Rank One Computing Corp S-1, filed Dec 3, 2025
Rank One Computing Corp (ROC)
As filed with the U.S. Securities and Exchange Commission on December 3, 2025.
Registration No. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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)
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 December 3, 2025 |
RANK ONE COMPUTING CORPORATION
[●] Shares
Common Stock
This is a firm commitment initial public offering of [●] 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 $[●] and $[●] per share with a $[●] assumed initial public offering price (which is the midpoint of the $[●] to $[●] range; this assumption is used throughout this prospectus).
We plan to apply 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 9.
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 96 for additional information regarding underwriters’ compensation. |
We have granted a 30-day option to the representative of the underwriters to purchase up to [●] additional shares of common stock solely to cover over-allotments, if any. If the representative of the underwriters exercises the option in full, the total underwriting discounts will be $[●] and the additional proceeds to us, before expenses, from the over-allotment option exercise will be $[●].
The underwriters expect to deliver the shares of common stock to purchasers on or about [●], 2025.
The date of this prospectus is [●], 2025.
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 9, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 48, and the financial statements and related notes included in this prospectus.
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 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 has coined the term “Vision AI” — 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 20th, 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 8th, 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 groups at Noblis, Inc. and MITRE Corporation, both of which are science and technology services providers to leading U.S. national security agencies. Our founders’ work included supporting a major case study for the FBI, regarding deployment of facial recognition technology during the course of the 2013 Boston Marathon Bombing investigation. Our CEO, 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.
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 9 and this prospectus in full. Our significant risks may be summarized as follows:
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. |
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| ● | 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 | [●] shares. | |
| Common Stock Outstanding Prior to This Offering (1) | 89,950 shares | |
| Common Stock to Be Outstanding Immediately After Completion of This Offering (1) | [●] shares (or [●] 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 [●] 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 $[●] million, or approximately $[●] million if the underwriters exercise their over-allotment option in full, based on the assumed initial public offering price of $[●] 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 purposes, including [●]. 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 plan to apply 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 9 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 96 for more information. |
| (1) | Based on 89,950 shares of our common stock outstanding as of the date of this prospectus, and excludes: |
| ● | [●] shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 56,148 shares of common stock issuable under our 2018 Equity Incentive Plan, as amended (the “2018 Plan”), at a weighted average exercise price of $360.37 per share; and |
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 | $ | (10.12 | ) | $ | (8.33 | ) | ||
| Earnings (Loss) per Share – Diluted | $ | (10.12 | ) | $ | (8.33 | ) | ||
| 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 | $ | (7.78 | ) | $ | 26.63 | |||
| Earnings (Loss) per Share – Diluted | $ | (7.78 | ) | $ | 24.94 | |||
8
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 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 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 bring 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 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 are 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 reducing 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 that 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 remains 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 [●] shares of common stock outstanding immediately after this offering assuming full exercise of the underwriters’ over-allotment option, and [●] 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 [●] shares in this offering at an assumed initial public offering price of $[●] 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 $[●] 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 81% of our outstanding shares of common stock. Upon completion of this offering, our executive officers, directors and principal stockholders and their affiliates will own [●] shares of our common stock, or approximately [●]% 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 [●] shares of common stock in this offering at an assumed initial public offering price of $[●] 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 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. 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 $[●] 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 $[●] 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:
| ● | $[●] 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. |
| ● | $[●] to update and expand our neural-processing infrastructure to accelerate the pace in which we train and deploy Vision AI algorithms. |
| ● | $[●] 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 $[●] 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; | |
| ● | on a pro forma basis to give effect to [●]; and | |
| ● | on a pro forma as adjusted basis to give further effect to our issuance and sale of [●] shares of our common stock in this offering at the assumed initial public offering price of $[●] 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 | Pro Forma as Adjusted | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| Cash and cash equivalents | $ | 72,151 | $ | $ | ||||||||
| Total long-term liabilities | 977,831 | |||||||||||
| Stockholders’ Equity: | ||||||||||||
| Preferred stock, $[0.01] par value, [●] shares authorized, [0] shares issued or outstanding, actual, pro forma, and pro forma as adjusted | - | |||||||||||
| Common stock, $0.01 par value, [200,000] shares authorized, [89,950], [●], and [●] shares issued and outstanding, actual, pro forma, and pro forma as adjusted, respectively | 90 | |||||||||||
| Additional paid-in capital | 4,210,298 | |||||||||||
| Accumulated Deficit | (2,900,823 | ) | ||||||||||
| Total stockholders’ equity | 1,309,565 | |||||||||||
| Total capitalization | $ | 2,287,396 | $ | $ | ||||||||
The number of shares of our common stock to be outstanding upon completion of this offering is based on 89,950 shares of our common stock outstanding as of September 30, 2025, and excludes:
| ● | [●] shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 56,148 shares of common stock issuable under the 2018 Plan at a weighted average exercise price of $360.37 per share. |
Each $1.00 increase (decrease) in the assumed initial public offering price of $[●] 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 $[●], 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 [●] shares offered by us would increase (decrease) cash, total stockholders’ equity (deficit) and total capitalization on a pro forma as adjusted basis by approximately $[●], assuming the assumed initial public offering price of $[●] 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 $[●] 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 $1,309,565, or $14.56 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.
Our pro forma net tangible book value as of September 30, 2025 was $[●], or $[●] per share of our common stock. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to [●].
After giving further effect to our sale of [●] shares of common stock in this offering at an assumed initial public offering price of $[●] 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 $[●] million, or $[●] per share of common stock. This represents an immediate increase in net tangible book value of $[●] per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $[●] 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 | $ | $ | ||||||
| Historical net tangible book value (deficit) per share as of September 30, 2025 | $ | 14.56 | $ | 14.56 | ||||
| Pro forma net tangible book value (deficit) per share, as of September 30, 2025, before giving effect to this offering | $ | $ | ||||||
| Increase net tangible book value (deficit) per share | $ | $ | ||||||
| Increase in pro forma net tangible book value (deficit) per share attributable to new investors in this offering | $ | $ | ||||||
| Pro forma as adjusted net tangible book value per share after giving effect to the offering | $ | $ | ||||||
| Dilution per share to new investors in the offering | $ | $ | ||||||
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 $[●] 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 $[●] million, or by $[●] per share of common stock and the dilution to new investors purchasing our common stock in this offering by $[●] 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 [●] additional shares of common stock in this offering at the assumed initial public offering price of $[●] 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 $[●] per share of common stock, the increase in the pro forma as adjusted net tangible book value per share to existing stockholders would be $[●] per share of common stock and the dilution to new investors purchasing securities in this offering would be $[●] per share of common stock.
The following charts illustrate our pro forma proportionate ownership, upon completion of this offering by present stockholders and investors in this offering, compared to the relative amounts paid by each. The charts reflect payment by present stockholders as of the date the consideration was received and by investors in this offering at the public offering price. The charts further assume no changes in net tangible book value other than those resulting from the offering.
| Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
| Number | Percent (%) | Amount ($) | Percent (%) | Per Share ($) | ||||||||||||||||
| Existing stockholders | % | % | $ | |||||||||||||||||
| New investors | % | % | $ | |||||||||||||||||
| Total | 100.0 | % | 100.0 | % | $ | |||||||||||||||
The table above assumes no exercise of the underwriters’ option to purchase [●] 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 [●]% 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 [●]% 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 89,950 shares of our common stock outstanding as of September 30, 2025, and excludes:
| ● | [●] shares of common stock issuable upon the exercise of the Representative’s Warrants; | |
| ● | 56,148 shares of common stock issuable under the 2018 Plan at a weighted average exercise price of $360.37 per share. |
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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 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 increase 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 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 Dec. 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 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 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.
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.
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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 has coined the term “Vision AI” — 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. |
| ● | 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 extention of ROC Watch for access management or gallery enrollment. ROC Enroll is widely used by MTN (telcom) in South Africa for SIM card registration. |
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 20th, 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 8th, 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 15th, 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 groups at Noblis, Inc. and MITRE Corporation, both of which are science and technology services providers to leading U.S. national security agencies. Our founders’ work included supporting a major case study for the FBI, regarding deployment of facial recognition technology during the course of the 2013 Boston Marathon Bombing investigation. Our CEO, 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.
Corporate History
In 2015, ROC’s three co-founders filed the initial Articles of Incorporation as a Subchapter S Corporation in the State of Virginia as Rank One Computing Corporation. In 2018, ROC filed a Statement of Conversion with updated Articles of Incorporation in the State of Colorado and issued 10,000 shares of common stock. In 2021, ROC hired Scott Swann as ROC’s CEO. In 2022, ROC filed an Amended and Restated Articles of Incorporation to effect a 1 for 10 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.
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.
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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 that 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 $100 billion to $116.5 billion, globally:
| ● | Vision AI: $26 billion - $32 billion |
| ● | Biometrics: $52 billion - $60 billion |
| ● | Video Analytics: $12.6 billion - $15.1 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 $22–25 billion. By 2025 it is forecasted to reach roughly $26–32 billion in value. Longer-term projections show continued high growth: for example, one study projects the global market to grow from about $26.6 billion in 2025 to $111.4 billion by 2033, a Compound Annual Growth Rate (“CAGR”) of roughly 19.6%. Another analysis forecasts an even higher CAGR of 27.6% during 2025–2032, reaching about $175 billion by 2032. Despite variations in forecasts, there is broad consensus that Vision AI is a high-growth segment, with double-digit annual expansion expected through the decade.
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 18.4% of global revenue in 2023. U.S. market size is substantial and growing: for instance, the U.S. Vision AI industry was valued at approximately $6.8 billion in 2024 and is on track to nearly double to about $12.5 billion by 2030. This growth (roughly 10–15% annually in the U.S.) 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, its most critical biometric screening systems still rely heavily on foreign Vision AI algorithms. This includes systems used by the FBI, the Department of Defense, the Department of State, the National Counterterrorism Center, the Department of Homeland Security, law enforcement AFIS and ABIS systems, and state DMV fraud detection programs. 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.
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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.
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 $45–47 billion in revenue. By 2025, it is projected around $52–60 billion. One analysis forecasts the market to grow from $45.18 billion in 2024 to $52.64 billion in 2025, a single-year growth of about 16.5%. Looking further ahead, the market is expected to continue on a double-digit growth trajectory; for example, forecasts show a rise to approximately $93–140 billion by 2030, implying mid-teens annual CAGR over the rest of the decade. Another study projects growth at about 15.3% CAGR from 2023 to 2032, with the market surpassing $140 billion by 2032. This sustained growth outlook reflects how integral biometrics have become in modern security, fintech, and identity systems worldwide.
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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 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 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 around $10–12 billion in 2024. This market is on a steep upward trajectory: it is projected to reach approximately $12.6–15.1 billion in 2025, and further to about $50–95 billion by 2032–2034 according to various forecasts. For example, Fortune Business Insights estimates the global market will grow at a 22.0% CAGR from 2025 to 2032, reaching $50.8 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 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 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 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 $19–23+ 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 95% 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 applications 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. All together 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 major components of the U.S. Department of Defense, Department of Justice, and Intelligence Community. 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 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 has 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 operating in classified environments, continues 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 | ||
| Josh 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 |
Scott Swann – Chief Executive Officer, Director
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 sector. 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 2024. 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.
Josh Klontz – Chief Technology Officer, Director
Josh 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 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 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, 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 coordination of the comprehensive security function for the enterprise. Mr. Martinez has a Master of Arts degree in political science from 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 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 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 for 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://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 it deems 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 Josh Klontz, respectively, who currently beneficially own approximately 5.96%, 23.07%, and 23.07%, respectively, of the voting power of our common stock and will beneficially own approximately [●]%, [●]%, and [●]%, respectively, of the voting power of our 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 Josh 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 [Corporate Governance] section of our website, https://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, 2024 and 2023. 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 $100,000 during the fiscal years ended December 31, 2024 and 2023.
Summary Compensation Table
| Salary | Bonus | Option Awards | Non-equity incentive plan compensation | All Other Compensation | Total | |||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||
| Brendan Klare | 2024 | 246,340 | - | 26,159 | 272,499 | |||||||||||||||||||||
| President, Chief Scientist, and Board Chairman | 2023 | 226,000 | 85,000 | 26,087 | 337,087 | |||||||||||||||||||||
| Josh Klontz | 2024 | 228,900 | - | 26,159 | 255,059 | |||||||||||||||||||||
| Chief Technology Officer and Director | 2023 | 210,000 | 85,000 | 26,087 | 321,087 | |||||||||||||||||||||
| Scott Swann | 2024 | 310,675 | - | 45,798 | 356,473 | |||||||||||||||||||||
| Chief Executive Officer and Director | 2023 | 289,000 | 289,000 | 45,673 | 623,673 | |||||||||||||||||||||
| Blake Moore | 2024 | 205,200 | - | 11,893 | 217,093 | |||||||||||||||||||||
| Chief Operating Officer | 2023 | 190,000 | 38,000 | 3,984 | 231,984 | |||||||||||||||||||||
| Cody Barnes | 2024 | 220,000 | - | 4,185 | 224,185 | |||||||||||||||||||||
| Chief Financial Officer | 2023 | 200,000 | 60,000 | 4,174 | 264,174 | |||||||||||||||||||||
| Anthony Brown | 2024 | 231,750 | - | 31,352 | 263,102 | |||||||||||||||||||||
| Chief of Staff | 2023 | 225,000 | 35,000 | 28,525 | 288,525 | |||||||||||||||||||||
Employment Arrangements with our Executive Officers and Directors
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 3,000 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.
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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
2018 Equity Incentive Plan
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 exercisable into 1,500 shares of Common Stock in fiscal year 2023, and Blake Moore received stock options exercisable into 450 shares of Common stock in fiscal year 2024. None of our other named executive officers received equity awards in fiscal years 2023 or 2024.
On September 18, 2018, our Board adopted and our shareholders approved the 2018 Equity Incentive Plan (“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.
The total number of shares reserved and available for issuance pursuant to the 2018 Plan will not exceed 70,000 shares. 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.
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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, 2024, 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 | |||||||||||||
| Scott Swann(1) | 3,000 | - | - | 37.35 | 1/15/2031 | |||||||||||||
| Scott Swann(2) | 4,200 | 1,800 | - | 400.00 | 4/18/2032 | |||||||||||||
| Josh Klontz(3) | 3,500 | 1,500 | - | 400.00 | 4/18/2032 | |||||||||||||
| Brendan Klare(4) | 3,500 | 1,500 | - | 400.00 | 4/18/2032 | |||||||||||||
| Anthony Brown(5) | 1,291 | 209 | - | 400.00 | 3/9/2033 | |||||||||||||
| Blake Moore(6) | 150 | - | - | 400.00 | 9/6/2032 | |||||||||||||
| Blake Moore(7) | 150 | 300 | - | 400.00 | 5/3/2034 | |||||||||||||
| Cody Barnes(8) | 150 | - | - | 18.15 | 11/4/2029 | |||||||||||||
| Cody Barnes(9) | 100 | - | - | 37.35 | 9/24/2030 | |||||||||||||
| Cody Barnes(10) | 560 | 240 | - | 400.00 | 4/18/2032 | |||||||||||||
| (1) | Represents 3,000 options held by Scott Swann, which have fully vested as of December 31, 2024. |
| (2) | Represents 6,000 options held by Scott Swann which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (3) | Represents 5,000 options held by Josh Klontz which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (4) | Represents 5,000 options held by Brendan Klare which 20% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 4 year term. |
| (5) | Represents 1,500 options held by Anthony Brown which 25% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 3 year term. |
| (6) | Represents 150 options held by Blake Moore which 33% vest 1 year after the grant date and the remaining shares vest monthly over a remaining 2 year term. |
| (7) | Represents 225 options held by Blake Moore which 2% vest each month after the vesting commencement date. |
| (8) | Represents 150 options held by Cody Barnes, which have fully vested as of December 31, 2024. |
| (9) | Represents 100 options held by Cody Barnes which 8% vest each month after the vesting commencement date |
| (10) | Represents 800 options held by Cody Barnes 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 89,950 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 | 18,180 | (2) | 20.1 | % | % | |||||||||||
| Executive Officers, Directors and Director Nominees | ||||||||||||||||
| Brendan Klare | 27,870 | (3) | 29.8 | % | % | |||||||||||
| Josh Klontz | 27,870 | (4) | 29.8 | % | % | |||||||||||
| Scott Swann | 7,200 | (5) | 7.4 | % | % | |||||||||||
| Blake Moore | 300 | (6) | * | % | ||||||||||||
| Cody Barnes | 3,660 | (7) | 4.0 | % | % | |||||||||||
| Anthony Brown | 1,291 | (8) | 1.4 | % | % | |||||||||||
| Edward Davis | - | - | % | |||||||||||||
| Brian Hibbeln | - | - | % | |||||||||||||
| Steven Martinez | - | - | % | |||||||||||||
| Dawn Meyerriecks | - | - | % | |||||||||||||
| All directors and executive officers as a group (10 individuals) | 68,191 | 64.0 | % | % | ||||||||||||
| * | 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 17,680 shares of our common stock owned directly and 500 shares of common stock issuable pursuant to presently exercisable options. |
| (3) | Brendan Klare’s beneficial ownership consists of 24,370 shares of our common stock owned directly and 3,500 shares of common stock issuable pursuant to presently exercisable options. |
| (4) | Josh Klontz’s beneficial ownership consists of 24,370 shares of our common stock owned directly and 3,500 shares of common stock issuable pursuant to presently exercisable options. |
| (5) | Scott Swann’s beneficial ownership consists of 7,200 shares of our common stock issuable pursuant to presently exercisable options. |
| (6) | Blake Moore’s beneficial ownership consists of 300 shares of common stock issuable pursuant to presently exercisable options. |
| (7) | Cody Barnes’s beneficial ownership consists of 2,850 shares of our common stock owned directly and 810 shares of common stock issuable pursuant to presently exercisable options. |
| (8) | Anthony Brown’s beneficial ownership consists of 1,291 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 have 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, Josh 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 [●], consisting of [200,000] shares of common stock, par value $0.01 per share, and [●] shares of preferred stock, par value $[0.01] per share. As of the date of this prospectus, there were 89,950 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, we had reserved 67,750 shares of common stock for issuance pursuant to the 2018 Plan.
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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 [●] 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 [●] shares of common stock will be outstanding, assuming an initial public offering price of $[●] per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), offered hereby and further assuming no exercise of the underwriters’ over-allotment option. Of the shares to be outstanding immediately after completion of the offering, all [●] 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 [●] 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 [●] 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, [substantially 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 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 [●], 2025, 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 |
|||
| 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 [●] 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 offering price of $[●] per share, which represents 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 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 |
||||||||||
| 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 expenses, will be approximately $[●].
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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 $[●] per share (100% of the 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 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 to which the date is December 3, 2025. 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; 200,000 shares authorized; 89,950 and 89,733 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | 90 | 90 | ||||||
| Additional paid-in capital | 4,210,298 | 3,842,279 | ||||||
| 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 | $ | (10.12 | ) | $ | (8.33 | ) | ||
| Loss per Share – Diluted | (10.12 | ) | (8.33 | ) | ||||
| Weighted Average Number of Shares – Basic | 89,833 | 89,733 | ||||||
| Weighted Average Number of Shares – Diluted | 89,833 | 89,733 | ||||||
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 | 89,733 | $ | 90 | $ | 3,842,279 | $ | (1,992,097 | ) | $ | 1,850,272 | ||||||||||
| Stock-based compensation | — | — | 359,913 | — | 359,913 | |||||||||||||||
| Issuance of common shares through options | 217 | — | 8,106 | — | 8,106 | |||||||||||||||
| Net Loss | — | — | — | (908,726 | ) | (908,726 | ) | |||||||||||||
| Balance, September 30, 2025 (Restated) | 89,950 | $ | 90 | $ | 4,210,298 | $ | (2,900,823 | ) | $ | 1,309,565 | ||||||||||
| Common Stock | Additional Paid-in | Retained Earnings | Total Stockholders’ | |||||||||||||||||
| Shares | Par | Capital | (Deficit) | Equity | ||||||||||||||||
| Balance, January 1, 2024 | 89,733 | $ | 90 | $ | 944,783 | $ | 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 | 89,733 | $ | 90 | $ | 3,606,914 | $ | (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.
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.
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 | $ | (2.39 | ) | $ | (7.73 | ) | $ | (10.12 | ) | |||
| 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-6
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.
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.
F-7
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.
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 | ||||
F-8
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-9
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-10
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-11
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-12
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 | 56,148 | 51,588 | ||||||
| Total | 56,148 | 51,588 | ||||||
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-13
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-14
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-15
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 200,000 authorized shares of Common Stock, par value $0.01.
