet minimum liquidity needs over the twelve-month look-forward period from the date the financial statements are issued.
Management is actively pursuing financing alternatives, which may include additional borrowings under existing or new credit facilities and equity offerings. However, the outcomes of these potential liquidity-enhancing actions are not fully within the Company’s control, and there can be no assurance that such actions will be successful or sufficient to alleviate the conditions described.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
F-7
Reclassification of Undistributed Retained Earnings Upon S-Corporation Termination
Effective January 1, 2024, the Company’s Subchapter S Corporation election terminated. In connection with this change, and in accordance with SAB Topic 4.B, “S-Corporation Distributions and Adjustments,” the Company reassessed the presentation of undistributed retained earnings accumulated during its S-Corporation period. As a result, the Company’s undistributed retained earnings as of December 31, 2023 were reclassified to additional paid-in capital (“APIC”) as of the conversion date.
This reclassification has been recorded as of January 1, 2024 and impacts all subsequent reporting periods, including the consolidated balance sheet as of September 30, 2025 and the statement of stockholders’ equity for the nine months then ended. The reclassification affects only the presentation within stockholders’ equity and had no impact on total equity, net loss, or cash flows for any period presented.
This revision does not represent an error correction but reflects the application of SAB Topic 4.B to conform the financial statement presentation to the Company’s change in tax status.
Recently Issued and Newly Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU and expects to include updated income tax disclosures.
In March 2024, the FASB issued ASU 2024-01 “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards”. The ASU clarify how an entity determines whether a profits interest or similar award is within the scope of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, by adding illustrative guidance. The guidance in ASU 2024-01 is effective for annual reporting periods beginning after December 15, 2024, and can be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. Early adoption is permitted. The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.
On November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses, which provides a practical expedient for estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for annual periods beginning after December 15, 2025 and interim periods within those annual reporting periods and should be applied prospectively, with early adoption permitted. The Company is assessing the impact of adopting this standard.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Inventories
Inventory, which consists of hardware for installation, and is stated at cost. Due to the nature of our deployments inventory turnover is quick, with most items moving from receipt to installation within a short period of time. As of September 30, 2025 and December 31, 2024, the Company has $26,563 and $38,241 of inventory respectively. These amounts are recorded in prepaid expenses and other current assets on the Balance Sheets.
F-8
Estimated Fair Value of Financial Instruments
The Company’s financial instruments include cash, accounts receivable, accounts payable, and lease commitments. Management believes the estimated fair value of these accounts on September 30, 2025, approximate their carrying value as reflected in the balance sheet due to their short-term nature. The carrying values of the Company’s Operating lease obligations approximate their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.
The fair value measurement disclosures are grouped into three levels based on valuation factors:
| ● | Level 1 – quoted prices in active markets for identical investments |
| ● | Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) |
| ● | Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
The Company’s Level 1 assets and liabilities include cash, accounts receivable, accounts payable, prepaid, and other current assets. Management believes the estimated fair value of these accounts at September 30, 2025, approximates their carrying value as reflected in the balance sheets due to the short-term nature of these instruments.
The Company’s Level 2 assets and liabilities include the Company’s operating lease assets and liabilities. The carrying amounts of these leases approximate their fair values, based on a comparison of the lease terms and the Company’s incremental borrowing rates with those of similar leases available in the market.
The Company’s Level 3 assets and liabilities use inputs to determine the fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.
Concentration of Credit Risk and Other Risks and Uncertainties
At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company has not previously experienced any losses related to these balances. The uninsured cash balance as of September 30, 2025 and December 31, 2024 was $0 and $0.5 million respectively. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents.
The Company’s customers are primarily concentrated in the United States. The table below details (1) the percentage of overall Accounts Receivable for customers that represented 10% or more of the total as of the end of each period and (2) the percentage of overall Revenue for customers that represented 10% or more of the total during each period.
| % of Total Accounts Receivable | % of Total Revenue | |||||||||||||||
| As of | Nine Months ended | |||||||||||||||
| 9/30/2025 | 12/31/2024 | 9/30/2025 | 9/30/2024 | |||||||||||||
| Customer A | 31 | % | - | 28 | % | - | ||||||||||
| Customer B | - | - | 18 | % | 31 | % | ||||||||||
| Customer C | 18 | % | - | - | - | |||||||||||
| Customer D | 13 | % | - | - | - | |||||||||||
| Customer E | - | 10 | % | - | - | |||||||||||
| Customer F | - | 11 | % | - | - | |||||||||||
| Customer G | - | 17 | % | - | - | |||||||||||
| Customer H | - | 17 | % | - | - | |||||||||||
Cash
Cash include cash-on-hand with financial institutions and subject to an insignificant risk. See Concentration of Credit Risk and Other Risks and Uncertainties above.
Accounts Receivable/Allowance for Credit Losses
The Company sells its services to customers on an open credit basis. Accounts receivable are uncollateralized, non-interest-bearing customer obligations and are typically due within 30 days. ASC 326 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also requires the Company to pool assets with similar risk characteristics and consider current economic conditions when estimating losses. Allowance for credit losses is based on the Company’s best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on expectations of the customer’s ability to pay by considering factors such as customer type (commercial or government), historical experience, financial position of the customer, age of the accounts receivable, current economic conditions, and reasonable and supportable forward-looking factors about its portfolio and future economic conditions.
F-9
Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below:
| September 30, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | 60,040 | $ | 20,784 | ||||
| Provision | 160,498 | 39,256 | ||||||
| Write-offs | - | - | ||||||
| Ending Balance | $ | 220,538 | $ | 60,040 | ||||
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives for property and equipment are five to seven years. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.
Revenue Recognition
The Company generates revenue from the sale of access to its software platforms, maintenance services and, professional services.
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company applies the following five-step revenue recognition model in accounting for its revenue arrangements:
| ● | Identification of the contract(s) with the customer, including whether collectability of the consideration is probable by considering the customers’ ability and intention to pay; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
In the following table, revenue is disaggregated by major product line and the timing of revenue recognition for the nine months ended September 30, 2025, and 2024.
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Timing of revenue recognition | ||||||||
| Products transferred at a point in time | $ | 7,430,653 | $ | 3,950,175 | ||||
| Products and services transferred over time | 6,061,781 | 7,111,603 | ||||||
| Total Revenue | $ | 13,492,434 | $ | 11,061,778 | ||||
| 2025 | 2024 | |||||||
| ROC SDK | $ | 4,263,378 | $ | 4,107,801 | ||||
| ROC Watch | 4,948,879 | 911,997 | ||||||
| ROC ABIS | 326,108 | 332,588 | ||||||
| ROC Enroll | 312,573 | - | ||||||
| R&D Contracts | 3,641,496 | 5,709,392 | ||||||
| Total Revenue | $ | 13,492,434 | $ | 11,061,778 | ||||
Each of the Company’s significant performance obligations and the Company’s application of ASC 606 to its revenue arrangements is discussed in further detail below.
F-10
Standalone Software License and Support:
The Company sells software licenses that include post-contract support (“PCS”) to customers for its Vision AI products, including ROC SDK, ROC Watch, ROC ABIS, and ROC Enroll. The Company’s software license arrangements are sold as perpetual or time-based, and in both cases software license revenue is recognized at a point in time when the license key is provided to the end user.
Perpetual software license sales include PCS for an initial 12-month period following license delivery, with customers able to renew PCS annually thereafter. Time-based licenses include PCS for the duration of the license term. PCS is recognized on a straight-line basis over the contract term, once the related Software license has been recognized.
PCS is accounted for as a distinct performance obligation because it provides ongoing updates, maintenance, and technical support services that are separately identifiable from the functional intellectual property conveyed in the software licenses. Accordingly, the Company allocates the transaction price between the license and PCS based on their respective standalone selling prices.
Bundled Security Solutions:
The Company sells bundled security solutions to customers that include the Software, hardware, and installation services and post-contract support (“PCS”) services. The end goal provides cameras, software, and devices installed at customer locations to monitor security and identify people and vehicles. Hardware and software licenses revenue is recognized at a point in time upon delivery to the customer site. Professional services and PCS revenue is recognized over the service period.
US Government Contracts:
The US Government contracts provide a license to use the Software as part of the stated project, with the Company providing additional professional services to run simulations or other applications of the Software. Most contracts are for a fixed fee, while some are billed on a usage or “time and materials” basis. Hardware and software licenses revenue is recognized at a point in time upon delivery to the customer site. Professional services revenue is recognized over the service period.
Contract Receivables
Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and client standing.
Costs to Obtain Contracts
The company elected practical expedients under ASC 606 for incremental costs of obtaining contracts. These costs were expensed when incurred.
Contract Liabilities
Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. During the nine months ended September 30, 2025, and 2024, the Company recognized $1,174,324 and $1,071,766 in sales that was recorded as deferred revenue as of December 31, 2024 and 2023, respectively.
Deferred revenue for customer contracts represents amounts collected from, or invoiced to, customers in advance of revenue recognition. The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue. Significant changes in our Deferred Revenue liability balances during the nine months ended September 30, 2025 and the year ended December 31, 2024 were as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | 1,490,949 | $ | 1,228,586 | ||||
| Revenue Recognized | (1,174,324 | ) | (1,115,624 | ) | ||||
| Amounts Collected or Invoiced | 1,095,968 | 1,377,987 | ||||||
| Ending Balance | $ | 1,412,593 | $ | 1,490,949 | ||||
F-11
Determining the Standalone Selling Price (SSP) for Post Contract Support (PCS) Services:
Contracts with customers often include multiple performance obligations that are distinct and accounted for separately. These typically include licensed software and post-contract support (“PCS”) services, such as maintenance, technical support, and software updates.
The Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. Standalone selling price is estimated at contract inception using all reasonably available information, including observable renewal rates, historical pricing relationships, market conditions, and industry data. Judgment is required when standalone selling price is not directly observable.
For time-based license contracts (up to one year), PCS services are bundled with the license and provided throughout the contract term. For perpetual license contracts, PCS services are included for the initial 12-month period following license delivery. Customers may subsequently purchase extended PCS services annually as outlined in the contracts, typically priced at 20% of the original perpetual license fee.
Based on the results of the Company’s standalone selling price analysis, a specific percentage of the transaction price is allocated to each performance obligation. For both time-based and perpetual license contracts, 20% of the transaction price is allocated to PCS services, using the observable annual renewal rate as the basis for SSP. The remaining 80% is allocated to the software license, reflecting the pricing relationship between the license and PCS and maximizing the use of observable inputs.
Revenue is recognized in accordance with the timing of satisfaction of each performance obligation. For time-based license contracts, the portion allocated to the software license is recognized at the time of delivery, while the PCS portion is recognized ratably over the contract term. For perpetual license contracts, the software license portion is recognized upon delivery, and the PCS portion is recognized ratably over the initial 12-month coverage period. Revenue from extended PCS services is recognized ratably over the applicable renewal term, consistent with the period of service delivery.
Determining the Standalone Selling Price (SSP) for Bundled Security Solutions and US Government Contracts:
The Company’s contracts for bundled solutions and government contracts can contain multiple performance obligations, including a combination of software licenses and related PCS, hardware, installation services, and professional services. The Company determines the SSP for each performance obligation using observable inputs, as follows:
| - | Hardware is generally purchased from third parties and resold to customers, with SSP established using a cost-plus-margin approach. |
| - | Installation and professional services are priced based on hourly rates that approximate market rates for similar services. Where the Company engages third parties to perform such tasks, SSP is approximated using cost-plus-margin. |
| - | Software licenses and related PCS are allocated consistent with the methodology described above, with 20% of the transaction price assigned to annual PCS based on observable renewal pricing, and 80% assigned to the software license. |
Contract Terms
The typical terms of software license contracts range from 12 to 36 months, with auto-renew options extending the contract for an additional term.
Significant Judgement
In instances where contracts include multiple performance obligations, the Company exercises judgment in determining the standalone selling price for each obligation. Standalone prices are established by evaluating market data for comparable services and considering the Company’s historical pricing practices. The aggregate standalone price of all performance obligations is calculated, and each individual obligation’s proportionate share of the total is determined. This ratio is then applied to the overall contract price to allocate the transaction price among the performance obligations accordingly.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value, is recognized if the carrying amount exceeds estimated un-discounted future cash flows.
F-12
Advertising Costs
The Company expenses the costs associated with advertising as they are incurred. The Company incurred $368,872 and $299,359 for advertising costs for the nine months ended September 30, 2025, and 2024, respectively.
Research and Development Costs
Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine the Company’s platforms and products services and other IT-related costs, travel costs, and allocated overhead. Research and development costs are expensed as incurred. During the nine months ended September 30, 2025 and 2024, the Company recorded $4.8 million and $4.6 million to Research and Development respectively.
Software Development Costs
The Company evaluates the capitalization of software development costs incurred after the establishment of technological feasibility. Through December 31, 2024, based on the Company’s development process and the level of development risk, technological feasibility for its products was generally not established until the products were available for general release. Accordingly, all software development costs incurred during those periods were expensed as research and development.
Beginning in 2025, the Company commenced development of a new software project for which technological feasibility was established prior to general release. For this project, eligible development costs incurred subsequent to the establishment of technological feasibility are being capitalized in accordance with ASC 98520. Capitalized amounts are presented as Capitalized software within the condensed consolidated balance sheets and will be amortized to cost of sales over the estimated economic life of the related product once available for general release. As of September 30, 2025 and December 31, 2024, the Company had $0.5 million and $0 respectively relating to capitalized software development costs.
Stock-Based Compensation
The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company utilized a 409A valuation to determine the value of the Company’s common stock on the date of issuance. The Company has a relatively low forfeiture rate of stock-based compensation, and forfeitures are recognized as they occur.
The valuation methodology used to determine the fair value of options issued during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Due to the Company’s limited historical data related to employee share option exercise behavior, the Company has elected to use the “simplified” method as permitted by Staff Accounting Bulletin No. 110 for its “plain vanilla” stock option grants. Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock. The expected forfeiture rate is estimated based on management’s best assessment.
Estimated volatility is a measure of the amount by which the Company’s asset price is expected to fluctuate each year during the expected life of the award. ROC did not have sufficient history as it was a private company and therefore utilized the volatility of peer companies.
F-13
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment.
Benefit Plans
We sponsor a defined contribution retirement savings plan for employees who meet certain eligibility requirements. Under the plan, the Company makes a non-elective contribution equal to 3% of each eligible employee’s compensation, regardless of whether the employee elects to contribute. There is no matching component. Employer contributions vest immediately. Total employer contributions was $220,170 for the nine months ended September 30, 2025 and $184,402 for the nine months ended September 30, 2024.
Net Income Per Common Share
Basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share (“Diluted EPS”) reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Diluted EPS includes the effect of stock options and warrants using the treasury stock method, and convertible instruments using the if converted method, when dilutive. Potential common shares are excluded from the calculation if their effect would be antidilutive.
The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share because their effect was anti-dilutive:
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Options | 9,376,716 | 8,615,196 | ||||||
| Total | 9,376,716 | 8,615,196 | ||||||
Note 3 – Prepaids and other current assets
Prepaids and other current assets consist of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Prepaid Expenses | $ | 135,720 | $ | 320,871 | ||||
| Prepaid Insurance | 50,912 | 8,538 | ||||||
| Inventory | 26,563 | 38,241 | ||||||
| Deposits | 57,844 | 23,154 | ||||||
| Total prepaids and other current assets | $ | 271,039 | $ | 390,804 | ||||
F-14
Note 4 – Property and Equipment
Property and equipment, at cost, consist of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Computers | $ | 693,750 | $ | 693,750 | ||||
| Furniture and fixtures | 92,269 | 92,269 | ||||||
| Gross Property and equipment | 786,019 | 786,019 | ||||||
| Less: Accumulated depreciation | (483,916 | ) | (381,537 | ) | ||||
| Net property and equipment | $ | 302,103 | $ | 404,482 | ||||
Depreciation expense for the nine months ended September 30, 2025, and 2024 was $102,379 and $101,430, respectively, which was allocated to general and administrative expenses.
Note 5 – Intangible Assets
Intangible assets consisted of the following:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Software | $ | 10,966 | $ | 10,966 | ||||
| Less: Accumulated amortization | (5,067 | ) | (3,927 | ) | ||||
| Net intangible assets | $ | 5,899 | $ | 7,039 | ||||
Amortization expense for the nine months ended September 30, 2025, and 2024 was $1,140 and $1,140, respectively.
Note 6 – Leases
Operating Leases
The Company leases approximately 6,600 square feet of office space in Morgantown, West Virginia. The lease requires payments of $799,956 over the five-year term. The lease expires in November 2029, subject to extension.
The Company leases approximately 5,892 square feet of office space in Denver, Colorado. The lease requires payments of $1,221,363 over the eight-year term. The lease expires in June 2029, subject to extension.
The Company leases approximately 1,546 square feet of office space in Grand Rapids, Michigan. The lease requires payments of $98,558 over the three year term. The lease expires in February 2027, subject to extension.
The Company determines if an arrangement is a lease at inception. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If a lease is identified, classification is determined at lease commencement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s leases do not provide an implicit interest rate and therefore the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the interest rate that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. Renewals or early terminations are not accounted for unless the Company is reasonably certain to exercise these options. Operating lease expense is recognized, and the ROU asset is amortized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For short-term leases, defined as leases with a term of twelve months or less, the Company elected the practical expedient to not recognize an associated lease liability and ROU asset. Lease payments for short-term leases are expensed on a straight-line basis over the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the Company’s consolidated balance sheets. The Company has not entered into any Finance leases.
F-15
The components of lease expense for the nine months ended September 30, 2025 and 2024 were as follows:
| Nine Months Ending September 30, 2025 | Nine Months Ending September 30, 2024 | |||||||
| Operating lease: | ||||||||
| Amortization of assets, included in total operating expense | $ | 203,158 | $ | 108,651 | ||||
| Interest on lease liabilities, included in total operating expense | 60,096 | 34,876 | ||||||
| Total net lease cost | $ | 263,254 | $ | 143,527 | ||||
| Supplemental balance sheet information related to leases was as follows: | ||||||||
| Operating Leases: | ||||||||
| Operating lease right-of-use asset | $ | 1,160,798 | $ | 740,093 | ||||
| Current operating lease liabilities | $ | 293,636 | $ | 169,878 | ||||
| Noncurrent operating lease liabilities | 977,831 | 676,495 | ||||||
| Total operating lease liabilities | $ | 1,271,468 | $ | 846,373 | ||||
Supplemental cash flow and other information related to leases were as follows:
| Nine Months Ending September 30, 2025 | Nine Months Ending September 30, 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows related to operating leases | $ | 198,844 | $ | 113,189 | ||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | 3.86 | 4.55 | ||||||
| Weighted average discount rate: | ||||||||
| Operating leases | 5.91 | % | 5.18 | % | ||||
Long-term obligations under the operating and finance leases at September 30, 2025, mature as follows:
| Future Minimum Lease Payments | September 30, 2025 | |||
| 2025 (remaining) | $ | 87,666 | ||
| 2026 | 363,049 | |||
| 2027 | 350,191 | |||
| 2028 | 358,841 | |||
| 2029 | 262,946 | |||
| Total lease payments | 1,422,693 | |||
| Less: Amounts representing interest | (151,225 | ) | ||
| Total lease obligations | 1,271,468 | |||
| Less: short-term obligations | (293,636 | ) | ||
| Total long-term | $ | 977,831 | ||
As of September 30, 2025, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating leases for the nine months ended September 30, 2025 and 2024 was $302,019 and $163,629, respectively.
F-16
Note 7 – Commitments and Contingencies
Line of Credit
On March 15, 2023 the Company entered into a revolving demand note with a bank that provides for short-term borrowings as needed, subject to the bank’s discretion. The line of credit may be cancelled by either party at any time for any reason by written notice to the other and is collateralized by the Company’s assets. The stated interest rate is adjustable with interest equal to the Prime Rate plus two percent per annum. At September 30, 2025, the total interest rate was at 9.5%. The line of credit balance outstanding as of September 30, 2025 and December 31, 2024, was $1,416,476 and $431,132 respectively.
Litigation
The Company is currently not involved in any litigation that it believes could have a materially adverse effect on its financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company, threatened against or affecting the company, its common stock, any of the Company’s or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Note 8 – Stockholders’ Equity
Capital Stock
The Company has 100,000,000 authorized shares of Common Stock, par value $0.01.
During the nine months ended September 30, 2025, employees exercised 36,239 stock options into shares of Common Stock. The Company received $8,106 for these options.
Common Stock Options
A summary of the Company’s stock option activity and related information follows:
| Number of | Weighted | Weighted | ||||||||||
| Shares | Average | Average | ||||||||||
| Under | Exercise | Contractual | ||||||||||
| Options | Price | Life | ||||||||||
| Options Outstanding at January 1, 2025 | 8,844,487 | $ | 2.12 | 7.59 | ||||||||
| Options Granted | 722,275 | 2.57 | 10 | |||||||||
| Exercised | (36,239 | ) | 0.22 | — | ||||||||
| Expired/Cancelled | (153,807 | ) | 2.40 | — | ||||||||
| Options Outstanding at September 30, 2025 | 9,376,716 | $ | 2.16 | 7.06 | ||||||||
| Options Exercisable at September 30, 2025 | 5,153,286 | $ | 1.94 | 6.63 | ||||||||
Share-based compensation expense recognized for stock options granted totaled $359,913 and $226,124 for the nine months ended September 30, 2025, and 2024, respectively.
The intrinsic value of outstanding stock options as of September 30, 2025, and 2024 was $4,801,673 and $1,376,596, respectively.
F-17
As of September 30, 2025, there was $1,751,032 of total unrecognized compensation expense related to unvested employee stock options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 2.3 years.
The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the nine months ended September 30, 2025, and 2024, are set forth in the table below.
| 2025 | 2024 | |||||||
| Weighted average fair value of stock options granted | $ | 1.35 |
$ | 0.51 |
||||
| Risk-free interest rate | 3.85% - 4.16 | % | 4.32% - 4.49 | % | ||||
| Volatility | 65% - 66 | % | 66% - 75 | % | ||||
| Expected life (years) | 6.00 - 6.02 | 5.13 - 6.02 | ||||||
| Dividend yield | — | % | — | % | ||||
Note 9 – Income Taxes
Each interim period is considered an integral part of the annual period; accordingly, we measure our income tax expense using an estimated annual effective tax rate. An enterprise is required, at the end of each interim reporting period, to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, as adjusted for discrete taxable events that occur during the interim period.