During the nine months ended September 30, 2025, employees exercised 217 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 | 52,961 | $ | 354.18 | 7.59 | ||||||||
| Options Granted | 4,325 | 428.38 | 10 | |||||||||
| Exercised | (217 | ) | 37.35 | — | ||||||||
| Expired/Cancelled | (921 | ) | 400.00 | — | ||||||||
| Options Outstanding at September 30, 2025 | 56,148 | $ | 360.37 | 7.06 | ||||||||
| Options Exercisable at September 30, 2025 | 30,858 | $ | 323.92 | 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-16
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 | $ | 224.94 | $ | 84.60 | ||||
| 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-17
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-18
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 to which the date is December 3, 2025. | |
| We have served as the Company’s auditor since 2025. | |
F-19
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; 200,000 shares authorized; 89,733 and 89,733 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively | 90 | 90 | ||||||
| Additional paid-in capital | 3,842,279 | 944,783 | ||||||
| (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-20
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 | $ | (7.78 | ) | $ | 26.63 | |||
| Earnings (Loss) per Share – Diluted | $ | (7.78 | ) | $ | 24.94 | |||
| Weighted Average Number of Shares – Basic | 89,733 | 89,469 | ||||||
| Weighted Average Number of Shares – Diluted | 89,733 | 95,524 | ||||||
The accompanying notes are an integral part of these Financial Statements.
F-21
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 | 89,050 | $ | 89 | $ | 560,498 | $ | 1,076,016 | $ | 1,636,603 | |||||||||||
| Stock options exercised | 683 | 1 | 13,990 | — | 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 | 89,733 | $ | 90 | $ | 944,783 | $ | 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 | 89,733 | $ | 90 | $ | 3,842,279 | $ | (1,992,097 | ) | $ | 1,850,272 | ||||||||||
The accompanying notes are an integral part of these Financial Statements.
F-22
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-23
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.
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-24
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-25
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-26
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 | 26.63 | $ | 19.52 | $ | (7.78 | ) | ||||||
| Earnings (Loss) per Share – Diluted | 24.94 | 18.28 | (7.78 | ) | ||||||||
| Weighted Average Number of Shares – Basic | 89,469 | 89,469 | 89,733 | |||||||||
| Weighted Average Number of Shares – Diluted | 95,524 | 95,524 | 89,733 | |||||||||
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 | 89,733 | 89,469 | ||||||
| Dilutive securities | ||||||||
| Options | - | 6,055 | ||||||
| Weighted average number of common shares - diluted | 89,733 | 95,524 | ||||||
| Earnings per share, basic | $ | (7.78 | ) | $ | 26.63 | |||
| Earnings per share, diluted | $ | (7.78 | ) | $ | 24.94 | |||
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 | 52,961 | 44,333 | ||||||
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 | % | ||||
F-33
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 200,000 authorized shares of Common Stock, par value $0.01.
During the year ended December 31, 2023, employees exercised 68 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 70,000 common shares at the date the options are granted.
As of December 31, 2024, there were 15,006 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 | 43,461 | $ | 342.66 | 9.17 | ||||||||
| Options Granted | 6,980 | 274.81 | 10 | |||||||||
| Exercised | (683 | ) | 20.49 | — | ||||||||
| Expired/Cancelled | (520 | ) | 349.09 | — | ||||||||
| Options Outstanding at December 31, 2023 | 49,238 | 360.06 | 8.40 | |||||||||
| Options Granted | 5,790 | 389.64 | 10 | |||||||||
| Exercised | 0 | - | — | |||||||||
| Expired/Cancelled | (2,067 | ) | 400 | — | ||||||||
| Options Outstanding at December 31, 2024 | 52,961 | $ | 354.18 | 7.59 | ||||||||
| Options Exercisable at December 31, 2024 | 29,664 | $ | 318.20 | 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 | $ | 94.32 | $ | 76.16 | ||||
| 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.
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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.
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Through and including [●], 2025 (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.
[●] Shares
Common Stock
RANK ONE COMPUTING CORPORATION
PROSPECTUS
[●], 2025
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 | $ | [●] | ||
| FINRA filing fee | [●] | |||
| Nasdaq initial listing fee | [●] | |||
| Transfer agent fees | [●] | |||
| Accounting fees and expenses | [●] | |||
| Legal fees and expenses | [●] | |||
| Printing and engraving expenses | [●] | |||
| Other expenses | [●] | |||
| Total | $ | [●] |
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”) limits or eliminates 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.
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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. |
| † | 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; |
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| (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 December 3, 2025.
| Rank One Computing Corporation | ||
| By: | /s/ Scott Swann | |
| Name: | Scott Swann | |
| Title: | Chief Executive Officer | |
KNOW ALL BY THESE PRESENT, that each person whose signature appears below constitutes and appoints each of Scott Swann and Cody Barnes, severally, as his or her true and lawful attorney-in-fact and agent, with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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/ Scott Swann | Chief Executive Officer and Director (Principal Executive Officer) | December 3, 2025 | ||
| Scott Swann | ||||
| /s/ Cody Barnes | Chief Financial Officer (Principal Financial and Accounting Officer) | December 3, 2025 | ||
| Cody Barnes | ||||
| /s/ Brendan Klare | President, Chief Scientist, and Board Chairman | December 3, 2025 | ||
| Brendan Klare | ||||
| /s/ Josh Klontz | Chief Technology Officer and Director | December 3, 2025 | ||
| Josh Klontz | ||||
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Exhibit 3.1
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: He 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 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 one class of stock to be designated, “Common Stock.” The total number of shares that the Company is authorized to issue is two hundred thousand (200,000) shares, all of which shall be Common Stock (the “Common Stock”). The Common Stock shall have a par value of $0.01 per share.
B. Upon the filing of these Amended and Restated Articles of Incorporation with the Secretary of State of the State of Colorado (the “Effective Time”), a one (1) for ten (10) 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 ten (10) shares of Common Stock automatically and without any action by the holder thereof upon the Effective Time and shall represent ten (10) shares of Common Stock from and after the Effective Time.
C. Each shareholder of record entitled to vote shall have one vote for each share of 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 such number of shares for as many persons as there are directors 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, a majority of the 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.
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.
ARTICLE VII
The Company shall indemnify officers, directors, employees, or agents to the fullest extent provided under applicable law and the Bylaws of the Company.
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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 Company’s board of directors (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 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 Amended and Restated Articles of Incorporation have been duly approved by the Board.
FIVE: These Amended and Restated Articles of Incorporation were approved by the holders of the requisite number of shares of said corporation in accordance with the CBCA.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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In Witness Whereof, Rank One Computing Corporation has caused these Amended and Restated Articles of Incorporation to be signed by its President on March 3, 2022.
| Rank One Computing Corporation | ||
| By: | /s/ Brendan F. Klare | |
| Name: | Brendan F. Klare | |
| Title: | President | |
Exhibit 3.2
BYLAWS
OF
RANK ONE COMPUTING CORPORATION
(A COLORADO CORPORATION)
Adopted September 18, 2018
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, at least a majority of the outstanding shares of the corporation 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 one vote, 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.
Section 2.14 Election.
(a) S Corporation Status. The Company and the shareholders agree that the Company shall maintain its federal income tax status as an S corporation until the shareholders holding a majority of the shares agree to terminate such status. No shareholder shall take any action which would result in the termination of the Company’s S Election without the prior written consent of persons holding a majority of the issued and outstanding shares.
(b) Number of Shareholders. The shareholders agree not to make any transfer of shares of the Company that would result in ownership of shares by more than the maximum number of shareholders permitted to an S corporation (currently 100) as determined under Sections 1361(b) and 1361(c) of the Internal Revenue Code of 1986, as amended (the “Code”).
(c) S Election Representations.
(i) In the case of natural persons, each shareholder represents and warrants to the Company and the shareholders that such shareholder is an individual who is not a nonresident alien. Each shareholder further represents, warrants, and covenants that, upon issuance or transfer of shares to such shareholder, such shareholder will be the true owner in interest of such shares, that such shareholder will not hold any such shares as agent for any other person or entity, and that such shareholder is not (a) a resident of or subject to the laws of any jurisdiction having laws providing for community property (unless the spouse of such shareholder has executed and delivered such documents and certificates as the Company requests), or (b) the holder of any such shares as tenant in common, joint tenant, or tenant by the entirety with any other person (unless such other person holding an interest as a tenant in common, joint tenant or tenant by the entirety has executed and delivered such documents and certificates as the Company requests).
(ii) In all other cases, each shareholder represents and warrants to the Company and the shareholders that such shareholder is either (i) a trust described in Section 1361(c)(2) of the Code (including any trust so described by virtue of having had an election made under Section 1361(d) of the Code), or (ii) an organization described in Section 1361(c)(6) of the Code.
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(d) Injunction. Due to the fact that the transfer of any shares or any interest therein may result in termination or revocation of the Company’s S Election, the shareholders recognize and acknowledge that irreparable damage may result in the event that this Agreement is not specifically enforced. Accordingly, if any dispute arises regarding the transfer of any shares, any shareholder shall be entitled, without showing actual damage, to a temporary or permanent injunction restraining such transfer pending determination of such controversy and that no bond or other security shall be required in connection with such action. If any dispute arises concerning the rights or obligations of any shareholder under this Agreement, including the right of any party to transfer any shares, such right or obligation shall be enforceable by decree of specific performance. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.
(e) Termination. Nothing in this Agreement shall be construed to prevent the Company and shareholders holding a majority of the shares from terminating the Company’s S Election, if such persons determine that such termination is desirable.
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.
Section 5.9 Right of First Refusal on Transfer of Shares. No shareholder shall sell, assign, pledge, or in any manner transfer any of the shares of common stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer which meets the requirements hereinafter set forth in this bylaw:
(a) If the shareholder desires to sell or otherwise transfer any of his shares of common stock, then the shareholder shall first give written notice thereof to the corporation. The notice shall name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the corporation shall have the option to purchase all of the shares, or any portion thereof, specified in the notice at the price and upon the terms set forth in such notice. In the event of a gift, property settlement or other transfer in which the proposed transferee is not paying the full price for the shares, and that is not otherwise exempted from the provisions of this Section 5.9, the price shall be deemed to be the fair market value of the stock at such time as determined in good faith by the Board of Directors. In the event the corporation elects to purchase all of the shares, or any portion thereof, it shall give written notice to the transferring shareholder of its election and settlement for said shares shall be made as provided below in paragraph (d).
(c) The corporation may assign its rights hereunder.
(d) In the event the corporation and/or its assignee(s) elect to acquire any of the shares of the transferring shareholder as specified in said transferring shareholder’s notice, the Secretary of the corporation shall so notify the transferring shareholder and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the corporation receives said transferring shareholder’s notice; provided that if the terms of payment set forth in said transferring shareholder’s notice were other than cash against delivery, the corporation and/or its assignee(s) shall pay for said shares on the same terms and conditions set forth in said transferring shareholder’s notice.
(e) In the event the corporation and/or its assignee(s) do not elect to acquire all of the shares, or any portion thereof, specified in the transferring shareholder’s notice, said transferring shareholder may, within the sixty-day period following the expiration of the option rights granted to the corporation and/or its assignees(s) herein, transfer the shares specified in said transferring shareholder’s notice which were not acquired by the corporation and/or its assignees(s) as specified in said transferring shareholder’s notice. All shares so sold by said transferring shareholder shall continue to be subject to the provisions of this bylaw in the same manner as before said transfer.
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(f) In addition to the restrictions set forth above and subject to the rights of the holders of any series of preferred stock to transfer capital stock under specified circumstances, no shareholder shall sell, assign, pledge, or in any manner transfer any of the shares of common stock of the corporation (excluding shares of common stock issued upon the conversion of preferred stock of the corporation) or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise without the prior consent of the corporation, upon duly authorized action of its Board of Directors. Without in any way limiting the basis on which the corporation may elect not to consent to a sale, assignment, pledge or transfer, the corporation does not at any time intend to consent to any requested sale, assignment, pledge or transfer (i) to individuals, companies or any other form of entity identified by the corporation as a potential competitor or considered by the corporation to be unfriendly, or (ii) if such sale, assignment, pledge or transfer increases the risk of the corporation having a class of security held of record by five hundred or more persons, as described in Section 12(g) of the 1934 Act, and Rule 12g5-1 promulgated thereunder, or otherwise requiring the corporation to register any class of securities under the 1934 Act; or (iii) if such sale, assignment, pledge or transfer would result in the loss of any federal or state securities law exemption relied upon by the corporation in connection with the initial issuance of such shares or the issuance of any other securities or if such sale, assignment, pledge or transfer is facilitated in any manner by any public posting, message board, trading portal, internet site, or similar method of communication, including without limitation any trading portal or internet site intended to facilitate secondary transfers of securities; or if such sale, assignment, pledge or transfer is to be effected in a brokered transaction; or if such sale, assignment, pledge or transfer represents a sale, assignment, pledge or transfer of less than all of the shares then held by the shareholder and its affiliates or is to be made to more than a single transferee. All shares sold, assigned, pledged or transferred with the corporation’s consent pursuant to this bylaw shall continue to be subject to the provisions of this bylaw in the same manner as before said sale, assignment, pledge or transfer.
(g) Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the provisions of this bylaw:
(i) Shareholder’s transfer of any or all shares held either during such shareholder’s lifetime or on death by will or intestacy to such shareholder’s immediate family or to any custodian or trustee for the account of such shareholder or such shareholder’s immediate family or to any limited partnership or limited liability company of which the shareholder, members of such shareholder’s immediate family or any trust for the account of such shareholder or such shareholder’s immediate family will be the general partner(s) of such partnership or manager(s) of such limited liability company, as the case may be. “Immediate family” as used herein shall mean spouse, lineal descendant, father, mother, brother, or sister of the shareholder making such transfer.
(ii) A shareholder’s bona fide pledge or mortgage of any shares with a commercial lending institution, provided that any subsequent transfer of said shares by said institution shall be conducted in the manner set forth in this bylaw.
(iii) A shareholder’s transfer of any or all of such shareholder’s shares to a person who, at the time of such transfer, is an officer or director of the corporation.
(iv) A corporate shareholder’s transfer of any or all of its shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the corporate shareholder, or pursuant to a sale of all or substantially all of the stock or assets of a corporate shareholder.
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(v) A corporate shareholder’s transfer of any or all of its shares to any or all of its shareholders.
(vi) A transfer by a shareholder which is a limited or general partnership or a limited liability company to any or all of its partners or members or former partners or former members.
(vii) A transfer by a shareholder that is a trust to any or all of its beneficiaries or former beneficiaries.
In any such case, the transferee, assignee, or other recipient shall receive and hold such shares subject to the provisions of this bylaw, and there shall be no further transfer of such shares except in accord with this bylaw.
(h) The provisions of this bylaw may be waived with respect to any transfer either by the corporation, upon duly authorized action of its Board of Directors, or by the shareholders, upon the express written consent of the owners of a majority of the voting power of the corporation (excluding the votes represented by those shares to be transferred by the transferring shareholder). This bylaw may be amended or repealed either by a duly authorized action of the Board of Directors or by the shareholders, upon the express written consent of the owners of a majority of the voting power of the corporation.
(i) Any sale or transfer, or purported sale or transfer, of securities of the corporation shall be null and void unless the terms, conditions, and provisions of this bylaw are strictly observed and followed.
(j) Notwithstanding anything to the contrary in this Section 5.9, the foregoing right of first refusal shall not apply to (A) any shares of Preferred Stock of the corporation or any shares of stock of the corporation issued upon conversion thereof, in exchange therefor, or as a distribution with respect thereto, or (B) any shares of stock of the corporation subject to the right of first refusal provisions of any agreement between the corporation and any of the corporation’s shareholders.
(k) The foregoing right of first refusal shall terminate upon the date the corporation’s securities are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.
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(l) The certificates representing shares of the corporation’s capital stock subject to the foregoing right of first refusal shall bear the following legend so long as such right of first refusal remains in effect:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY OR THE COMPANY’S ASSIGNEE(S), AS PROVIDED IN THE COMPANY’S BYLAWS.”
Section 5.10 Market Stand-Off. By acceptance of the corporation’s capital stock, whether directly upon issuance by the corporation or upon transfer from another shareholder, each shareholder agrees that for a period of not less 180 days following the effective date of the first registration statement of the corporation covering the corporation’s capital stock (or other securities) to be sold on the corporation’s behalf in an underwritten public offering, such shareholder will not sell, hedge or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any shares of the corporation’s capital stock, or other securities of the corporation held thereby, except securities specifically included in such registration. In order to enforce the foregoing covenant, the corporation may impose stop-transfer instructions with respect to securities of the corporation held by such shareholder until the end of such period.
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 3.3
AMENDMENT NO. 1 TO
RANK ONE COMPUTING CORPORATION
BYLAWS
Amendment No. 1 Adopted by Board: March 4, 2024
Amendment No. 1 Approved by Stockholders: March 5, 2024
THIS AMENDMENT NO. 1 TO BYLAWS (“Amendment”) is made as of this 4th day of March, 2024 and amends those certain Bylaws (“Bylaws”) adopted by Rank One Computing Corporation (the “Company”) on September 18, 2018.
RECITALS
| A. | The Company’s board of directors deems it in the best interests of the stockholders and the Company to adopt this Amendment and, subject to approval by shareholders holding a majority of the Company’s outstanding shares, provide for the amendment of the Bylaws in the manner and on the circumstances set forth more fully herein. |
NOW THEREFORE, the board of directors of the Company adopts the Amendment as follows:
AMENDMENT
1. Delete Section 2.14. Section 2.14 (Election) of the Bylaws shall be deleted in its entirety.
2. No Other Changes. Except as herein amended, all other terms and conditions of the Agreement remain in full force and effect.
Exhibit 10.1
Rank One Computing Corporation
2018 Equity Incentive Plan
Adopted: September 18, 2018
Approved By Stockholders: September 18, 2018
Termination Date: September 18, 2028
ARTICLE 1
Purposes
1.1. General Purpose. Rank One Computing Corporation, a Colorado corporation (the “Company”) has adopted this Rank One Computing Corporation 2018 Equity Incentive Plan (this “Plan”) in order 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. Capitalized terms used herein and not otherwise defined are defined in the Definitions section in Article 10.
1.2. Equity Incentives. This Plan allows the Company to provide a variety of equity incentives to eligible participants that will provide economic benefits to such participants based on the increase in the value of the Company’s equity.
ARTICLE 2
Administration
2.1. Administration by Board. The Board shall administer this Plan unless and until the Board delegates administration to a Committee, as provided in Section 2.3.
2.2. Powers of Board. The Board shall have the power, subject to and within the limitations of, the express provisions of this Plan:
(a) to determine the persons to whom an Equity Incentive shall be granted and the form, terms and conditions of any such Equity Incentive;
(b) to construe and interpret this Plan and Equity Incentives granted under this Plan and to establish, amend and revoke rules and regulations for this Plan’s administration; provided that the Board, in the exercise of this power, may correct any defect, omission or inconsistency in this Plan or in any Equity Incentive Agreement, in a manner and to the extent the Board shall deem necessary or expedient to make this Plan fully effective;
(c) to effect, at any time and from time to time, with the consent of any adversely affected Optionholder, (1) the reduction of the exercise price of any outstanding Option under this Plan and/or (2) the cancellation of any outstanding Option under this Plan and the grant in substitution therefor of (i) a new Option under this Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (ii) a Restricted Stock Award (including a stock bonus), (iii) a Stock Appreciation Right, (iv) cash or (v) other valuable consideration (as determined by the Board, in the Board’s sole discretion) or (3) any other action that is treated as a repricing under generally accepted accounting principles; provided that the exercise price per share of Common Stock of any Option shall not be less than that specified under this Plan for newly granted Equity Incentives except that the Board may grant an Option with a lower exercise price if such Option is granted as part of a transaction to which Section 424(a) of the Code applies;
(d) to terminate or suspend this Plan as provided in Section 9.8;
(e) to amend this Plan as provided in Section 9.9; and
(f) 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 this Plan.
2.3. Delegation to Committee. The Board may delegate administration of this Plan to a Committee of one or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration of this Plan is delegated to a Committee, the Committee shall have those powers specified by the Board in such delegation or, if no specific powers are specified or reserved by the Board, the Committee shall have all of the powers theretofore possessed by the Board in connection with the administration of this Plan, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of this Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of this Plan.
2.4. Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive in all respects.
2.5. Arbitration. Any dispute or claim concerning any Equity Incentive granted (or not granted) pursuant to this Plan or relating to or arising out of this Plan shall be fully, finally and exclusively resolved by binding and confidential arbitration conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association in Denver, Colorado. The Company shall pay all arbitration fees. In addition to any other relief, the arbitrator may award to the prevailing party recovery of such party’s attorneys’ fees and costs. The Company hereby waives and, by accepting an Equity Incentive, each Participant waives their respective rights to have any such dispute or claim tried by a judge or jury.
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ARTICLE 3
Shares Subject to this Plan
3.1. Share Reserve. Subject to the provisions of Section 8.1, the shares of Common Stock that may be issued pursuant to Equity Incentives shall not exceed in the aggregate three hundred (300) shares of Common Stock.
3.2. Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, then the shares of Common Stock with respect to which such Option was not exercised shall revert to and again become available for issuance under this Plan. Any shares of Common Stock issued under the terms of a Restricted Stock Award or an Option, including unvested shares of Common Stock held pursuant to Section 5.12, subsequently repurchased by the Company shall revert to and again become available for issuance under this Plan. Any Stock Appreciation Rights that expire or otherwise terminate, in whole or in part, without having been realized shall revert to and again become available for issuance under this Plan.
3.3. Source of Shares. The shares of Common Stock subject to this Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
ARTICLE 4
Eligibility
4.1. Eligibility for Specific Equity Incentives. Incentive Stock Options may be granted only to Employees. Equity Incentives other than Incentive Stock Options may be granted to Employees, Officers, Directors and Consultants.
4.2. Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option unless the exercise price of such Incentive Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
4.3. Consultants. Except as otherwise may be determined by the Board, a Consultant shall not be eligible for the grant of an Equity Incentive if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of 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 some other provision of Rule 701.
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ARTICLE 5
Option Provisions
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All Options shall 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 shall be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
5.1. Term. No Option granted shall be exercisable after the expiration of ten (10) years from the date such Option was granted.
5.2. Exercise Price. Subject to the provisions of Section 4.2 regarding Ten Percent Stockholders, the exercise price per share of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price per share lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another stock option in a manner satisfying the provisions of Section 424(a) of the Code.
5.3. Consideration.
(a) The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash or check at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (A) by delivery to the Company of other Common Stock, (B) according to a deferred payment or other similar arrangement with the Optionholder, (C) by a “net exercise” of the Option (as further described below), (D) by delivery of a promissory note with full recourse to the Optionholder and the Optionholder’s assets or (E) in any other form of legal consideration that may be acceptable to the Board.
(b) Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). At any time that the Company is incorporated in Colorado, payment of the Common Stock’s “par value,” as defined in the Colorado Business Corporation Act, shall not be made by deferred payment and must be paid in a form of consideration that is permissible under the Colorado Business Corporation Act.
(c) In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at least at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes.
(d) In the case of a “net exercise” of an Option, the Company will not require a payment of the exercise price of the Option from the Participant but will reduce the number of shares of Common Stock issued upon the exercise by the largest number of whole shares that has a Fair Market Value that does not exceed the aggregate exercise price. With respect to any remaining balance of the aggregate exercise price, the Company shall accept a cash payment from the Participant. The shares of Common Stock so used to pay the exercise price of an Option under a “net exercise” will be considered to have resulted from the exercise of the Option, and accordingly, the Option will not again be exercisable with respect to such shares, the shares actually delivered to the Participant and any shares withheld for purposes of tax withholding.
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5.4. Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable only by the Optionholder during the lifetime of the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
5.5. Transferability of a Nonstatutory Stock Option. If a Nonstatutory Stock Option does not provide for transferability, then except as otherwise may be determined by the Board, such Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
5.6. Incentive Stock Option $100,000 Limitation. 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 become exercisable during any calendar year (under all plans of the Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of any Equity Incentive Agreement.
5.7. Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when the Option may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 5.7 are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.
5.8. Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise such Optionholder’s Option (to the extent that such Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement) or (b) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise such Optionholder’s Option within the time specified in the Option Agreement, the Option shall terminate.
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5.9. Extension of Termination Date. An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’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 shall terminate on the earlier of (a) the expiration of the term of the Option as set forth in Section 5.1 or (b) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
5.10. Disability of Optionholder. In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise such Optionholder’s Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (b) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
5.11. Death of Optionholder. In the event that (a) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (b) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to Section 5.4 or 5.5, but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
5.12. Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.
5.13. Right of Repurchase. Subject to the “Repurchase Limitation” in Section 9.6, the Option may, but need not, include a provision whereby the Company may elect to repurchase all or any part of any vested or unvested shares of Common Stock acquired by the Optionholder pursuant to the exercise or early exercise of the Option at a price equal to the lower of the Fair Market Value or the exercise price of such shares.
5.14. Right of First Refusal. The Option may, but need not, include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option. Except as expressly provided in this Section or in the Equity Incentive Agreement for the Option, such right of first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.
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ARTICLE 6
Provisions of Equity Incentives other than Options
6.1. Restricted Stock Awards. Each Restricted Stock Award agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Restricted Stock Award agreements need not be identical; provided, however, that each Restricted Stock Award agreement shall include (through incorporation of the provisions hereof, by reference in the agreement or otherwise) the substance of each of the following provisions:
(a) Purchase Price. At the time of the grant of a Restricted Stock Award, the Board will determine the price to be paid by the Participant for each share subject to the Restricted Stock Award. The price to be paid by the Participant for each share subject to the Restricted Stock Award shall not be less than the Common Stock’s Fair Market Value on the date such award is made or at the time the purchase is consummated. A Restricted Stock Award may be awarded as a stock bonus (i.e., with no cash purchase price to be paid) to the extent permissible under applicable law.
(b) Consideration. At the time of the grant of a Restricted Stock Award, the Board will determine the consideration permissible for the payment of the purchase price of the Restricted Stock Award. The purchase price of Common Stock acquired pursuant to the Restricted Stock Award shall be paid in one of the following ways: (i) in cash at the time of purchase; (ii) at the discretion of the Board, according to a deferred payment or other similar arrangement with the Participant; (iii) by services rendered or to be rendered to the Company; (iv) by delivery of a promissory note with full recourse to the Participant and the Participant’s assets; or (v) in any other form of legal consideration that may be acceptable to the Board; provided, however, that at any time that the Company is incorporated in Colorado, payment must be paid in a form of consideration that is permissible under the Colorado Business Corporation Act.
(c) Vesting. Subject to the “Repurchase Limitation” in Section 9.6, shares of Common Stock acquired under a Restricted Stock Award may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
(d) Termination of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in Section 9.6, in the event that a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Restricted Stock Award agreement at a price equal to the amount paid by the Participant for such shares of Common Stock. Provided that the “Repurchase Limitation” in Section 9.6 is not violated, the Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following the purchase of the restricted stock unless otherwise determined by the Board or provided in the Restricted Stock Award agreement.
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(e) Transferability. Rights to acquire shares of Common Stock granted under a Restricted Stock Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award agreement, as the Board shall determine in its discretion, and so long as Common Stock awarded under the Restricted Stock Award remains subject to the terms of the Restricted Stock Award agreement.
6.2. Stock Appreciation Rights. Each Stock Appreciation Right agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Stock Appreciation Right agreements may change from time to time. The terms and conditions of separate Stock Appreciation Right agreements need not be identical, but each Stock Appreciation Right agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(a) Calculation of Appreciation. Each Stock Appreciation Right will be denominated in Common Stock equivalents. The appreciation distribution payable per Common Stock equivalent on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (i) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a share of Common Stock over (ii) the Fair Market Value of a share of Common Stock at the time of grant of the Stock Appreciation Right or, in the case of Ten Percent Stockholders, 110% of such Fair Market Value
(b) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Stock Appreciation Right as the Board deems appropriate; provided, however, that a Stock Appreciation Right that could be settled in shares of Common Stock shall be subject to the “Repurchase Limitation” in Section 9.6.
(c) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Rights agreement evidencing such Right.
(d) Payment. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash or any combination of the two, as the Board deems appropriate.
(e) Termination of Continuous Service. If a Participant’s Continuous Service terminates for any reason, any unvested Stock Appreciation Rights shall be forfeited and any vested Stock Appreciation Rights shall be automatically redeemed.
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ARTICLE 7
Covenants of the Company
7.1. Availability of Shares. During the terms of the Equity Incentives, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Equity Incentives.
7.2. Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over this Plan such authority as may be required to grant Equity Incentives and to issue and sell shares of Common Stock upon exercise of the Equity Incentives; provided, however, that this undertaking shall not require the Company to register under the Securities Act this Plan, any Equity Incentive or any Common Stock issued or issuable pursuant to any Equity Incentive. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under this Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Equity Incentives unless and until such authority is obtained.
ARTICLE 8
Adjustments upon Changes in Stock
8.1. Capitalization Adjustments. If any change is made in, or other event occurs with respect to, the Common Stock subject to this Plan or subject to any Equity Incentive without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, dividend, stock split, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”), this Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to this Plan pursuant to Sections 3.1 and 3.2 and the outstanding Equity Incentives will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Equity Incentives by the Board. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.
8.2. Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, all outstanding Options shall terminate immediately prior to the completion of such dissolution or liquidation, and shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such stock is still in Continuous Service.
8.3. Corporate Transaction. The following provisions will apply to Equity Incentives in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Equity Incentive 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 an Equity Incentive. 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 Equity Incentives, contingent upon the closing or completion of the Corporate Transaction:
(a) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Equity Incentive or to substitute a similar stock award for the Equity Incentive (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
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(b) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Equity Incentive to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(c) accelerate the vesting, in whole or in part, of the Equity Incentive (and, if applicable, the time at which the Equity Incentive 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 Equity Incentive 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;
(d) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Equity Incentive;
(e) cancel or arrange for the cancellation of the Equity Incentive, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, or no consideration, as the Board, in its sole discretion, may consider appropriate; and
(f) 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 of the Equity Incentive immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise. For clarity, this payment may be $0 if the value of the property is equal to or less than the exercise price. 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 Equity Incentives or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of an Equity Incentive.
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ARTICLE 9
Miscellaneous
9.1. Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which an Equity Incentive may first be exercised or the time during which an Equity Incentive or any part thereof will vest in accordance with this Plan, notwithstanding the provisions in the Equity Incentive stating the time at which such Equity Incentive may first be exercised or the time during which such Equity Incentive will vest.
9.2. Stockholder Rights. No Optionholder shall 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 an Option unless and until such Participant has satisfied all requirements for exercise of the Option pursuant to its terms.
9.3. No Employment or Other Service Rights. Nothing in this Plan or any instrument executed or Equity Incentive granted pursuant hereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Equity Incentive was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without cause, (b) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (c) the service of a Director pursuant to the Bylaws of the Company or an Affiliate. Furthermore, nothing in this Plan or any instrument executed or Equity Incentive granted pursuant hereto shall affect any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
9.4. Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Equity Incentive, (a) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that Participant is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Equity Incentive and (b) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Equity Incentive for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements and any assurances given pursuant to such requirements shall be inoperative if (i) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Equity Incentive has been registered under a then currently effective registration statement under the Securities Act or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under this Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
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9.5. Withholding Obligations. The terms of an Equity Incentive Agreement must require the Participant to satisfy any federal, state or local tax withholding obligation (including with respect to the withholding of income tax and of the Participant’s liability for employment taxes, including FICA and Medicare taxes) relating to the exercise or acquisition of Common Stock under an Equity Incentive by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Equity Incentive; provided, however, that no shares of Common Stock shall be withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable accounting); or (c) delivering to the Company owned and unencumbered shares of Common Stock.
9.6. Repurchase Limitation. The terms of any repurchase option shall be specified in the Equity Incentive, and the repurchase price may be either the Fair Market Value of the shares of Common Stock on the date of termination of Continuous Service or the lower of (1) the Fair Market Value of the shares of Common Stock on the date of repurchase or (2) their original purchase price.
(a) Fair Market Value. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of Continuous Service at not less than the Fair Market Value of the shares of Common Stock to be purchased on the date of termination of Continuous Service, then (i) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Equity Incentives after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”) and (ii) the right terminates when the shares of Common Stock become publicly traded.
(b) Original Purchase Price. If the repurchase option gives the Company the right to repurchase the shares of Common Stock upon termination of Continuous Service at 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, then (x) the right to repurchase at the original purchase price shall lapse at the rate of at least twenty percent (20%) of the shares of Common Stock per year over five (5) years from the date the Equity Incentive is granted (without respect to the date the Equity Incentive was exercised or became exercisable) and (y) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares of Common Stock within ninety (90) days of termination of Continuous Service (or in the case of shares of Common Stock issued upon exercise of Options after such date of termination, within ninety (90) days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code regarding “qualified small business stock”).
9.7. Effective Date. This Plan shall become effective as determined by the Board, but no Equity Incentive shall be exercised (or, in the case of a stock bonus, shall be granted) unless and until this Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date this Plan is adopted by the Board.
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9.8. Plan Term. The Board may suspend or terminate this Plan at any time. Unless sooner terminated, this Plan shall terminate on the day before the tenth (10th) anniversary of the date this Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Equity Incentives may be granted under this Plan while this Plan is suspended or after this Plan is terminated. Suspension or termination of this Plan shall not impair rights and obligations under any Equity Incentive granted while this Plan is in effect except with the written consent of the affected Participant.
9.9. Amendment of Plan. The Board at any time, and from time to time, may amend this Plan. However, except as provided in Section 8.1, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code. It is expressly contemplated that the Board may amend this Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to bring this Plan or Incentive Stock Options granted under this Plan into compliance therewith. Rights under any Equity Incentive granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
9.10. Amendment of Equity Incentives. The Board at any time, and from time to time, may amend the terms of any one or more Equity Incentives; provided, however, that the rights under any Equity Incentive shall not be impaired by any such amendment unless the affected Participant consents in writing. Rights under any Equity Incentive granted before amendment of this Plan shall not be impaired by any amendment of this Plan unless the affected Participant consents in writing.
9.11. Section 409A. Notwithstanding anything in this Plan to the contrary, the Plan and Equity Incentives made under the Plan are intended to be stock rights that do not provide for the deferral of compensation under Section 409A of the Code, and the Plan shall be interpreted to the fullest extent possible and shall be operated so as to comply with the requirements imposed by Section 409A of the Code such that Equity Incentives do not provide for the deferral of compensation. If any Plan provision or Equity Incentive would result in the imposition of any additional tax or interest under Section 409A of the Code, the Company and the Participant intend that the Plan provision or Equity Incentive will be reformed to avoid imposition, to the extent possible, of such additional tax and interest, and no action taken by the Company to so comply with Section 409A of the Code shall be deemed to adversely affect the Participant’s rights to an Equity Incentive. The Participant further agrees that the Committee, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify an Equity Incentive in any manner and delay the payment of any amounts payable pursuant to an Equity Incentive to the extent necessary to meet the requirements of Section 409A of the Code as the Committee deems appropriate or desirable.
9.12. Tax Consequences. Each Participant shall be solely responsible for all of the tax consequences to the Participant of any award issued under the Plan, including any consequences arising under Section 409A of the Code. The Company provides no guaranty or assurance concerning the tax consequences to the Participants of any award issued under the Plan.
9.13. Governing Law. The law of the State of Colorado shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.
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ARTICLE
10.
Definitions
10.1. “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code (as defined below).
10.2. “Board” means the board of directors of the Company.
10.3. “Change of 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 “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then-outstanding voting securities; (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation or (iv) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company).
Notwithstanding the foregoing or any other provision of this Plan, the term Change of Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company and any definition of Change of Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Equity Incentives subject to such agreement (it being understood, however, that if no definition of Change of Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply).
10.4. “Code” means the Internal Revenue Code of 1986, as amended.
10.5. “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with Section 1.3.
10.6. “Common Stock” means the common stock, par value $0.01 per share, of the Company.
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10.7. “Company” means Rank One Computing Corporation, a Colorado corporation.
10.8. “Consultant” means any person, including any advisor, (1) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (2) serving as a member of the Board of Directors of an Affiliate and who is compensated for such services. However, the term “Consultant” shall not include Directors who are not compensated by the Company for their services as Directors, and the payment of a director’s fee by the Company for services as a Director shall not cause a Director to be considered a “Consultant” for purposes of the Plan.
10.9. “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Officer, Director or Consultant, is not interrupted or terminated as determined by the Board or the Company’s chief executive officer; provided that (a) a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Officer, Consultant or Director 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, shall not terminate a Participant’s Continuous Service, (b) the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave; provided, however , that a leave of absence shall be treated as Continuous Service for purposes of vesting in an Equity Incentive only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.
10.10. “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(a) a Change of Control; or
(b) a merger, consolidation or similar transaction following which (i) the Company is not the surviving corporation or (ii) the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding such transaction are converted or exchanged by virtue thereof into other property, whether in the form of securities, cash or otherwise.
10.11. “Director” means a member of the Board.
10.12. “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
10.13. “Employee” means any person employed by the Company or an Affiliate; provided that service as a Director or payment of a director’s fee by the Company for such service or for service as a member of the board of directors of an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
10.14. “Equity Incentive” means any right granted under this Plan, including an Option, a Restricted Stock Award and a Stock Appreciation Right.
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10.15. “Equity Incentive Agreement” means a written agreement between the Company and a holder of an Equity Incentive evidencing the terms and conditions of a grant of an individual Equity Incentive, which shall be subject to the terms and conditions of this Plan.
10.16. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
10.17. “Fair Market Value” means, as of any date, the fair market value of the Common Stock, determined, where applicable, in accordance with the requirements of the Code, as established in good faith by the Board. The Board’s determination of Fair Market Value shall be conclusive for purposes of this Plan.
10.18. “Group” means any “group” within the meaning of Section 13(d) or 14(d) of the Exchange Act.
10.19. “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
10.20. “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
10.21. “Officer” means any person designated by the Company as an officer.
10.22. “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to this Plan.
10.23. “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant, which shall be subject to the terms and conditions of this Plan.
10.24. “Optionholder” means a person to whom an Option is granted pursuant to this Plan or, if applicable, such other person who holds an outstanding Option.
10.25. “Participant” means a person to whom an Equity Incentive is granted pursuant to this Plan or, if applicable, such other person who holds an outstanding Equity Incentive.
10.26. “Person” means any natural person, corporation, partnership, limited liability company, trust or other legal entity.
10.27. “Plan” means this Rank One Computing Corporation 2018 Equity Incentive Plan.
10.28. “Restricted Stock Award” means an award of shares of Common Stock granted pursuant to the terms and conditions of Section 6.1.
10.29. “Securities Act” means the Securities Act of 1933, as amended.
10.30. “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 6.2.
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10.31. “Subsidiary” means, with respect to any Person, (1) any corporation of which more than fifty percent (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 shall 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 (2) any partnership 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 fifty percent (50%).
10.32. “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 ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Affiliate.
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Exhibit 10.2
AMENDMENT NO. 1 TO
RANK ONE COMPUTING CORPORATION
2018 EQUITY INCENTIVE PLAN
Plan Adopted: September 18, 2018
Plan Approved by Stockholders: September 18, 2018
Termination Date: September 18, 2028
Amendment No. 1 Adopted: April 28, 2023
Amendment No. 1 Approved by Stockholders: April 28, 2023
THIS AMENDMENT NO. 1 TO 2018 EQUITY INCENTIVE PLAN (“Amendment”) is made as of this 28th day of April, 2023 and amends that certain 2018 Equity Incentive Plan (“Plan”) adopted by Rank One Computing Corporation (the “Company”) as of September 18, 2018.
RECITALS
| A. | The Company’s board of directors and stockholders deem it in the best interests of the stockholders and the Company to adopt this Amendment and provide for the amendment of the Plan in the manner and on the circumstances set forth more fully herein. |
NOW THEREFORE, the board of directors and stockholders of the Company adopt the Amendment as follows:
AMENDMENT
1. Revised Section 5.8. Section 5.8 (Termination of Continuous Service) of the Plan shall be wholly amended and restated in its entirety to read as follows:
5.8. Termination of Continuous Service. In the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise such Optionholder’s Option (to the extent that such Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the expiration of the term of the Option as set forth in the Option Agreement or (b) such earlier date specified in the Option Agreement, if any, following the termination of the Optionholder’s Continuous Service. If, after termination of Continuous Service, the Optionholder does not exercise such Optionholder’s Option within the time specified in the Option Agreement, the Option shall terminate.
2. No Other Changes. Except as herein amended, all other terms and conditions of the Agreement remain in full force and effect.
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of January 4, 2021 (the “Effective Date”) by and between Rank One Computing Corporation, a Colorado corporation (“Company”) and B. Scott Swann, an individual (the “Employee”). In consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows:
1. Definitions. For purposes of this Agreement only (unless specified to the contrary), the following terms shall have the meanings set forth below:
“Affiliate” means, with respect to any individual, (i) such individual’s spouse and lineal relations (whether natural or adopted) and any trust formed and maintained solely for the benefit of such individual or such individual’s spouse or lineal relations and with respect to any entity, (ii) any person or entity controlling, controlled by or under common control with such entity, whether by ownership of voting securities, by contract or otherwise.
“Cause” means any of the following:
(i) Employee’s substantial failure to perform his duties in accordance with the Company’s bylaws and written policies, and as directed by the Company Board or President;
(ii) Employee’s material breach of this Agreement or Company’s Certificate of Incorporation, bylaws or written policies or procedures;
(iii) Employee’s gross negligence or willful misconduct with respect to the Company, including but not limited to dishonesty in the performance of Employee’s duties hereunder or conversion, misappropriation or embezzlement by Employee of any monies or property of the Company; or
(iv) the institution of formal legal charges for, or conviction of Employee of fraud, embezzlement, any other offense involving dishonesty or constituting a breach of trust, or any felony (or any crime in any jurisdiction other than the United States or any state thereof in which the Company does business which would constitute such a felony under the laws of the United States or any state thereof).
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Board” means the board of directors of the Company.
“Disability” means physical or mental incapacity resulting in Employee being unable to perform his duties for any consecutive 3-month period, or for any 6 non-consecutive months in any consecutive 12-month period. Any question as to the existence of the Disability of Employee as to which Employee and Company cannot agree shall be determined in writing by a qualified independent physician as appointed by Company and Employee (or Employee’s representative). The determination of Disability made in writing to the Company and Employee shall be final and conclusive for all purposes of this Agreement.