The computation of the estimated annual effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year and projections of permanent differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes. Each quarter, the estimate of the annual effective tax rate is updated if needed.
The effective rate for income taxes for the nine months ended September 30, 2025 and 2024 are as follows:
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Pre-tax book income | (308,250 | ) | (1,352,951 | ) | ||||
| Income tax expense (benefit) | 600,476 | (605,147 | ) | |||||
| Effective tax rate | (51.33 | )% | 44.73 | % | ||||
Our effective tax rates for the first nine months of 2025, as compared to the U.S. federal statutory rate of 21% were primarily impacted by change in valuation allowance. Our effective tax rates for the first nine months of 2024, as compared to the U.S. federal statutory rate of 21% were primarily impacted by state taxes, nondeductible items, and change in tax status.
F-18
As of September 30, 2025, the Company recorded a full valuation allowance against its net deferred tax assets. This conclusion is supported by negative evidence, including continued losses, limited capital resources, and other factors that contributed to substantial doubt regarding the Company’s ability to continue as a going concern (see Note 2).
Further, since no income tax is payable for 2024, the Company reversed the income tax payable that had been recorded in connection with the December 31, 2024 tax provision.
Management does not believe that there are significant uncertain tax positions in 2025 or 2024, and no interest or penalties related to uncertain tax positions have been recognized in 2025.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. This legislation makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, immediate expensing of domestic research and experimental costs under Section 174, and the business interest expense limitation. In accordance with ASC 740, Income Taxes, the effects of changes in tax laws must be recognized in the period of enactment.
As of September 30, 2025, the Company has reflected the impact of this legislation in its deferred tax balances. Specifically, the immediate expensing of domestic research costs eliminated deferred tax liabilities that could otherwise serve as a source of taxable income, contributing to the conclusion that a full valuation allowance is required on the Company’s net deferred tax assets.
Note 10 – Related Party Transactions
The Company has evaluated its relationships and transactions in accordance with ASC 850, Related Party Disclosures, and has determined that there were no material related party transactions or balances requiring disclosure in the accompanying financial statements.
Note 11 – Segment Information
The Company’s Chief Operating Decision Maker (the “CODM”) is the Chief Executive Officer (CEO). The Company has determined it is a single reportable segment. The CODM manages the business activities and receives financial reporting information on a consolidated basis and does not receive financial results at a lower level of disaggregation. While the CODM reviews sales by product offering, no profit measures are provided at that level. Accordingly, product offerings are not considered separate operating segments for external reporting.
Resource allocation and performance evaluation are based on consolidated net income as reported in the consolidated statements of income, with supplemental consideration of sales by product offering, as well as consolidated gross profit and operating income or loss. Sales are monitored at the individual product offering level to gauge growth and market penetration, and to ensure timely execution of the Company’s sales contracts, but profit measures are not available at the product level.
The CODM reviews only the expense captions presented in the consolidated statements of income (cost of sales; selling, general and administrative; research and development; and interest and other expense) and receives no further disaggregated expense information.
The CODM does not review segment asset information in assessing performance or allocating resources. Accordingly, the Company does not present segment asset disclosures below the consolidated balance sheet level. All of the Company’s long-lived assets are located in the United States. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.
Note 12 – Subsequent Events
The Company has evaluated events that occurred through the date that the financial statements were issued, and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the financial statements.
F-19
Report of Independent Registered Public Accounting Firm
To the Members of the Audit Committee
Rank One Computing Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Rank One Computing Corporation, (“the Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December, 2024, 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 audit 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 control 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/ Rosenberg Rich Baker Berman, P.A. | |
| Somerset, New Jersey | |
| August 14, 2025, except for the effects of the restatement and revisions discussed in Notes 2, 6, and 11 to the consolidated financial statements and for the effect of a forward 167-to-1 stock split as noted on Note 2, to which the date is January 26, 2026. | |
| We have served as the Company’s auditor since 2025. | |
F-20
RANK ONE COMPUTING CORPORATION
BALANCE SHEETS
| December 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 726,436 | $ | 1,615,120 | ||||
| Accounts receivable (less allowance for credit losses of $60,040 and $20,784 in 2024 and 2023, respectively) | 2,765,786 | 4,570,817 | ||||||
| Prepaid expenses and other current assets | 390,804 | 231,780 | ||||||
| Total Current Assets | 3,883,026 | 6,417,717 | ||||||
| Net Property and Equipment | 404,482 | 493,193 | ||||||
| Intangible assets, net | 7,039 | 8,559 | ||||||
| Operating lease right-of use asset | 1,363,956 | 848,743 | ||||||
| Deferred Tax Asset, net | 787,017 | - | ||||||
| Total Other Assets | 2,562,494 | 1,350,495 | ||||||
| Total Assets | $ | 6,445,520 | $ | 7,768,212 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,202,856 | $ | 2,199,187 | ||||
| Deferred revenue | 1,490,949 | 1,228,586 | ||||||
| Line of credit | 431,132 | - | ||||||
| Operating lease liabilities short term | 268,508 | 154,200 | ||||||
| Total Current Liabilities | 3,393,445 | 3,581,970 | ||||||
| Operating lease liabilities | 1,201,803 | 805,362 | ||||||
| Total Long-Term Liabilities | 1,201,803 | 805,362 | ||||||
| Total Liabilities | 4,595,248 | 4,387,332 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock, par value $0.01; 100,000,000 shares authorized; 14,985,411 and 14,985,411 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively | 149,854 | 149,854 | ||||||
| Additional paid-in capital | 3,692,515 | 795,019 | ||||||
| (Accumulated Deficit) Retained Earnings | (1,992,097 | ) | 2,436,007 | |||||
| Total Stockholder’s Equity | 1,850,272 | 3,380,880 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 6,445,520 | $ | 7,768,212 | ||||
The accompanying notes are an integral part of these Financial Statements.
F-21
RANK ONE COMPUTING CORPORATION
STATEMENTS OF INCOME
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Sales | $ | 13,704,702 | $ | 15,410,827 | ||||
| Cost of sales | 1,747,038 | 2,766,639 | ||||||
| Gross Profit | 11,957,664 | 12,644,188 | ||||||
| Selling, general and administrative | 7,542,742 | 6,173,689 | ||||||
| Research and Development | 5,683,836 | 4,014,016 | ||||||
| Income (loss) from Operations | (1,268,914 | ) | 2,456,483 | |||||
| Other Income (Expense) | ||||||||
| Interest income | 644 | 54 | ||||||
| Interest expense | (1,594 | ) | — | |||||
| Other Expense | (43,134 | ) | (93,815 | ) | ||||
| Other Income | 14,843 | 19,605 | ||||||
| Total Other Income (Expense) | (29,241 | ) | (74,156 | ) | ||||
| Income (Loss) before provision for income taxes | (1,298,155 | ) | 2,382,327 | |||||
| Benefit from income taxes | (600,477 | ) | - | |||||
| Net Income (Loss) | $ | (697,678 | ) | $ | 2,382,327 | |||
| Earnings (Loss) per Share – Basic | $ | (0.05 | ) | $ | 0.16 | |||
| Earnings (Loss) per Share – Diluted | $ | (0.05 | ) | $ | 0.15 | |||
| Weighted Average Number of Shares – Basic | 14,985,411 | 14,941,323 | ||||||
| Weighted Average Number of Shares – Diluted | 14,985,411 | 15,952,508 | ||||||
The accompanying notes are an integral part of these Financial Statements.
F-22
RANK ONE COMPUTING CORPORATION
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024, AND 2023
| Common Stock | Additional Paid-in | Retained Earnings (Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Par | Capital | Deficit) | Equity | ||||||||||||||||
| Balance January 1, 2023 | 14,871,350 | $ | 148,714 | $ | 411,873 | $ | 1,076,016 | $ | 1,636,603 | |||||||||||
| Stock options exercised | 114,061 | 1,140 | 12,851 | — | 13,991 | |||||||||||||||
| Stock-based compensation | — | — | 370,295 | — | 370,295 | |||||||||||||||
| Distributions | — | — | — | (1,022,336 | ) | (1,022,336 | ) | |||||||||||||
| Net Income | — | — | — | 2,382,327 | 2,382,327 | |||||||||||||||
| Balance, December 31, 2023 | 14,985,411 | $ | 149,854 | $ | 795,019 | $ | 2,436,007 | $ | 3,380,880 | |||||||||||
| Stock-based compensation | — | — | 461,489 | — | 461,489 | |||||||||||||||
| Termination of S Corporation upon reorganization | — | — | 2,436,007 | (2,436,007 | ) | — | ||||||||||||||
| Distributions | — | — | — | (1,294,419 | ) | (1,294,419 | ) | |||||||||||||
| Net Loss | — | — | — | (697,678 | ) | (697,678 | ) | |||||||||||||
| Balance, December 31, 2024 | 14,985,411 | $ | 149,854 | $ | 3,692,515 | $ | (1,992,097 | ) | $ | 1,850,272 | ||||||||||
The accompanying notes are an integral part of these Financial Statements.
F-23
RANK ONE COMPUTING CORPORATION
STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net Income (Loss) | $ | (697,678 | ) | $ | 2,382,327 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Stock based compensation | 461,489 | 370,295 | ||||||
| Depreciation | 135,537 | 107,901 | ||||||
| Amortization | 1,520 | 1,520 | ||||||
| Amortization of ROU assets | 174,468 | 119,152 | ||||||
| Change in expected credit losses | 39,256 | 20,784 | ||||||
| Changes in Assets and Liabilities: | ||||||||
| Accounts receivable | 1,765,775 | (2,963,697 | ) | |||||
| Prepaid expenses and other current assets | (159,024 | ) | (119,481 | ) | ||||
| Deferred tax Asset | (787,017 | ) | - | |||||
| Accounts payable and accrued expenses | (996,331 | ) | 1,341,748 | |||||
| Deferred revenue | 262,365 | 785,008 | ||||||
| Lease liability | (178,932 | ) | (126,694 | ) | ||||
| Net Cash Provided by Operating Activities | 21,428 | 1,918,863 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of fixed Assets | (46,825 | ) | (270,047 | ) | ||||
| Net Cash Used in Investing Activities | (46,825 | ) | (270,047 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Distributions | (1,294,419 | ) | (1,022,336 | ) | ||||
| Option exercises | — | 13,991 | ||||||
| Repayments to the line of credit | (1,093,868 | ) | (1,600,000 | ) | ||||
| Proceeds from the line of credit | 1,525,000 | 1,600,000 | ||||||
| Net Cash Used in Financing Activities | (863,287 | ) | (1,008,345 | ) | ||||
| Net Increase (Decrease) In Cash | (888,684 | ) | 640,471 | |||||
| Cash, Beginning of Year | 1,615,120 | 974,649 | ||||||
| Cash, End of Year | $ | 726,436 | $ | 1,615,120 | ||||
| Supplemental Disclosures: | ||||||||
| Cash paid for interest | $ | 1,594 | $ | 5,632 | ||||
| Cash paid for income taxes | $ | — | $ | — | ||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Recognition of ROU asset and corresponding operating lease liability | $ | 689,681 | $ | 82,432 | ||||
The accompanying notes are an integral part of these Financial Statements.
F-24
RANK ONE COMPUTING CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023
Note 1 – Organization and Nature of Business
Rank One Computing Corporation (the “Company” or “ROC”) was incorporated in 2015 in the state of Virginia and converted to a Colorado corporation in 2018. We are an independent American artificial intelligence company developing Vision AI in identity, security, and digital forensics. The Company’s Vision AI platform delivers real-time facial recognition, multimodal biometric verification, and AI-powered evidence analysis.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company is restating its previously issued financial statements to expand and/or clarify various disclosure, noted in Notes 2, 6 and 11. There were no material changes to the financials as a result of these changes.
On January 8, 2026, the Company effected a stock split of the Company’s issued and outstanding Common Shares, by a ratio of 167-for-1 (the “Forward Stock Split”). Accordingly, all Common Shares, stock options, warrants, as well as per share information, for all periods presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this Stock Split.
Recently Issued and Newly Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements primarily through expanded disclosures around significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the ASU and expects to include updated income tax disclosures.
In March 2024, the FASB issued ASU 2024-01 “Compensation – Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards”. The ASU clarifies how an entity determines whether a profits interest or similar award is within the scope of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, by adding illustrative guidance. The guidance in ASU 2024-01 is effective for annual reporting periods beginning after December 15, 2024, and can be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. Early adoption is permitted. The adoption of ASU 2024-01 is not expected to have any impact on the Company’s financial statements.
On November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or a retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements and related disclosures.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
Inventories
Inventory, which consists of hardware for installation, and is stated at cost. Due to the nature of our deployments inventory turnover is quick, with most items moving from receipt to installation within a short period of time. As of December 31, 2024 and 2023, the Company has $38,241 and 49,677 of inventory respectively. These amounts are recorded in prepaid expenses and other current assets on the Balance Sheets.
F-25
Estimated Fair Value of Financial Instruments
The Company’s financial instruments include cash, accounts receivable, accounts payable, and lease commitments. Management believes the estimated fair value of these accounts on December 31, 2024, approximate their carrying value as reflected in the balance sheet due to their short-term nature. The carrying values of the Company’s Operating lease obligations approximate their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.
The fair value measurement disclosures are grouped into three levels based on valuation factors:
| ● | Level 1 – quoted prices in active markets for identical investments |
| ● | Level 2 – other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) |
| ● | Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) |
The Company’s Level 1 assets and liabilities include cash, accounts receivable, accounts payable, prepaid, and other current assets. Management believes the estimated fair value of these accounts at December 31, 2024, approximates their carrying value as reflected in the balance sheets due to the short-term nature of these instruments.
The Company’s Level 2 assets and liabilities include the Company’s operating lease assets and liabilities. The carrying amounts of these leases approximate their fair values, based on a comparison of the lease terms and the Company’s incremental borrowing rates with those of similar leases available in the market.
The Company’s Level 3 assets and liabilities use inputs to determine the fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.
Concentration of Credit Risk and Other Risks and Uncertainties
At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company has not previously experienced any losses related to these balances. The uninsured cash balance as of December 31, 2024 and 2023 was $0.5 million and $1.1 million, respectively. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents.
The Company’s customers are primarily concentrated in the United States. The table below details (1) the percentage of overall Accounts Receivable for customers that represented 10% or more of the total as of the end of each year and (2) the percentage of overall Revenue for customers that represented 10% or more of the total as of the end of each year.
| % of Total Accounts Receivable | % of Total Revenue | |||||||||||||||
| As of 12/31/2023 | As of 12/31/2024 | As of 12/31/2023 | As of 12/31/2024 | |||||||||||||
| Customer A | 51 | % | - | 26 | % | 25 | % | |||||||||
| Customer B | - | - | 23 | % | - | |||||||||||
| Customer C | 15 | % | - | - | - | |||||||||||
| Customer D | - | 17 | % | - | - | |||||||||||
| Customer E | - | 11 | % | - | - | |||||||||||
| Customer F | - | 10 | % | - | - | |||||||||||
Cash
Cash include cash-on-hand with financial institutions and subject to an insignificant risk. See Concentration of Credit Risk and Other Risks and Uncertainties above.
F-26
Accounts Receivable/Allowance for Credit Losses
The Company sells its services to customers on an open credit basis. Accounts receivable are uncollateralized, non-interest-bearing customer obligations and are typically due within 30 days. ASC 326 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also requires the Company to pool assets with similar risk characteristics and consider current economic conditions when estimating losses. Allowance for credit losses is based on the Company’s best estimate of probable losses inherent in its accounts receivable portfolio and is determined based on expectations of the customer’s ability to pay by considering factors such as customer type (commercial or government), historical experience, financial position of the customer, age of the accounts receivable, current economic conditions, and reasonable and supportable forward-looking factors about its portfolio and future economic conditions.
Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below:
| Year ended December, | ||||||||
| 2024 | 2023 | |||||||
| Beginning balance | $ | 20,784 | $ | - | ||||
| Provision | 39,256 | 20,784 | ||||||
| Write-offs | - | - | ||||||
| Ending Balance | $ | 60,040 | $ | 20,784 | ||||
Property and Equipment
Property and equipment are recorded at cost and depreciated over their estimated useful lives or the term of the lease using the straight-line method for financial statement purposes. Estimated useful lives for property and equipment are five to seven years. Additions, betterments and replacements are capitalized, while expenditures for repairs and maintenance are charged to operations when incurred. As units of property are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income.
Income Taxes
The Company was incorporated in 2015 as a Subchapter S Corporation, and its earnings and losses were included in the personal tax returns of the stockholders; therefore, the Company did not record any income tax provision during its S-Corporation period. Upon the termination of its S-Corporation election, the Company’s undistributed retained earnings were reclassified to additional paid-in capital to reflect the change in tax status in the Company’s consolidated financial statements.
Effective January 1, 2024, the Company became a C-Corporation and effective with the change, income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of accruals to cash, Section 174 expense, right-of-use asset, right-of-use liability, and property and equipment for financial and income tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. See Note 9 - Income Taxes below.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. As of December 31, 2024, and 2023, the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s 2024, 2023, 2022, and 2021 Federal and State tax returns remain subject to examination by their respective taxing authorities. None of the Company’s Federal or State tax returns are currently under examination.
The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes.
As of December 31, 2024, and 2023, the Company had a net deferred tax asset of $787,017 and $0, respectively.
F-27
Revenue Recognition
The Company generates revenue from the sale of access to its software platforms, maintenance services and, professional services.
In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company applies the following five-step revenue recognition model in accounting for its revenue arrangements:
| ● | Identification of the contract(s) with the customer, including whether collectability of the consideration is probable by considering the customers’ ability and intention to pay; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
In the following table, revenue is disaggregated by major product line and the timing of revenue recognition for the years ended December 31, 2024, and 2023.
| 2024 | 2023 | |||||||
| ROC SDK | $ | 5,958,212 | $ | 5,125,163 | ||||
| ROC Watch | 1,326,607 | 980,377 | ||||||
| ROC ABIS | 352,692 | - | ||||||
| ROC Enroll | 40,200 | - | ||||||
| R&D Contracts | 6,026,991 | 9,055,287 | ||||||
| Other | - | 250,000 | ||||||
| Total Revenue | $ | 13,704,702 | $ | 15,410,827 | ||||
For the Year Ended December 31,
| 2024 | 2023 | |||||||
| Timing of revenue recognition | ||||||||
| Products transferred at a point in time | $ | 5,634,194 | $ | 6,587,618 | ||||
| Products and services transferred over time | 8,070,508 | 8,823,208 | ||||||
| Total Revenue | $ | 13,704,702 | $ | 15,410,827 | ||||
Each of the Company’s significant performance obligations and the Company’s application of ASC 606 to its revenue arrangements is discussed in further detail below.
Standalone Software License and Support:
The Company sells software licenses that include post-contract support (“PCS”) to customers for its Vision AI products, including ROC SDK, ROC Watch, ROC ABIS, and ROC Enroll. The Company’s software license arrangements are sold as perpetual or time-based, and in both cases software license revenue is recognized at a point in time when the license key is provided to the end user.
Perpetual software license sales include PCS
for an initial 12-month period following license delivery, with customers able to renew PCS annually thereafter. Time-based licenses
include PCS for the duration of the license term. PCS is recognized on a straight-line basis over the contract term, once the related
Software license has been recognized.
PCS is accounted for as a distinct performance obligation because it provides ongoing updates, maintenance, and technical support services that are separately identifiable from the functional intellectual property conveyed in the software licenses. Accordingly, the Company allocates the transaction price between the license and PCS based on their respective standalone selling prices.
F-28
Bundled Security Solutions:
The Company sells bundled security solutions to customers that include the Software, hardware, installation services, and post-contract support (“PCS”) services. The end goal provides cameras, software, and devices installed at customer locations to monitor security and identify people and vehicles. Hardware and software licenses revenue is recognized at a point in time upon delivery to the customer site. Professional services and PCS revenue is recognized over the service period.
US Government Contracts:
The US Government contracts provide a license to use the Software as part of the stated project, with the Company providing additional professional services to run simulations or other applications of the Software. Most contracts are for a fixed fee, while some are billed on a usage or “time and materials” basis. Hardware and software licenses revenue is recognized at a point in time upon delivery to the customer site. Professional services revenue is recognized over the service period.
Contract receivables are recorded at the invoiced amount and are uncollateralized, non-interest-bearing client obligations. Provisions for estimated uncollectible accounts receivable are made for individual accounts based upon specific facts and circumstances including criteria such as their age, amount, and client standing.
Costs to Obtain Contracts
The company elected practical expedients under ASC 606 for incremental costs of obtaining contracts. These costs were expensed when incurred.
Contract Liabilities
Sales are generally recorded in the month the service is provided. For clients who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract. During the years ended December 31, 2024, and 2023, the Company recognized $1,115,624 and $764,423 in sales that was recorded as deferred revenue as of December 31, 2023 and 2022, respectively.
Deferred revenue for customer contracts represents amounts collected from, or invoiced to, customers in advance of revenue recognition. The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue. Significant changes in our Deferred Revenue liability balances during the year ended December 31, 2024 and 2023 were as follows:
| Year ended December, | ||||||||
| 2024 | 2023 | |||||||
| Beginning balance | $ | 1,228,586 | $ | 443,576 | ||||
| Revenue Recognized | (1,115,624 | ) | (764,423 | ) | ||||
| Amounts Collected or Invoiced | 1,377,987 | 1,549,433 | ||||||
| Ending Balance | $ | 1,490,949 | $ | 1,228,586 | ||||
Determining the Standalone Selling Price (SSP) for Post Contract Support (PCS) Services:
Contracts with customers often include multiple performance obligations that are distinct and accounted for separately. These typically include licensed software and PCS services, such as maintenance, technical support, and software updates.
The Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. Standalone selling price is estimated at contract inception using all reasonably available information, including observable renewal rates, historical pricing relationships, market conditions, and industry data. Judgment is required when standalone selling price is not directly observable.
For time-based license contracts (up to one year), PCS services are bundled with the license and provided throughout the contract term. For perpetual license contracts, PCS services are included for the initial 12-month period following license delivery. Customers may subsequently purchase extended PCS services annually as outlined in the contracts, typically priced at 20% of the original perpetual license fee.
Based on the results of the Company’s standalone selling price analysis, a specific percentage of the transaction price is allocated to each performance obligation. For both time-based and perpetual license contracts, 20% of the transaction price is allocated to PCS services, using the observable annual renewal rate as the basis for SSP. The remaining 80% is allocated to the software license, reflecting the pricing relationship between the license and PCS and maximizing the use of observable inputs.