2. Term of Employment. Subject to the provisions of Sections 5.1 through Section 5.3, inclusive, and conditional upon Employee receiving a release from all non-competition obligations to third parties that prohibit Employee’s employment by the Company, Employee shall be employed by the Company unless and until the termination or resignation of the Employee (the “Employment Term”). Employee’s employment is “at will” and can be terminated by the Company or the Employee at any time and for any reason, and nothing in this Agreement shall be construed as an agreement or commitment of employment for any period of time. Upon termination of Employee’s employment with the Company for any reason, the Company’s obligation to make payments hereunder shall cease, except that the Company shall be required to make the payments set forth in Section 5 herein.
3. Position.
(a) Employee’s title with the Company (the “Position”) and role will be Chief Executive Officer. Employee will report directly to the Company Board and President. Employee shall otherwise perform any duties reasonably required by Company. Employee will travel from time to time to the extent reasonably necessary to the performance of his duties hereunder.
(b) During the Employment Term, Employee shall in good faith perform the duties set forth in this Section 3 and shall devote substantially all of his working time and efforts to the performance of such duties; provided, however, that Employee may devote time to personal and family investments, industry-related groups and board positions and other activities to the extent that such investments do not materially conflict with the discharge of his duties hereunder. The existence of any such material conflict shall be determined in good faith by the Company Board.
4. Compensation.
4.1. Base Salary. Beginning on the Effective Date, the Company shall pay Employee a gross annual base salary equal to (the “Base Salary”). The Base Salary is payable in regular installments in accordance with the Company’s usual payment practices. The Company Board or a compensation committee appointed by the Company Board shall annually review the Base Salary beginning at the end of 2021 and determine changes in the Base Salary in good faith.
4.2. Bonus. Employee will be entitled to receive an annual performance bonus based on achievement certain key performance indicators (“KPIs”). For the 2021 calendar year, Employee may earn a performance bonus equal to 20% of the Base Salary based on achievement of one or more of the following five Company financial performance goals, for a potential maximum bonus of 100% of the Base Salary: (A) Company’s 2021 gross revenues exceed $5.0 million, (B) Company’s 2021 net profits exceed $1.0 million, (C) Company’s 2021 gross revenues exceed $5.5 million, (D) Company’s 2021 net profits exceed $1.5 million and (E) Company’s 2021 gross revenues exceed $6.0 million. The Company’s gross revenues will be calculated on a cash basis, gross receipts net of any reseller or customer discounts, or similar sales discount incentives, and the Company’s net profits will be calculated on a cash basis, net of all expenses except for interest, taxes, depreciation and amortization. The Company will determine the performance bonus payable on an annual basis at the end of each fiscal year, to be paid to Employee within ninety (90) days following the end of such fiscal year. In order to earn the performance bonus, Employee must be employed by the Company through the date on which the performance bonus is paid. In no event whatsoever shall Employee be entitled to a performance bonus following his or her employment or engagement with the Company. Employee’s annual performance bonus plan is subject to annual review by the Company, which will set forth new KPIs, performance metrics and thresholds for each such applicable year. Employee acknowledges that this individualized performance bonus plan for 2021 may be replaced in future years by an annual performance bonus program that Company may make available to other Company employees, as amended from time to time, subject to and on a basis consistent with the terms, conditions and overall administration of such programs as are provided to other employees of the Company. The Company, in its discretion, reserves the right to amend or terminate any benefits set forth in this Section 4.2 at any time.
4.3 Equity. Employee will receive an option grant to purchase shares of the Company’s Common Stock in an amount equal to of the currently outstanding shares of the Company (the “Stock Option”) pursuant to the Company’s 2018 Equity Incentive Plan (the “Plan”). The Stock Option will be granted at the first Company Board meeting following the completion of the third-party valuation of the Company’s Common Stock to be effective as soon as reasonably practicable following the date hereof in accordance with the requirements of Section 409A of the Code. The Stock Option will have an exercise price equal to the fair market value of the Company’s Common Stock as determined by the Board on the date of grant and shall vest over four years as follows: 1/4 of the Stock Option shares shall vest upon the first anniversary of the date of grant and 1/48 shall vest monthly thereafter.
4.4 Benefits.
(a) Incentive Benefits. Employee will be entitled to participate in any retirement or benefit plans and arrangements that Company may be made available to employees in the future, as amended from time to time, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements on the same terms as such benefits are provided to other employees of the Company. The Company, in its discretion, reserves the right to amend or terminate such benefits at any time.
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(b) Welfare Benefits. The Company shall also provide to Employee all vacation, health, major medical, hospitalization, life insurance and disability insurance on the same terms as such benefits are provided to other employees of the Company. As of the Effective Date, the Company does not track vacation/sick leave, and Employee is entitled to take time off so long as his or her absence from work does not materially interfere with the Company’s business. The Company, in its discretion, reserves the right to amend or terminate such benefits at any time.
4.5 Business Expenses and Perquisites. The Company shall reimburse Employee for all pre-approved out-of-pocket expenses paid by him in connection with the performance of his duties hereunder pursuant to the Company’s policy for travel and expense reimbursement. In addition, all reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code.
4.6 Place of Employment. The principal place of employment of Employee shall be within a 50-mile radius of Washington, DC or such other location as is consented to by Employee in writing. It is understood, however, and agreed that Employee may be required, in connection with the performance of his duties, to work from time to time at other locations designated by the Company Board or President or as required in connection with the business of Company. When required to travel to and/or spend time at such other locations, Employee’s reasonable traveling and temporary living expenses shall be reimbursed by the Company, upon submittal of vouchers in accordance with Section 4.5.
5. Termination. Employee’s employment may be terminated by either party at any time. In the event of any such termination, the rights of the parties will be determined as set forth in this Section 5. Employee acknowledges and agrees that any valid written notice of termination by Employee delivered in accordance with the terms of this Agreement shall operate as a resignation by Employee from the Position.
5.1. Termination For Cause by the Company. If Employee’s employment is terminated by the Company for Cause or due to Employee’s death or Disability, (a) Employee shall be entitled to receive his Base Salary through the date of termination, (b) the Company shall reimburse Employee in accordance with Section 4.5 for expenses Employee has incurred in the pursuit of his duties under this Agreement prior to the date of termination, and (c) Employee shall not be entitled to receive any benefits from and after the date of termination, unless otherwise required by applicable law.
5.2. Termination of Employment Without Cause by the Company.
(a) If Employee’s employment is terminated by the Company without Cause, Company shall provide Employee with written notice of termination setting forth the circumstances surrounding the termination (if any). In the event of such termination, the Company shall, subject to subsection (c) below, pay Employee:
(i) Base Salary earned through the date of termination;
(ii) Severance in an amount equal to (A) two months of Base Salary if employment is terminated prior to the first anniversary of the Effective Date, (B) three months of Base Salary if employment is terminated between after the first anniversary of the Effective Date but before the second anniversary of the Effective Date, or (C) four months of Base Salary if employment is terminated between after the second anniversary of the Effective Date, to be paid on the Company’s regularly scheduled payroll dates commencing within the first regular payroll date to occur following Employee’s delivery of an effective release of claims as described in Section 5.2(c) below (the date such release is effective is the “Release Effective Date”); provided, however, that any payments that would have otherwise been made prior to the Release Effective Date but for the fact that a release had not yet been delivered, shall accrue and be paid in the first payroll date that follows such Release Effective Date, with subsequent payments occurring on each subsequent Company payroll date (the “Severance Payments”);
(iii) reimbursement for expenses incurred but not yet reimbursed by Company in the pursuit of his duties prior to the date of termination in accordance with Section 4.5 of this Agreement to be paid within thirty (30) days of such termination;
(iv) any Bonus earned for a completed fiscal year but not yet paid to be paid within the earlier of (A) thirty (30) days of such termination and (B) the date that is ninety (90) days following the end of the fiscal year during which the Bonus is earned; and
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(v) any other compensation and benefits to which Employee may be entitled under applicable plans, programs and agreements of Company to be paid, if applicable, within thirty (30) days of such termination or earlier if required by applicable law.
(b) Any payment by the Company pursuant to this Section 5.2 is, to the fullest extent permissible under applicable law, conditioned upon the execution and effectiveness (including the execution of any non-revocation period) of a general release of claims, in a form reasonably satisfactory to the Company in its discretion, which is to be provided to Employee no later than the date of Employee’s termination of employment with the Company, of the Company, its Affiliates and any related parties signed by the Employee. Such release shall be fully effective no later than sixty (60) days following termination or Employee shall forfeit the Severance Payments under this Section 5.2.
5.3. No Mitigation or Offset. In the event of any termination of Employee’s employment under this Agreement, Employee shall be under no obligation to seek other employment, and there shall be no offset against amounts due under this Agreement on account of any remuneration attributable to any subsequent employment that Employee may obtain.
5.4. Nature of Payments. Any amounts due Employee under this Agreement in the event of any termination of Employee’s employment with Company are in the nature of severance payments, or liquidated damages which contemplate both direct damages and consequential damages that may be suffered as a result of the termination of Employee’s employment, or both, and are not in the nature of a penalty.
5.5. Notice of Termination. Any purported termination of employment by the Company or resignation by Employee shall be communicated by written notice to the other party hereto.
5.6. Unemployment. The Company will not contest Employee’s application for unemployment benefits in the event Company terminates Employee’s employment with the Company, unless the Company determines in its reasonable discretion that the grounds for termination arose out of gross negligence or willful misconduct. The Company reserves the right, however, to provide true and accurate responses to any inquiries by the applicable government authorities.
5.7. Third Party Non-Competition Obligations. In the event that Employee is not released by written agreement prior to the Effective Date from all non-competition obligations to third parties that prohibit Employee’s employment by the Company, this Agreement and the Proprietary Information Agreement shall be deemed null and void immediately prior to the Effective Date, and neither party shall owe any duty or obligation to the other under this Agreement or under the Proprietary Information Agreement, including, without limitation, under this Section 5 of this Agreement.
6. Non-Disparagement. Employee and Company and its Affiliates agree not to disparage the other in any manner likely to be harmful to them or their business or personal reputation. Notwithstanding the foregoing, nothing in this Agreement shall prohibit any party from (a) making truthful statements or disclosures required by applicable law, regulation or legal process; (b) requesting or receiving confidential legal advice; (c) engaging in communications protected under Section 7 of the National Labor Relations Act; (d) responding to inquiries of a prospective employer; or (e) participating in any investigation by the federal Equal Employment Opportunity Commission, the Department of Labor, or any other federal, state or local agency.
7. Proprietary Information. Employee will be required as a condition of employment to sign and abide by the Company’s Proprietary Information and Intellectual Property Agreement (the “Proprietary Information Agreement”), a form of which is attached hereto as Exhibit A. Nothing in the Proprietary Information Agreement shall limit or otherwise circumscribe any confidentiality agreement Employee may have previously entered into with the Company.
8. Non-Compliance. Subject to the following sentence, but notwithstanding any other provision of this Agreement to the contrary (specifically including the provisions of Section 5), if Employee breaches Section 6 or materially breaches the Proprietary Information Agreement while employed by the Company, the Company may terminate the employment of Employee for Cause, and, whether or not Employee is employed by the Company, from and after any such breach by Employee, the Company shall cease to have any obligations to make payments to Employee under this Agreement.
9. Specific Performance. Employee acknowledges and agrees that the Company’s remedies at law for a breach of any of the provisions of Section 6 hereof would be inadequate and, in recognition of this fact, Employee agrees that, in the event of such a breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.
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10. Enforceability. It is expressly understood and agreed that although Employee and the Company consider the restrictions contained in Section 6 hereof to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Employee, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that the any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
11. Section 409A and 280G. In the event that the payments or benefits set forth in this Agreement constitute “non-qualified deferred compensation” subject to Section 409A of the Code, then the following conditions apply to such payments or benefits:
11.1. To the extent necessary to comply with Section 409A of the Code, any termination of Employee’s employment triggering payment of benefits under must constitute a “separation from service” under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) before distribution of such benefits can commence. To the extent that the termination of Employee’s employment does not constitute a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) (as the result of further services that are reasonably anticipated to be provided by Employee to Company at the time Employee’s employment terminates), any such payments under this Agreement that constitute deferred compensation under Section 409A of the Code shall be delayed until after the date of a subsequent event constituting a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h). For purposes of clarification, this Section 6(a) shall not cause any forfeiture of benefits on Employee’s part, but shall only act as a delay until such time as a “separation from service” occurs.
11.2. Notwithstanding any other provision with respect to the timing of payments under this Agreement if, at the time of Employee’s termination, Employee is deemed to be a “specified employee” of Company (within the meaning of Section 409A(a)(2)(B)(i) of the Code), then limited only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which Employee may become entitled under this Agreement as a result of a “separation from service” which are subject to Section 409A of the Code (and not otherwise exempt from its application) shall be withheld until the first (1st) business day after six (6) months have elapsed following the termination of Employee’s employment, at which time Employee shall be paid an aggregate amount equal to the accumulated, but unpaid, payments otherwise due to Employee under the terms of this Agreement.
11.3. It is intended that each installment of the payments and benefits provided under this Agreement shall be treated as a separate “payment” for purposes of Section 409A of the Code. Neither Company nor Employee shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A of the Code.
11.4. Notwithstanding any other provision of this Agreement to the contrary, this Agreement shall be interpreted and at all times administered in a manner that avoids the inclusion of compensation in income under Section 409A of the Code, or the payment of increased taxes, excise taxes or other penalties under Section 409A of the Code. The parties intend this Agreement to be in compliance with Section 409A of the Code. Notwithstanding any other provision of this Agreement to the contrary, the Employee acknowledges and agrees that Company does not guarantee the tax treatment or tax consequences associated with any payment or benefit arising under this Agreement, including but not limited to consequences related to Section 409A of the Code and that Employee agrees to pay any taxes payable by him in accordance with the Code including, without limitation, Section 409A of the Code.
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11.5. If any payment or benefit Employee would receive under this Agreement (for purposes of this section, a “Payment”) would: (i) constitute a “parachute payment” within the meaning of Section 280G the Code; and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either: (A) the full amount of such Payment; or (B) such lesser amount as would result in no portion of the Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employments taxes, income taxes and the Excise Tax, results in Employee’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. With respect to subsection (B), if there is more than one method of reducing the payment as would result in no portion of the Payment being subject to the Excise Tax, then Employee shall determine which method shall be followed, provided that if Employee fails to make such determination within thirty (30) days after Company has sent Employee written notice of the need for such reduction, Company may determine the amount of such reduction in its sole discretion. If any reduction of benefits or payments is required under this subsection (d), the order of reduction shall be cash first, equity acceleration next and then remaining fringe benefits if any.
11.6. If any payment or benefits under this Agreement is subject to Section 409A of the Code, is conditioned upon the execution of a general release of claims and the consideration period is such that the Employee can control the taxable year in which such payments begin, such payments and benefits shall, to the extent required by Section 409A of the Code, begin in the later taxable year.
12. Miscellaneous.
12.1. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado without giving any effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado.
12.2. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, THE PARTIES HERETO EACH WAIVE TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
12.3. Entire Agreement: Amendments. This Agreement contains the entire understanding of the parties with respect to the employment of Employee by the Company. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.
12.4. No Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.
12.5. Severability. In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
12.6. Assignment.
(a) Absent the prior written consent of the Company, this Agreement shall not be assignable by Employee, except that Employee may assign payments due hereunder to a trust established for the benefit of Employee’s family or to his estate or to any partnership or trust entered into by Employee and/or his immediate family members (meaning, his spouse, lineal descendants, parents and siblings).
(b) Absent the prior written consent of the Employee, this Agreement shall not be assignable by the Company, except that the Company may assign this Agreement in connection with a change of control transaction or to an Affiliate.
12.7. Successors: Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of Employee and successors and assigns of the Company.
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12.8. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be given to the respective addresses set forth on the execution page of this Agreement, provided that:
(a) all notices to the Company shall be directed to the attention of Rank One Computing Corporation, 1120 Lincoln St, Ste 1607, Denver, CO 80203, Attn: General Counsel.
(b) all notices to Employee shall be directed to 520 12th St S, Apt 2201, Arlington, VA 22202.
or to such other address as either party may have furnished to the other in writing in accordance herewith. Each such notice or other communication shall be effective (i) if given by prepaid overnight courier, upon receipt, (ii) if given by United States mail, postage prepaid, return receipt requested, the later of actual receipt or three business days after deposit with the United States postal service, or (iii) upon confirmed receipt of email; provided that notice of change of address shall be effective only upon receipt.
12.9. Withhold Taxes. The Company may withhold from any amounts payable under this Agreement such Federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.
12.10. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first above written.
| COMPANY: | ||
| RANK ONE COMPUTING CORPORATION, a Colorado corporation | ||
| By: | /s/ Brendan F. Klare | |
| Brendan F. Klare, CEO | ||
| EMPLOYEE: | ||
| /s/ B. Scott Swann | ||
| B. Scott Swann | ||
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EXHIBIT A
PROPRIETARY INFORMATION AND INTELLECTUAL PROPERTY AGREEMENT
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RANK ONE COMPUTING CORPORATION
PROPRIETARY INFORMATION AND INTELLECTUAL PROPERTY AGREEMENT
This Proprietary Information and Intellectual Property Agreement is effective as of January 4, 2021 (the “Effective Date”) and is entered into as of December 21, 2020 in consideration of the undersigned’s (“me” or “Employee”), employment or continued employment by RANK ONE COMPUTING CORPORATION, a Colorado corporation (the “Company”), and the compensation and other consideration now and hereafter paid or provided to me, I hereby agree as follows:
1. Definitions. As used in this Agreement:
1.1 “Intellectual Property” means all algorithms, application programming interfaces (APIs), apparatus, concepts, data, databases and data collections, designs, developments, diagrams, discoveries, documentation, drawings, flow charts, formulae, ideas and inventions (whether or not patentable or reduced to practice), know-how, mask works, materials, marketing and development plans, marks (including brand names, product names, logos, and slogans), methods, models, net lists, network configurations and architectures, procedures, processes, protocols, schematics, software code (in any form, including source code and executable or object code), specifications, subroutines, techniques, test vectors, tools, trade secrets, uniform resource identifiers including uniform resource locaters (URLs), user interfaces, web sites, works of authorship, and other forms of technology.
1.2 Intellectual Property Rights. The term “Intellectual Property Rights” means all past, present, and future rights in or pertaining to Intellectual Property, which may exist or be created under the laws of any jurisdiction in the world, including (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, and mask work rights; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patent and industrial property rights; (e) other proprietary rights in Intellectual Property of every kind and nature; and (f) rights in or relating to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in clauses (a) through (e) of this sentence.
1.3 Proprietary Information. The term “Proprietary Information” means any and all confidential and/or proprietary knowledge, data, or information related to the Company’s business that is labeled or identified as “confidential” or “proprietary” or that I otherwise know, or would reasonably be expected to know, the Company considers to be confidential or proprietary or the Company has a duty to treat as confidential. By way of illustration but not limitation, “Proprietary Information” includes (a) Intellectual Property of the Company, (b) Work Product (as defined below), (c) information regarding research, development, products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers and the existence of any business discussions, negotiations or agreements between the Company and any third party; and (d) information regarding the skills and compensation of the Company’s employees, contractors or other service providers.
1.4 Work Product. The term “Work Product” means (a) all items provided or to be provided by me to Company, (b) all Intellectual Property, in any stage of development, that I conceive, create, develop, or reduce to practice (or conceived, created, developed, or reduced to practice in the past), either alone or jointly with others, in connection with performing services for Company, and (c) all tangible embodiments (including models, presentations, prototypes, reports, samples, and summaries) of each item of such Intellectual Property.
2. Nondisclosure.
2.1 Recognition of Company’s Rights; Nondisclosure. At all times during my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company’s Proprietary Information, except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an officer of the Company expressly authorizes such in writing. I will obtain Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that incorporates any Proprietary Information and/or disparages the Company. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information will be the sole property of the Company and its assigns. Notwithstanding anything contained herein to the contrary, nothing in this Agreement is intended to prohibit me from discussing with other employees, or with third parties who are not competitors of the Company, my wages, hours, and other terms and conditions of employment.
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2.2 Third Party Information. I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.
2.3 No Improper Use of Information of Prior Employers and Others. During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.
3. Assignment of Intellectual Property.
3.1 Previous Intellectual Property. Intellectual Property, if any, which I created or acquired prior to the commencement of my employment with the Company and which is not Work Product is excluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on Exhibit A (Previous Intellectual Property) attached hereto a complete list of all Intellectual Property relevant to the subject matter of my employment by Company that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Previous Intellectual Property”). If disclosure of any such Previous Intellectual Property would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Previous Intellectual Property in Exhibit A but am only to disclose a cursory name for each such Previous Intellectual Property, a listing of the party or parties to whom it belongs and the fact that full disclosure as to such Previous Intellectual Property has not been made for that reason. A space is provided on Exhibit A for such purpose. If no such disclosure is attached, I represent that there is no Previous Intellectual Property. If, in the course of my employment with the Company, I incorporate any Previous Intellectual Property into any Work Product, Company product, process or machine, the Company is hereby granted and will have a nonexclusive, fully paid, royalty-free, irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to make, have made, modify, use, reproduce, make derivative works of, distribute, publicly perform, publicly display, import and sell such Previous Intellectual Property. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, Previous Intellectual Property in any Work Product or Company Intellectual Property without the Company’s prior written consent. I also agree that I will not incorporate into any Company software or otherwise deliver to the Company any software code licensed under the GNU General Public License or any other open source license that would require the Company to make any public disclosure or general availability of source code owned, developed or distributed by the Company.