Revenue is recognized in accordance with the timing of satisfaction of each performance obligation. For time-based license contracts, the portion allocated to the software license is recognized at the time of delivery, while the PCS portion is recognized ratably over the contract term. For perpetual license contracts, the software license portion is recognized upon delivery, and the PCS portion is recognized ratably over the initial 12-month coverage period. Revenue from extended PCS services is recognized ratably over the applicable renewal term, consistent with the period of service delivery.
F-29
Determining the Standalone Selling Price (SSP) for Bundled Security Solutions and US Government Contracts:
The Company’s contracts for bundled solutions and government contracts can contain multiple performance obligations, including a combination of software licenses and related PCS, hardware, installation services, and professional services. The Company determines the SSP for each performance obligation using observable inputs, as follows:
| - | Hardware is generally purchased from third parties and resold to customers, with SSP established using a cost-plus-margin approach. |
| - | Installation and professional services are priced based on hourly rates that approximate market rates for similar services. Where the Company engages third parties to perform such tasks, SSP is approximated using cost-plus-margin. |
| - | Software licenses and related PCS are allocated consistent with the methodology described above, with 20% of the transaction price assigned to annual PCS based on observable renewal pricing, and 80% assigned to the software license. |
Payment Terms
The typical terms of software license contracts range from 12 to 36 months, with auto-renew options extending the contract for an additional term. The Company invoices clients one month in advance for its services, in addition to any contractual data overages or for additional services.
Significant Judgement
In instances where contracts include multiple performance obligations, the Company exercises judgment in determining the standalone selling price for each obligation. Standalone prices are established by evaluating market data for comparable services and considering the Company’s historical pricing practices. The aggregate standalone price of all performance obligations is calculated, and each individual obligation’s proportionate share of the total is determined. This ratio is then applied to the overall contract price to allocate the transaction price among the performance obligations accordingly.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events and circumstances indicate that the carrying value of an asset might not be recoverable. An impairment loss, measured as the amount by which the carrying value exceeds the fair value, is recognized if the carrying amount exceeds estimated un-discounted future cash flows.
Advertising Costs
The Company expenses the costs associated with advertising as they are incurred. The Company incurred $371,531 and $393,783 for advertising costs for the year ended December 31, 2024, and 2023, respectively.
Research and Development Costs
Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine the Company’s platforms and products services and other IT-related costs, travel costs, and allocated overhead. Research and development costs are expensed as incurred. During the year ended December 31, 2024 and 2023, the Company recorded $5.7million and $4.0 million to Research and Development respectively.
Software Development Costs
The Company evaluates capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process and substantial development risks, technological feasibility is generally established for the Company’s products when they are made available for general release. Accordingly, during the years ended December 31, 2024 and 2023 costs were charged to research and development expense.
Stock-Based Compensation
The Company follows the requirements of FASB ASC 718-10-10, Share-Based Payments with regards to stock-based compensation issued to employees and non-employees. The Company has agreements and arrangements that call for stock to be awarded to employees and consultants at various times as compensation and periodic bonuses. The expense for this stock-based compensation is equal to the fair value of the stock price on the day the stock was awarded multiplied by the number of shares awarded. The Company utilized a 409A valuation to determine the value of the Company’s common stock on the date of issuance. The Company has a relatively low forfeiture rate of stock-based compensation, and forfeitures are recognized as they occur.
F-30
The valuation methodology used to determine the fair value of options issued during the period is the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including the volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options. Due to the Company’s limited historical data related to employee share option exercise behavior, the Company has elected to use the “simplified” method as permitted by Staff Accounting Bulletin No. 110 for its “plain vanilla” stock option grants. Risk-free interest rates are calculated based on continuously compounded risk-free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common Stock. The expected forfeiture rate is estimated based on management’s best assessment.
Estimated volatility is a measure of the amount by which the Company’s asset price is expected to fluctuate each year during the expected life of the award. ROC did not have sufficient history as it was a private company and therefore utilized the volatility of peer companies.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment.
Benefit Plans
We sponsor a defined contribution retirement savings plan for employees who meet certain eligibility requirements. Under the plan, the Company makes a non-elective contribution equal to 3% of each eligible employee’s compensation, regardless of whether the employee elects to contribute. There is no matching component. Employer contributions vest immediately. Total employer contributions were $253,963 and $233,629 for fiscal years 2024 and 2023, respectively.
Net Income Per Common Share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) adjusted for income or loss that would result from the assumed conversion of potential common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
The following table sets forth the information needed to compute basic and diluted earnings per share for the years ended December 31, 2024, and 2023:
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net Income (Loss) Available to Common Shareholders | $ | (697,678 | ) | $ | 2,382,327 | |||
| Weighted average number of common shares - basic | 14,985,411 | 14,941,323 | ||||||
| Dilutive securities | ||||||||
| Options | - | 1,011,185 | ||||||
| Weighted average number of common shares - diluted | 14,985,411 | 15,952,508 | ||||||
| Earnings per share, basic | $ | (0.05 | ) | $ | 0.16 | |||
| Earnings per share, diluted | $ | (0.05 | ) | $ | 0.15 | |||
The following table sets forth the number of potential shares of common stock that have been excluded from diluted net income per share because their effect was anti-dilutive:
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Options | 8,844,487 | 7,403,611 | ||||||
F-31
Note 3 – Prepaids and other current assets
Prepaids and other current assets consist of the following:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Prepaid Expenses | $ | 320,871 | $ | 106,864 | ||||
| Prepaid Insurance | 8,538 | 53,450 | ||||||
| Inventory | 38,241 | 49,677 | ||||||
| Deposits | 23,154 | 21,789 | ||||||
| Total prepaids and other current assets | $ | 390,804 | $ | 231,780 | ||||
Note 4 – Property and Equipment
Property and equipment, at cost, consist of the following:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Computers | $ | 693,750 | $ | 646,925 | ||||
| Furniture and fixtures | 92,269 | 92,269 | ||||||
| Gross Property and equipment | 786,019 | 739,194 | ||||||
| Less: Accumulated depreciation | (381,537 | ) | (246,001 | ) | ||||
| Net property and equipment | $ | 404,482 | $ | 493,193 | ||||
Depreciation expense for the years ended December 31, 2024, and 2023 was $135,537 and $107,901, respectively, which was allocated to general and administrative expenses.
Note 5 – Intangible Assets
Intangible assets consisted of the following:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Software | $ | 10,966 | $ | 10,966 | ||||
| Less: Accumulated amortization | (3,927 | ) | (2,407 | ) | ||||
| Net intangible assets | $ | 7,039 | $ | 8,559 | ||||
Amortization expense for the years ended December 31, 2024, and 2023 was $1,520 and $1,520, respectively.
Note 6 – Leases
Operating Leases
The Company leases approximately 6,600 square feet of office space in Morgantown, West Virginia. The lease requires payments of $799,956 over the five-year term. The lease expires in November 2029, subject to extension.
The Company leases approximately 5,892 square feet of office space in Denver, Colorado. The lease requires payments of $1,22,363 over the eight-year term. The lease expires in June 2029, subject to extension.
F-32
The Company leases approximately 1,546 square feet of office space in Grand Rapids, Michigan. The lease requires payments of $98,558 over the three year term. The lease expires in February 2027, subject to extension.
The Company determines if an arrangement is a lease at inception. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If a lease is identified, classification is determined at lease commencement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company’s leases do not provide an implicit interest rate and therefore the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the interest rate that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. Renewals or early terminations are not accounted for unless the Company is reasonably certain to exercise these options. Operating lease expense is recognized, and the ROU asset is amortized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. For short-term leases, defined as leases with a term of twelve months or less, the Company elected the practical expedient to not recognize an associated lease liability and ROU asset. Lease payments for short-term leases are expensed on a straight-line basis over the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on the Company’s consolidated balance sheets. The Company has not entered into any Finance leases.
For the years ended December 31, 2024 and 2023, the company recognized rent expense for short term leases of approximately $26,934 and $25,321, respectively.
The components of lease expense were as follows:
| Year Ended December 31, 2024 | Year Ended December 31, 2023 | |||||||
| Operating lease: | ||||||||
| Amortization of assets, included in total operating expense | $ | 174,468 | $ | 119,152 | ||||
| Interest on lease liabilities, included in total operating expense | 56,809 | 44,419 | ||||||
| Total net lease cost | $ | 231,277 | $ | 163,571 | ||||
| Supplemental balance sheet information related to leases was as follows: | ||||||||
| Operating Leases: | ||||||||
| Operating lease right-of-use asset | $ | 1,363,956 | $ | 848,743 | ||||
| Current operating lease liabilities | $ | 268,508 | $ | 154,200 | ||||
| Noncurrent operating lease liabilities | 1,201,803 | 805,362 | ||||||
| Total operating lease liabilities | $ | 1,470,311 | $ | 959,562 | ||||
Supplemental cash flow and other information related to leases were as follows:
| Year Ended December 31, 2024 | Year Ended December 31, 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows related to operating leases | $ | 178,932 | $ | 126,694 | ||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | 4.34 | 5.30 | ||||||
| Weighted average discount rate: | ||||||||
| Operating leases | 6.99 | % | 5.19 | % | ||||
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Long-term obligations under the operating and finance leases at December 31, 2024, mature as follows:
| For the Twelve Months Ended December 31, | Operating Leases | |||
| 2025 | $ | 346,605 | ||
| 2026 | 363,049 | |||
| 2027 | 350,191 | |||
| 2028 | 358,841 | |||
| 2029 | 262,946 | |||
| Total lease payments | 1,681,632 | |||
| Less: Amounts representing interest | (211,321 | ) | ||
| Total lease obligations | 1,470,311 | |||
| Less: short-term obligations | (268,508 | ) | ||
| Total long-term | $ | 1,201,803 | ||
As of December 31, 2024, the Company had no additional significant operating or finance leases that had not yet commenced. Rent expense under all operating leases for the year ended December 31, 2024 and 2023 was $258,211 and $188,891, respectively.
Note 7 – Commitments and Contingencies
Line of Credit
On March 15, 2023, the Company entered into a revolving demand note with a bank for an amount not to exceed $1,000,000. The line of credit may be cancelled by either party at any time for any reason by written notice to the other and is collateralized by the Company’s assets. The stated interest rate is adjustable with interest equal to the Prime Rate plus two percent per annum. At December 31, 2024, the total interest rate was at 9.75%. The line of credit balance outstanding as of December 31, 2024 and 2023, was $431,132 and $0 respectively.
Litigation
The Company is currently not involved in any litigation that it believes could have a materially adverse effect on its financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of the Company, threatened against or affecting the company, its common stock, any of the Company’s or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Note 8 – Stockholders’ Equity
Capital Stock
The Company has 100,000,000 authorized shares of Common Stock, par value $0.01.
During the year ended December 31, 2023, employees exercised 114,061 stock options into shares of Common Stock. The Company received $13,991 for these options.
During the years ended December 31, 2024 and 2023, the Company made distributions to its shareholder of $1,294,419 and $1,022,336, respectively. Distributions were made to fund shareholder income tax liabilities resulting from the Company’s pass-through income for tax years 2022 (funded in 2023) and 2023 (funded in 2024), consistent with its status as an S corporation through December 31, 2023.
Option Plan Details
On September 18, 2018, and as amended on April 28, 2023, the Company’s shareholders approved: (i) the adoption of a new stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may, from time to time, in its discretion and in accordance with applicable regulatory requirements, grant to directors, officers, employees and consultants of the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 11,690,000 common shares at the date the options are granted.
As of December 31, 2024, there were 2,506,002 options, immediately available for future allocation pursuant to applicable regulatory requirements. All options vest upon terms as set by the Board of Directors, either over time, up to 36 months, or upon the achievement of certain corporate milestones.
F-34
Common Stock Options
A summary of the Company’s stock option activity and related information follows:
| Number of | Weighted | Weighted | ||||||||||
| Shares | Average | Average | ||||||||||
| Under | Exercise | Contractual | ||||||||||
| Options | Price | Life | ||||||||||
| Options Outstanding at January 1, 2023 | 7,257,987 | $ | 2.05 | 9.17 | ||||||||
| Options Granted | 1,165,660 | 1.65 | 10 | |||||||||
| Exercised | (114,061 | ) | 0.12 | — | ||||||||
| Expired/Cancelled | (86,840 | ) | 2.09 | — | ||||||||
| Options Outstanding at December 31, 2023 | 8,222,746 | 2.16 | 8.40 | |||||||||
| Options Granted | 966,930 | 2.33 | 10 | |||||||||
| Exercised | - | - | — | |||||||||
| Expired/Cancelled | (345,189 | ) | 2.40 | — | ||||||||
| Options Outstanding at December 31, 2024 | 8,844,487 | $ | 2.12 | 7.59 | ||||||||
| Options Exercisable at December 31, 2024 | 4,953,888 | $ | 1.91 | 7.33 | ||||||||
Share-based compensation expense recognized for stock options granted totaled $461,489 and $370,295 for the years ended December 31, 2024, and 2023, respectively.
The intrinsic value of outstanding stock options as of December 31, 2024, and 2023 was $1,424,470 and $776,962, respectively.
As of December 31, 2024, there was $824,217 of total unrecognized compensation expense related to unvested employee stock options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 2.3 years.
The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the years ended December 31, 2024, and 2023, are set forth in the table below.
| 2024 | 2023 | |||||||
| Weighted average fair value of stock options granted | $ | 0.56 | $ | 0.46 | ||||
| Risk-free interest rate | 3.84% - 4.52 | % | 3.62% - 4.22 | % | ||||
| Volatility | 66 | % | 50-75 | % | ||||
| Expected life (years) | 5.13 - 6.02 years | 5 – 6.25 years | ||||||
| Dividend yield | — | % | — | % | ||||
F-35
Note 9 – Income Taxes
The components of income tax expense for the year ended December 31, 2024 are as follows:
| 2024 | ||||
| Current Income Tax expense: | ||||
| Federal | $ | 131,076 | ||
| State | 55,464 | |||
| Total current income tax expense/(benefit) | 186,540 | |||
| Deferred Income Tax expense (benefit): | ||||
| Federal | (625,427 | ) | ||
| State | (161,588 | ) | ||
| Total deferred income tax expense/(benefit) | (787,016 | ) | ||
| Total income tax expense/(benefit) | $ | (600,475 | ) | |
As discussed in Note 2, the Company changed its tax status from S-Corporation to C-Corporation effective for 2024. Accordingly, the net deferred tax asset at the date that the termination election was filed of approximately $500,219 has been recorded through a credit to the deferred tax provision.
Interest and penalties related to income tax liabilities are included in ‘Income tax expense (benefit)’ in the statements of income.
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before the provision for income taxes. The sources and effects of the differences are as follows:
| 2024 | ||||
| Pre-Tax Income (Loss) | (1,298,155 | ) | ||
| U.S. Federal Statutory Tax Rate | (272,613 | ) | ||
| State and Local Income Taxes, Net of Federal Income Tax Effect [1] | (13,185 | ) | ||
| Effect of Changes in Tax Status | (489,795 | ) | ||
| Tax Credits | (88,619 | ) | ||
| Nontaxable or Nondeductible Items | 209,529 | |||
| Rate Changes | (9,976 | ) | ||
| Other Adjustments | 64,184 | |||
| Total Tax | $ | (600,475 | ) | |
F-36
Significant components of the Company’s net non-current deferred tax assets and liabilities are as follows:
| Deferred Tax Assets | 2024 | |||
| Bad Debts | $ | 15,049 | ||
| NQSOs | 25,988 | |||
| ROU Liability | 368,543 | |||
| Section 174 Costs | 994,473 | |||
| R&D Credit | - | |||
| Deferred Tax assets | 1,404,054 | |||
| Less: Valuation Allowance | - | |||
| Deferred tax assets | $ | 1,404,054 | ||
| Deferred tax liabilities | ||||
| Accrual to Cash Adjustment | $ | (172,003 | ) | |
| Depreciation | (103,151 | ) | ||
| ROU Asset | (341,885 | ) | ||
| Deferred tax liabilities | (617,039 | ) | ||
| Net deferred tax asset (liability) | $ | 787,016 | ||
Reconciliation between the effective tax rate on income from continuing operations and the statutory rate for the year ending December 31, 2024 is as follows:
| For the Year Ended December 31, 2024 | ||||
| U.S. Federal Statutory Tax Rate | 21 | % | ||
| State and Local Income Taxes, Net of Federal Income Tax Effect [1] | 1.02 | % | ||
| Effect of Changes in Tax Status | 37.73 | % | ||
| Tax Credits | 6.83 | % | ||
| Nontaxable or Nondeductible Items | -16.14 | % | ||
| Rate Changes | 0.77 | % | ||
| Other Adjustments | -4.95 | % | ||
| Total Tax | 46.26 | % | ||
In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. Based on historic, current, and forecasted results, management believes it is more likely than not that the Company will realize the benefits of all of its deferred tax assets.
F-37
We have included in the table above deferred tax assets related to U.S. federal tax carryforwards of research and development tax credits which expire starting in 2045.
The management does not believe that there are significant uncertain tax positions in 2024. There are no interest and penalties related to uncertain tax positions in 2024.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. This act makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. According to ASC 740, “Income Taxes,” the effects of changes in tax rates and laws on deferred tax balances must be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, the Company is evaluating its impact on the financial statements.
Note 10 – Related Party Transactions
The Company has evaluated its relationships and transactions in accordance with ASC 850, Related Party Disclosures, and has determined that there were no material related party transactions or balances requiring disclosure in the accompanying financial statements.
Note 11 – Segment Information
The Company’s Chief Operating Decision Maker (the “CODM”) is the Chief Executive Officer (CEO). The Company has determined it is a single reportable segment. The CODM manages the business activities and receives financial reporting information on a consolidated basis and does not receive financial results at a lower level of disaggregation. While the CODM reviews sales by product offering, no profit measures are provided at that level. Accordingly, product offerings are not considered separate operating segments for external reporting.
Resource allocation and performance evaluation are based on consolidated net income as reported in the consolidated statements of income, with supplemental consideration of sales by product offering, as well as consolidated gross profit and operating income or loss. Sales are monitored at the individual product offering level to gauge growth and market penetration, and to ensure timely execution of the Company’s sales contracts, but profit measures are not available at the product level.
The CODM reviews only the expense captions presented in the consolidated statements of income (cost of sales; selling, general and administrative; research and development; and interest and other expense) and receives no further disaggregated expense information.
The CODM does not review segment asset information in assessing performance or allocating resources. Accordingly, the Company does not present segment asset disclosures below the consolidated balance sheet level. All of the Company’s long-lived assets are located in the United States. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above.
Note 12 – Subsequent Events
The Company has evaluated events that occurred through the date that the financial statements were issued, and determined that there have been no events that have occurred that would require adjustments to the Company’s disclosures in the financial statements.
F-38
Through and including [●], 2026 (the 25th day after the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in the listing, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
3,000,000 Shares
Common Stock
RANK ONE COMPUTING CORPORATION
PROSPECTUS
[●], 2026
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth an itemized statement of the amounts of all expenses (excluding underwriting discounts and non-accountable expense allowance) payable by us in connection with the registration of the common stock offered hereby. With the exception of the SEC registration fee, the FINRA filing fee and the Nasdaq initial listing fee, the amounts set forth below are estimates.
| SEC registration fee | $ | 3,398.64 | ||
| FINRA filing fee | 3,950 | |||
| Nasdaq initial listing fee | 50,000 | |||
| Transfer agent fees | 2,999 | |||
| Accounting fees and expenses | 103,940 | |||
| Legal fees and expenses | 250,000 | |||
| Printing and engraving expenses | 20,000 | |||
| Other expenses | 13,560 | |||
| Total | $ | 447,848 |
Item 14. Indemnification of Directors and Officers
We are incorporated under the laws of the State of Colorado. The Colorado Revised Statutes and the Colorado Business Corporation Act (the “CBCA”) limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors.
Section 7-109-102(1) of the CBCA permits indemnification of a director of a Colorado corporation, in the case of a third party action, if the director (a) conducted himself or herself in good faith, (b) reasonably believed that (i) in the case of conduct in his or her official capacity, his or her conduct was in the corporation’s best interest, or (ii) in all other cases, his or her conduct was not opposed to the corporation’s best interest, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. Section 7-109-103 further provides for mandatory indemnification of directors and officers who are successful on the merits or otherwise in litigation.
Section 7-109-102(4) of the CBCA limits the indemnification that a corporation may provide to its directors in two key respects. A corporation may not indemnify a director in a derivative action in which the director is held liable to the corporation, or in any proceeding in which the director is held liable on the basis of his improper receipt of a personal benefit. Sections 7-109-104 of the CBCA permits a corporation to advance expenses to a director, and Section 7-109-107(1)(c) of the CBCA permits a corporation to indemnify and advance litigation expenses to officers, employees and agents who are not directors to a greater extent than directors if consistent with law and provided for by the articles of incorporation or bylaws, a resolution of directors or shareholders, or a contract between the corporation and the officer, employee or agent.
Our articles of incorporation and bylaws, as amended, provide that we shall indemnify our directors and officers to the fullest extent permitted by the CBCA. In addition, we may also indemnify and advance expenses to an officer who is not a director to a greater extent, not inconsistent with public policy, and if provided for by general or specific action of our board of directors or shareholders or by contract.
Item 15. Recent Sales of Unregistered Securities
The Company has not sold any securities within the past three years which were not registered under the Securities Act.
II-1
Item 16. Exhibits
The following is a list of exhibits filed as a part of this registration statement:
| * | To be filed by amendment. |
| ** | Filed herewith. |
| *** | Previously filed. |
| † | Confidential treatment has been requested for portions of this exhibit. Certain information has been redacted from this exhibit pursuant to Item 601(b)(10)(iv) of Regulation S-K because it is both not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish an unredacted copy of the exhibit and its materiality and competitive harm analyses to the Commission upon request. |
Item 17. Undertakings
The undersigned registrant hereby undertakes:
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
II-2
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (i) | If the registrant is relying on Rule 430B (§230.430B): | ||
| (a) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) [§230.424(b)(3)] shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and | ||
| (b) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) [§230.424(b)(2), (b)(5), or (b)(7)] as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) [§230.415(a)(1)(i), (vii), or (x)] for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or | ||
| (ii) | If the registrant is subject to Rule 430C (§230.430C), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. | ||
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| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: | |
| The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; | |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (6) | The undersigned registrant hereby undertakes that: |
| (i) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
| (ii) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, on January 12, 2026.
| Rank One Computing Corporation | ||
| By: | /s/ B. Scott Swann | |
| Name: | B. Scott Swann | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Act, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ B. Scott Swann | Chief Executive Officer and Director | January 12, 2026 | ||
| B. Scott Swann | (Principal Executive Officer) | |||
| /s/ Cody Barnes | Chief Financial Officer (Principal Financial and Accounting Officer) | January 12, 2026 | ||
| Cody Barnes | ||||
| * | President, Chief Scientist, and Board Chairman | January 12, 2026 | ||
| Brendan Klare | ||||
| * | Chief Technology Officer and Director | January 12, 2026 | ||
| Joshua Klontz | ||||
| *By: | /s/ B. Scott Swann | |
| B. Scott Swann | ||
| Attorney-in-Fact |
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Exhibit 1.1
UNDERWRITING AGREEMENT
between
RANK ONE COMPUTING CORPORATION
and
THE BENCHMARK COMPANY, LLC
as Representative of the Several Underwriters
RANK ONE COMPUTING CORPORATION
UNDERWRITING AGREEMENT
[●], 2026
The Benchmark Company, LLC
150 E. 58th Street, 17th Floor
New York, NY 10155
As Representative of the several Underwriters named on Schedule 1 attached hereto
Ladies and Gentlemen:
The undersigned, Rank One Computing Corporation, a company incorporated under the laws of the State of Colorado (the “Company”), hereby confirms its agreement (this “Agreement”) with The Benchmark Company, LLC (the “Representative”) and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:
| 1. | Purchase and Sale of Shares. |
1.1 Firm Shares.
1.1.1. Nature and Purchase of Firm Shares.
(i) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [·] shares (the “Firm Shares”) of common stock of the Company, par value $0.01 per share (the “Common Stock”).
(ii) The Firm Shares are to be offered initially to the public at a price of $[·] per share as set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof) (the “Firm Offering Price”). The Underwriters agree, severally and not jointly, to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[·] per share (93% of the Firm Offering Price).
1.1.2. Shares Payment and Delivery.
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the first (1st) Business Day (as defined below) following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the second (2nd) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Sheppard, Mullin, Richter & Hampton LLP, 30 Rockefeller Plaza, New York, NY 10112 (“Representative Counsel”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”
(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same-day) funds, payable to the order of the Company upon delivery of the Firm Shares through the facilities of the Depository Trust Company (“DTC”) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days (as defined below) prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
1.2 Over-allotment Option.
1.2.1. Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase up to [·] additional shares of Common Stock, representing 15% of the Firm Shares sold in the offering, from the Company (the “Over-allotment Option”). Such [·] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public Securities is hereinafter referred to as the “Offering.”
1.2.2. Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 30 days after the Closing Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of written notice to the Company from the Representative, setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than five (5) Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel, or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein: (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice; and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.
1.2.3. Payment and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same-day) funds, payable to the order of the Company upon delivery to the Representative of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares.
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1.3 Representative’s Warrant.
1.3.1. Purchase Warrants. The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing Date and Option Closing Date, as applicable, a warrant (a “Representative’s’ Warrant”) for the purchase of an aggregate number of shares of Common Stock representing seven percent (7%) of the Public Securities issued on such Closing Date or Option Closing Date. The Representative’s Warrant agreement, in the form attached hereto as Exhibit A (the “Representative’s Warrant Agreement”), shall be exercisable, in whole or in part, commencing on a date which is 180 days following the Closing Date and expiring on the five-year anniversary of the commencement of sales for the Offering at an initial exercise price per shares of Common Stock of $[·], which is equal to 100% of the Firm Offering Price. The Representative’s Warrant and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant Agreement and the underlying shares of Common Stock during the 180 days immediately following the date of effectiveness or commencement of sales of the offering and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of 180 days immediately following the date of effectiveness or commencement of sales of the offering to anyone other than: (i) an Underwriter or a selected dealer in connection with the Offering; or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
1.3.2. Delivery. Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request.
2. Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows:
2.1 Filing of Registration Statement.
2.1.1. Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-[·]), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus (as defined below) included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
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Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated [·], 2025, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
“Applicable Time” means [TIME], Eastern time, on the date of this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including, without limitation, any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is: (i) required to be filed with the Commission by the Company; (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission; or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)).
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Pricing Disclosure Package” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 001-[•] providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the Common Stock. The registration of the Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
2.2 Stock Exchange Listing. The Common Stock have been approved for listing on The Nasdaq Capital Market (the “Exchange”) under the symbol “ROC”, and the Company has taken no action designed to, or likely to have the effect of, delisting the Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.3 No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
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2.4 Disclosures in Registration Statement.
2.4.1. Compliance with Securities Act and 10b-5 Representation.
(i) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with the Underwriter’s Information (as defined below).
(iii) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus hereto does not conflict in any material respect with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Preliminary Prospectus, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the disclosure contained in the “Underwriting” section of the Prospectus (the “Underwriters’ Information”); and
(iv) Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
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2.4.2. Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and: (i) that is filed as an exhibit to the Registration Statement, the Pricing Disclosure Package and the Prospectus; or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and (i) neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, (ii) to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder except, in each of (i) and (ii), for such defaults that would not reasonably be expected to result in a Material Adverse Change (as defined in Section 2.5.1 below). To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations, except for any violation that would not reasonably be expected to result in a Material Adverse Change.
2.4.3. Prior Securities Transactions. During the past three (3) years from the date of this Agreement, no securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
2.4.4. Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all material foreign regulation on the Offering and the Company’s business as currently conducted are correct in all material respects and no other such material regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
2.5 Changes After Dates in Registration Statement.
2.5.1. No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor any change or development that, singularly or in the aggregate, would involve a material adverse change in or affecting the condition (financial or otherwise), results of operations, business, or assets of the Company (a “Material Adverse Change”); (ii) other than in the ordinary course of business, there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iii) no executive officer or director of the Company has resigned from any position with the Company.
2.5.2. Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
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2.6 Independent Accountants. To the knowledge of the Company, Rosenberg Rich Baker Berman, P.A. (the “Auditor”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
2.7 Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present, in all material respects, the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with the U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to any normal year-end audit adjustments); and the supporting schedules, if any, included in the Registration Statement present fairly, in all material respects, the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly, in all material respects, the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus: (a) neither the Company nor any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”), has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business; (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock; (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the ordinary course of business, any grants under any stock compensation plan; and (d) there has not been any Material Adverse Change in the Company’s long-term or short-term debt, as of the date of this Agreement.
2.8 Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued Common Stock or any security convertible or exercisable into Common Stock, or any contracts or commitments to issue or sell Common Stock or any such options, warrants, rights or convertible securities.
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2.9 Valid Issuance of Securities, etc.
2.9.1. Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such shares, exempt from such registration requirements.
2.9.2. Securities Sold Pursuant to this Agreement. The Public Securities and Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to any preemptive rights of any holders of any security of the Company that have not been waived or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken. The Public Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representative’s Warrant Agreement has been duly and validly taken; the Common Stock issuable upon exercise of the Representative’s Warrant have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrant Agreement, such Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company that have not been waived or similar contractual rights granted by the Company.
2.10 Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company.
2.11 Validity and Binding Effect of Agreements. This Agreement and the Representative’s Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
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2.12 No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement, the Representative’s Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation or bylaws (as the same may be amended or restated from time to time, the “Charter”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof except in the case of clauses (i) and (iii) for any such breach, conflict, violation default, lien, charge or encumbrance that would not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Change.
2.13 No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not: (i) in violation of any term or provision of its Charter; (ii) in violation of any license or permit; or (iii) any violation of applicable law, rule, regulation, judgment or decree of any Governmental Entity except, in the case of clause (ii) and (iii), for any such violation that would not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Change.
2.14 Corporate Power; Licenses; Consents.
2.14.1. Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for the absence of which would not reasonably expected to have a Material Adverse Change.
2.14.2. Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Warrant Agreement and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except: (i) such consents, approvals, authorizations, orders, filings, registrations or qualifications that have already been obtained or made; and (ii) with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
2.15 D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal stockholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.24 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate and incorrect.
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2.16 Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which is required to be disclosed and has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the Public Securities on the Exchange.
2.17 Good Standing. The Company has been duly incorporated and is validly existing as a corporation under the laws of the State of Colorado and as of the date hereof is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to be so qualified, singularly or in the aggregate, would not reasonably be expected to result in a Material Adverse Change.
2.18 Insurance. The Company carries or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, including, but not limited to, directors and officers insurance coverage at least equal to $5,000,000 and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able: (i) to renew its existing insurance coverage as and when such policies expire; or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change.
2.19 Transactions Affecting Disclosure to FINRA.
2.19.1. Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.
2.19.2. Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member participating in the offering as defined by FINRA Rule 5110; or (iii) any person or entity that has any direct or indirect affiliation or association with any participating FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
2.19.3. Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.19.4. FINRA Affiliation. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there is no: (i) officer or director of the Company; (ii) beneficial owner of 5% or more of any class of the Company’s securities; or (iii) beneficial owner of the Company’s unregistered equity securities which were acquired during the 180 day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
2.19.5. Information. All information provided by the Company in its FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
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2.20 Foreign Corrupt Practices Act. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that: (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding; (ii) if not given in the past, might have had a Material Adverse Change; or (iii) if not continued in the future, might adversely affect the assets, business, or operations of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
2.21 Compliance with OFAC. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
2.22 Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
2.23 Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to the Representative or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
2.24 Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers and directors, and each holder of the Company’s issued and outstanding Common Stock prior to the consummation of the Offering on a fully-diluted basis (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the execution of this Agreement.
2.25 Subsidiaries. All direct and indirect Subsidiaries of the Company are duly organized and in good standing (to the extent the concept of good standing is applicable in such jurisdiction) under the laws of the place of organization or incorporation, and each Subsidiary is in good standing (to the extent the concept of good standing is applicable in such jurisdiction) in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not result in a Material Adverse Change. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.26 Related Party Transactions. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required by the Securities Act or the Securities Act Regulations.
2.27 Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
2.28 Sarbanes-Oxley Compliance.
2.28.1. Disclosure Controls. The Company has taken all necessary actions to ensure that, in the time periods required, the Company will comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
2.28.2. Compliance. The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and has taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act then applicable to it.
2.29 Accounting Controls. Except as disclosed in the Registration Statement, Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries maintain systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
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2.30 No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
2.31 No Labor Disputes. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.
2.32 Intellectual Property Rights. The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others which has not been subsequently rectified. Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change: (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.32, reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change has not been subsequently rectified or settled. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any persons. Except as would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, with respect to generative artificial intelligence models or advanced machine learning models (“AI Tools”), the Company and its subsidiaries, (i) use AI Tools in compliance with applicable licenses terms, consents, agreements and laws; (ii) to the knowledge of the Company, have not used AI Tools to create or develop any products, or Intellectual Property in a manner that resulted in a third party having rights in such products or Intellectual Property Rights; and (iii) have not included and do not include personally identifiable information, protected health information, consumer information, trade secrets or other confidential information in any prompts or inputs into any AI Tools, for the avoidance of doubt, prong (ii) and (iii) do not include machine learning functionalities of the Company’s products or product candidates.
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2.33 Taxes. Each of the Company and its Subsidiaries has: (i) filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof, except in any case in which the failure so to file would not reasonably be expected to cause a Material Adverse Change; and (ii) has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary, except as currently being contested in good faith or would not reasonably be expected to cause a Material Adverse Change. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods set forth in such consolidated financial statements. Except as disclosed in writing to the Underwriters: (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries; and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
2.34 ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its ERISA Affiliates (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under: (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan”; or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
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2.35 Compliance with Laws. Except as otherwise disclosed in the Registration Statement, Pricing Disclosure Package and Prospectus and as could not, individually or in the aggregate, be expected to result in a Material Adverse Change, the Company: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the services provided by the Company (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or notice from any other governmental authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such material Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any governmental authority or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such governmental authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding that, if brought, may result in a Material Adverse Change; (E) has not received notice that any governmental authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such governmental authority is considering such action; and (F) has filed, obtained, maintained or submitted or taken reasonably practicable steps to file, obtain, maintain or submit all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct, in all material respects, on the date filed (or were corrected or supplemented by a subsequent submission).
2.36 Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was and is an “ineligible issuer,” as defined in Rule 405.
2.37 Real Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
2.38 Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s or its Subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described as required.
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2.39 Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.40 Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.41 Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
2.42 Emerging Growth Company. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
2.43 Testing-the-Waters Communications. The Company has not: (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are “qualified institutional buyers” within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act; and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company confirms that the Representative have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-B hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
2.44 Electronic Road Show. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering.
2.45 Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
2.46 [Reserved].
2.47 Regulatory Filings. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, neither the Company nor any of its Subsidiaries has failed to file with the applicable Governmental Authority any required filing, declaration, listing, registration, report or submission, except for such failures that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Change; except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, all such filings, declarations, listings, registrations, reports or submissions were in material compliance with applicable laws when filed and no deficiencies have been asserted by any applicable regulatory authority with respect to any such filings, declarations, listings, registrations, reports or submissions, except for any deficiencies that, individually or in the aggregate, would not result in a Material Adverse Change.
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2.48 [Reserved].
2.49 Environmental Laws. Except as set forth in the Registration Statement, the Pricing Disclosure Package or the Prospectus, the Company and its Subsidiaries (i) are in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (ii) have received and are in compliance with all material permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as described in the Registration Statement, the Pricing Disclosure Package or the Prospectus; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except, in the case of any of clauses (i), (ii) or (iii) above, for any such failure to comply or failure to receive required permits, licenses, other approvals or liability as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.
2.50 Cybersecurity. The Company and its Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with, the operation of the business of the Company and its Subsidiaries as currently conducted, and, to the knowledge of the Company, free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its Subsidiaries have implemented commercially reasonable physical, technical and administrative controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data, including Personal Data (as defined herein), used in connection with their businesses. “Personal Data” means: (i) a natural person’s name, street address, telephone number, e-mail address, photograph, social security number or tax identification number, driver’s license number, passport number, credit card number, bank information, or customer or account number; (ii) any information which would qualify as “personally identifying information” under the Federal Trade Commission Act, as amended; (iii) “personal data” as defined by GDPR (as defined below); and (iv) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any data related to an identified person’s health or sexual orientation. Except as disclosed in the Registration Statement, the Pricing Disclosure Package or the Prospectus, there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person, nor any incidents under internal review or investigations relating to the same. The Company and its Subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification.
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2.51 Compliance with Data Privacy Laws. The Company and its Subsidiaries are, and at all prior times were, in material compliance with all applicable state, federal and foreign data privacy and security laws and regulations (collectively, the “Privacy Laws”). To ensure compliance with the Privacy Laws, the Company and its Subsidiaries have in place, comply with, and take appropriate steps reasonably designed to ensure compliance in all material respects with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, handling, and analysis of Personal Data (the “Policies”). The Company and its Subsidiaries have, to the knowledge of the Company, at all times made all disclosures to users or customers required by applicable laws and regulatory rules or requirements, and none of such disclosures made or contained in any Policy have, to the knowledge of the Company, been inaccurate or in violation of any applicable laws and regulatory rules or requirements in any material respect. The Company further certifies that neither it nor any Subsidiary: (i) has received notice of any actual or potential liability under or relating to, or actual or potential violation of, any of the Privacy Laws, and has no knowledge of any event or condition that would reasonably be expected to result in any such notice; (ii) is currently conducting or paying for, in whole or in part, any investigation, remediation, or other corrective action pursuant to any Privacy Law; or (iii) is a party to any order, decree, or agreement that imposes any obligation or liability under any Privacy Law.
| 3. | Covenants of the Company. The Company covenants and agrees as follows: |
3.1 Amendments to Registration Statement. The Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1. Compliance. The Company, subject to Section 3.2.2, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing: (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Warrant for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement; and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Warrant. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
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3.2.2. Continued Compliance. The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to: (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in light of the circumstances existing at the time it is delivered to a purchaser; or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly: (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement; and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.
3.2.3. Exchange Act Registration. For a period of three (3) years after the date of this Agreement, the Company shall use its best efforts to maintain the registration of the Common Stock under the Exchange Act. The Company shall not deregister the Common Stock under the Exchange Act without prior written consent of the Representative, which consent shall not be unreasonably withheld.
3.2.4. Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each Issuer General Use Free Writing Prospectus hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representative. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
3.2.5. Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
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3.3 Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and Representative Counsel, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and upon request, will deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.4 Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.5 Effectiveness and Events Requiring Notice to the Representative. The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus for at least nine (9) months after the Applicable Time, and shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in: (a) the Registration Statement in order to make the statements therein not misleading; or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall use its best efforts to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three (3) fiscal quarters immediately preceding the announcement of any quarterly financial information.
3.7 Listing. The Company shall use its best efforts to maintain the listing of the Common Stock (including the Public Securities) on the Exchange for at least three (3) years from the date of this Agreement.
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3.8 Financial Public Relations Firm. As of the Effective Date, the Company shall have retained a financial public relations firm reasonably acceptable to the Representative and the Company, which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the Effective Date.
3.9 Reports to the Representative.
3.9.1. Periodic Reports, etc. For a period of two (2) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish or make available to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) a copy of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future Subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system (or with respect to articles and press releases, posted on the Company’s website) shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.1.
3.9.2. Transfer Agent; Transfer Sheets. For a period of one (1) years after the date of this Agreement, the Company shall retain a transfer agent and registrar reasonably acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. VStock Transfer LLC is acceptable to the Representative to act as Transfer Agent for the Common Stock.
3.9.3. Trading Reports. During such time as the Public Securities are listed on the Exchange, the Company shall provide, if available and upon the Representative’s request, to the Representative, at the Company’s expense, such reports published by the Exchange and provided to the Company relating to price trading of the Public Securities, as the Representative shall reasonably request. Documents made freely available by the Exchange through its website shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.3.
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3.10 Payment of Expenses
3.10.1. General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the Public Securities to be sold in the Offering (including the Option Shares) with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Public Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors in an amount not to exceed $7,500 in the aggregate; (e) all fees, expenses and disbursements relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate (including, without limitation, all filing and registration fees); (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses of a financial public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities; (j) fees and expenses of the transfer agent for the Common Stock; (k) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (l) the costs associated with one set of bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones, each of which the Company or its designee shall provide within a reasonable time after the Closing Date in such quantities as the Representative may reasonably request; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) fees and expenses of Representative Counsel; (p) the costs associated with the Underwriter’s use of Ipreo’s book-building, prospectus tracking and compliance software for the Offering (up to a maximum of $20,000); and (q) the Underwriters’ actual accountable “road show” expenses. The expenses to be paid by the Company and reimbursed to the Underwriters (“Accountable Out-of-Pocket Expenses”) under this Section 3.10.1 shall not exceed $175,000 without the prior approval of the Company. The Company has advanced an amount of $32,500 (the “Advance”) to the Representative in anticipation of any Accountable Out-of-Pocket Expenses to be incurred by the Representative.
3.10.2. Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10.1, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1.0%) of the gross proceeds received by the Company from the sale of the Firm Shares, less the Advance (as such term is defined in Section 3.10.1 hereof), provided, however, that in the event that the Offering is terminated under Section 8 hereof, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
3.11 Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
3.12 Delivery of Earning Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the 15th full calendar month following the date of this Agreement, an earnings statement (which need not be certified by an independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least 12 consecutive months beginning after the date of this Agreement.
3.13 Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
3.14 Internal Controls. Except to the extent disclosed in the Registration Statement, Pricing Disclosure Package and Prospectus, the Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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3.15 Accountants. As of the date of this Agreement, the Company has retained an independent registered public accounting firm reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement. The Representative acknowledge that the Auditor is acceptable to the Representative.
3.16 FINRA. For a period of 90 days from the later of the Closing Date or any Option Closing Date, the Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that: (i) any officer or director of the Company; (ii) any beneficial owner of 5% or more of any class of the Company’s securities prior to the Offering; or (iii) any beneficial owner of 5% or more of the Company’s unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
3.17 No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
3.18 Company Lock-Up Agreements.
3.18.1. Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 180 days after the date of this Agreement (the “Lock-Up Period”): (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; or (iii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), or (iii) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
The restrictions contained in this Section 3.18.1 shall not apply to: (i) the shares of Common Stock to be sold hereunder; (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, which is disclosed in the Registration Statement, Disclosure Package and Prospectus, provided that such options, warrants, and securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities; or (iii) the issuance by the Company of stock options, stock based awards, or shares of capital stock of the Company under any equity compensation plan of the Company, provided that in each of (ii) and (iii) above, the underlying shares shall be restricted from sale during the entire Lock-Up Period.
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3.18.2. [Reserved].
3.19 Release of D&O Lock-up Period. If the Representative, in its sole discretion, agree to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.24 hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
3.20 Blue Sky Qualifications. The Company shall use its reasonable best efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate with the consent of the Company, and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
3.21 Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
3.22 Emerging Growth Company Status. The Company shall promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any time prior to the later of: (i) completion of the distribution of the Public Securities within the meaning of the Securities Act; or (ii) 15 days following the completion of the Lock-Up Period.
4. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to: (i) the continuing accuracy in all material respects of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
4.1 Regulatory Matters.
4.1.1. Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:30 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by the Representative, not to be unreasonably withheld, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
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4.1.2. FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3. Exchange Stock Market Clearance. On the Closing Date, the Common Stock shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
4.2 Company Counsel Matters.
4.2.1. Closing Date Opinion of U.S. Securities Counsel. On the Closing Date, the Representative shall have received the favorable opinion of Lucosky Brookman LLP, counsel to the Company with respect to certain legal matters as to U.S. federal securities and New York State law, dated the Closing Date and addressed to the Representative, in form and substance reasonably satisfactory to the Representative.
4.2.2. Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable opinion of Lucosky Brookman LLP, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsel in its opinion delivered on the Closing Date.
4.2.3. Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested.
4.3 Comfort Letters.
4.3.1. Cold Comfort Letter. At the time this Agreement is executed, the Representative shall have received a cold comfort letter from the Auditor containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to the Representative, to the Company and to the Auditor, dated as of the date of this Agreement.
4.3.2. Bring-down Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) Business Days prior to the Closing Date or the Option Closing Date, as applicable.
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4.4 Officers’ Certificates.
4.4.1. Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer and its Chief Financial Officer stating on behalf of the Company and not in an individual capacity that: (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading; (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus; (iii) to the best of their knowledge after reasonable investigation, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct in all material respects and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date); and (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any Material Adverse Change, except as set forth in the Prospectus.