3.2 Assignment of Intellectual Property. Subject to Sections 3.3 and 3.5, I hereby assign and agree to assign in the future (when any such Intellectual Property is first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title and interest in and to any and all Work Product, whether previously created, now existing, or arising in the future (and all Intellectual Property Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes. Intellectual Property assigned to the Company, or to a third party as directed by the Company pursuant to this Section 3, is hereinafter referred to as “Company Intellectual Property.” I hereby forever waive and agree not to assert any and all Intellectual Property Rights I may have in or with respect to Company Intellectual Property.
3.3 Nonassignable Intellectual Property. I recognize that, in the event of a specifically applicable state law, regulation, rule, or public policy (“Specific Intellectual Property Law”), this Agreement will not be deemed to require assignment of any intellectual property which qualifies fully for protection under a Specific Intellectual Property Law by virtue of the fact that any such intellectual property was, for example, developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted or was derived from work performed by me directly or indirectly for the Company. In the absence of a Specific Intellectual Property Law, the preceding sentence will not apply.
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3.4 Obligation to Keep Company Informed. During the period of my employment and for one (1) year after termination of my employment with the Company, I will promptly disclose to the Company fully and in writing all Intellectual Property authored, conceived or reduced to practice by me, either alone or jointly with others, which may reasonably be considered as relevant to the Company’s Work Product or Proprietary Information. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf or in which I am named as an inventor or co-inventor within one (1) year after termination of employment. At the time of each such disclosure, I will advise the Company in writing of any Intellectual Property that I believe fully qualifies for protection under the provisions of a Specific Intellectual Property Law; and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Intellectual Property that qualifies fully for protection under a Specific Intellectual Property Law. I will preserve the confidentiality of any Intellectual Property that does not fully qualify for protection under a Specific Intellectual Property Law.
3.5 Government or Third Party. I also agree to assign all my right, title and interest in and to any particular Company Intellectual Property to a third party, including without limitation the United States, as directed by the Company.
3.6 Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).
3.7 Enforcement of Intellectual Property Rights. I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Intellectual Property Rights relating to Company Intellectual Property in any and all countries. To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Intellectual Property Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Intellectual Property Rights to the Company or its designee. My obligation to assist the Company with respect to Intellectual Property Rights relating to such Company Intellectual Property in any and all countries will continue beyond the termination of my employment, but the Company will compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.
3.8 Further Assurances. In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 3 with the same legal force and effect as if executed by me. I hereby waive, assign and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Intellectual Property Rights assigned hereunder to the Company.
3.9 Presumption of Ownership. Due to the difficulty of establishing when Intellectual Property is first conceived or developed, whether it results from access to the Company’s actual or anticipated business or research or development, or whether it is a direct or indirect result or derivation of any work I perform for the Company, I hereby acknowledge and agree that all Intellectual Property which may reasonably be considered to be related to the creation, development, licensing, marketing, distribution or sale of automated face recognition algorithms and systems or any other material line of the Company’s business conducted by the Company during my employment with the Company conceived, developed, suggested, or reduced to practice by me, alone or jointly with others whether during the term of this Agreement commencing on the Effective Date or otherwise during my employment shall be presumed to be Work Product and to belong to the Company, and I shall have the burden of proof to prove otherwise.
4. Records. Unless otherwise directed or requested by the Company, I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information and all Intellectual Property developed by me during the period of my employment at the Company, which records will be available to and remain the sole property of the Company at all times.
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5. No Conflicts or Solicitation. I acknowledge that during my employment I will have access to and knowledge of Proprietary Information. To protect the Company’s Proprietary Information, I agree that during the period of my employment by the Company I will not, without the Company’s express written consent, engage in any other employment or business activity which is directly or indirectly competitive with the Company, or would otherwise conflict with my obligations to the Company. For the period of my employment by the Company and continuing until two (2) years after my last day of employment with the Company, I will not directly or indirectly (a) induce any employee, independent contractor or consultant of the Company to terminate or negatively alter his or her relationship with the Company, (b) solicit the business of any client or customer of the Company (other than on behalf of the Company) in any manner that is competitive with the Company or (c) induce any supplier, content provider, vendor, consultant or independent contractor of the Company to terminate or negatively alter his, her or its relationship with the Company. If any restriction set forth in this Section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it will be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
6. No Conflicting Obligation; Covenant not to Compete.
6.1 I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any non-compete agreement or any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement.
6.2 I acknowledge that during my employment I will have access to and knowledge of Company Proprietary Information. To protect Company’s Proprietary Information and trade secrets, I agree that during my employment with the Company whether full-time or part-time and for a period of two (2) years after my last day of employment with the Company, I will not directly or indirectly engage in (whether as an employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business that engages in a “Restricted Business” in a “Restricted Territory” (as defined below). It is agreed that ownership of (i) no more than one percent (1%) of the outstanding voting stock of a publicly traded corporation, or (ii) any stock I presently own and have disclosed to the Company’s board of directors prior to the date hereof will not constitute a violation of this provision (“Permitted Ownership”).
6.3 I agree and acknowledge that the time limitation on the restrictions in this Section 6, combined with the geographic scope, is reasonable. I also acknowledge and agree that this Section 6 is reasonably necessary for the protection of Company’s Proprietary Information as defined in Section 1.2 herein, that through my employment I will receive adequate consideration for any loss of opportunity associated with the provisions herein, and that these provisions provide a reasonable way of protecting Company’s business value which will be imparted to me. If any restriction set forth in this Section 6 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it will be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
6.4 As used herein, the terms: (a) “Restricted Business” means the creation, development, licensing, marketing, distribution or sale of automated face recognition algorithms and systems and any other material line of the Company’s business conducted by the Company during my employment with the Company and (b) “Restricted Territory” means any state, county, or locality in the United States in which the Company conducts business and any other country, city, state, jurisdiction, or territory in which the Company does business.
7. Disclosure of Conflicts of Interest.
7.1 I will disclose the existence of and all material facts related to any actual or possible Conflict of Interest to the Company’s Board of Directors. As used herein, a “Conflict of Interest” includes: (1) any transaction between the Company and an entity (i) in which I, my parent, my child, my sibling or the spouse or domestic partner of any of the foregoing has a material financial interest of any kind, including any ownership interest (other than Permitted Ownership) or (ii) of which I serve as director, officer, employee, independent contractor, agent or other legal representative or (2) any material financial interest of any kind, in any person, firm, corporation or business that engages in a Restricted Business or is a past, current or potential customer, supplier, investor or other business relation of the Company (other than Permitted Ownership through accounts for which I do not, directly or indirectly, influence investing activities) or (3) the receipt of any gifts, entertainment or other favors which might reasonably be expected to influence or be intended to influence me in the performance of my duties.
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8. Return Of Company Documents. When I leave the employ of the Company or upon request by the Company during the course of my employment, I will deliver to the Company any and all property, equipment, drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Intellectual Property, Third Party Information or Proprietary Information of Company. I agree that I will not copy, delete or alter any information contained on my Company computer before I return it to Company. I further agree that any property situated on Company’s premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. Prior to leaving, I will cooperate with the Company in completing and signing the Company’s termination statement.
9. Legal And Equitable Remedies. Because my services are personal and unique and because I may have access to and become acquainted with the Company’s Proprietary Information, the Company has the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.
10. Notification Of New Employer. In the event that I leave the employ of the Company, I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.
11. General Provisions.
11.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by and construed according to the laws of the State of Colorado, without regard for its conflicts of law principles that would require application of the laws of a different state. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Denver, Colorado for any lawsuit filed there against me by Company arising from or related to this Agreement.
11.2 Notices. Any notice required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed facsimile or electronic mail during normal business hours of the recipient, and if not sent during normal business hours of the recipient, then on the next business day; (c) five calendar days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the other party hereto at such party’s address hereinafter set forth on the signature page hereof, or at such other address as such party may designate by ten (10) days advance written notice to the other party hereto
11.3 Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any one or more of the provisions contained in this Agreement is, for any reason, held to be invalid, illegal or unenforceable in any respect, such holding will not affect the other provisions of this Agreement, and this Agreement will be construed with such modifications as a part hereof and treated as though originally set forth in this Agreement and/or as if such invalid, illegal or unenforceable provision had never been contained herein. The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them.
11.4 Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.
11.5 Survival. The provisions of this Agreement will survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.
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11.6 Employment. I acknowledge and agree that my relationship with the Company is “AT-WILL”, and that both the Company and I may terminate my employment relationship at any time, with or without cause or advance notice. I further agree and understand that nothing in this Agreement will confer any right with respect to continuation of employment by the Company, nor will it interfere in any way with my right or the Company’s right to terminate my employment at any time, with or without cause or advance notice.
11.7 Waiver. No waiver by the Company of any breach of this Agreement will be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement will be construed as a waiver of any other right. The Company will not be required to give notice to enforce strict adherence to all terms of this Agreement.
11.8 Entire Agreement. The obligations pursuant to Sections 2 and 3 of this Agreement will apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
11.9 Advice of Counsel. I ACKNOWLEDGE THAT, IN EXECUTING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT MAY NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
11.10 Export. The export of technical data or products utilizing technical data to countries outside the United States could violate United States export laws or regulations. I agree that I will not export such data, directly or indirectly, unless I have specific authorization from the Company.
11.11 Reporting. You are hereby notified in accordance with the Defend Trade Secrets Act of 2016 that you will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. You are further notified that if you file a lawsuit for retaliation by an employer for reporting a suspected violation of law, you may disclose the employer’s trade secrets to your attorney and use the trade secret information in the court proceeding if you: (a) file any document containing the trade secret under seal; and (b) do not disclose the trade secret, except pursuant to court order.
[Remainder of Page Intentionally Left Blank]
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This Agreement is effective as of the first day of my employment with the Company, namely: January 4, 2021.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
| EMPLOYEE: | ||
| /s/ B. Scott Swann | ||
| (Signature) | ||
| B. Scott Swann | ||
| (Printed Name) | ||
| Accepted And Agreed To: | ||
| Rank One Computing Corporation | ||
| By: | /s/ Brendan F. Klare | |
| Name: | Brendan F. Klare | |
| Title: | CEO | |
| Address: | 1120 N. Lincoln Street, Suite 1607 Denver, Colorado 80203 |
|
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Exhibit A
PREVIOUS INTELLECTUAL PROPERTY
| TO: | Rank One Computing Corporation |
| FROM: | B. Scott Swann |
| DATE: | January 4, 2021 |
| SUBJECT: | Previous Intellectual Property |
1. Except as listed in Section 2 below, the following is a complete list of all Intellectual Property relevant to the subject matter of my employment by Company that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement (collectively referred to as “Previous Intellectual Property”):
| ☒ | No Intellectual Property. | |
| ☐ | See below: | |
| ☐ | Additional sheets attached. |
2. Due to a prior confidentiality agreement, I cannot complete the disclosure under Section 1 above with respect to Intellectual Property generally listed below, the Intellectual Property Rights and duty of confidentiality with respect to which I owe to the following party(ies):
| Intellectual Property | Party(ies) | Relationship | |||
| 1. | |||||
| 2. | |||||
| 3. | |||||
| ☐ | Additional sheets attached. | ||||
A-1
Exhibit 10.4
AWARD/CONTRACT 2. CONTRACT (Proc. Inst. Ident.) NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO. 5. ISSUED BY CODE 1. THIS CONTRACT IS A RATED ORDER UNDER DPAS (15 CFR 700) 7. NAME AND ADDRESS OF CONTRACTOR (No., street, country, State and ZIP Code) RATING PAGE OF PAGES 26 See Block 20C 6. ADMINISTERED BY (If other than Item 5) CODE 8. DELIVERY FOB ORIGIN X OTHER (See below) 9. DISCOUNT FOR PROMPT PAYMENT 10. SUBMIT INVOICES (4 copies unless otherwise specified) TO THE ADDRESS SHOWN IN ITEM CODE 11. SHIP TO/MARK FOR CODE FACILITY CODE 12. PAYMENT WILL BE MADE BY 13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: 10 U.S.C. 2304 (c) ( ) 41 U.S.C. 3304 (a) ( 14. ACCOUNTING AND APPROPRIATION DATA See Section G 15C. 15D. 15E. UNIT PRICE QUANTITY UNIT n00014 ( ) ) - S0602A DCmA DEnVER Denver Federal Center Building 16 6th Avenue and Kipling Street Po Box 25586 Denver Co 80225 - 0586 RAnK onE ComPuTınG CoRPoRATıon Attn: 1290 n BRoADWAY STE 1200 DEnVER Co 802035603 CODE Attn: ) 7EW26 SCD - C 15A. ITEM NO 15F. AMOUNT 15B. SUPPLIES/SERVICES Continued 15G. TOTAL AMOUNT OF CONTRACT $ 16. TABLE OF CONTENTS PAGE(S) SEC. DESCRIPTION (X) PAGE(S) SEC. DESCRIPTION (X) PART II - CONTRACT CLAUSES PART I - THE SCHEDULE 15 I CONTRACT CLAUSES X A SOLICITATION/CONTRACT FORM PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH. 3 B SUPPLIES OR SERVICES AND PRICES/COSTS X 26 J LIST OF ATTACHMENTS X 3 C DESCRIPTION/SPECS./WORK STATEMENT X PART IV - REPRESENTATIONS AND INSTRUCTIONS 7 D PACKAGING AND MARKING X K REPRESENTATIONS CERTIFICATIONS AND 7 E INSPECTION AND ACCEPTANCE X OTHER STATEMENTS OF OFFERORS 7 F DELIVERIES OR PERFORMANCE X L INSTRS., CONDS., AND NOTICES TO OFFERORS 9 G CONTRACT ADMINISTRATION DATA X M EVALUATION FACTORS FOR AWARD 13 H SPECIAL CONTRACT REQUIREMENTS X document and return copies to issuing office.) Contractor agrees to 18. SEALED - BID AWARD ( Contractor is not required to sign this document.) Your bid on Solicitation Number including the additions or changes made by you which additions or changes are set forth in full above, is hereby accepted as to the items listed above and on any continuation sheets. This award consummates the contract which consists of the following documents: (a) the Government's solicitation and your bid, and (b) this award/contract. No further contractual document is necessary. (Block 18 should be checked only when awarding a sealed - bid contract.) 20A. NAME OF CONTRACTING OFFICER furnish and deliver all items or perform all the services set forth or otherwise identified above and on any continuation sheets for the consideration stated herein. The rights and obligations of the parties to this contract shall be subject to and governed by the following documents: (a) this award/contract, (b) the solicitation, if any, and (c) such provisions, representations, certifications, and specifications, as are attached or incorporated by reference herein. (Attachments are listed herein.) 19A. NAME AND TITLE OF SIGNER (Type or print) , 20C. DATE SIGNED (Signature of the Contracting Officer) 20B. UNITED STATES OF AMERICA BY 17. X CONTRACTOR' S NEGOTIATED AGREEMENT ( Contractor is required to sign this (Signature of person authorized to sign) AUTHORIZED FOR LOCAL REPRODUCTION Previous edition is NOT usable 19C. DATE SIGNED BY STANDARD FORM 26 (Rev. 3/2013) Prescribed by GSA - FAR (48 CFR) 53.214(a) 1 CONTRACTING OFFICER WILL COMPLETE ITEM 17 (SEALED - BID OR NEGOTIATED PROCUREMENT) OR 18 (SEALED - BID PROCUREMENT) AS APPLICABLE CORPORATION Scott Swann 19B. NAME OF CONTRACTOR RANK ONE COMPUTING CEO 07 / 20 / 2023 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
ComPuTınG CoRPoRATıon RAnK onE AMOUNT UNIT PRICE QUANTITY UNIT SUPPLIES/SERVICES ITEM NO. (F) (E) (C) (D) (B) Accounting ınfo: (A) NAME OF OFFEROR OR CONTRACTOR PAGE 2 26 CONTINUATION SHEET REFERENCE NO. OF DOCUMENT BEING CONTINUED OF AUTHORIZED FOR LOCAL REPR OPTIONAL FORM 336 (4 - 86) Sponsored by GSA FAR (48 CFR) 53.110 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Item Number Section B - Supplies or Services and Prices CLINs/SLINs Description Quantity Unit Unit Price Amount 0001 8 EA Monthly Technical Reports. The Contractor shall furnish the necessary personnel and facilities to conduct the research effort as described in Section C and Exhibit A. QTY:8 Unit: EA Product/Service Code: AC13 Award Type: Firm - fixed - price Product/Service Code: AC13 000101 EA ACRN: AA PR Line 00001 (Qty:0 and Amt: $ ) 0002 12 EA Option 1: Monthly Technical Reports. If exercised, The Contractor shall furnish the necessary personnel and facilities to conduct the research effort as described in Section C and Exhibit A. QTY:12 Unit: EA Award Type: Product/Service Code: AC13 Award Type: Firm - fixed - price Amount: $ (Option Line Item) Product/Service Code: AC13 0003 1 LO NSP This line item is not separately priced. The Contractor shall deliver and . QTY:1 Unit: LO Completion Form (Not Separately Priced) Product/Service Code: AC13 Award Type: Firm - fixed - price (Not Separately Priced) Product/Service Code: AC13 0099 1 LO NSP This line item is not separately priced. The Contractor shall prepare and submit all reports and data items in accordance with the Contract Data Requirements List (CDRLs) included as Exhibit A of this contract. QTY:1 Unit: LO Completion Form (Not Separately Priced) Product/Service Code: AC13 Award Type: Firm - fixed - price (Not Separately Priced) Product/Service Code: AC13 The total amount of the base and exercised options is $ . The total potential amount for this action is $ . Section C - Statement of Work Safeguarding Covered Defense Information and Cyber Incident Reporting Page 3 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