4.4.2. Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying on behalf of the Company and not in an individual capacity: (i) that each of the Charter is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no Material Adverse Change or development involving a prospective Material Adverse Change in the condition or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal, state or foreign commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may reasonably be expected to result in a Material Adverse Change, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
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4.6 Delivery of Agreements.
4.6.1. Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
4.6.2. Representative’s Warrant Agreement. On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Warrant Agreement.
4.7 Additional Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Warrant as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.
| 5. | Indemnification. |
5.1 Indemnification of the Underwriters.
5.1.1. General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives, partners, shareholders, affiliates, counsel and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries (a “Claim”), arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in: (A) the Registration Statement, the Pricing Disclosure Package, any Preliminary Prospectus, the Prospectus, or in any Issuer Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (B) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (C) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representative’s Warrant under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement, Pricing Disclosure Package or Prospectus, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit to any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus. The Company also agrees that it will reimburse each Underwriter Indemnified Party for all fees and expenses (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) (collectively, the “Expenses”), and further agrees wherever and whenever possible to advance payment of Expenses as they are incurred by an Underwriter Indemnified Party in investigating, preparing, pursuing or defending any Claim.
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5.1.2. Procedure. If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses if an Underwriter Indemnified Party requests that the Company do so. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company, and shall be advanced by the Company. Notwithstanding anything to the contrary contained herein, and provided that the Company has timely honored its obligations under Section 5, the Underwriter Indemnified Party shall not enter into any settlement without the prior written consent (which shall not be unreasonably withheld) of the terms of any settlement by the Company. The Company shall not be liable for any settlement of any action effected without its consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior written consent of the Underwriters, settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action in respect of which advancement, reimbursement, indemnification or contribution may be sought hereunder (whether or not such Underwriter Indemnified Party is a party thereto) unless such settlement, compromise, consent or termination: (i) includes an unconditional release of each Underwriter Indemnified Party, acceptable to such Underwriter Indemnified Party, from all liabilities, expenses and claims arising out of such action for which indemnification or contribution may be sought; and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Underwriter Indemnified Party.
5.2 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.
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5.3 Contribution.
5.3.1. Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof: (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Public Securities; or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering of the Public Securities purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the Public Securities purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage expense, or liability, or action, investigation or proceeding, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of or otherwise incurred in connection with any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, act or failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
5.3.2. Contribution Procedure. Within 15 days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (a “contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute as provided in this Section 5.3.2 are several and not joint.
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| 6. | Default by an Underwriter. |
6.1 Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate ten percent (10%) of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 relates to more than ten percent (10%) of the Firm Shares or Option Shares, you may in your discretion arrange for yourself or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than ten percent (10%) of the Firm Shares or Option Shares, you do not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties satisfactory to you to purchase said Firm Shares or Option Shares on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by you or the Company without liability on the part of the Company (except as provided in Sections 3.10 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of Representative Counsel may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares or Option Shares (if any).
| 7. | Additional Covenants. |
7.1 Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board of Directors comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Common Stock listed on another exchange or quoted on an automated quotation system; and (ii) if applicable, at least one (1) member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
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7.2 [Reserved.]
7.3 Right of First Refusal. Provided that the Firm Shares are sold in accordance with the terms of this Agreement, the Representative shall have an irrevocable right of first refusal (the “Right of First Refusal”), for a period commencing on the Closing Date and ending on the earlier of (i) the completion of a Subject Transaction (as defined below) or (ii) twelve (12) months after the Closing Date (the “ROFR Period”), to act as lead or joint-lead investment banker, lead or joint book-runner, and/or lead or joint placement agent, at the Representative’s sole and exclusive discretion, any future public, private equity or debt offering (but excluding traditional secured or unsecured lending transactions from a banking institution), including an equity linked financing, or for a merger or acquisition transaction (each, a “Subject Transaction”), during such ROFR Period, of the Company, or any successor to or Subsidiary of the Company, on terms and conditions customary for the Representative for a Subject Transaction. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional lead or joint-lead investment banker, book-runner and/or placement agent in a Subject Transaction during the ROFR Period referred to above without the express written consent of the Representative.
The Company shall notify the Representative of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by email. If the Representative fails to exercise their Right of First Refusal with respect to a Subject Transaction within five (5) Business Days after the mailing of such written notice, then the Representative shall have no further claim or right with respect to the Subject Transaction. The Representative may elect, in their sole and absolute discretion, not to exercise their Right of First Refusal with respect to a Subject Transaction; provided that any such election by the Representative shall not adversely affect the Representative’s Right of First Refusal with respect to any other Subject Transaction during the ROFR Period agreed to above. The terms and conditions of any such engagement shall be set forth in a separate agreement and may be subject to, among other things, satisfactory completion of due diligence by the Representative, market conditions, the absence of a material adverse change to the Company’s business, financial condition, approval of the Representative’s internal committees and any other conditions that the Representative may deem appropriate for a transaction of such nature.
| 8. | Effective Date of this Agreement and Termination Thereof. |
8.1 Effective Date. This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.
8.2 Termination. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date if: (i) any domestic or international event or act or occurrence has materially disrupted, or in your reasonable judgement will in the immediate future materially disrupt, general securities markets in the United States; (ii) trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; (iii) the United States shall have become involved in a new war or an increase in major hostilities; (iv) a banking moratorium has been declared by a New York State or federal authority; (v) a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; (vi) the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative’s reasonable judgement, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; (vii) the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) the Representative shall have become aware after the date hereof of a Material Adverse Change or an adverse material change in general market conditions that would, in the Representative’s reasonable judgement, make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities of to enforce contracts made by the Underwriters for the sale of the Public Securities.
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8.3 Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall be terminated for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters for all Accountable Out-of-Pocket Expenses contemplated under Section 3.10.1 herein then due and payable (including the reasonable fees and disbursements of Representative Counsel) up to $175,000, less the Advance of $32,500 already paid to the Representative. Upon demand, the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representative will be promptly returned to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A). For the avoidance of any doubt, if this Agreement is terminated pursuant to Section 6 hereof, the Company shall have no obligation to reimburse a defaulting Underwriter for any Accountable Out-of-Pocket Expenses (including the fees and expenses of its counsel) incurred by such defaulting Underwriter in connection with this Agreement and the offering contemplated hereby.
8.4 Survival of Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
8.5 Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect as of the date they were made regardless of: (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company; or (ii) delivery of and payment for the Public Securities.
| 9. | Miscellaneous. |
9.1 Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by electronic transmission and confirmed and shall be deemed given when so delivered or emailed and confirmed (which may be by email) or if mailed, two (2) days after such mailing.
If to the Representative:
The Benchmark Company, LLC
150 East 58th Street, 17th Floor
New York, NY 10155
Attn: John J. Borer III
Email: jborer@benchmarkcompany.com
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with a copy (which shall not constitute notice) to:
Sheppard, Mullin, Richter & Hampton LLP
30 Rockefeller Plaza
New York, NY 10112
Attn: Richard Friedman, Esq.
Email: Rafriedman@sheppardmullin.com
If to the Company:
Rank One Computing Corporation
1290 Broadway, Suite 1200
Denver, CO 80203
Attn: Scott Swann
Email: scott.swann@roc.ai
with a copy (which shall not constitute notice) to:
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Denver, CO 80203
Attn: Joseph M. Lucosky, Esq.
Email: jlucosky@lucbro.com
9.2 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
9.3 Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
9.4 Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and Benchmark, dated July 1, 2025, shall remain in full force and effect.
9.5 Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
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9.6 Governing Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York (the “Specified Courts”), and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
9.7 Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
9.8 Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
[Signature Page Follows]
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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
| Very truly yours, | ||
| RANK ONE COMPUTING CORPORATION | ||
| By: | ||
| Name: | Scott Swann | |
| Title: | Chief Executive Officer | |
| Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto: | |||
| THE BENCHMARK COMPANY, LLC | |||
| By: | |||
| Name: | John J. Borer | ||
| Title: | Senior Managing Director | ||
SCHEDULE 1
| Underwriter | Total Number of Firm Shares to be | Number of Additional Option Shares to be Purchased if the Over- Allotment Option is Fully Exercised | ||||||
| The Benchmark Company, LLC | [●] | [●] | ||||||
| TOTAL | [●] | [●] |
SCHEDULE 2-A
Pricing Information
Number of Firm Shares: [_____]
Number of Option Shares: [_____]
Public Offering Price per Firm Share: $[_____]
Public Offering Price per Option Share: $[_____]
Underwriting Discount per Firm Share: $[_____]
Underwriting Discount per Option Share: $[_____]
Proceeds to Company per Firm Share (before expenses): $[_____]
Proceeds to Company per Option Share (before expenses): $[_____]
SCHEDULE 2-B
Written Testing-the-Waters Communications
(See attached)
SCHEDULE 3
List of Lock-Up Parties
EXHIBIT A
Form of Representative’s Warrant Agreement
(See attached)
EXHIBIT B
Form of Lock-Up Agreement
(See attached)
EXHIBIT C
Form of Press Release
RANK ONE COMPUTING CORPORATION
[Date]
Rank One Computing Corporation (the “Company”) announced today that The Benchmark Company, LLC acting as representative for the underwriters in the Company’s recent public offering of _______ shares of common stock of the Company, are [waiving] [releasing] a lock-up restriction with respect to _________ shares of common stock of the Company held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares of common stock may be sold on or after such date.
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.
Exhibit 3.4
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
RANK ONE COMPUTING CORPORATION
The undersigned hereby certifies that:
ONE: The date of filing the original Articles of Incorporation of this company with the Secretary of State of the State of Colorado was September 18, 2018.
TWO: Brendan F. Klare is the duly elected and acting President of Rank One Computing Corporation, a Colorado corporation.
THREE: The Articles of Incorporation of the company are hereby second amended and restated in their entirety to read as follows:
ARTICLE I
The name of this company is RANK ONE COMPUTING CORPORATION (the “Company”).
ARTICLE II
The address of the registered office of this Company in the State of Colorado is 1290 Broadway, Suite 1200, Denver, Colorado, 80203, and the name of the registered agent of this Company in the State of Colorado at such address is Rank One Computing Corporation.
ARTICLE III
The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the Colorado Business Corporation Act (the “CBCA”).
ARTICLE IV
A. The Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of Common Stock (the “Common Stock”) that the Company is authorized to issue is one hundred million (100,000,000) shares. The total number of shares of Preferred Stock (the “Preferred Stock”) that the Company is authorized to issue is one million (1,000,000) shares. The Common Stock and the Preferred Stock shall have a par value of $0.01 per share. The Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title prior to the issuance of any shares thereof, without stockholder approval. The voting powers, designations, preferences, limitations, restrictions, conversion rights, cumulative, relative, participating, optional, and other rights, and the qualification, limitations or restrictions thereof, of the Preferred Stock shall hereinafter be prescribed by resolution of the Company’s board of directors (the “Board”).
B. Upon the filing of these Second Amended and Restated Articles of Incorporation with the Secretary of State of the State of Colorado (the “Effective Time”), a one (1) for one hundred sixty-seven (167) forward split of the Common Stock shall become effective, pursuant to which each one (1) share of Common Stock outstanding and held of record by each shareholder of the Company immediately prior to the Effective Time shall be reclassified and split into one hundred sixty-seven (167) shares of Common Stock automatically and without any action by the holder thereof upon the Effective Time and shall represent one hundred sixty-seven (167) shares of Common Stock from and after the Effective Time.
C. Each shareholder of record of Common Stock shall be entitled to one vote for each share of Common Stock standing in such shareholder’s name on the books of the Company, except that in the election of directors, such shareholder shall have the right to vote the number of votes equal to the number of shares of Common Stock such shareholder owns for each director to be elected. Cumulative voting shall not be allowed in the election of directors or for any other purpose.
D. At all meetings of shareholders, shares representing a majority of the total number of votes attributable to all shares entitled to vote at such meeting, represented in person or by proxy, shall constitute a quorum; and at any meeting at which a quorum is present the affirmative vote of a majority of the votes cast on the matter represented at such meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number is required by applicable law.
E. Any action required or permitted by Articles 101 to 117 of the CBCA to be taken at a meeting of the shareholders of the Company may be taken without a meeting if the shareholders holding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted consent to such action in writing.
F. Notice to the shareholders of the Company of an annual meeting need not include a description of the purpose or purposes for which the meeting is called unless the Bylaws of the Company so provide.
G. Holders of shares of Common Stock are entitled to ratably receive dividends when and if declared by the Board out of funds legally available for that purpose, subject to the provisions of these Second Amended and Restated Articles of Incorporation, the Bylaws of the Company, any statutory or contractual restrictions on the payment of dividends, and any prior rights and preferences that may be applicable to any outstanding Preferred Stock.
H. Upon liquidation, dissolution, distribution of assets or other winding up of the Company, the holders of Common Stock are entitled to receive ratably the assets available for distribution to the holders after payment of liabilities and the liquidation preference of any of the Company’s outstanding shares of Preferred Stock.
ARTICLE V
Except as otherwise agreed in writing by the Company, no shareholder of the Company shall have any preemptive or similar right to acquire or subscribe for any additional unissued shares of stock, or other securities of any class, or rights, warrants or options to purchase stock or scrip, or securities of any kind convertible into stock or carrying stock purchase warrants or privileges.
ARTICLE VI
To the fullest extent permitted by the CBCA, as the same exists or may hereafter be amended, a director of the Company shall not be personally liable to the Company or its shareholders for monetary damages. If the CBCA is hereafter amended to eliminate or limit further the liability of a director, then, in addition to the elimination and limitation of liability provided by the preceding sentence, the liability of each director shall be eliminated or limited to the fullest extent permitted by the CBCA as so amended. Any repeal or modification of this Article by the shareholders of the Company shall be prospective only and shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.
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ARTICLE VII
The Company shall indemnify officers, directors and employees to the fullest extent provided under applicable law and the Bylaws of the Company.
ARTICLE VIII
For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its shareholders or any class thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the Company shall be vested in the Board. The number of directors which shall constitute the whole Board shall be fixed by the Board in the manner provided in the Bylaws of the Company, subject to any restrictions which may be set forth in these Second Amended and Restated Articles of Incorporation.
B. The Board is expressly empowered to adopt, amend, or repeal the Bylaws of the Company. The shareholders shall also have the power to adopt, amend, or repeal the Bylaws of the Company.
C. The directors of the Company need not be elected by written ballot unless the Bylaws of the Company so provide.
* * * *
FOUR: These Second Amended and Restated Articles of Incorporation have been duly approved by the Board.
FIVE: These Second Amended and Restated Articles of Incorporation were approved by the holders of the requisite number of shares of the Company in accordance with the CBCA.
In Witness Whereof, Rank One Computing Corporation has caused these Second Amended and Restated Articles of Incorporation to be signed by its President on January 8, 2026.
| Rank One Computing Corporation | ||
| By: | /s/ Brendan F. Klare | |
| Name: | Brendan F. Klare | |
| Title: | President | |
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Exhibit 3.5
AMENDED AND RESTATED
BYLAWS
OF
RANK ONE COMPUTING CORPORATION
(A COLORADO CORPORATION)
Adopted January 9, 2026
BYLAWS
OF
RANK ONE COMPUTING CORPORATION
(a colorado corporation)
ARTICLE I
OFFICES
Section 1.1 Business Offices. The corporation may have such offices, either within or outside Colorado, as the board of directors may from time to time determine or as the business of the corporation may require.
Section 1.2 Registered Office. The registered office of the corporation required by the Colorado Business Corporation Act (the “Act”) to be maintained in Colorado shall be as set forth in the Articles of Incorporation, unless changed as provided by law.
ARTICLE II
SHAREHOLDERS
Section 2.1 Annual Meeting. An annual meeting of the shareholders shall be held on such date and at such time as the board of directors shall fix in the notice of meeting, beginning with the year 2018, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting is a legal holiday in Colorado, the meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as conveniently may be. Failure to hold an annual meeting as required by these bylaws shall not invalidate any action taken by the board of directors or officers of the corporation.
Section 2.2 Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the president or the board of directors, and shall be called by the president or the board of directors at the written, dated and executed, demand of the holders of not less than one-tenth of all the votes of the corporation entitled to be cast on any proposed issue to be considered.
Section 2.3 Place of Meetings. Each meeting of the shareholders shall be held at such place, either within or outside Colorado, as may be designated in the notice of meeting, or, if no place is designated in the notice, at the principal office of the corporation if in Colorado or, if the principal office is not located in Colorado, at the registered office of the corporation in Colorado.
Section 2.4 Notice of Meetings. Except as otherwise required by law, written notice of each meeting of the shareholders stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be given, either personally (including delivery by private courier) or by first class, certified or registered mail or by facsimile or electronic mail with written acknowledgement of receipt, to each shareholder of record entitled to notice of such meeting, not less than 10 nor more than 60 days before the date of the meeting, except that if the authorized shares of the corporation are to be increased, at least 30 days notice shall be given, and, if the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation not in the usual and regular course of business is to be voted on, at least 20 days notice shall be given. Such notice shall be deemed to be given in person when delivered to the shareholder by telephone, telegraph, teletype, electronically transmitted facsimile or other form of wire or wireless communication or by mail or private carrier. If mailed, such notice shall be deemed to be given as to each shareholder when deposited in the United States mail, addressed to the shareholder at the shareholder’s address shown in the corporation’s current record of shareholders, with postage thereon prepaid, but, if three successive notices mailed to the last-known address of any shareholder of record are returned as undeliverable, no further notices to such shareholder shall be necessary until another address for such shareholder is made known to the corporation. If a meeting is adjourned to another time or place, notice need not be given if the time and place thereof are announced at the meeting, unless the adjournment is for more than 30 days or if after the adjournment a new record date is fixed, in either of which case notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting in accordance with the foregoing provisions of this Section 2.4.
Section 2.5 Waiver of Notice. Whenever notice is required by law, the Articles of Incorporation or these bylaws to be given to any shareholder, a waiver thereof in writing signed by the shareholder entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. By attending a meeting, a shareholder (a) waives objection to lack of notice or defective notice of such meeting unless the shareholder, at the beginning of the meeting, objects to the holding of the meeting or the transacting of business at the meeting because of lack of notice or defective notice, and (b) waives objection to consideration at such meeting of a particular matter not within the purpose or purposes described in the notice of such meeting unless the shareholder objects to considering the matter when it is presented.
Section 2.6 Fixing of Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. A record date fixed for the purpose of determining shareholders entitled to notice of a meeting of the shareholders shall be fixed not less than 10 days immediately preceding such meeting (30 days if the authorized stock is to be increased, 20 days if the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation not in the usual and regular course of business is to be considered). If no record date is so fixed, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring the dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of the shareholders has been made as provided in this Section, such determination shall apply to any adjournment thereof. Notwithstanding the foregoing provisions of this section, the record date for determining shareholders entitled to take action without a meeting as provided in Section 2.13 below shall be the date specified in such section.
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Section 2.7 Voting List. After fixing the record date, the officer or agent having charge of the stock transfer books for shares of the corporation shall make a complete record of the shareholders entitled to be given notice of the meeting or any adjournment thereof. The list shall be arranged by voting groups and within each voting group by class or series of shares, shall be alphabetical within each class or series, and shall show the address of, and the number of shares of each class and series that are held by, each shareholder. For a period of 10 days before such meeting or two business days after notice of the meeting is given, whichever is earlier, this record shall be kept on file at the principal office of the corporation, whether within or outside Colorado, and shall be subject to inspection by any shareholder or his agent or attorney for any purpose germane to the meeting at any time during usual business hours. Such record shall also be produced and kept open at the time and place of the meeting and any adjournment thereof and shall be subject to the inspection of any shareholder or his agent or attorney for any purpose germane to the meeting during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of the shareholders.
Section 2.8 Proxies. At any meeting of the shareholders, a shareholder may vote by proxy executed in writing by the shareholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.
Section 2.9 Quorum and Voting Rights. At all meetings of shareholders, shares representing a majority of the total number of votes attributable to all shares entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum with respect to each matter. If a quorum is present, action on a matter, other than the election of directors, is approved if at least a majority of the votes cast favor the action, unless the vote of a greater proportion or number is otherwise required by the Act, the Articles of Incorporation or these bylaws. Notwithstanding the foregoing, an amendment to the Articles of Incorporation that adds, changes or deletes a greater quorum or voting requirement shall meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater. In the absence of a quorum on any matter, at least a majority of the shares so represented may adjourn the meeting with respect to such matter from time to time for a period not to exceed 60 days at any one adjournment. At any such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting.
Section 2.10 Conflicting Interest Transaction; Notice Rights. A conflicting interest transaction is any loan or other assistance by the corporation to a director or to an entity in which a director of the corporation is a director or officer or has a financial interest; a guaranty by the corporation of an obligation of a director or of an obligation of an entity in which a director of the corporation is a director or officer or has a financial interest; or a contract or transaction between the corporation and a director or between the corporation and an entity in which a director of the corporation is a director or officer or has a financial interest.
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No conflicting interest transaction shall be void or voidable or be enjoined, set aside or give rise to an award of damages or other sanctions in a proceeding by a shareholder or by or in the right of the corporation, solely because the conflicting interest transaction involves a director of the corporation or an entity in which a director of the corporation is a director or officer or has a financial interest or solely because the director is present at or participates in the meeting of the corporation’s board of directors or of the committee of the board of directors which authorizes, approves or ratifies the conflicting interest transaction or solely because the director’s vote is counted for such purpose, if: (a) the material facts as to the director’s relationship or interest and as to the conflicting interest transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes, approves or ratifies the conflicting interest transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or (b) the material facts as to the director’s relationship or interest and as to the conflicting interest transaction are disclosed or are known to the shareholders entitled to vote thereon, and the conflicting interest transaction is specifically authorized, approved or ratified in good faith by a vote of the shareholders; or (c) the conflicting interest transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof or the shareholders.
A board of directors or a committee thereof shall not authorize a loan, by the corporation to a director of the corporation or to an entity in which a director of the corporation is a director or officer or has a financial interest, or a guaranty, by the corporation of an obligation of a director of the corporation or of an obligation of an entity in which a director of the corporation is a director or officer or has a financial interest, until at least 10 days after written notice of the proposed authorization of the loan or guaranty has been given to the shareholders who would be entitled to vote thereon if the issue of the loan or guaranty were submitted to a vote of the shareholders.