1. System Security Plan and Plans of Action and Milestones (SSP/POAM) Reviews a) Within thirty (30) days of contract award, the Contractor shall make its System Security Plan(s) (SSP(s)) for its covered contractor information system(s) available for review by the Government at the contractor’s facility. The SSP(s) shall implement the security requirements in Defense Federal Acquisition Regulation Supplement (DFARS) clause 252.204 - 7012, which is included in this contract. The Contractor shall fully cooperate in the Government’s review of the SSPs at the Contractor’s facility. b) If the Government determines that the SSP(s) does not adequately implement the requirements of DFARS clause 252.204 - 7012 then the Government shall notify the Contractor of each identified deficiency. The Contractor shall correct any identified deficiencies within thirty (30) days of notification by the Government. The contracting officer may provide for a correction period longer than thirty (30) days and, in such a case, may require the Contractor to submit a plan of action and milestones (POAM) for the correction of the identified deficiencies. The Contractor shall immediately notify the contracting officer of any failure or anticipated failure to meet a milestone in such a POAM. c) Upon the conclusion of the correction period, the Government may conduct a follow - on review of the SSP(s) at the Contractor’s facilities. The Government may continue to conduct follow - on reviews until the Government determines that the Contractor has corrected all identified deficiencies in the SSP(s). d) The Government may, in its sole discretion, conduct subsequent reviews at the Contractor’s site to verify the information in the SSP(s). The Government will conduct such reviews at least every three (3) years (measured from the date of contract award) and may conduct such reviews at any time upon thirty (30) days’ notice to the Contractor. 2. Compliance to NIST 800 - 171 a) The Contractor shall fully implement the CUI Security Requirements (Requirements) and associated Relevant Security Controls (Controls) in NIST Special Publication 800 - 171 (Rev. 1) (NIST SP 800 - 171), or establish a SSP(s) and POA&Ms that varies from NIST 800 - 171 only in accordance with DFARS clause 252.204 - 7012(b)(2), for all covered contractor information systems affecting this contract. b) Notwithstanding the allowance for such variation, the contractor shall identify in any SSP and POA&M their plans to implement the following, at a minimum: (1) Implement Control 3.5.3 (Multi - factor authentication). This means that multi - factor authentication is required for all users, privileged and unprivileged accounts that log into a network. In other words, any system that is not standalone should be required to utilize acceptable multi - factor authentication. For legacy systems and systems that cannot support this requirement, such as CNC equipment, etc., a combination of physical and logical protections acceptable to the Government may be substituted; (2) Implement Control 3.1.5 (least privilege) and associated Controls, and identify practices that the contractor implements to restrict the unnecessary sharing with, or flow of, covered defense information to its subcontractors, suppliers, or vendors based on need - to - know principles; (3) Implement Control 3.1.12 (monitoring and control remote access sessions) - Require monitoring and controlling of remote access sessions and include mechanisms to audit the sessions and methods. (4) Audit user privileges on at least an annual basis; (5) Implement: i. Control 3.13.11 (FIPS 140 - 2 validated cryptology or implementation of NSA or NIST approved algorithms (i.e. FIPS 140 - 2 Annex A: AES or Triple DES) or compensating controls as documented in a SSP and POAM); and, ii. NIST Cryptographic Algorithm Validation Program (CAVP) (see https://csrc.nist.gov/projects/cryptographic - algorithm - validation - program); Page 4 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(6) Implement Control 3.13.16 (Protect the confidentiality of CUI at rest) or provide a POAM for implementation which shall be evaluated by the Navy for risk acceptance. (7) Implement Control 3.1.19 (encrypt CUI on mobile devices) or provide a plan of action for implementation which can be evaluated by the Government Program Manager for risk to the program. 3. Cyber Incident Response: a) The Contractor shall, within fifteen (15) days of discovering the cyber incident (inclusive of the 72 - hour reporting period), deliver all data used in performance of the contract that the Contractor determines is impacted by the incident and begin assessment of potential warfighter/program impact. b) Incident data shall be delivered in accordance with the Department of Defense Cyber Crimes Center (DC3) Instructions for Submitting Media available at http://www.acq.osd.mil/dpap/dars/pgi/docs/Instructions_for_Submitting_Media.docx. In delivery of the incident data, the Contractor shall, to the extent practical, remove contractor - owned information from Government covered defense information. c) If the Contractor subsequently identifies any such data not previously delivered to DC3, then the Contractor shall immediately notify the contracting officer in writing and shall deliver the incident data within ten (10) days of identification. In such a case, the Contractor may request a delivery date later than ten (10) days after identification. The contracting officer will approve or disapprove the request after coordination with DC3. 4. Naval Criminal Investigative Service (NCIS) Outreach The Contractor shall engage with NCIS industry outreach efforts and consider recommendations for hardening of covered contractor information systems affecting DON programs and technologies. 5. NCIS/Industry Monitoring a) In the event of a cyber incident or at any time the Government has indication of a vulnerability or potential vulnerability, the Contractor shall cooperate with the Naval Criminal Investigative Service (NCIS), which may include cooperation related to: threat indicators; pre - determined incident information derived from the Contractor's infrastructure systems; and the continuous provision of all Contractor, subcontractor or vendor logs that show network activity, including any additional logs the contractor, subcontractor or vendor agrees to initiate as a result of the cyber incident or notice of actual or potential vulnerability. b) If the Government determines that the collection of all logs does not adequately protect its interests, the Contractor and NCIS will work together to implement additional measures, which may include allowing the installation of an appropriate network device that is owned and maintained by NCIS, on the Contractor's information systems or information technology assets. The specific details (e.g., type of device, type of data gathered, monitoring period) regarding the installation of an NCIS network device shall be the subject of a separate agreement negotiated between NCIS and the Contractor. In the alternative, the Contractor may install network sensor capabilities or a network monitoring service, either of which must be reviewed for acceptability by NCIS. Use of this alternative approach shall also be the subject of a separate agreement negotiated between NCIS and the Contractor. c) In all cases, the collection or provision of data and any activities associated with this statement of work shall be in accordance with federal, state, and non - US law. Statement of Work The Contractor shall conduct the effort under CLIN(s) 0001 & 0099 in accordance with Attachment Number 1, Page 5 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Statement of Work, entitled and Exhibit A, Contract Data Requirements List. If Option 1 is exercised, the Contractor shall conduct the effort under CLIN 0002 & 0099 in accordance with Attachment Number 1, Statement of Work, entitled, , and Exhibit A, Contract Data Requirements List Key Personnel (a) The Contractor agrees to assign to the contract tasks those persons whose resumes were submitted with its proposal and who are necessary to fulfill the requirements of the contract as "key personnel". No substitutions may be made except in accordance with this instruction. (b) The Contractor understands that during the first ninety (90) days of the contract performance period, no personnel substitutions will be permitted unless these substitutions are unavoidable because of the incumbent's sudden illness, death or termination of employment. In any of these events, the Contractor shall promptly notify the Contracting Officer and provide the information described in paragraph (c) below. After the initial ninety (90) day period the Contractor must submit to the Contracting Officer all proposed substitutions, in writing, at least 45 days in advance 60 days if security clearance must be obtained, of any proposed substitution and provide the information required by paragraph (c) below. (c) Any request for substitution must include a detailed explanation of the circumstances necessitating the proposed substitution, a resume for the proposed substitute, and any other information requested by the Contracting Officer. Any proposed substitute must have qualifications equal to or superior to the qualifications of the incumbent. The Contracting Officer or his/her authorized representative will evaluate such requests and promptly notify the Contractor in writing of his/her approval or disapproval thereof. (d) In the event that any of the identified key personnel cease to perform under the contract and the substitute is disapproved, the contract may be immediately terminated in accordance with the Termination clause of the contract. The following are identified as key personnel: Principal Investigator, Acknowledgement of Sponsorship (a) As used in DFARS 252.235 - 7010, 'Acknowledgement of Support and Disclaimer,' "material" also includes but is not limited to, news releases, letters to the editor, articles, abstracts, manuscripts, brochures, advertisements, photos, films, videos, slides, charts, graphs, drawings, speeches, trade association meetings, symposia, etc. (b) Nothing in the foregoing shall affect compliance with the requirements of the clauses of this contract entitled "Disclosure of Information" (252.204 - 7000) and "Security Requirements" (FAR 52.204 - 2 and Alternate I) if such clause is a part of the contract (c) The Contractor further agrees to include this provision in any subcontract awarded as a result of this contract. Research Does Not Involve Human Subjects, Animals, or Recombinant or Synthetic Nucleic Acid Molecules The work to be performed under this contract, including any related subcontracts, does not include research involving human subjects, animals, or recombinant or synthetic nucleic acid molecules . If the Contractor or any of its subcontractors intends to perform work under this contract involving human subjects, animals, or Page 6 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
recombinant or synthetic nucleic acid molecules, such work may not commence unless and until all required approvals have been obtained (e.g. HRPO review for human subject research) and the Contracting Officer has issued a written modification to the contract adding the new work to the statement of work and incorporating as applicable DFARS 252.235 - 7004, DFARS 252.235 - 7002, and National institutes of Health guidelines. The Government will not reimburse or otherwise pay for work performed in violation of this requirement. Section D - Packaging and Marking Packaging and Marking Preservation, packaging, packing and marking of all deliverable contract line items shall conform to normal commercial packing standards to assure safe delivery at destination. Report Preparation Scientific or technical reports prepared by the Contractor and deliverable under the terms of this contract will be prepared in accordance with format requirements contained in ANSI/NISO Z39.18 - 2005 (R2010), entitled, "Scientific and Technical Reports - Preparation, Presentation and Preservation". [NOTE: All National Information Standards Organization (NISO) American National Standards are available as free, downloadable pdf(s) at http://www.niso.org/standards/index.html.] (a) All scientific and technical reports delivered pursuant to the terms of this contract shall identify units of measurement in accordance with the International System of Units (SI) commonly referred to as the "Metric System". Conversion to U.S. customary units may also be given where additional clarity is deemed necessary. Guidance for application of the metric system is contained in the American Society of Testing Materials document entitled "Standard Practice for Use of the International System of Units (The Modernized Metric System)" (ASTM Designation E380 - 89A). (b) This provision also applies to journal article preprints, reprints, commercially published books or chapters of books, theses or dissertations submitted in lieu of a scientific and/or technical report. Section E - Inspection and Acceptance Award Inspection and Acceptance Inspection and acceptance of the reports and/or other deliverables under this contract will be accomplished by the COR/Program Officer designated in Section G of this contract, who shall have thirty (30) days after contractual delivery for acceptance. If the contract includes a Not - Separately - Priced (NSP) CLIN(s) that is/are to be delivered before the current end date in the period of performance, the contractor shall use a receiving report in WAWF as a Material Inspection and Receiving Report in lieu of a DD Form 250 for each NSP CLIN due before the end of the current period. Otherwise, the receiving report required for the final report in Exhibit A can include the final report and any other NSP CLINs due at the same time. Section F - Deliveries or Performance Period of Performance The effort performed under CLIN(s) 0001, 0003 & 0099 shall be conducted from 08/1/2023 through 03/31/2024. If Option 1 is exercised, the effort performed under CLIN(s) 0002 & 0099 shall be conducted from 04/1/2024 through 03/31/2025. CLIN(s)/SLIN(s) will be delivered as follows: Page 7 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Delivery No Later Than (if applicable) Period of Performance (if applicable) Delivery Address Delivery Code Item Description Item/Sub Number 0001 Monthly Technical Reports. The Contractor shall furnish the necessary personnel and facilities to conduct the research effort as described in Section C and Exhibit A. QTY:8 Unit: EA Product/Servi Option 1: Monthly Technical Reports. If exercised, The Contractor shall furnish the necessary personnel and facilities to conduct the research effort as described in Section C and Exhibit A. QTY:1 This line item is not separately Attn: l 8/1/2023 - 3/31/2024 0002 Attn: 4/1/2024 - 3/31/2025 0003 priced. The Contractor shall deliver and . QTY:1 Unit: L Attn: 8/1/2023 - 3/31/2024 0099 This line item is not separately priced. The Contractor shall prepare and submit all reports and data items in accordance with the Contract Data Requirements List (CDRLs) included as Exhibit A of Attn: 8/1/2023 - 3/31/2024 1) Any request for a period of performance extension shall be submitted in writing to the Contracting Officer and Contracting Officer Representative (COR)/Program Officer no later than sixty (60) days prior to the expiration of the contract to allow the Government time to consider, and if approved, process the request. Requests submitted less than sixty (60) days prior to the expiration of the contract may be rejected and not processed by the Government. 2) The request shall include (a) Contract Number, (b) Contract Line Item number (CLIN) associated with the extension, (c) current expiration date of the CLIN associated with the extension, (d) revised date for which the extension is requested, (e) the name of the COR associated with this contract and his/her Program Code, (f) the rationale as to why the extension is required, (g) status of the remaining task(s) to be completed during the extension period, (h) plan of action for completing the effort, and (i) evidence of sufficient funding under the CLIN to ensure remaining task(s) may be completed during the extension. Distribution of Invention Disclosures and Reports The Contractor shall submit all invention disclosures and reports required by the Patent Rights clause of the contract via email to the Program Officer/COR, , Corporate Counsel (Code 07), and the Administrative Contracting Officer. The email address for Corporate Counsel (Code 07) is . The Corporate Counsel will provide a recommendation to the Administrative Contracting Officer. The Corporate Counsel will represent the Contracting Officer with regard to invention reporting matters arising under this contract. Place of Delivery All deliverable items (e.g., prototypes and software stated in Section B, and reports and data listed in the DD1423) shall be F.O.B. Destination. FAR 52.242 - 15 Stop - Work Order. (AUG 1989) Page 8 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Section G - Contract Administration Data Procuring Office Representative In order to expedite administration of this contract, the Administrative Contracting Officer should direct inquiries to the appropriate office listed below. Contract Negotiator - - , (P) , Email: Inspection and Acceptance by the Contracting Officer Representative (COR) – , (P) , Email: Security Matters – , email: Patent Matters – , email: eSRS - Insert the Contracting Officer name, an ISRS , in Block 15 of the subcontracting section of Contract Administration Delegation In accordance with FAR 42.202, the contracting officer delegates all contract administration functions listed in FAR 42.302(a). The Contractor is advised to direct all inquiries concerning administration of this contract to the Administrative Contracting Officer designated in Block 6 of the Standard Form 26 of this contract. Award Distribution (JULY 2015) In accordance with the requirements of FAR 4 . 201 , distribution is made to the contractor, program office, administrative contracting office, payment office and audit office . See the following matrix to determine the specific distribution location, which is based upon the award form used : Distribution: SF 26 SF 30 SF 33 SF 1449 DD1155 Contractor See Block 7 See Block 8 See Block 15 A See Block 17 a See Block 9 Program Office See Block 11 or See Block 6 Section G See Block 6 See Block 7 See Block 11 or See Block 15 See Block 14 Section G See Block 24 See Block 16 See Block 7 Administrative Contracting Office Payment Office See Block 12 See Block 14 See Block 25 See Block 18a See Block 15 Auditor See Section G See Section G See Section G See Section G See Section G Type of Award This is a Firm - fixed - price completion type contract. Financial Accounting Data Total Amount Line of Accounting (LOA) List of Item/Sub Number (LI#) ACRN Page 9 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
ACRN List of Item/Sub Number (LI#) Line of Accounting (LOA) Total Amount AA 000101 Total Obligated Amount $ $ Allotment of Funds It is hereby understood and agreed that this contract will not exceed a total amount of $ ; CLIN 0001 is Fully Funded Award Notification/Distribution award and modification documents are available via the Department of Defense (DoD) Electronic Document Access System (EDA) within the Procurement Integrated Enterprise Environment (PIEE)(https://piee.eb.mil/). EDA is a Web - based system that provides secure online access, storage and retrieval of awards and modifications to DoD employees and vendors (including contractors and recipients). creates an award notification profile for every award prior to the execution of the award using email addresses provided in the proposal or application . The notification profile will use the email address from the Business Point of Contact in the proposal to notify the recipient of an award . If your EDA notification profile for an award needs to be updated, please contact us at the following email address: . The following information should be provided: a. Email Subject: EDA Award Notification Change Request; b. Award Number c. The new email address to be added to the EDA award notification profile. d. First name e. Last name f. Organization IMPORTANT: In some cases, EDA notifications are appearing in recipients' Junk Email folder. If you are experiencing issues receiving EDA notifications, please check your junk email. If found, please mark EDA notifications as "not junk." EDA inactivates user accounts for non - use after 90 days. Failure to use your account will result in inactivation. A password reset and EDA POC approval is required to reactivate accounts. Payment Instructions The payment office shall allocate and record the amounts paid to the accounting classification citations in the contract using the table located at https:// www.acq.osd.mil/dpap/dars/pgi/pgi_htm/current/PGI204_71.htm#payment_instructions based on the type of payment request submitted (see DFARS 252.232 - 7006) and the type of effort. Refunds/Overpayments Page 10 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Refunds owed to the Government in accordance with any provision (e . g . paragraph (h) of FAR 52 . 216 - 7 , paragraph (d) of FAR 52 . 232 - 25 ) of this contract must be remitted through the Department of Treasury’s website, www . pay . gov . Instructions necessary for using pay . gov for refunds to awards can be found at . Once the contractor completes and submits the refund form through pay.gov, the contractor will receive an email from the system confirming the submission. This system - generated email from pay.gov must be forwarded to both the Administrative Contracting Officer and the Contracting Officer. DFARS 252.232 - 7006 Wide Area WorkFlow Payment Instructions. (JAN 2023) (a) Definitions . As used in this clause - Department of Defense Activity Address Code (DoDAAC) is a six position code that uniquely identifies a unit, activity, or organization. Document type means the type of payment request or receiving report available for creation in Wide Area WorkFlow (WAWF). Local processing office (LPO) is the office responsible for payment certification when payment certification is done external to the entitlement system. Payment request and receiving report are defined in the clause at 252.232 - 7003, Electronic Submission of Payment Requests and Receiving Reports. (b) Electronic invoicing . The WAWF system provides the method to electronically process vendor payment requests and receiving reports, as authorized by Defense Federal Acquisition Regulation System (DFARS) 252.232 - 7003, Electronic Submission of Payment Requests and Receiving Reports. (c) WAWF access . To access WAWF, the Contractor shall - (1) Have a designated electronic business point of contact in the System for Award Management at https:// www.sam.gov and (2) Be registered to use WAWF at https://wawf.eb.mil/ following the step - by - step procedures for self - registration available at this Web site. (d) WAWF training . The Contractor should follow the training instructions of the WAWF Web - Based Training Course and use the Practice Training Site before submitting payment requests through WAWF. Both can be accessed by selecting the "Web Based Training" link on the WAWF home page at https://wawf.eb.mil/ . (e) WAWF methods of document submission . Document submissions may be via Web entry, Electronic Data Interchange, or File Transfer Protocol. (f) WAWF payment instructions . The Contractor shall use the following information when submitting payment requests and receiving reports in WAWF for this contract or task or delivery order: (1) Document type . The Contractor shall submit payment requests using the following document type(s): (i) For cost - type line items, including labor - hour or time - and - materials, submit a cost voucher. (ii) For fixed price line items - Page 11 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(A) That require shipment of a deliverable, submit the invoice and receiving report specified by the Contracting Officer. Invoice and Receiving Report (Combo) (B) For services that do not require shipment of a deliverable, submit either the Invoice 2in1, which meets the requirements for the invoice and receiving report, or the applicable invoice and receiving report, as specified by the Contracting Officer. Invoice 2 in1 (iii) For customary progress payments based on costs incurred, submit a progress payment request. (iv) For performance based payments, submit a performance based payment request. (v) For commercial financing, submit a commercial financing request. (2) Fast Pay requests are only permitted when Federal Acquisition Regulation (FAR) 52.213 - 1 is included in the contract. (Note: The Contractor may use a WAWF "combo" document type to create some combinations of invoice and receiving report in one step.) (3) Document routing . The Contractor shall use the information in the Routing Data Table below only to fill in applicable fields in WAWF when creating payment requests and receiving reports in the system. Routing Data Table* Field Name in WAWF Data to be entered in WAWF Pay Official DoDAAC Issue By DoDAAC Admin DoDAAC** Inspect By DoDAAC Not Applicable Ship To Code Ship From Code Not Applicable Mark For Code Not Applicable Service Approver (DoDAAC) Not Applicable Service Acceptor (DoDAAC) Accept at Other DoDAAC Page 12 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
LPO DoDAAC Not Applicable DCAA Auditor DoDAAC Not Applicable Other DoDAAC(s) Not Applicable (*Contracting Officer: Insert applicable DoDAAC information. If multiple ship to/acceptance locations apply, insert "See Schedule" or "Not applicable.") (** Contracting Officer : If the contract provides for progress payments or performance - based payments, insert the DoDAAC for the contract administration office assigned the functions under FAR 42 . 302 (a)( 13 ) . ) (4) Payment request . The Contractor shall ensure a payment request includes documentation appropriate to the type of payment request in accordance with the payment clause, contract financing clause, or Federal Acquisition Regulation 52.216 - 7, Allowable Cost and Payment, as applicable. (5) Receiving report . The Contractor shall ensure a receiving report meets the requirements of DFARS Appendix F. (g) WAWF point of contact . (1) The Contractor may obtain clarification regarding invoicing in WAWF from the following contracting activity's WAWF point of contact. For WAWF Vendor support, please contact the WAWF Help Desk ( ); for Payment Issues, please contact the appropriate DFAS office ( ); for additional assistance, please contact . (2) Contact the WAWF helpdesk at , if assistance is needed. Section H - Special Contract Requirements Contract Authority for Development and Demonstration of Initial or Additional Prototypes In accordance with 10 USC 4004 (Section 861 of the National Defense Authorization Act (NDAA) for Fiscal Year 2018 as amended by Section 831 of the NDAA for Fiscal Year 2021), this contract issued under BAA , may be modified to contain a contract line item or contract option for the development and demonstration or initial production of technology developed under the contract or for the delivery of initial or additional items if the item or prototype thereof is created as the result of work performed under the contract. Intelligence Oversight 1. In compliance with DoDD 5148.13 paragraph 4.1.e and SECNAVINST 3820.3F, all contractor personnel conducting Intelligence or Intelligence - related activities or supporting those efforts under Department of Defense authorities shall report any Questionable Intelligence Activity (QIA) or Significant or Highly Sensitive Matter (S/HSM) to the Contracting Officer Representative/Program Officer and the Senior Intelligence Officer. Intelligence - Related Activities: Activities that are not conducted under the authority of Executive Order 12333 that involves the collection, retention, or analysis of information, and the activities’ primary purpose is to: Page 13 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