Section 2.11 Voting of Shares. Subject to the provisions of Section 2.6, each outstanding share of record, regardless of class, is entitled to the number of votes specified in the Articles of Incorporation, and each outstanding fractional share of record is entitled to a corresponding fractional vote, on each matter submitted to a vote of the shareholders either at a meeting thereof or pursuant to Section 2.13, except to the extent that the voting rights of the shares of any class or classes are limited, increased or denied by the Articles of Incorporation as permitted by the Act. In the election of directors, each record holder of stock entitled to vote at such election shall have the right to vote the number of shares owned by him for as many persons as there are directors to be elected, and for whose election he has the right to vote. Cumulative voting shall not be allowed.
Section 2.12 Voting of Shares by Certain Holders.
(a) Shares Held or Controlled by the Corporation. No shares held by another corporation shall be voted at any meeting or counted in determining a quorum if a majority of the shares entitled to vote for the election of directors of such other corporation is held by this corporation.
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(b) Shares Held by Another Corporation. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine.
(c) Shares Held by More Than One Person. Shares standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, voting with respect to the shares shall have the following effects: (i) if only one person votes, his act binds all; (ii) if two or more persons vote, the act of the majority so voting binds all; (iii) if two or more persons vote, but the vote is evenly split on any particular matter, each faction may vote the shares in question proportionally, or any person voting the shares of a beneficiary, if any, may apply to any court of competent jurisdiction in Colorado to appoint an additional person to act with the persons so voting the shares, in which case the shares shall be voted as determined by a majority of such persons; and (iv) if a tenancy is held in unequal interests, a majority or even split for the purposes of subparagraph (iii) shall be a majority or even split in interest. The foregoing effects of voting shall not be applicable if the secretary of the corporation is given written notice of alternative voting provisions and is furnished with a copy of the instrument or order wherein the alternative voting provisions are stated.
(d) Shares Held in Trust or by a Personal Representative. Shares held by an administrator, executor, guardian, conservator or other personal representative may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.
(e) Shares Held by a Receiver. Shares standing in the name of a receiver may be voted by such receiver and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do is contained in an appropriate order of the court by which such receiver was appointed.
(f) Pledged Shares. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.
(g) Redeemable Shares Called for Redemption. Redeemable shares that have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been deposited with a bank, trust company or other financial institution with irrevocable instruction and authority to pay the redemption price to the holders of the shares upon surrender of certificates therefor.
(h) Shares Held in a Fiduciary Capacity. The corporation may vote any shares, including its own shares, held by it in a fiduciary capacity.
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Section 2.13 Action by Shareholders Without a Meeting. If the Articles of Incorporation so provide, action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by the shareholders holding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted. Any such written consents shall be delivered to the Secretary of the corporation for inclusion in the minutes or for filing with the corporate records. Action taken under this section is effective when such minimum necessary shareholders have signed the consent, unless the consent specifies a different effective date. Any such writing may be received by the corporation by electronically transmitted facsimile or other form of wire or wireless communication providing the corporation with a complete copy thereof, including a copy of the signature thereto. The shareholder so transmitting such a writing shall furnish an original of such writing to the corporation, but the failure of the corporation to receive or record such original writing shall not affect the action so taken. The record date for determining shareholders entitled to take action without a meeting shall be the date the written consent is first received by the corporation.
ARTICLE III
Board of Directors
Section 3.1 General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, the board of directors, except as otherwise provided in the Act, the Articles of Incorporation or these bylaws.
Section 3.2 Number, Tenure and Qualifications. The number of directors of the corporation shall be as fixed from time to time by resolution of the board of directors or shareholders. Except as provided in Sections 2.1 and 3.5, directors shall be elected at each annual meeting of the shareholders. Each director shall hold office until the next annual meeting of the shareholders and thereafter until his successor shall have been elected and qualified, or until his earlier death, resignation or removal. Directors must be natural persons at least 18 years old but need not be residents of Colorado or shareholders of the corporation.
Section 3.3 Resignation. Any director may resign at any time by giving written notice to the corporation. A director’s resignation is effective when it is received by the corporation unless the notice specifies a later effective date, and the acceptance of such resignation shall not be necessary to make it effective.
Section 3.4 Removal. At a meeting called expressly for that purpose, the entire board of directors or any lesser number may be removed, with or without cause, only if the number of votes cast in favor of removal exceeds the number of votes cast against removal by those shares then entitled to vote at an election of directors; except that if the holders of shares of any class of stock are entitled to elect one or more directors by the provisions of the Articles of Incorporation, the provisions of this Section 3.4 shall apply, with respect to the removal of a director or directors so elected by such class, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. Any reduction in the authorized number of directors shall not have the effect of shortening the term of any incumbent director unless such director is also removed from office in accordance with this Section 3.4.
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Section 3.5 Vacancies. Unless otherwise required in the Articles of Incorporation, any vacancy occurring in the board of directors, including vacancies due to an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum, or by the affirmative vote of two directors if there are only two directors remaining, or by a sole remaining director, or by the shareholders if there are no directors remaining. The term of a director elected by the directors in office to fill a vacancy expires at the next annual shareholders’ meeting at which directors are elected. The term of a director elected by the shareholders to fill a vacancy shall be the unexpired term of his or her predecessor in office; except that, if the director’s predecessor had been elected by the directors in office to fill a vacancy, the term of a director elected by the shareholders shall be the unexpired term of the last predecessor elected by the shareholders. If the vacant office was held by a director elected by a voting group of shareholders: (a) if one or more of the remaining directors were elected by the same voting group, only such directors are entitled to vote to fill the vacancy if it is filled by directors, and they may do so by the affirmative vote of a majority of such directors remaining in office; and (b) only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.
Section 3.6 Regular Meetings. A regular meeting of the board of directors shall be held immediately after and at the same place as the annual meeting of the shareholders, or as soon thereafter as conveniently may be, at the time and place, either within or outside Colorado, determined by the board, for the purpose of electing officers and for the transaction of such other business as may come before the meeting. Failure to hold such meeting, however, shall not invalidate any action taken by any officer then or thereafter in office. The board of directors may provide, by resolution, the time and place, either within or outside Colorado, for the holding of additional regular meetings without other notice than such resolution.
Section 3.7 Special Meetings. Special meetings of the board of directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any convenient place, either within or outside Colorado, as the place for holding any special meeting of the board called by them.
Section 3.8 Meetings by Telephone. Unless otherwise provided by the Articles of Incorporation, one or more members of the board of directors may participate in a meeting of the board by, or the meeting may be conducted through the use of, any communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.
Section 3.9 Notice of Meetings. Notice of each meeting of the board of directors (except those regular meetings for which notice is not required) stating the place, day and hour of the meeting shall be given to each director at least two days prior thereto by the mailing of written notice by first class, certified or registered mail, or at least two days prior thereto by personal delivery (including delivery by private courier to the director or delivered to the last address of the director furnished by him to the corporation for such purpose) of written notice or by telephone, telegraph, teletype, electronically transmitted facsimile, e-mail or other form of wire or wireless communication, except that, in the case of a meeting to be held pursuant to Section 3.8, notice may be given by telephone one day prior thereto. The method of notice need not be the same to each director. Notice shall be deemed to be given at the earliest of (a) the date received, but, if the director is no longer at the address of record, then the date delivery was attempted; (b) five days after mailing; or (c) the date shown on the return receipt, if mailed by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee. Neither the business to be transacted at nor the purpose of any meeting of the board of directors need be specified in the notice of such meeting unless otherwise required by statute.
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Section 3.10 Waiver of Notice. Whenever notice is required by law, the Articles of Incorporation or these bylaws to be given to the directors, a waiver thereof in writing signed by the director entitled to such notice, whether before, at or after the time stated therein, shall be equivalent to the giving of such notice. Such waiver shall be delivered to the corporation for filing with the corporate records, but such delivery and filing shall not be conditions of the effectiveness of the waiver. A director’s attendance at, or participation in a meeting, waives any required notice to him or her of the meeting unless: (a) at the beginning of the meeting, or promptly upon his or her later arrival, the director objects to holding the meeting or transacting business at the meeting because of lack of notice or defective notice and does not thereafter vote for or assent to action taken at the meeting; or (b) if special notice was required of a particular purpose, the director objects to transacting business with respect to the purpose for which such special notice was required and does not thereafter vote for or assent to action taken at the meeting with respect to such purpose. Neither the business to be transacted at nor the purpose of any meeting of the board of directors need be specified in the waiver of notice of such meeting unless otherwise required by statute.
Section 3.11 Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless the director: (a) objects at the beginning of the meeting, or promptly upon his or her arrival, to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting; (b) contemporaneously requests that his dissent or abstention as to any specific action taken be entered in the minutes of such meeting; or (c) causes written notice of his dissent or abstention as to any specific action to be received by the presiding officer of such meeting before its adjournment or by the corporation immediately after adjournment of such meeting. The right of dissent or abstention as to a specific action taken at a meeting of the board is not available to a director who votes in favor of such action.
Section 3.12 Quorum and Voting Rights. Except as otherwise may be required by law, the Articles of Incorporation or these bylaws, a majority of the number of directors fixed in accordance with these bylaws, present in person, shall constitute a quorum for the transaction of business at any meeting of the board of directors, and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. If less than such majority is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than an announcement at the meeting, until a quorum shall be present. No director may vote or act by proxy or power of attorney at any meeting of directors.
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Section 3.13 Action Without a Meeting. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by all of the directors. Such consent (which may be signed in counterparts) shall have the same force and effect as a unanimous vote of the directors and may be stated as such in any document. Unless the consent specifies a different effective date, action taken without a meeting pursuant to a consent in writing as provided herein is effective when all directors have signed the consent; however, the consent shall not be effective if, before all of the directors have signed the consent, any director has revoked his or her consent by a writing signed by the director and received by the secretary or any other person authorized by the bylaws or the board of directors to receive such a revocation. All consents signed pursuant to this Section 3.13 shall be delivered to the secretary of the corporation for inclusion in the minutes or for filing with the corporate records.
Section 3.14 Executive and Other Committees. The board of directors, by resolution adopted by a majority of the directors in office when the action is taken, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and affairs of the corporation, except that no such committee shall have the power or authority to (a) authorize distributions, (b) approve or propose to the shareholders actions or proposals required by law to be approved by the shareholders, (c) fill vacancies on the board of directors or any committee thereof, including any committee authorized by this Section 3.14, (d) adopt, amend or repeal the bylaws, (e) approve a plan of merger not requiring shareholder approval, (f) amend Articles of Incorporation to the extent required by law to be amended by the full board of directors, (g) authorize or approve reacquisition of shares of the corporation, except according to a formula or method prescribed by the board of directors, or (h) authorize or approve the issuance or sale of shares, or any contract for the sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares; except that the board of directors may authorize a committee or an officer to do so within limits specifically prescribed by the board of directors. The delegation of authority to any committee shall not operate to relieve the board of directors or any member of the board from any responsibility imposed by law. Subject to the foregoing, the board of directors may provide such powers, limitations and procedures for such committees as the board deems advisable; except that each committee shall be governed by the procedures set forth in Sections 3.6 (except as they relate to an annual meeting) and 3.7 through 3.13 as if the committee were the board of directors. Each committee shall keep regular minutes of its meetings, which shall be reported to the board of directors when required and submitted to the corporation for inclusion in the corporate records.
Section 3.15 Compensation. By resolution of the board of directors, notwithstanding the provisions of Section 2.10, a director may be paid his expenses, if any, of attendance at each meeting of the board of directors and each meeting of any committee of the board of which he is a member and may be paid a fixed sum for attendance at each such meeting or a stated salary, or both a fixed sum and a stated salary. Subject to Section 2.10, no such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
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ARTICLE IV
Officers
Section 4.1 Number and Qualifications. The officers of the corporation shall consist of a president, a secretary, a treasurer and such other officers, including a chairman of the board, chief executive officer, one or more vice-presidents and a controller, as may from time to time be appointed by the board. In addition, the board of directors or the president may appoint such assistant and other subordinate officers, including assistant vice-presidents, assistant secretaries and assistant treasurers, as it or he shall deem necessary or appropriate. Any number of offices may be held by the same person. An officer shall be a natural person who is at least 18 years old.
Section 4.2 Appointment and Term of Office. Except as provided in Sections 4.1 and 4.6, the officers of the corporation shall be appointed by the board of directors annually at the first meeting of the board held after each annual meeting of the shareholders as provided in Section 3.6. If the appointment of officers shall not be held as provided herein, such appointment shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly appointed and shall have qualified, or until the expiration of his term in office if appointed for a specified period of time, or until his earlier death, resignation or removal.
Section 4.3 Compensation. Officers shall receive such compensation for their services as may be authorized or ratified by the board of directors and no officer shall be prevented from receiving compensation by reason of the fact that he is also a director of the corporation. Appointment as an officer shall not of itself create a contract or other right to compensation for services performed as such officer.
Section 4.4 Resignation. Any officer may resign at any time, subject to any rights or obligations under any existing contracts between the officer and the corporation, by giving written notice of resignation to the corporation. A resignation of an officer is effective when the notice is received by the corporation unless the notice specifies a later effective date. If a resignation is made effective at a later date, the board of directors may permit the officer to remain in office until the effective date and may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date, or the board of directors may remove the officer at any time before the effective date and may fill the resulting vacancy. An officer’s resignation shall take effect at the time specified in such notice and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. An officer’s resignation does not affect the corporation’s contract rights, if any, with the officer.
Section 4.5 Removal. Any officer may be removed with or without cause at any time by the board of directors or, in the case of assistant and other subordinate officers, by the board of directors or the president (whether or not such officer was appointed by the president) whenever in its or his judgment, as the case may be, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. The appointment of an officer shall not in itself create contract rights.
Section 4.6 Vacancies. A vacancy in any office, however occurring, may be filled by the board of directors or, if such office may be filled by the president as provided in Section 4.1, by the president, for the unexpired portion of the term.
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Section 4.7 Authority and Duties. The officers of the corporation shall have the authority and shall exercise the powers and perform the duties specified below and as may be additionally specified by the president, the board of directors or these bylaws (and, in all cases where the duties of any officer are not prescribed by the bylaws or by the board of directors, such officer shall follow the orders and instructions of the president), except that in any event each officer shall exercise such powers and perform such duties as may be required by law:
(a) Chairman of the Board. The chairman of the board, if any, shall be elected from among the directors, shall preside at all meetings of the shareholders and directors of the corporation and shall have and may exercise all such powers and perform such other duties as may be assigned to him from time to time by the board of directors.
(b) Chief Executive Officer. The chief executive officer, if any, shall, subject to the direction and supervision of the board of directors, (i) have general and active control of its affairs and business and general supervision of its officers, agents and employees; (ii) in the absence of the chairman of the board, preside at all meetings of the shareholders and the board of directors; (iii) see that all orders and resolutions of the board of directors are carried into effect; and (iv) perform all other duties incident to the office of Chief Executive Officer and as from time to time may be assigned to him by the board of directors.
(c) President. The president shall, subject to the direction and supervision of the board of directors, (i) if there is no chief executive officer, be the chief executive officer of the corporation and have general and active control of its affairs and business and general supervision of its officers, agents and employees; (ii) unless there is a chairman of the board, preside at all meetings of the shareholders and the board of directors; (iii) see that all orders and resolutions of the board of directors are carried into effect; and (iv) perform all other duties incident to the office of president and as from time to time may be assigned to him by the board of directors.
(d) Vice-Presidents. The vice-president, if any (or, if there is more than one, then each vice-president), shall assist the president and shall perform such duties as may be assigned to him by the president or by the board of directors. The vice-president, if there is one (or, if there is more than one, then the vice-president designated by the board of directors, or, if there be no such designation, then the vice-presidents in order of their election), shall, at the request of the president or, in his absence or inability or refusal to act, perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president. Assistant vice-presidents, if any, shall have such powers and perform such duties as may be assigned to them by the president or by the board of directors.
(e) Secretary. The secretary shall: (i) prepare and maintain the minutes of the proceedings of the shareholders, the board of directors and any committees of the board; (ii) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (iii) be custodian of the corporate records and of the seal of the corporation; (iv) keep at the corporation’s registered office or principal place of business within or outside Colorado a record containing the names and addresses of all shareholders and the number and class of shares held by each, unless such a record shall be kept at the office of the corporation’s transfer agent or registrar; (v) have general charge of the stock books of the corporation, unless the corporation has a transfer agent; (vi) authenticate records of the corporation; and (vii) in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Assistant secretaries, if any, shall have the same duties and powers, subject to supervision by the secretary.
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(f) Treasurer. The treasurer shall: (i) be the principal financial officer of the corporation and have the care and custody of all its funds, securities, evidences of indebtedness and other personal property and deposit the same in accordance with the instructions of the board of directors; (ii) receive and give receipts and acquittances for moneys paid in on account of the corporation, and pay out of the funds on hand all bills, payrolls and other just debts of the corporation of whatever nature upon maturity; (iii) unless there is a controller, be the principal accounting officer of the corporation and as such prescribe and maintain the methods and systems of accounting to be followed, keep complete books and records of account, prepare and file all local, state and federal tax returns, prescribe and maintain an adequate system of internal audit and prepare and furnish to the president and the board of directors statements of account showing the financial position of the corporation and the results of its operations; (iv) upon request of the board, make such reports to it as may be required at any time; and (v) perform all other duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the board of directors or the president. Assistant treasurers, if any, shall have the same powers and duties, subject to the supervision by the treasurer.
Section 4.8 Surety Bonds. The board of directors may require any officer or agent of the corporation to execute to the corporation a bond in such sums and with such sureties as shall be satisfactory to the board, conditioned upon the faithful performance of his duties and for the restoration to the corporation of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
ARTICLE V
Stock
Section 5.1 Issuance of Shares. The issuance or sale by the corporation of any shares of its authorized capital stock of any class shall be made only upon authorization by the board of directors, except as otherwise may be provided by law. No shares shall be issued until full consideration has been received therefor. Every issuance of shares shall be recorded on the books maintained for such purpose by or on behalf of the corporation.
Section 5.2 Stock Certificates; Uncertificated Shares. The shares of stock of the corporation shall be represented by certificates, except that the board of directors may authorize the issuance of any class or series of stock of the corporation without certificates as provided by law. If shares are represented by certificates, such certificates shall be signed either manually or in facsimile in the name of the corporation by one or more officers designated in the bylaws or by the board of directors and may be sealed with the seal of the corporation or with a facsimile thereof. If the issuing corporation is authorized to issue different classes of shares or different series within a class, the share certificate shall contain a summary, on the front or the back, of the designations, preferences, limitations and relative rights applicable to each class, the variations in preferences, limitations and rights determined for each series, and the authority of the board of directors to determine variations for future classes or series. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish to the shareholder this information on request in writing and without charge. If the person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid. Certificates of stock shall be in such form consistent with law as shall be prescribed by the board of directors.
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Section 5.3 Consideration for Shares. Shares shall be issued for such consideration expressed in dollars as shall be fixed from time to time by the board of directors. Such consideration shall consist of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed and other securities of the corporation; however, the promissory note of a subscriber or an affiliate of the subscriber for shares shall not constitute consideration for the shares unless the note is negotiable and is secured by collateral, other than the shares, having a fair market value at least equal to the principal amount of the note. For the purposes of this Section, “promissory note” means a negotiable instrument on which there is an obligation to pay independent of collateral and does not include a nonrecourse note.
Section 5.4 Lost Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, the board of directors may direct the issuance of a new certificate in lieu thereof upon such terms and conditions in conformity with law as it may prescribe. The board of directors may in its discretion require a bond in such form and amount and with such surety as it may determine before issuing a new certificate.
Section 5.5 Transfer of Shares. Upon presentation and surrender to the corporation or to the corporation’s transfer agent of a certificate of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, payment of all transfer taxes, if any, and the satisfaction of any other requirements of law, including inquiry into and discharge of any adverse claims of which the corporation has notice, the corporation or the transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transfer on the books maintained for such purpose by or on behalf of the corporation. No transfer of shares shall be effective until it has been entered on such books. The corporation or the corporation’s transfer agent may require a signature guaranty or other reasonable evidence that any signature is genuine and effective before making any transfer. Transfers of uncertificated shares shall be made in accordance with applicable provisions of law.
Section 5.6 Holders of Record. The corporation shall be entitled to treat the holder of record of any share of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as may be required by the laws of Colorado.
Section 5.7 Shares Held for Account of Another. The board of directors, in the manner provided by the Act, may adopt a procedure whereby a shareholder of the corporation may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with such procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth therein, to be the holders of record of the number of shares specified in place of the shareholder making the certification.
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Section 5.8 Transfer Agents, Registrars and Paying Agents. The board of directors may at its discretion appoint one or more transfer agents, registrars or agents for making payment upon any class of stock, bond, debenture or other security of the corporation. Such agents and registrars may be located either within or outside Colorado. They shall have such rights and duties and shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification
Section 6.1 Definitions. For purposes of this Article, the following terms shall have the meanings set forth below:
(a) “Corporation” includes any domestic or foreign entity that is a predecessor of the Corporation by reason of a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.
(b) “Director” means an individual who is or was a director of the Corporation or an individual who, while a director of the Corporation, is or was serving at the Corporation’s request as a director, officer, partner, trustee, employee, fiduciary or agent of another domestic or foreign corporation or other person or of an employee benefit plan. A director is considered to be serving an employee benefit plan at the Corporation’s request if his or her duties to the Corporation also impose duties on, or otherwise involve services by, the director to the plan or to participants in or beneficiaries of the plan. “Director” includes, unless the context requires otherwise, the estate or personal representative of a director.
(c) “Expenses” includes counsel fees.
(d) “Liability” means the obligation incurred with respect to a proceeding to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable Expenses.
(e) “Official Capacity” means, when used with respect to a Director, the office of Director in the Corporation and, when used with respect to a person other than a Director as contemplated in Section 7-109-107 of the Act (an officer, employee, fiduciary and agent), the office in the Corporation held by the officer or the employment, fiduciary or agency relationship undertaken by the employee, fiduciary or agent on behalf of the Corporation. “Official Capacity” does not include service for any other domestic or foreign corporation or other person or employee benefit plan.
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(f) ”Party” includes a person who was, is or is threatened to be made a named defendant or respondent in a proceeding.
(g) “Proceeding” means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.