- Train intelligence personnel. - Conduct research, development, or testing and evaluation for the purpose of developing intelligence - specific capabilities. Activities that use intelligence funding (e.g., Military Intelligence Program or National Intelligence Program) are presumed to be intelligence or intelligence - related activities. Specifically excluded from this definition are operational security activities, such as own force monitoring, force protection, maintenance of technologies or systems, cyberspace surveillance and reconnaissance operations. This is not an exhaustive list. See DODM 5204.01 Section 3.1.a (3) for additional information. Questionable Intelligence Activity (QIA): Any Intelligence or Intelligence - related activity when there is reason to believe such activity may be unlawful or contrary to an Executive Order, Presidential Directive, Intelligence Community Directive, or applicable DoD policy governing that activity. Significant or Highly Sensitive Matter (S/HSM): An Intelligence or Intelligence - related activity (regardless of whether the Intelligence or Intelligence - related activity is unlawful or contrary to an Executive Order, Presidential Directive, Intelligence Community Directive, or DoD policy), or serious criminal activity by Intelligence personnel, that could impugn the reputation or integrity of the Intelligence Community, or otherwise call into question the propriety of Intelligence activities. Such matters might involve actual or potential: - Congressional inquiries or investigations. - Adverse media coverage. - Impact on foreign relations or foreign partners. - Systemic compromise, loss, or unauthorized disclosure of protected information. 2. An activity or conduct that qualifies as either a Questionable Intelligence Activity (QIA) or a Significant or Highly Sensitive Matter (S/HSM) is reportable without waiting for substantiation, completion of an investigation, formal adjudication, or final resolution of the issue. 3. No adverse action will be taken against DoD contractor personnel because they intend to report to the appropriate authorities what they reasonably believe is a QIA or S/HSM. 4. The above requirements do not preclude, supersede, or limit the existing authorities and policies governing reporting of criminal or counterintelligence matters to the Defense Criminal Investigative Organizations (DCIO) and Military Department Counterintelligence Organizations (MDCO). NCIS is the DON DCIO and MDCO. 5. The contractor shall include paragraphs 1 - 4, including this paragraph (5), in all subcontracts, or similar contractual instruments. Small Business Subcontracting Opportunities In accordance with FAR 19.705 - 2, the Contracting Officer has determined and concurred with the Contractor that no subcontracting possibilities exist, inclusive for Small Businesses Concerns. Therefore no subcontracting plan is required under this acquisition. Data Rights Assertions The Contractor submitted Data Rights Assertions in accordance with DFARS 252.227 - 7013, DFARS 252.227 - 7014, and/or DFARS 252.227 - 7018 entitled "IP Rights Assertions" associated with its Statement of work, entitled " ." These assertions are incorporated into this award as Attachment Number 3. Page 14 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Technical Direction (a) Performance of the work hereunder is subject to the technical direction of the Program Officer/COR designated in this contract, or duly authorized representative. Technical direction includes the following: (1) Direction to the Contractor which shifts work emphasis between work areas or tasks, requires pursuit of certain lines of inquiry, fills in details or otherwise serves to accomplish the objectives described in the statement of work; (2) Guidelines to the Contractor which assist in the interpretation of drawings, specifications or technical portions of work description. (b) Technical direction must be within the general scope of work stated in the contract. Technical direction may not be used to: (1) Assign additional work under the contract; (2) Direct a change as defined in the contract clause entitled "Changes"; (3) Increase or decrease the estimated contract cost, the fixed fee, or the time required for contract performance; or (4) Change any of the terms, conditions or specifications of the contract. (c) The only individual authorized to in any way amend or modify any of the terms of this contract shall be the Contracting Officer. When, in the opinion of the Contractor, any technical direction calls for effort outside the scope of the contract or inconsistent with this special provision, the Contractor shall notify the Contracting Officer in writing within ten working days after its receipt. The Contractor shall not proceed with the work affected by the technical direction until the Contractor is notified by the Contracting Officer that the technical direction is within the scope of the contract. (d) Nothing in the foregoing paragraphs may be construed to excuse the Contractor from performing that portion of the work statement which is not affected by the disputed technical direction. Section I - Contract Clauses FAR 52.252 - 2 Clauses Incorporated by Reference. (FEB 1998) This contract incorporates one or more clauses by reference, with the same force and effect as if they were given in full text. Upon request, the Contracting Officer will make their full text available. Also, the full text of a clause may be accessed electronically at this/these address(es): https:// www.acquisition.gov/ (End of clause) Clauses Included by Reference Clause Number Clause Title Clause Database Definitions. (JUN 2020) 52.202 - 1 FAR Gratuities. (APR 1984) 52.203 - 3 FAR Covenant Against Contingent Fees. (MAY 2014) 52.203 - 5 FAR Restrictions on Subcontractor Sales to the Government. (JUN 2020) 52.203 - 6 FAR Anti - Kickback Procedures. (JUN 2020) 52.203 - 7 FAR FAR FAR 52.203 - 8 52.203 - 10 Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity. (MAY 2014) Price or Fee Adjustment for Illegal or Improper Activity. (MAY 2014) Page 15 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Clause Database Clause Number Clause Title Certification and Disclosure Regarding Payments to Influence Certain Federal Transactions. (SEP 2007) 52.203 - 11 FAR Limitation on Payments to Influence Certain Federal Transactions. (JUN 2020) 52.203 - 12 FAR Contractor Code of Business Ethics and Conduct. (NOV 2021) 52.203 - 13 FAR Display of Hotline Poster(s). (NOV 2021) 52.203 - 14 FAR Prohibition on Requiring Certain Internal Confidentiality Agreements or Statements. (JAN 2017) 52.203 - 19 FAR Security Requirements. (MAR 2021) 52.204 - 2 FAR Printed or Copied Double - Sided on Postconsumer Fiber Content Paper. (MAY 2011) 52.204 - 4 FAR Reporting Executive Compensation and First - Tier Subcontract Awards. (JUN 2020) 52.204 - 10 FAR System for Award Management Maintenance. (OCT 2018) 52.204 - 13 FAR Commercial and Government Entity Code Maintenance. (AUG 2020) 52.204 - 18 FAR Incorporation by Reference of Representations and Certifications. (DEC 2014) 52.204 - 19 FAR FAR 52.204 - 23 Prohibition on Contracting for Hardware, Software, and Services Developed or Provided by Kaspersky Lab and Other Covered Entities. (NOV 2021) Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment. (NOV 2021) Prohibition on a ByteDance Covered Application. (JUN 2023) FAR FAR 52.204 - 25 52.204 - 27 Protecting the Government's Interest When Subcontracting With Contractors Debarred, Suspended, or Proposed for Debarment. (NOV 2021) 52.209 - 6 FAR Prohibition on Contracting With Inverted Domestic Corporations. (NOV 2015) 52.209 - 10 FAR Market Research. (NOV 2021) 52.210 - 1 FAR Defense Priority and Allocation Requirements. (APR 2008) 52.211 - 15 FAR Audit and Records - Negotiation. (JUN 2020) 52.215 - 2 FAR Order of Precedence - Uniform Contract Format. (OCT 1997) 52.215 - 8 FAR Integrity of Unit Prices. (NOV 2021) 52.215 - 14 FAR Limitations on Pass - Through Charges. (JUN 2020) -- Alternate I (OCT 2009) 52.215 - 23 FAR Notice of Price Evaluation Preference for HUBZone Small Business Concerns. (OCT 2022) 52.219 - 4 FAR Small Business Subcontracting Plan. (OCT 2022) 52.219 - 9 FAR Small Business Subcontracting Plan. (OCT 2022) - Alternate II (NOV 2016) 52.219 - 9 FAR Post - Award Small Business Program Rerepresentation. (MAR 2023) 52.219 - 28 FAR Convict Labor. (JUN 2003) 52.222 - 3 FAR Prohibition of segregated facilities. (APR 2015) 52.222 - 21 FAR Equal Opportunity. (SEP 2016) 52.222 - 26 FAR Employment Reports on Veterans. (JUN 2020) 52.222 - 37 FAR Notification of Employee Rights Under the National Labor Relations Act. (DEC 2010) 52.222 - 40 FAR Combating Trafficking in Persons. (NOV 2021) 52.222 - 50 FAR Employment Eligibility Verification. (MAY 2022) 52.222 - 54 FAR Drug - Free Workplace. (MAY 2001) 52.223 - 6 FAR Encouraging Contractor Policies To Ban Text Messaging While Driving. (JUN 2020) 52.223 - 18 FAR Restrictions on Certain Foreign Purchases. (FEB 2021) 52.225 - 13 FAR Authorization and Consent. (JUN 2020) -- Alternate I (APR 1984) 52.227 - 1 FAR Notice and Assistance Regarding Patent and Copyright Infringement. (JUN 2020) 52.227 - 2 FAR Filing of Patent Applications - Classified Subject Matter. (DEC 2007) 52.227 - 10 FAR Patent Rights - Ownership by the Contractor. (MAY 2014) 52.227 - 11 FAR Federal, State, and Local Taxes. (FEB 2013) 52.229 - 3 FAR Limitation on Withholding of Payments. (APR 1984) 52.232 - 9 FAR Interest. (MAY 2014) 52.232 - 17 FAR Assignment of Claims. (MAY 2014) 52.232 - 23 FAR Prompt Payment. (JAN 2017) 52.232 - 25 FAR Payment by Electronic Funds Transfer - System for Award Management. (OCT 2018) 52.232 - 33 FAR Unenforceability of Unauthorized Obligations. (JUN 2013) 52.232 - 39 FAR Providing Accelerated Payments to Small Business Subcontractors. (MAR 2023) 52.232 - 40 FAR Disputes. (MAY 2014) 52.233 - 1 FAR Protest After Award. (AUG 1996) 52.233 - 3 FAR Applicable Law for Breach of Contract Claim. (OCT 2004) 52.233 - 4 FAR Payments to Small Business Subcontractors. (JAN 2017) 52.242 - 5 FAR Bankruptcy. (JUL 1995) 52.242 - 13 FAR Changes - Fixed - Price. (AUG 1987) - Alternate V (APR 1984) 52.243 - 1 FAR Competition in Subcontracting. (DEC 1996) 52.244 - 5 FAR Termination for Convenience of the Government (Fixed - Price). (APR 2012) 52.249 - 2 FAR Default (Fixed - Price Research and Development). (APR 1984) 52.249 - 9 FAR Computer Generated Forms. (JAN 1991) 52.253 - 1 FAR Page 16 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
er Clause Title Clause Numb Clause Database Contracting officer's representative. (DEC 1991) 252.201 - 7000 DFARS Requirements Relating to Compensation of Former DoD Officials. (SEP 2011) Prohibition on Persons Convicted of Fraud or Other Defense - Contract - Related Felonies. (JAN 252.203 - 7000 252.203 - 7001 DFARS DFARS 2023) Requirement to Inform Employees of Whistleblower Rights. (DEC 2022) 252.203 - 7002 DFARS Agency Office of the Inspector General. (AUG 2019) 252.203 - 7003 DFARS Representation Relating to Compensation of Former DoD Officials. (SEP 2022) 252.203 - 7005 DFARS Disclosure of information. (OCT 2016) 252.204 - 7000 DFARS Payment for Contract Line or Subline Items Not Separately Priced. (APR 2020) 252.204 - 7002 DFARS Control of government personnel work product. (APR 1992) 252.204 - 7003 DFARS Billing Instructions - Cost Vouchers. (MAY 2023) 252.204 - 7006 DFARS DFARS 252.204 - 7009 Limitations on the Use or Disclosure of Third - Party Contractor Reported Cyber Incident Information. (JAN 2023) Safeguarding Covered Defense Information and Cyber Incident Reporting. (JAN 2023) Notice of Authorized Disclosure of Information for Litigation Support. (JAN 2023) Prohibition on the Acquisition of Covered Defense Telecommunications Equipment or Services. (JAN 2023) NIST SP 800 - 171 DoD Assessment Requirements. (JAN 2023) DFARS DFARS DFARS DFARS 252.204 - 7012 252.204 - 7015 252.204 - 7018 252.204 - 7020 Subcontracting with Firms that are Owned or Controlled by the Government of a Country that is a State Sponsor of Terrorism. (MAY 2019) 252.209 - 7004 DFARS Restrictions on the Use of Mandatory Arbitration Agreements. (JAN 2023) 252.222 - 7006 DFARS Drug - free work force. (SEP 1988) 252.223 - 7004 DFARS Preference for Certain Domestic Commodities. (APR 2022) 252.225 - 7012 DFARS Export - Controlled Items. (JUN 2013) 252.225 - 7048 DFARS Restriction on the Acquisition of Certain Magnets, Tantalum, and Tungsten. (JAN 2023) 252.225 - 7052 DFARS Prohibition Regarding Business Operations with the Maduro Regime. (JAN 2023) 252.225 - 7056 DFARS 252.225 - 7058 DFARS 252.226 - 7001 DFARS 252.227 - 7013 DFARS 252.227 - 7014 DFARS 252.227 - 7016 DFARS 252.227 - 7025 DFARS Postaward Disclosure of Employment of Individuals Who Work in the People's Republic of China. (JAN 2023) Utilization of Indian Organizations, Indian - Owned Economic Enterprises, and Native Hawaiian Small Business Concerns. (JAN 2023) Rights in Technical Data - Other Than Commercial Products and Commercial Services. (MAR 2023) Rights in Other Than Commercial Computer Software and Other Than Commercial Computer Software Documentation. (MAR 2023) Rights in Bid or Proposal Information. (JAN 2023) Limitations on the Use or Disclosure of Government - Furnished Information Marked with Restrictive Legends. (JAN 2023) Deferred ordering of technical data or computer software. (APR 1988) 252.227 - 7027 DFARS Technical data - withholding of payment. (MAR 2000) 252.227 - 7030 DFARS Validation of Restrictive Markings on Technical Data. (JAN 2023) 252.227 - 7037 DFARS Patents - reporting of subject inventions. (APR 1990) 252.227 - 7039 DFARS Electronic Submission of Payment Requests and Receiving Reports. (DEC 2018) 252.232 - 7003 DFARS Levies on Contract Payments. (DEC 2006) 252.232 - 7010 DFARS Acknowledgment of support and disclaimer. (MAY 1995) 252.235 - 7010 DFARS Pricing of contract modifications. (DEC 1991) 252.243 - 7001 DFARS Requests for equitable adjustment. (DEC 2022) 252.243 - 7002 DFARS Subcontracts for Commercial Products or Commercial Services. (JAN 2023) 252.244 - 7000 DFARS Sources of Electronic Parts. (JAN 2023) 252.246 - 7008 DFARS Transportation of Supplies by Sea. (JAN 2023) 252.247 - 7023 DFARS Clauses Included by Full Text FAR 52.217 - 9 Option To Extend the Term of the Contract. (MAR 2000) (a) The Government may extend the term of this contract by written notice to the Contractor within the period of performance; provided that the Government gives the Contractor a preliminary written notice of its intent to extend at least 1 day before the contract expires. The preliminary notice does not commit the Government to an extension. (b) If the Government exercises this option, the extended contract shall be considered to include this option clause. Page 17 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(c) The total duration of this contract, including the exercise of any options under this clause, shall not exceed 20 months. (End of clause) FAR 52.222 - 35 Equal Opportunity for Veterans. (JUN 2020) (a) Definitions. As used in this clause - "Active duty wartime or campaign badge veteran," "Armed Forces service medal veteran," "disabled veteran," "protected veteran," "qualified disabled veteran," and "recently separated veteran" have the meanings given at Federal Acquisition Regulation (FAR) 22.1301. (b) Equal opportunity clause. The Contractor shall abide by the requirements of the equal opportunity clause at 41 CFR 60 - 300.5(a), as of March 24, 2014. This clause prohibits discrimination against qualified protected veterans, and requires affirmative action by the Contractor to employ and advance in employment qualified protected veterans. (c) Subcontracts. The Contractor shall insert the terms of this clause in subcontracts valued at or above the threshold specified in FAR 22.1303(a) on the date of subcontract award, unless exempted by rules, regulations, or orders of the Secretary of Labor. The Contractor shall act as specified by the Director, Office of Federal Contract Compliance Programs, to enforce the terms, including action for noncompliance. Such necessary changes in language may be made as shall be appropriate to identify properly the parties and their undertakings. (End of clause) FAR 52.222 - 36 Equal Opportunity for Workers with Disabilities. (JUN 2020) (a) Equal opportunity clause. The Contractor shall abide by the requirements of the equal opportunity clause at 41 CFR 60 - 741.5(a), as of March 24, 2014. This clause prohibits discrimination against qualified individuals on the basis of disability, and requires affirmative action by the Contractor to employ and advance in employment qualified individuals with disabilities. (b) Subcontracts. The Contractor shall include the terms of this clause in every subcontract or purchase order in excess of the threshold specified in Federal Acquisition Regulation (FAR) 22.1408(a) on the date of subcontract award, unless exempted by rules, regulations, or orders of the Secretary, so that such provisions will be binding upon each subcontractor or vendor. The Contractor shall act as specified by the Director, Office of Federal Contract Compliance Programs of the U.S. Department of Labor, to enforce the terms, including action for noncompliance. Such necessary changes in language may be made as shall be appropriate to identify properly the parties and their undertakings. (End of clause) FAR 52.244 - 6 Subcontracts for Commercial Products and Commercial Services. (JUN 2023) (a) Definitions. As used in this clause - Commercial product, commercial service , and commercially available off - the - shelf item have the meanings contained in Federal Acquisition Regulation (FAR) 2.101. Subcontract includes a transfer of commercial products or commercial services between divisions, subsidiaries, or affiliates of the Contractor or subcontractor at any tier. Page 18 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(b) To the maximum extent practicable, the Contractor shall incorporate, and require its subcontractors at all tiers to incorporate, commercial products, commercial services, or nondevelopmental items as components of items to be supplied under this contract . (c)(1) The Contractor shall insert the following clauses in subcontracts for commercial products or commercial services: (i) 52.203 - 13, Contractor Code of Business Ethics and Conduct (NOV 2021) (41 U.S.C. 3509), if the subcontract exceeds the threshold specified in FAR 3.1004(a) on the date of subcontract award, and has a performance period of more than 120 days. In altering this clause to identify the appropriate parties, all disclosures of violation of the civil False Claims Act or of Federal criminal law shall be directed to the agency Office of the Inspector General, with a copy to the Contracting Officer. (ii) 52 . 203 - 15 , Whistleblower Protections Under the American Recovery and Reinvestment Act of 2009 (JUN 2010 ) (Section 1553 of Pub . L . 111 - 5 ), if the subcontract is funded under the Recovery Act . (iii) 52.203 - 19, Prohibition on Requiring Certain Internal Confidentiality Agreements or Statements (JAN 2017). (iv) 52.204 - 21, Basic Safeguarding of Covered Contractor Information Systems (NOV 2021), other than subcontracts for commercially available off - the - shelf items, if flow down is required in accordance with paragraph (c) of FAR clause 52.204 - 21. (v) 52.204 - 23, Prohibition on Contracting for Hardware, Software, and Services Developed or Provided by Kaspersky Lab and Other Covered Entities (NOV 2021) (Section 1634 of Pub. L. 115 - 91). (vi) 52.204 - 25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment. (NOV 2021) (Section 889(a)(1)(A) of Pub. L. 115 - 232). (vii) 52 . 204 - 27 , Prohibition on a ByteDance Covered Application (JUN 2023 ) (Section 102 of Division R of Pub . L . 117 - 328 ) . (viii) 52.219 - 8, Utilization of Small Business Concerns (OCT 2022) (15 U.S.C. 637(d)(2) and (3)), if the subcontract offers further subcontracting opportunities. If the subcontract (except subcontracts to small business concerns) exceeds the applicable threshold specified in FAR 19.702(a) on the date of subcontract award, the subcontractor must include 52.219 - 8 in lower tier subcontracts that offer subcontracting opportunities. (ix) 52.222 - 21, Prohibition of Segregated Facilities (APR 2015). (x) 52.222 - 26, Equal Opportunity (SEP 2016) (E.O. 11246). (xi) 52.222 - 35, Equal Opportunity for Veterans (JUN 2020)(38 U.S.C. 4212(a)). (xii) 52 . 222 - 36 , Equal Opportunity for Workers with Disabilities (JUN 2020 ) ( 29 U . S . C . 793 ) . (xiii) 52.222 - 37, Employment Reports on Veterans (JUN 2020) (38 U.S.C. 4212). Page 19 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(xiv) 52.222 - 40, Notification of Employee Rights Under the National Labor Relations Act (DEC 2010) (E.O. 13496), if flow down is required in accordance with paragraph (f) of FAR clause 52.222 - 40. (xv)(A) 52.222 - 50, Combating Trafficking in Persons (NOV 2021) (22 U.S.C. chapter 78 and E.O. 13627). (B) Alternate I (MAR 2015) of 52.222 - 50 (22 U.S.C. chapter 78 and E.O. 13627). (xvi) 52.222 - 55, Minimum Wages for Contractor Workers under Executive Order 14026 (JAN 2022), if flowdown is required in accordance with paragraph (k) of FAR clause 52.222 - 55. (xvii) 52.222 - 62, Paid Sick Leave Under Executive Order 13706 (JAN 2022) (E.O. 13706), if flowdown is required in accordance with paragraph (m) of FAR clause 52.222 - 62. (xviii)(A) 52.224 - 3, Privacy Training (JAN 2017) (5 U.S.C. 552a) if flow down is required in accordance with 52.224 - 3(f). (B) Alternate I (JAN 2017) of 52.224 - 3, if flow down is required in accordance with 52.224 - 3(f) and the agency specifies that only its agency - provided training is acceptable). (xix) 52.225 - 26, Contractors Performing Private Security Functions Outside the United States (Oct 2016) (Section 862, as amended, of the National Defense Authorization Act for Fiscal Year 2008; 10 U.S.C. Subtitle A, Part V, Subpart G Note). (xx) 52.232 - 40, Providing Accelerated Payments to Small Business Subcontractors (MAR 2023), if flow down is required in accordance with paragraph (c) of FAR clause 52.232 - 40. (xxi) 52 . 247 - 64 , Preference for Privately Owned U . S . - Flag Commercial Vessels (NOV 2021 ) ( 46 U . S . C . 55305 and 10 U . S . C . 2631 ), if flow down is required in accordance with paragraph (d) of FAR clause 52 . 