Section 6.2 Right to Indemnification. Subject to Section 6.4, the Corporation shall indemnify any person made a Party because the person is or was a Director to a Proceeding against Liability incurred in, relating to, or as a result of, the Proceeding to the fullest extent permitted by law, including, without limitation, in circumstances in which, in the absence of this Section 6.2, indemnification would be discretionary under the Act, if: (a) the person conducted himself or herself in good faith; (b) the person reasonably believed: (I) in the case of conduct in an Official Capacity with the Corporation, that his or her conduct was in the Corporation’s best interests; and (II) in all other cases, that his or her conduct was at least not opposed to the Corporation’s best interests; and (c) in the case of any criminal Proceeding, the person had no reasonable cause to believe his or her conduct was unlawful. A Director’s conduct with respect to an employee benefit plan for a purpose the Director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement of (b)(II) above. A Director’s conduct with respect to an employee benefit plan for a purpose that the Director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirements of (a) above. The termination of a Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the Director did not meet the standard of conduct described in this section. However, the Corporation may not indemnify a Director under this section: (a) in connection with a Proceeding by or in the right of the Corporation in which the Director was adjudged liable to the Corporation; or (b) in connection with any other Proceeding charging that the Director derived an improper personal benefit, whether or not involving action in an Official Capacity, in which Proceeding the Director was adjudged liable on the basis that he or she derived an improper personal benefit. Indemnification permitted under this section in connection with a Proceeding by or in the right of the Corporation is limited to reasonable Expenses incurred in connection with the Proceeding.
In addition to the foregoing, the Corporation shall indemnify a person who was wholly successful, on the merits or otherwise, in the defense of any Proceeding to which the person was a Party because the person is or was a Director, against reasonable Expenses incurred by him or her in connection with the Proceeding.
Section 6.3 Advancement of Expenses. The Corporation may pay for or reimburse the reasonable Expenses incurred by a Director who is a Party to a Proceeding in advance of final disposition of the Proceeding if: (a) the Director furnishes to the Corporation a written affirmation of the Director’s good faith belief that he or she has met the standard of conduct described in section 6.2; (b) the Director furnishes to the Corporation a written undertaking, executed personally or on the Director’s behalf, to repay the advance if it is ultimately determined that he or she did not meet the standard of conduct; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under this article. The undertaking required by (b) of this section shall be an unlimited general obligation of the Director but need not be secured and may be accepted without reference to financial ability to make repayment.
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Section 6.4 Burden of Proof. The Corporation may not indemnify a Director under Section 6.2 unless authorized in the specific case after a determination has been made that indemnification of the Director is permissible in the circumstances because the Director has met the standard of conduct set forth in Section 6.2. The Corporation shall not advance Expenses to a Director under Section 6.3 unless authorized in the specific case after the written affirmation and undertaking are received and the determination required by Section 6.3 has been made. The determinations required by this section shall be made: (a) by the board of directors by a majority vote of those present at a meeting at which a quorum is present, and only those Directors not parties to the Proceeding shall be counted in satisfying the quorum; or (b) if a quorum cannot be obtained, by a majority vote of a committee of the board of directors designated by the board of directors, which committee shall consist of two or more Directors not parties to the Proceeding; except that Directors who are parties to the Proceeding may participate in the designation of Directors for the committee. If a quorum cannot be obtained as contemplated in (a) above, and a committee cannot be established under (b) above, or, even if a quorum is obtained or a committee is designated, if a majority of the Directors constituting such quorum or such committee so directs, the determination required to be made by this section shall be made: by independent legal counsel selected by a vote of the board of directors or the committee or, if a quorum of the full board cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board of directors; or by the shareholders. Authorization or indemnification and advance of Expenses shall be made in the same manner as the determination that indemnification or advance of Expenses is permissible; except that, if the determination that indemnification or advance of Expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of Expenses shall be made by the body that selected such counsel.
Section 6.5 Notification and Defense of Claim. Promptly after receipt by a Party of notice of the commencement of any Proceeding, the Party shall, if a claim in respect thereof is to be made against the Corporation under this Article, notify the Corporation in writing of the commencement thereof; provided, however, that delay in so notifying the Corporation shall not constitute a waiver or release by the Party of any rights under this Article. With respect to any such Proceeding: (a) the Corporation shall be entitled to participate therein at its own expense; (b) any counsel representing the Party to be indemnified in connection with the defense or settlement thereof shall be counsel mutually agreeable to the Party and to the Corporation; and (c) the Corporation shall have the right, at its option, to assume and control the defense or settlement thereof, with counsel satisfactory to the Party. If the Corporation assumes the defense of the Proceeding, the Party shall have the right to employ its own counsel, but the fees and Expenses of such counsel incurred after notice from the Corporation of its assumption of the defense of such Proceeding shall be at the expense of the Party unless (i) the employment of such counsel has been specifically authorized by the Corporation, (ii) the Party shall have reasonably concluded that there may be a conflict of interest between the Corporation and the Party in the conduct of the defense of such Proceeding, or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such Proceeding. Notwithstanding the foregoing, if an insurance carrier has supplied directors’ and officers’ liability insurance covering a Proceeding and is entitled to retain counsel for the defense of such Proceeding, then the insurance carrier shall retain counsel to conduct the defense of such Proceeding unless the Party and the Corporation concur in writing that the insurance carrier’s doing so is undesirable. The Corporation shall not be liable under this Article for any amounts paid in settlement of any Proceeding effected without its written consent. The Corporation shall not settle any Proceeding in any manner that would impose any penalty or limitation on a Party without the Party’s written consent. Consent to a proposed settlement of any Proceeding shall not be unreasonably withheld by either the Corporation or the Party.
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Section 6.6 Notice to Shareholders of Indemnification of Director. If the Corporation indemnifies or advances Expenses to a Director under this Article in connection with a Proceeding by or in the right of the Corporation, the Corporation shall give written notice of the indemnification or advance to the shareholders with or before the notice of the next shareholders’ meeting. If the next shareholder action is taken without a meeting at the instigation of the board of directors, such notice shall be given to the shareholders at or before the time the first shareholder signs a writing consenting to such action.
Section 6.7 Enforcement. The right to indemnification and advancement of Expenses granted by this Article shall be enforceable in any court of competent jurisdiction if the Corporation denies the claim, in whole or in part, or if no disposition of such claim is made within 90 days after the written request for indemnification or advancement of Expenses is received. If successful in whole or in part in such suit, the Party’s Expenses incurred in bringing and prosecuting such claim shall also be paid by the Corporation. Whether or not the Party has met any applicable standard of conduct, been adjudged liable to the Corporation or derived improper personal benefit, the court in such suit may order indemnification or the advancement of Expenses as the court deems proper (subject to any express limitation of the Act). Further, the Corporation shall indemnify a Party from and against any and all Expenses and, if requested by the Party, shall (within 10 business days of such request) advance such Expenses to the Party which are incurred by the Party in connection with any claim asserted against or suit brought by the Party for recovery under any directors’ and officers’ liability insurance policies maintained by the Corporation, regardless of whether the Party is unsuccessful in whole or in part in such claim or suit.
Section 6.8 Proceedings by a Party. The Corporation shall indemnify, advance or reimburse Expenses incurred by a Director in connection with an appearance as a witness in a Proceeding at a time when he or she has not been made a named defendant or respondent in the Proceeding.
Section 6.9 Subrogation. In the event of any payment under this Article, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnified Party, who shall execute all papers and do everything that may be necessary to assure such rights of subrogation to the Corporation.
Section 6.10 Other Payments. The Corporation shall not be liable under this Article to make any payment in connection with any Proceeding against or involving a Party to the extent the Party has otherwise actually received payment (under any insurance policy, agreement or otherwise) of the amounts otherwise indemnifiable hereunder. A Party shall repay to the Corporation the amount of any payment the Corporation makes to the Party under this Article in connection with any Proceeding against or involving the Party, to the extent the Party has otherwise actually received payment (under any insurance policy, agreement or otherwise) of such amount.
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Section 6.11 Insurance. The Corporation may purchase and maintain insurance on behalf of a person who is or was a Director, officer, employee, fiduciary or agent of the Corporation, or who, while a Director, officer, employee, fiduciary or agent of the Corporation, is or was serving at the request of the Corporation as a Director, officer, partner, trustee, employee, fiduciary or agent of another domestic or foreign corporation or other person or of an employee benefit plan, against liability asserted against or incurred by the person in that capacity or arising from his or her status as a Director, officer, employee, fiduciary or agent, whether or not the Corporation would have power to indemnify the person against the same liability under Section 6.2 or 6.12. Any such insurance may be procured from any insurance company designated by the board of directors, whether such insurance company is formed under the laws of Colorado or any other jurisdiction of the United States or elsewhere, including any insurance company in which the Corporation has an equity or any other interest through stock ownership or otherwise.
Section 6.12 Indemnification of Officers, Employees, Fiduciaries and Agents. An officer is entitled to mandatory indemnification and to apply for court-ordered indemnification under the Act, in each case to the same extent as a Director. The Corporation shall indemnify and advance expenses to an officer, employee, fiduciary or agent of the Corporation to the same extent as to a Director. In addition, the Corporation may also indemnify and advance expenses to an officer, employee, fiduciary or agent who is not a Director to a greater extent than provided to a Director, if not inconsistent with public policy, and if provided for by general or specific action of its board of directors or shareholders, or contract.
Section 6.13 Other Rights and Remedies. The rights to indemnification and advancement of Expenses provided in this Article shall be in addition to any other rights to which a Party may have or hereafter acquire under any law, provision of the Articles of Incorporation, any other or further provision of these bylaws, vote of the shareholders or Directors, agreement or otherwise. The Corporation shall have the right, but shall not be obligated, to indemnify or advance Expenses to any agent of the Corporation not otherwise covered by this Article in accordance with and to the fullest extent permitted by the Act.
Section 6.14 Applicability; Effect. The rights to indemnification and advancement of Expenses provided in this Article shall be applicable to acts or omissions that occurred prior to the adoption of this Article, shall continue as to any Party during the period such Party serves in any one or more of the capacities covered by this Article, shall continue thereafter so long as the Party may be subject to any possible Proceeding by reason of the fact that he served in any one or more of the capacities covered by this Article, and shall inure to the benefit of the estate and personal representatives of each such person. Any repeal or modification of this Article or of any section or provision hereof shall not affect any rights or obligations then existing. All rights to indemnification under this Article shall be deemed to be provided by a contract between the Corporation and each Party covered hereby.
Section 6.15 Severability. If any provision of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever (a) the validity, legality and enforceability of the remaining provisions of this Article (including without limitation, all portions of any sections of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, all portions of any section of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent of this Article that each Party covered hereby is entitled to the fullest protection permitted by law.
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ARTICLE VII
Miscellaneous
Section 7.1 Voting of Securities by the Corporation. Unless otherwise provided by resolution of the board of directors, on behalf of the corporation the president or any vice-president shall attend in person or by substitute appointed by him, or shall execute written instruments appointing a proxy or proxies to represent the corporation at, all meetings of the shareholders of any other corporation, association or other entity in which the corporation holds any stock or other securities, and may execute written waivers of notice with respect to any such meetings. At all such meetings and otherwise, the president or any vice-president, in person or by substitute or proxy as aforesaid, may vote the stock or other securities so held by the corporation and may execute written consents and any other instruments with respect to such stock or securities and may exercise any and all rights and powers incident to the ownership of said stock or securities, subject, however, to the instructions, if any, of the board of directors.
Section 7.2 Seal. The corporate seal of the corporation shall be in such form as adopted by the board of directors, and any officer of the corporation may, when and as required, affix or impress the seal, or a facsimile thereof, to or on any instrument or document of the corporation.
Section 7.3 Fiscal Year. The fiscal year of the corporation shall be as established by the board of directors.
Section 7.4 Amendments. The directors may amend or repeal these bylaws unless the Articles of Incorporation reserve such power exclusively to the shareholders in whole or in part or the shareholders, in amending or repealing a particular bylaw provision, provide expressly that the directors may not amend or repeal such bylaw. The shareholders may amend or repeal the bylaws even though the bylaws may also be amended or repealed by the directors.
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Exhibit 4.1
Form of Representative’s Warrant Agreement
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF 180 DAYS FOLLOWING THE CLOSING DATE (DEFINED BELOW) TO ANYONE OTHER THAN: (I) THE BENCHMARK COMPANY, LLC, OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING; OR (II) A BONA FIDE OFFICER OR PARTNER OF THE BENCHMARK COMPANY OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [________________] [DATE THAT IS 180 DAYS FROM THE CLOSING DATE OF THE OFFERING]. VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [DATE THAT IS FIVE YEARS FROM THE CLOSING DATE OF THE OFFERING].
WARRANT TO PURCHASE COMMON STOCK
RANK ONE COMPUTING CORPORATION
| Warrant Shares: _______1 | Initial Exercise Date: ______, 2026 |
THIS WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after ____, 20262 (the “Initial Exercise Date”) and, in accordance with FINRA Rule 5110(g)(8)(A), prior to at 5:00 p.m. (New York time) on the date that is five (5) years following the commencement date of sales in the Offering (the “Termination Date”) but not thereafter, to subscribe for and purchase from Rank One Computing Corporation, a company incorporated under the laws of the State of Colorado (the “Company”), up to ______ shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), of the Company (the “Warrant Shares”), as subject to adjustment hereunder. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
| 1 | Equal to 7% or the shares of Common Stock issued in the Offering including pursuant to the Over-Allotment Option |
| 2 | Date that is 180 days from the commencement date of sales in this offering |
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock Equivalents” means any securities of the Company that would entitle the holder thereof to acquire Common Stock.
“Closing Date” means the hour and date of delivery and payment for the Firm Shares (as defined in the Underwriting Agreement).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which a Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for the Common Stock is then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported, or (d) in all other cases, the fair market value of the Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Underwriting Agreement” means the Underwriting Agreement entered into as of [_____], 2026 between the Company and the Holder.
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Section 2. Exercise.
a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise Form annexed hereto. Within two (2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within five (5) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $_______3, subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. In lieu of exercising this Warrant by delivering the aggregate Exercise Price by wire transfer or cashier’s check, at the election of the Holder this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
| (A) | = | as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day; (ii) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof; or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
| 3 | 100% of the initial public offering price of the Firm Shares. |
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| (B) | = | the Exercise Price of this Warrant, as adjusted hereunder; and |
| (X) | = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a “cashless exercise,” the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by its transfer agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either: (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder; or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 and, in either case, the Warrant Shares have been sold by the Holder prior to the Warrant Share Delivery Date (as defined below), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). If the Warrant Shares can be delivered via DWAC, the transfer agent shall have received from the Company, at the expense of the Company, any legal opinions or other documentation required by it to deliver such Warrant Shares without legend (subject to receipt by the Company of reasonable back up documentation from the Holder, including with respect to affiliate status) and, if applicable and requested by the Company prior to the Warrant Share Delivery Date, the transfer agent shall have received from the Holder a confirmation of sale of the Warrant Shares (provided the requirement of the Holder to provide a confirmation as to the sale of Warrant Shares shall not be applicable to the issuance of unlegended Warrant Shares upon a cashless exercise of this Warrant if the Warrant Shares are then eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the second (2nd) Trading Day following the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue) for each Trading Day after the second (2nd) Trading Day following such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise.
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ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause its transfer agent to deliver to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided, however, that the Holder shall be required to return any Warrant Shares or Common Stock subject to any such rescinded exercise notice concurrently with the return to Holder of the aggregate Exercise Price paid to the Company for such Warrant Shares and the restoration of Holder’s right to acquire such Warrant Shares pursuant to this Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall: (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed; and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of the shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver the shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
viii. Signature. This Section 2 and the exercise form attached hereto set forth the totality of the procedures required of the Holder in order to exercise this Purchase Warrant. Without limiting the preceding sentences, no ink-original exercise form shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any exercise form be required in order to exercise this Purchase Warrant. No additional legal opinion, other information or instructions shall be required of the Holder to exercise this Purchase Warrant. The Company shall honor exercises of this Purchase Warrant and shall deliver Shares underlying this Purchase Warrant in accordance with the terms, conditions and time periods set forth herein.
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e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon: (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates; and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in: (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be; (B) a more recent public announcement by the Company; or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of the shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on its shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant); (ii) subdivides outstanding shares of Common Stock into a larger number of shares; (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. For the purposes of clarification, the Exercise Price of this Warrant will not be adjusted in the event that the Company or any subsidiary thereof, as applicable, sells or grants any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any shares of Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect.
b) [RESERVED]
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of the shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend (other than cash dividends) or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
e) Fundamental Transaction. If, at any time while this Warrant is outstanding: (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person; (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions; (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of shares of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of Common Stock; (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the shares of Common Stock or any compulsory share exchange pursuant to which the shares of Common Stock are effectively converted into or exchanged for other securities, cash or property; or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any outstanding shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable by holders of shares of Common Stock as a result of such Fundamental Transaction for each share of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of shares of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the Exercise Price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.
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f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If: (A) the Company shall declare a dividend (or any other distribution in whatever form) on the shares of Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the shares of Common Stock; (C) the Company shall authorize the granting to all holders of the shares of Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the shares of Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the shares of Common Stock are converted into other securities, cash or property; or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed a notice to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 5 calendar days prior to the applicable record or effective date hereinafter specified, stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the shares of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to provide such notice or any defect therein shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of its subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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Section 4. Transfer of Warrant.
a) Transferability. Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of the offering pursuant to which this Warrant is being issued, except the transfer of any security:
i. by operation of law or by reason of reorganization of the Company;
ii. to any FINRA member firm participating in the Offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;
iii. if the aggregate amount of securities of the Company held by the Holder or related person do not exceed 1% of the securities being offered;
iv. that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund; or
v. the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period.
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Subject to the foregoing restriction, any applicable securities laws and the conditions set forth in Section 4(d), this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
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Section 5. Registration Rights.
5.1. Demand Registration.
5.1.1 Grant of Right. The Company, upon written demand (a “Demand Notice”) of the Holder(s) of at least 51% of the Warrants and/or the underlying Warrant Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the Warrant Shares underlying the Warrants (collectively, the “Registrable Securities”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within 60 days after receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided, however, that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 5.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement; or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until 30 days after such offering is consummated. The demand for registration may be made at any time beginning on the Initial Exercise Date and expiring on the fifth anniversary of the commencement date of sales in the Offering. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt of any such Demand Notice.
5.1.2 Terms. The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 5.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State; or (ii) the principal shareholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 5.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the Warrant Shares covered by such registration statement and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 5.1.2, the Holder shall be entitled to a demand registration under this Section 5.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the date of the Underwriting Agreement in accordance with FINRA Rules 5110(g)(8)(B) and 5110(g)(8)(C).
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5.2 “Piggy-Back” Registration.
5.2.1 Grant of Right. In addition to the demand right of registration described in Section 5.1 hereof, the Holder shall have the right, for a period of no more than two (2) years from the Initial Exercise Date in accordance with FINRA Rule 5110(g)(8)(D), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of Shares which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.
5.2.2 Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 5.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than ten (10) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company during the two (2) year period following the Initial Exercise Date until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within five (5) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 5.2.2; provided, however, that such registration rights shall terminate on the second anniversary of the Initial Exercise Date.
5.3 General Terms
5.3.1 Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
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5.3.2 Exercise of Warrants. Nothing contained in this Warrant shall be construed as requiring the Holder(s) to exercise their Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
5.3.3 Documents Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto); and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
5.3.4 Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 5, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Warrant Shares and their intended methods of distribution.
5.3.5 Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
5.3.6 Damages. Should the registration or the effectiveness thereof required by Sections 5.1 and 5.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
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Section 6. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding Trading Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the shares of Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will: (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value; (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant; and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Underwriting Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Underwriting Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Underwriting Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any shares of Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
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j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| RANK ONE COMPUTING CORPORATION | ||
| By: | ||
|
Name: |
Scott Swann | |
| Title: | Chief Executive Officer | |
NOTICE OF EXERCISE
TO: RANK ONE COMPUTING CORPORATION
_________________________
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
☐ in lawful money of the United States; or
☐ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please register and issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________
Name of Authorized Signatory: ___________________________________________________________
Title of Authorized Signatory: ____________________________________________________________
Date: ________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to:
_______________________________________________ whose address is__________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder’s Signature: _____________________________
Holder’s Address: _____________________________
_____________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Exhibit 10.8
RANK ONE COMPUTING CORPORATION
2026 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: January 8, 2026
APPROVED BY THE STOCKHOLDERS: January 8, 2026
1. General.
(a) Eligible Stock Award Recipients. Employees, Directors and Consultants are eligible to receive Stock Awards.
(b) Available Stock Awards. The Plan provides for the grant of the following types of Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Awards, and (vii) Other Stock Awards.s
(c) Purpose. The Plan, through the grant of Stock Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.
(d) Adoption Date; Effective Date. The Plan will come into existence on the Adoption Date, but no Award may be granted prior to the Effective Date.
2. Administration.
(a) Administration by the Board. The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) Powers of the Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine (A) who will be granted Stock Awards; (B) when and how each Stock Award will be granted; (C) what type of Stock Award will be granted; (D) the provisions of each Stock Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Stock Award; (E) the number of shares of Common Stock subject to, or the cash value of, a Stock Award; and (F) the Fair Market Value applicable to a Stock Award.
(ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Stock Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Stock Award fully effective.
(iii) To settle all controversies regarding the Plan and Stock Awards granted under it.
(iv) To accelerate, in whole or in part, the time at which a Stock Award may be exercised or vest (or the time at which cash or shares of Common Stock may be issued in settlement thereof, to the extent consist with Section 409A of the Code).
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or a Stock Award Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under the Participant’s then-outstanding Stock Award without the Participant’s written consent except as provided in subsection (viii) below.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or bringing the Plan or Stock Awards granted under the Plan into compliance with the requirements for Incentive Stock Options or ensuring that they are exempt from, or compliant with, the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of Applicable Law. The Company will seek stockholder approval of any amendment of the Plan if required by Applicable Law or stock exchange listing requirements. Except as otherwise provided in the Plan or a Stock Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Stock Award without the Participant’s written consent.
(vii) To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 422 of the Code regarding Incentive Stock Options.
(viii) To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that a Participant’s rights under any Stock Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of Applicable Law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent (A) to maintain the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Stock Award solely because it impairs the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code or requires the commencement of a new holding period necessary for treatment as an Incentive Stock Option; (C) to clarify the manner of exemption from, or to bring the Stock Award into compliance with, Section 409A of the Code; or (D) to comply with Applicable Law.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Stock Awards.
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Stock Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
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(xi) To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable). Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable). The Board or any Committee may retain the authority to concurrently administer the Plan with the Committee or subcommittee, as applicable, to which it has delegated its authority hereunder, and may, at any time, revest in the Board or the Committee some or all of the powers previously delegated
(ii) Rule 16b-3 Compliance. To the extent a Stock Award is intended to qualify for the exemption from Section 16(b) of the Exchange Act that is available under Rule 16b-3 of the Exchange Act, the Stock Award will be granted by the Board or a Committee that consists solely of two or more Non-Employee Directors, as determined under Rule 16b-3(b)(3) of the Exchange Act and thereafter any action establishing or modifying the terms of the Stock Award will be approved by the Board or a Committee meeting such requirements to the extent necessary for such exemption to remain available.
(d) Delegation to Other Person or Body. The Board or any Committee may delegate to one or more persons or bodies, in addition to the Board or the Committee (as applicable), the authority to do one or more of the following to the extent consistent with Applicable Law: (i) designate recipients, other than Officers, of Options and SARs (and, to the extent permitted by Applicable Law, other Stock Awards) and, to the extent permitted by Applicable Law, the terms of such Stock Awards, and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such recipients; provided, however, that the Board or Committee resolutions regarding such delegation will fix the terms of such delegation in accordance with Applicable Law, and provided that no Board or Committee resolution may permit a person or body to grant a Stock Award to such person or body. Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided in the resolutions approving the delegation authority. Neither the Board nor any Committee may delegate authority to determine the Fair Market Value to any person or body other than a Committee or Committees of the Board in accordance with Section 2(c) above.
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(e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board or any Committee in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
3. Shares Subject to the Plan.
(a) Share Reserve.
(i) Subject to Section 3(b) and Section 9(a) (relating to Capitalization Adjustments), the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards from and after the Effective Date will not exceed 1,000,000 shares (the initial “Share Reserve”). The Share Reserve will automatically increase on the first day of each fiscal year (beginning January 1, 2027) by an amount equal to the lesser of (i) 3% of the total number of shares of Common Stock outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares of Common Stock as may be determined by the Board.
(ii) For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).
(iii) Shares of Common Stock may be issued in connection with a merger of acquisition as permitted by, as applicable, Nasdaq Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08, NYSE American Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.
(b) Reversion of Shares to the Share Reserve. If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan. If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan. Any shares reacquired by or withheld by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.
(c) Incentive Stock Option Limit. Subject to the Share Reserve and Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will be 1,000,000 shares of Common Stock.
(d) Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.
4. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however, that Nonstatutory Stock Options and Stock Appreciation Rights may not be granted to Employees, Directors and Consultants unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code, (ii) the Company, in consultation with its legal counsel, has determined that such Stock Awards are otherwise exempt from Section 409A of the Code, or (iii) the Company, in consultation with its legal counsel, has determined that such Stock Awards comply with the distribution requirements of Section 409A of the Code.
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(b) Ten Percent Stockholders. A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five years from the date of grant.
(c) Consultants. A Consultant will not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or sale of the Company’s securities to such Consultant cannot be registered on a Form S-8 Registration Statement under the Securities Act because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of any other provision applicable to the Form S-8 Registration Statement under the Securities Act, unless the Company determines that such grant need not be registered on a Form S-8 Registration Statement under the Securities Act and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.
5. Provisions Relating to Options and Stock Appreciation Rights.
Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate. All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however, that each Stock Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Stock Award Agreement or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of 10 years from the date of its grant or such shorter period specified in the Stock Award Agreement.
(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Stock Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Stock Award if such Stock Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a corporate transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents.
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(c) Purchase Price for Options. To exercise an Option, the Participant must provide notice of exercise to the Company in accordance with the procedures specified in the Option Agreement or as otherwise provided by the Company (including, through any Equity Management Platform). The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by Applicable Law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below. The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. To the extent permitted by the applicable Option Agreement, the permitted methods of payment are as follows:
(i) by cash, check, bank draft, electronic funds transfer or money order payable to the Company;
(ii) provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or “sell to cover”;
(iii) provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, that are valued at Fair Market Value on the date of exercise, and that have been held by the Participant for the minimum period necessary to avoid adverse accounting treatment as a result of such delivery. “Delivery” for these purposes, in the sole discretion of the Company and/or the Board, at the time Participant exercises their Option, will include delivery to the Company of Participant’s attestation of ownership of such shares of Common Stock in a form approved by the Company. Participant may not exercise their option by delivery to the Company of Common Stock if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock;
(iv) provided that the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of the Option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price plus, to the extent permitted by the Company and/or Board at the time of exercise, the aggregate withholding obligations in respect of the Option exercise; provided, further that Participant must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment. Shares of Common Stock will no longer be subject to the Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board.
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(d) Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR. The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of the number of Common Stock equivalents with respect to which the Participant is exercising the SAR on such date. The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Award Agreement evidencing such SAR.
(e) Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:
(i) Restrictions on Transfer. An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, a Nonstatutory Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2).
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, upon the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, upon the death of the Participant, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of Applicable Laws.
(f) Vesting Generally. The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of performance goals or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.
(g) Termination of Continuous Service. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Stock Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Stock Award Agreement, which period will not be less than 30 days if necessary to comply with Applicable Laws unless such termination is for Cause) and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.
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(h) Extension of Termination Date. If the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement. In addition, unless otherwise provided in a Participant’s Stock Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of the period of time (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement.
(i) Disability of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six months if necessary to comply with Applicable Laws unless such termination is for Cause), and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
(j) Death of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Stock Award Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date 12 months following the date of death (or such longer or shorter period specified in the Stock Award Agreement, which period will not be less than six months if necessary to comply with Applicable Laws unless such termination is for Cause), and (ii) the expiration of the term of such Option or SAR as set forth in the Stock Award Agreement. If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.
(k) Termination for Cause. Except as explicitly provided otherwise in a Participant’s Stock Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option or SAR (whether vested or unvested) from and after the date of such termination of Continuous Service. If a Participant’s Continuous Service is suspended pending an investigation of whether the Participant will be terminated for Cause, all the Participant’s rights under any Stock Award, including the right to exercise or continuing vesting in the Stock Award, will be suspended during the investigation period.
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(l) Non-Exempt Employees. If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option or SAR (although the Stock Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Stock Award Agreement, in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company's then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.
6. Provisions of Stock Awards Other than Options and SARs.
(a) Restricted Stock Awards. Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock underlying a Restricted Stock Award may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical. Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under Applicable Law.
(ii) Vesting. Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board. To the extent the forfeiture is effectuated pursuant to the repurchase of the Common Stock, then unless otherwise provided in the Restricted Stock Award Agreement, the repurchase price will be the lower of (i) the Fair Market Value of the shares of Common Stock on the date of repurchase or (ii) their original purchase price. However, the Company will not exercise its repurchase right until at least six months (or such longer or shorter period of time necessary to avoid classification of the Stock Award as a liability for financial accounting purposes) have elapsed following delivery of shares of Common Stock subject to the Stock Award, unless otherwise specifically provided by the Board.
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(iii) Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.
(v) Dividends. A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
(b) Restricted Stock Unit Awards. A Restricted Stock Unit Award represents the right to receive from the Company on the respective scheduled vesting or payment date for such Restricted Stock Unit Award, one share of Common Stock for each earned and vested Restricted Stock Unit, or, if specified in the applicable Stock Award agreement, the Fair Market Value of one share of Common Stock paid in cash. Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under Applicable Law.
(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
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(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(vii) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code will contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions, if any, will be determined by the Board and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without limitation, a requirement that any Common Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.
(c) Performance Awards. Each Performance Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate. Without limiting the generality of the foregoing, the Performance Award Agreement will contain the performance goals to be achieved, the performance period(s), the Continuous Service requirements, the payout formula and number of shares of Common Stock, cash, or other property that may be earned under the award (including any payout formula that provides for a payout based on a multiple of the target number of shares of Common Stock subject to an award), and the other terms and conditions of any such Performance Award, as determined by the Board.
(d) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.
7. Covenants of the Company.
(a) Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Stock Awards.
(b) Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise or vesting of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise or vesting of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of a Stock Award or the subsequent issuance of cash or Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities law.
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(c) No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of a Stock Award or a possible period in which the Stock Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of a Stock Award to the holder of such Stock Award.
8. Miscellaneous.
(a) Applicability of Award Terms to New Property. If a Participant receives new or additional shares of Common Stock, other securities, other property, or cash in respect of a Stock Award, those shares, securities, property and cash will be subject to all the same terms of the Plan and the Stock Award Agreement as applied to the underlying shares of Common Stock subject to that Stock Award.
(b) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards will constitute general funds of the Company.
(c) Corporate Action Constituting Grant of Stock Awards. Corporate action constituting a grant by the Company of a Stock Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Stock Award Agreement or related grant documents as a result of a clerical error in the papering of the Stock Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Stock Award Agreement or related grant documents.
(d) Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to a Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to the Stock Award has been entered into the books and records of the Company.
(e) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or any other instrument executed thereunder or in connection with any Stock Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
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(f) Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Stock Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares subject to any portion of such Stock Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Stock Award (but only if the modification would not cause the Participant to incur penalties or additional taxation under Section 409A of the Code). In the event of any such reduction, the Participant will have no right with respect to any portion of the Stock Award that is so reduced or extended.
(g) Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
(h) Withholding Obligations. Unless prohibited by the terms of a Stock Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to a Stock Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the amount of tax that may be due based on the maximum rates in effect in the Participant’s tax jurisdictions (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from a Stock Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Stock Award Agreement.
(i) Electronic Delivery. Any reference herein or in a Stock Award Agreement to a “written” agreement or document will include any agreement or document delivered electronically or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access), including, without limitation, via an Equity Management Platform. The Company may decide to deliver any such notices and documents related to Stock Awards and all other documents that the Company is required to deliver to security holders by email or by posting them on an Equity Management Platform. As a condition to participating in the Plan, Participants agree to receive such documents by electronic delivery and agree to participate in the Plan through any Equity Management Platform.
(j) Deferrals. To the extent permitted by Applicable Law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with Applicable Law.
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(k) Compliance with Section 409A of the Code. To the extent that the Board determines that any Stock Award granted hereunder is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Stock Award Agreements will be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in the Plan (and unless the Stock Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding a Stock Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.
(l) Unfunded Obligation. Participants will have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan are considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. Neither the Company nor an Affiliate will be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company will retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account will not create or constitute a trust or fiduciary relationship between the Board or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of the Company or any Affiliate. The Participants will have no claim against the Company or any Affiliate for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
(m) Data Privacy. As a condition of receipt of any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this paragraph by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Company and Affiliates may hold certain personal information about a Participant, including but not limited to, the Participant’s name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), any shares of stock held in the Company or any of its Affiliates, details of all Stock Awards, in each case, for the purpose of implementing, managing and administering the Plan and Stock Awards (the “Data”). The Company and its Affiliates may transfer the Data amongst themselves as necessary for the purpose of implementation, administration and management of a Participant’s participation in the Plan, and the Company and its Affiliates may each further transfer the Data to any third parties assisting the Company in the implementation, administration and management of the Plan, such as the Equity Management Platform. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. Through acceptance of a Stock Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect to deposit any shares of Common Stock. The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data held by the Company with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the Participant or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local human resources representative. The Company may cancel Participant’s ability to participate in the Plan if the Participant refuses or withdraws his or her consents as described herein. For more information on the consequences of refusal to consent or withdrawal of consent, Participants may contact their local human resources representative.
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(n) Failure to Comply. In addition to the remedies of the Company elsewhere provided for herein, a material failure by a Participant to comply with any of the terms and conditions of the Plan or any Stock Award Agreement, unless such failure is remedied by such Participant within ten days after having been notified of such failure by the Board, will be grounds for the cancellation and forfeiture of such Stock Award, in whole or in part, as the Board may determine.
(o) Fractional Shares. The Company will not be required to issue fractional shares upon the exercise or settlement of any Stock Award.
(p) Clawback Policy. Notwithstanding any provisions to the contrary under this Plan, a Stock Award will be subject to the Company’s clawback policy as may be established and/or amended from time to time (the “Clawback Policy”). The Board may require a Participant to forfeit, return or reimburse the Company all or a portion of the Stock Award and any amounts paid thereunder pursuant to the terms of the Clawback Policy or as necessary or appropriate to comply with Applicable Law. The implementation of any Clawback Policy will not be deemed a triggering event for purposes of any definition of ”good reason" for resignation or "constructive termination."
(q) Severability. If any one or more of the provisions (or any part thereof) of this Plan is held invalid, illegal or unenforceable in any respect, such provision will be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan will not in any way be affected or impaired thereby.
(r) No Constraint on Corporate Action. Nothing in this Plan will be construed to: (i) limit, impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (ii) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
(s) Section 83(i). Participants will not be permitted to make an election under Code Section 83(i) with respect to any Stock Awards without the Company’s express written consent, which may be withheld for any reason or no reason.
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9. Adjustments upon Changes in Common Stock; Other Corporate Events.
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, then: (i) the class(es) and maximum number of securities subject to the Plan and the maximum number of shares by which the Share Reserve may increase annually pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c), and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards will be proportionately adjusted and such adjustment shall occur automatically. Any fractional share resulting from an adjustment pursuant to this section will be rounded down to the nearest whole number, and the exercise or purchase price per share will be rounded up to the nearest whole cent. In no event may the exercise or purchase price, if any, under any Stock Award be decreased to an amount less than the par value, if any, of the stock subject to the Stock Award. Such adjustments will be determined by the Board, and its determination will be final, binding and conclusive upon all persons having an interest therein. To the extent such adjustments cannot occur automatically, the Board shall have the power to make determinations as it deems necessary and its determinations and any adjustments under this section will be final, binding and conclusive.
(b) Dissolution or Liquidation. Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c) Corporate Transaction. The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board may take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award (which, for the avoidance of doubt, need not be the same type of award as the Stock Award for which it is substituted and need not have the same tax-status) for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction; provided, however, that the Board may require Participants to complete and deliver to the Company a notice of exercise before the effective date of a Corporate Transaction, which exercise is contingent upon the effectiveness of such Corporate Transaction;
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(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;
(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised or settled prior to the effective time of the Corporate Transaction, in exchange for such cash consideration (including no consideration) as the Board, in its sole discretion, may consider appropriate; and
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise or settlement of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise or settlement. For clarity, this payment may be zero ($0) if the value of the property is equal to or less than the exercise price (if any). Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Company’s Common Stock in connection with the Corporate Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies.
The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award. Payment of any Stock Award consideration: (A) may be made on a delayed and/or contingent basis in the event of any applicable escrows, earn-outs, or other limitations, conditions, vesting requirements, contingencies or holdbacks applicable to all or some holders of Common Stock in connection with the Corporate Transaction, subject to Applicable Law, (B) may be subject to the Participant executing a letter of transmittal, cancellation agreement, release of claims, or other similar acknowledgement or agreement, and (C) may be made in cash or other property that the Board may determine.
(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur. In the event of a Change in Control, the Board may terminate the ability of Participants to exercise the unvested portion of an early-exercise Option without the consent of the Participant.
(e) Exercise Freeze. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock, including any Capitalization Adjustment or Corporate Transaction, for reasons of administrative convenience the Board may refuse to permit the exercise of any Stock Award during a period of up to thirty days prior to the consummation of any such transaction.
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10. Plan Term; Earlier Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless terminated sooner by the Board, the Plan will automatically terminate on the day before the 10th anniversary of the Adoption Date. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. In the event of the termination of the Plan, all Stock Awards and any shares of Common Stock subject thereto will remain subject to the terms of the Plan and the applicable Stock Award Agreement as in effect immediately prior to such termination.
(b) No Impairment of Rights. Suspension or termination of the Plan will not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the affected Participant or as otherwise permitted in the Plan.
11. Effective Date of Plan.
This Plan will become effective on the Effective Date.
12. Choice of Law.
The laws of the State of Colorado will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
13. Definitions. As used in the Plan (or as otherwise used in connection with an Award, or as otherwise may be defined in the applicable Stock Award Agreement), the following definitions will apply to the capitalized terms indicated below:
(a) “Adoption Date” means the earlier of (i) the date that this Plan is first approved by the Company’s stockholders, and (ii) the date this Plan is adopted by the Board.
(b) “Affiliate” means, at the time of determination, any “parent” or “majority-owned subsidiary” of the Company, as such terms are defined in Rule 405. The Board will have the authority to determine the time or times at which “parent” or “majority-owned subsidiary” status is determined within the foregoing definition.
(c) “Applicable Law” means, as in effect from time to time, all applicable laws, rules, regulations and requirements, including, but not limited to, all U.S. federal, state, or local laws, any stock exchange rules or regulations and the applicable laws, rules or regulations of any other country or jurisdiction where Stock Awards are granted or Participants reside or provides services.
(d) “Board” means the Board of Directors of the Company.
(e) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
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(f) “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and intended to apply to Stock Awards and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company, or any of its employees or directors; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company, the Company’s employment policies, or of any statutory or other duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Stock Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.
(g) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; or
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
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(iv) individuals who, on the Effective Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment of election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered a member of the Incumbent Board.
Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the definition set forth herein will apply, and (C) with respect to any non-qualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (i), (ii), (iii), or (iv) also constitutes a Section 409A Chage in Control if required in order for the payment to not violate Section 409A of the Code.
(h) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(i) “Committee” means the Compensation Committee of the Board or any other committee of one or more Directors to whom authority has been delegated by the Board or the Compensation Committee in accordance with Section 2(c).
(j) “Common Stock” means the common stock of the Company.
(k) “Company” means Rank One Computing Corporation, a Colorado corporation.
(l) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services (whether directly or indirectly, including without limitation through an engagement with a professional employer organization, employer of record or similar arrangement, and is deemed pursuant to such arrangement to be a consultant or advisor of the Company or an Affiliate under Applicable Laws) and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan.
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(m) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
(n) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of more than 50% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
(o) “Director” means a member of the Board.
(p) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(q) “Effective Date” means the IPO Date.
(r) “Employee” means any person employed by the Company or an Affiliate (whether directly or indirectly, including without limitation through an engagement with a professional employer organization, employer of record or similar arrangement, and is deemed pursuant to such arrangement to be an employee of the Company or an Affiliate under Applicable Laws). However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
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(s) “Entity” means a corporation, partnership, limited liability company or other entity.
(t) “Equity Management Platform” means any website, software, intranet, or online portal maintained by the Company or a third party designee utilized to administer the Plan or any Stock Award (including, for example, an equity administration platform such as E*Trade).
(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(v) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.
(w) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on an established stock exchange or traded on any established market, the Fair Market Value will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume or trading the Common Stock) on the date of determination, as reported in a source the Board deems reliable.
(ii) If there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Stock, or if otherwise determined by the Board, the Fair Market Value will be determined by the Board in compliance with Section 409A of the Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.
(x) “Good Reason” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of a definition of such term in the applicable written agreement, such term means, with respect to a Participant, a material and unreasonable diminution of such Participant’s duties (as determined by the Board in its sole discretion) without such Participant’s consent; provided, however, that the following shall not constitute Good Reason: (i) a change of title; (ii) a reduction in such Participant’s duties by virtue of the Company undergoing a Change in Control and/or being made part of a larger entity or group of entities; and/or (iii) cessation of such Participant’s service, if any, on the Board or a committee thereof. For such Participant to receive the benefits under the applicable written agreement between such Participant and the Company as a result of a voluntary resignation for Good Reason, unless otherwise provided in such agreement, all of the following requirements must be satisfied: (A) such Participant must provide notice to the Company of such Participant’s intent to assert Good Reason within thirty (30) days of the initial existence of the condition set forth in the previous sentence; (B) the Company will have thirty (30) days (the “Company Cure Period”) from the date of such notice to remedy the condition and, if it does so, such Participant may withdraw such Participant’s resignation or such Participant may resign with no benefits under the applicable written agreement; and (C) any termination of such Participant’s Continuous Service under this provision must occur within ten (10) days of the earlier of expiration of the Company Cure Period or written notice from the Company that it will not undertake to cure the applicable condition. Unless otherwise set forth in the applicable written agreement, should the Company remedy the condition as set forth above and then such condition arises again, such Participant may assert Good Reason again subject to all of the conditions set forth herein. Unless otherwise set forth in the applicable written agreement, the term “Company” for purposes of “Good Reason” will be interpreted to include any Affiliate of the Company to which such Participant provides services, if appropriate, as determined by the Board in its sole discretion.
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(y) “Incentive Stock Option” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
(z) “IPO Date” means the date of commencement of trading of shares of Common Stock on the principal securities exchange on which the Common Stock is listed or admitted to trade.
(aa) “Non-Employee Director” means a Director who either (i) is not a current employee or Officer of the Company of an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated under the Securities Act (“Regulation S-K”), does not possess an interests in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K, or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
(bb) “Nonstatutory Stock Option” means an option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.
(cc) “Officer” means any person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.
(dd) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.
(ee) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.
(ff) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(gg) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(c).
(hh) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.
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(ii) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(jj) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
(kk) “Performance Award” means a Stock Award (such as a performance stock unit) that may vest, be earned, or become exercisable based on the attainment of one or more performance goals and which is granted under the terms and conditions of Section 6 pursuant to such terms as are approved by the Board.
(ll) “Performance Award Agreement” means a written agreement between the Company and a holder of a Performance Award evidencing the terms and conditions of a Performance Award grant. Each Performance Award Agreement will be subject to the terms and conditions of the Plan.
(mm) “Plan” means this Rank One Computing Corporation 2026 Equity Incentive Plan, as amended from time to time.
(nn) “Prospectus” means the document containing the Plan information specified in Section 10(a) of the Securities Act.
(oo) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).
(pp) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.
(qq) “Restricted Stock Unit Award” means a right to earn shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).
(rr) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.
(ss) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.
(tt) “Rule 405” means Rule 405 promulgated under the Securities Act.
(uu) “Section 409A Change in Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets, as provided in Section 409A(a)(2)(A)(v) of the Code and U.S. Treasury Regulations Section 1.409A-3(i)(5) (without regard to any alternative definitions thereunder).
(vv) “Securities Act” means the Securities Act of 1933, as amended.
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(ww) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.
(xx) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.
(yy) “Stock Award” means any right to receive Common Stock, cash, or other property granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, Performance Award, a Stock Appreciation Right or any Other Stock Award.
(zz) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement will be subject to the terms and conditions of the Plan.
(aaa) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
(bbb) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.
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Exhibit 23.1
CONSENT AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement of our report dated August 14, 2025, except for the effects of the restatement and revision discussed in Notes 2, 6, and 11 to the consolidated financial statements and for the effect of a forward 167-to-1 stock split as noted on Note 2, to which the date is January 12, 2026, relating to the consolidated financial statements of Rank One Computing Corporation, and to the reference to our Firm under the caption “Experts” in the Prospectus.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
January 12, 2026