247 - 64 . ( 2 ) While not required, the Contractor may flow down to subcontracts for commercial products or commercial services a minimal number of additional clauses necessary to satisfy its contractual obligations . (d) The Contractor shall include the terms of this clause, including this paragraph (d), in subcontracts awarded under this contract. (End of clause) FAR 52.252 - 4 Alterations in Contract. (APR 1984) Portions of this contract are altered as follows: Revisions or supplements after issuance of the solicitation or contract award will occur via amendment or modification. (End of clause) FAR 52.252 - 6 Authorized Deviations in Clauses. (NOV 2020) Page 20 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(a) The use in this solicitation or contract of any Federal Acquisition Regulation ( 48 CFR Chapter 1 ) clause with an authorized deviation is indicated by the addition of (DEVIATION) after the date of the clause . (b) The use in this solicitation or contract of any Defense Federal Acquisition Regulation Supplement (48 CFR Chapter 2) clause with an authorized deviation is indicated by the addition of (DEVIATION) after the name of the regulation. (End of clause) FAR Deviations 52.215 - 12 SUBCONTRACTOR CERTIFIED COST OR PRICING DATA (DEVIATION 2022 - O0001) (OCT 2021) (a) Before awarding any subcontract expected to exceed $2 million, on the date of agreement on price or the date of award, whichever is later; or before pricing any subcontract modification involving a pricing adjustment expected to exceed $2 million, the Contractor shall require the subcontractor to submit certified cost or pricing data (actually or by specific identification in writing), in accordance with Federal Acquisition Regulation (FAR) 15.408, Table 15 - 2 (to include any information reasonably required to explain the subcontractor’s estimating process such as the judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data, and the nature and amount of any contingencies included in the price), unless an exception under FAR 15.403 - 1(b) applies. If the $2 million threshold for submission of certified cost or pricing data is adjusted for inflation as set forth in FAR 1.109(a), then pursuant to FAR 1.109(d) the changed threshold applies throughout the remaining term of the contract, unless there is a subsequent threshold adjustment. (b) The Contractor shall require the subcontractor to certify in substantially the form prescribed in FAR 15.406 - 2 that, to the best of its knowledge and belief, the data submitted under paragraph (a) of this clause were accurate, complete, and current as of the date of agreement on the negotiated price of the subcontract or subcontract modification. (c) In each subcontract that, when entered into, exceeds $2 million, the Contractor shall insert either — (1) The substance of this clause, including this paragraph (c), if paragraph (a) of this clause requires submission of certified cost or pricing data for the subcontract; or (2) The substance of the clause at 52.215 - 13, Subcontractor Certified Cost or Pricing Data — Modifications (DEVIATION 2022 - O0001). (End of clause) FAR Deviations 52.219 - 8 Utilization of Small Business Concerns (DEVIATION 2023 - O0002) (DEC 2022) (a) Definitions. As used in this contract — HUBZone small business concern means a small business concern that meets the requirements described in 13 CFR 126.200, certified by the Small Business Administration (SBA) and designated by SBA as a HUBZone small business concern in the Dynamic Small Business Search (DSBS) and SAM. Service - disabled veteran - owned small business concern — (1) Means a small business concern - (i) Not less than 51 percent of which is owned by one or more service - disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service - disabled veterans; and Page 21 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(ii) The management and daily business operations of which are controlled by one or more service - disabled veterans or, in the case of a service - disabled veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran. (2) Service - disabled veteran means a veteran, as defined in 38 U.S.C.101 (2), with a disability that is service - connected, as defined in 38 U.S.C.101(16). Small business concern means a concern, including its affiliates, that is independently owned and operated, not dominant in its field of operation and qualified as a small business under the criteria and size standards in 13 CFR part 121, including the size standard that corresponds to the NAICS code assigned to the contract or subcontract. Small disadvantaged business concern, consistent with 13 CFR 124.1002, means a small business concern under the size standard applicable to the acquisition, that - (1) Is at least 51 percent unconditionally and directly owned (as defined at 13 CFR 124.105) by - (i) One or more socially disadvantaged (as defined at 13 CFR 124.103) and economically disadvantaged (as defined at 13 CFR 124.104) individuals who are citizens of the United States; and (ii) Each individual claiming economic disadvantage has a net worth not exceeding $850,000 after taking into account the applicable exclusions set forth at 13 CFR 124.104(c)(2); and (2) The management and daily business operations of which are controlled (as defined at 13.CFR 124.106) by individuals, who meet the criteria in paragraphs (1)(i) and (ii) of this definition. Veteran - owned small business concern means a small business concern - (1) Not less than 51 percent of which is owned by one or more veterans (as defined at 38 U.S.C.101(2)) or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans; and (2) The management and daily business operations of which are controlled by one or more veterans. Women - owned small business concern means a small business concern - (1) That is at least 51 percent owned by one or more women, or, in the case of any publicly owned business, at least 51 percent of the stock of which is owned by one or more women; and (2) Whose management and daily business operations are controlled by one or more women. (b) It is the policy of the United States that small business concerns, veteran - owned small business concerns, service - disabled veteran - owned small business concerns, small disadvantaged business concerns, and women - owned small business concerns shall have the maximum practicable opportunity to participate in performing contracts let by any Federal agency, including contracts and subcontracts for subsystems, assemblies, components, and related services for major systems. It is further the policy of the United States that its prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business concerns, veteran - owned small business concerns, service - disabled veteran - owned small business concerns, HUBZone small business concerns, small disadvantaged business concerns, and women - owned small business concerns. (c)(1) A joint venture qualifies as small business concern if — (i) Each party to the joint venture qualifies as small under the size standard for the solicitation; or (ii) The protégé is small under the size standard for the solicitation in a joint venture comprised of a mentor and protégé with an approved mentor - protégé agreement under a SBA mentor - protégé program. Page 22 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(2) A joint venture qualifies as — (i) A service - disabled veteran - owned small business concern if it complies with the requirements in 13 CFR part 125; or (ii) A HUBZone small business concern if it complies with the requirements in 13 CFR 126.616(a) through (c). (d) The Contractor hereby agrees to carry out this policy in the awarding of subcontracts to the fullest extent consistent with efficient contract performance. The Contractor further agrees to cooperate in any studies or surveys as may be conducted by the United States Small Business Administration or the awarding agency of the United States as may be necessary to determine the extent of the Contractor's compliance with this clause. (e)( 1 ) The Contractor may accept a subcontractor's written representations of its size and socioeconomic status as a small business, small disadvantaged business, veteran - owned small business, service - disabled veteran - owned small business, or a women - owned small business if the subcontractor represents that the size and socioeconomic status representations with its offer are current, accurate, and complete as of the date of the offer for the subcontract . (2) The Contractor may accept a subcontractor's representations of its size and socioeconomic status as a small business, small disadvantaged business, veteran - owned small business, service - disabled veteran - owned small business, or a women - owned small business in the System for Award Management (SAM) if – (i) The subcontractor is registered in SAM; and (ii) The subcontractor represents that the size and socioeconomic status representations made in SAM are current, accurate and complete as of the date of the offer for the subcontract. (3) The Contractor may not require the use of SAM for the purposes of representing size or socioeconomic status in connection with a subcontract. (4) In accordance with 13 CFR 121.411, 124.1015, 125.29, 126.900, and 127.700, a contractor acting in good faith is not liable for misrepresentations made by its subcontractors regarding the subcontractor's size or socioeconomic status. (5) The Contractor shall confirm that a subcontractor representing itself as a HUBZone small business concern is certified by SBA as a HUBZone small business concern by accessing SAM or by accessing DSBS at https://web.sba.gov/pro - net/search/dsp_dsbs.cfm. If the subcontractor is a joint venture, the Contractor shall confirm that at least one party to the joint venture is certified by SBA as a HUBZone small business concern. The Contractor may confirm the representation by accessing SAM. (End of clause) DFARS 252.225 - 7060 Prohibition on Certain Procurements from the Xinjiang Uyghur Autonomous Region. (JUN 2023) (a) Definitions . As used in this clause - Forced labor means any work or service that is exacted from any person under the menace of any penalty for nonperformance and that the worker does not offer to perform (10 U.S.C. 2496). XUAR means the Xinjiang Uyghur Autonomous Region of the People's Republic of China (10 U.S.C. 2496). (b) Prohibition . In accordance with 10 U.S.C. 4661, none of the funds appropriated or otherwise made available for DoD may be used to knowingly procure any products mined, produced, or manufactured wholly or in part by forced labor from XUAR or from an entity that has used labor Page 23 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
from within or transferred from XUAR. The Contractor shall make a good faith effort to determine that forced labor from XUAR will not be used in the performance of this contract (section 855, Pub. L. 117 - 263). (c) Subcontracts . The Contractor shall insert this clause, including this paragraph (c), without alteration other than to identify the appropriate parties, in subcontracts including subcontracts for commercial products, commercial services, and commercially available off - the - shelf items. (End of clause) DFARS 252.232 - 7007 Limitation of Government's obligation. (OCT 2021) (a) Contract line item(s) is/are incrementally funded. For this/these item(s), the sum of $ of the total price is presently available for payment and allotted to this contract. An allotment schedule is set forth in paragraph (j) of this clause. (b) For item(s) identified in paragraph (a) of this clause, the Contractor agrees to perform up to the point at which the total amount payable by the Government, including reimbursement in the event of termination of those item(s) for the Government's convenience, approximates the total amount currently allotted to the contract. The Contractor is not authorized to continue work on those item(s) beyond that point. The Government will not be obligated in any event to reimburse the Contractor in excess of the amount allotted to the contract for those item(s) regardless of anything to the contrary in the clause entitled "Termination for Convenience of the Government." As used in this clause, the total amount payable by the Government in the event of termination of applicable contract line item(s) for convenience includes costs, profit, and estimated termination settlement costs for those items(s). (c) Notwithstanding the dates specified in the allotment schedule in paragraph (j) of this clause, the Contractor will notify the Contracting Officer in writing at least ninety days prior to the date when, in the Contractor's best judgment, the work will reach the point at which the total amount payable by the Government, including any cost for termination for convenience, will approximate 85 percent of the total amount then allotted to the contract for performance of the applicable item(s). The notification will state (1) the estimated date when that point will be reached and (2) an estimate of additional funding, if any, needed to continue performance of applicable line items up to the next scheduled date for allotment of funds identified in paragraph (j) of this clause, or to a mutually agreed upon substitute date. The notification will also advise the Contracting Officer of the estimated amount of additional funds that will be required for the timely performance of the item(s) funded pursuant to this clause, for a subsequent period as may be specified in the allotment schedule in paragraph (j) of this clause, or otherwise agreed to by the parties. If after such notification additional funds are not allotted by the date identified in the Contractor's notification, or by an agreed substitute date, the Contracting Officer will terminate any item(s) for which additional funds have not been allotted, pursuant to the clause of this contract entitled "Termination for Convenience of the Government." (d) When additional funds are allotted for continued performance of the contract line item(s) identified in paragraph (a) of this clause, the parties will agree as to the period of contract performance which will be covered by the funds. The provisions of paragraph (b) through (d) of this clause will apply in like manner to the additional allotted funds and agreed substitute date, and the contract will be modified accordingly. (e) If, solely by reason of failure of the Government to allot additional funds, by the dates indicated below, in amounts sufficient for timely performance of the contract line item(s) identified in paragraph (a) of this clause, the Contractor incurs additional costs or is delayed in the performance of the work under this contract and if additional funds are allotted, an equitable adjustment will be made in the price or prices (including appropriate target, billing, and ceiling prices where applicable) of the item(s), or in the time of delivery, or both. Failure to agree to any Page 24 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
such equitable adjustment hereunder will be a dispute concerning a question of fact within the meaning of the clause entitled "Disputes." (f) The Government may at any time prior to termination allot additional funds for the performance of the contract line item(s) identified in paragraph (a) of this clause. (g) The termination provisions of this clause do not limit the rights of the Government under the clause entitled "Default." The provisions of this clause are limited to the work and allotment of funds for the contract line item(s) set forth in paragraph (a) of this clause. This clause no longer applies once the contract is fully funded except with regard to the rights or obligations of the parties concerning equitable adjustments negotiated under paragraphs (d) or (e) of this clause. (h) Nothing in this clause affects the right of the Government to terminate this contract pursuant to the clause of this contract entitled "Termination for Convenience of the Government." (i) Nothing in this clause shall be construed as authorization of voluntary services whose acceptance is otherwise prohibited under 31 U.S.C. 1342. (j) The parties contemplate that the Government will allot funds to this contract in accordance with the following schedule: On execution of contract $ , $ , $ , $ [month] [day], [year] $[ ] (End of clause) DFARS 252.235 - 7011 Final scientific or technical report. (DEC 2019) The Contractor shall - (a) Submit an electronic copy of the approved final scientific or technical report, not a summary, delivered under this contract to the Defense Technical Information Center (DTIC) through the web - based input system at https://discover.dtic.mil/submit - documents/ as required by DoD Instruction 3200.12, DoD Scientific and Technical Information Program (STIP). Include a completed Standard Form (SF) 298, Report Documentation Page, in the document, or complete the web - based SF 298. (b) For instructions on submitting multi - media reports, follow the instructions at https://discover.dtic.mil/submit - documents/ (c) Email classified reports (up to Secret) to . If a SIPRNET email capability is not available, follow the classified submission instructions at https://discover.dtic.mil/submit - documents/ . (End of clause) DFARS Deviations 252.225 - 7972 PROHIBITION ON THE PROCUREMENT OF FOREIGN - MADE UNMANNED AIRCRAFT SYSTEMS (MAY 2020) (DEVIATION 2020 - O0015) (a) Prohibition. In accordance with section 848 of the National Defense Authorization Act for Fiscal Year 2020, the Contractor shall not provide or use in the performance of this contract — Page 25 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
(1) An unmanned aircraft system (UAS), or any related services or equipment, that — (i) Is manufactured in the People’s Republic of China or by an entity domiciled in the People’s Republic of China; (ii) Uses flight controllers, radios, data transmission devices, cameras, or gimbals manufactured in the People’s Republic of China or by an entity domiciled in the People’s Republic of China; (iii) Uses a ground control system or operating software developed in the People’s Republic of China or by an entity domiciled in the People’s Republic of China ; or (iv) Uses network connectivity or data storage located in, or administered by an entity domiciled in, the People’s Republic of China ; or (2) A system for the detection or identification of a UAS, or any related services or equipment, that is manufactured — (i) In the People’s Republic of China; or (ii) By an entity domiciled in the People’s Republic of China. (b) Subcontracts . The Contractor shall insert the substance of this clause, including this paragraph (b), in all subcontracts or other contractual instruments, including subcontracts for the acquisition of commercial items . (End of clause) Section J - List of Documents, Exhibits and Other Attachments Number of Pages Title Number 2 Enclosure 1 Enclosure 1 0 Exhibit A CDRLs Exhibit A CDRLs 3 Attachment 1 SOW 1 6 Attachment 2 2 4 Attachment 3 Data Rights Assertions 3 5 Attachment 4 End User terms of Use 4 Page 26 Doc ID: 43a46ff8b5196c4e42442662072d32eefc44767a
Exhibit 10.5
SUBCONTRACTOR AGREEMENT
Under Government Contract
Under Base Agreement
Under Project Agreement
THIS AGREEMENT IS MADE
BETWEEN
a Delaware Limited Liability Corporation
hereinafter referred to as “BUYER” (PRIME)
AND
Rank One Computing Corporation
1290 Broadway, Suite 1200
Denver, CO 80203
hereinafter referred to as the “SELLER” (Subcontractor)
WITNESSETH THAT:
IN CONSIDERATION OF the promises, mutual covenants and agreements herein contained, the parties hereto agree as follows:
| 1. | Superseding Effect |
This Subcontracting Agreement (Agreement) embodies the entire understanding between BUYER and SELLER and, with the exception of previously executed non-disclosure agreements executed between the parties, supersedes all other written or oral agreements, if any. This Agreement shall not be altered, amended or otherwise modified unless done so in writing and signed by a duly authorized representative of each BUYER and SELLER.
| Base Agreement | Subcontract Agreement |
| 2. | Agreement Type |
This Agreement is a Basic Ordering Agreement under which BUYER may issue Firm Fixed Price (FFP) and/or Time and Materials (T&M) tasking in accordance with Base Agreement (Exhibit A) and within the scope of Project Agreement Statement of Work (Exhibit B) and in accordance with the SELLER Statement of Work (SOW) issued by BUYER to SELLER in the form as included as Exhibit C. All SELLER SOWs are subject to the terms, conditions, and provisions of this Agreement. The Agreement shall govern in the event of any conflict with any SELLER SOWs.
| 3. | SELLER Statement of Work (SOW) |
Subject to the terms and conditions hereinafter provided, the SELLER shall furnish all materials, supplies, and labor necessary to perform the requirements included in the SELLER SOW. SELLER SOWs issued by BUYER to SELLER shall be in the form as included in Exhibit C.
| 4. | Term |
The period during which BUYER may issue tasking hereunder shall be from August 2, 2022 through June 30, 2025. The period of performance for individual tasking shall be stated in the SELLER SOW.
| 5. | Level of Effort, Funding |
The level of effort for the performance of SELLER SOW issued under this Agreement will be established by requirements identified in the SELLER SOW and estimated in the SELLER Cost Estimate, the form of which is attached as Exhibit D. The SELLER in no event shall exceed the amount of funding allocated to the SELLER by the BUYER as evidenced in a SELLER Funding Letter, the form of which is attached as Exhibit E.
The BUYER makes no guarantee of any minimum amount or level of effort to be procured under this Agreement. The BUYER’s sole liability and responsibility extends only to the funding amounts provided in the SELLER Funding Letter issued and within the terms and conditions of the Agreement.
| Base Agreement | Subcontract Agreement |
2
The BUYER contemplates that the BUYER may allot funding incrementally to the SELLER tasking to the full estimated cost as specified in the SELLER Cost Estimate. The SELLER agrees to perform work on this Agreement up to the point at which the total amount paid and payable under this Agreement approximates but does not exceed the total amount allotted by the BUYER in the SELLER Funding Letter.
The BUYER is not obligated to reimburse the SELLER for costs incurred in excess of the total amount allotted by the BUYER to this Agreement via SELLER Funding Letter.
The SELLER is not obligated nor encouraged to continue performance under this Agreement or otherwise incur costs in excess of the amount then allotted to SELLER via SELLER Funding Letter under this Agreement by the BUYER, until the BUYER notifies the SELLER in writing via SELLER Funding Letter that the amount allotted by the BUYER has been increased and specifies the increased amount that shall then constitute the total amount allotted by the BUYER to this Agreement.
| 6. | Billing and Payment |
As consideration for the furnishing of services, the SELLER will submit invoices in the form of attached Exhibit F in accordance with the billing instructions outlined below. Invoices shall reflect the actual costs incurred, as they are incurred, under individual tasking issued.
Using the SELLER Invoice format provided as Exhibit F, SELLER shall submit invoices for work performed hereunder not more than once monthly. At a minimum, invoices shall be itemized including the name of the SELLER, each individual performer, current period and cumulative direct labor hours worked, itemized labor costs, itemized travel, including origination / destination, purpose and total cost(s). Itemized material cost(s) showing the invoice number, date, company, purchase order number, item description(s) and signed DD-250(s) (Exhibit G) transferring assets to the government client for each tasking shall be included in the invoice, summarizing the total billing amount. SELLER will provide receipts for all Travel and Material incurred costs with their invoices. SELLER will identify any associated technical milestones and the progress toward completion. While the invoice(s) need not be accompanied by copies of paid material receipts, invoices, and other backup, they shall be retained by SELLER and are subject to review by Government officials upon request.
| Invoices may be sent to: |
| Attn: | Accounts Payable |
| Ref: | Subcontract |
Invoices shall be emailed to the BUYER at . Follow-up to ensure receipt is the responsibility of the SELLER.
| Base Agreement | Subcontract Agreement |
3
Invoices will be processed by the BUYER each month. Invoices must be received by BUYER from the SELLER by the 5th day of the month. At BUYER’s discretion, any invoice received after the 5th day of the month may be processed the following month. Invoices will be paid within five business days after receipt by BUYER of government funds in payment of the BUYER’s invoice including SELLER costs. SELLER shall complete and submit an Electronic Funds Transfer (EFT) Request Form (Exhibit H) for invoice payments via electronic transfer. In the event the Government refuses to accept any portion of the SELLER’s costs, the BUYER reserves the right to withhold payment of subsequent invoices in an amount equal to the amount in dispute until such time as the dispute is settled. Settlement of such disputes will be a high priority.
BUYER reserves the right to purchase all materials required by the Government for any effort under this Agreement. SELLER may only purchase materials with written authorization of the BUYER and the Government Agreement Officer’s Representative (AOR) in the form of a Material Purchase Authorization as per Exhibit I.
SELLER shall comply with Article V: Obligation and Payment of the Base Agreement attached as Exhibit A.
| 7. | Limitation of Liability; Indemnification. |
Notwithstanding any other provision of this Agreement, the maximum liability of BUYER for any breach or alleged breach of this Agreement shall not exceed the funded amounts of individual tasking as issued by BUYER to SELLER via SELLER Funding Letter, nor shall BUYER be liable for any special, incidental or consequential damages resulting from any such breach or alleged breach. The SELLER agrees to perform work on tasking only to the point where the total amount payable by BUYER is equal to or less than the amounts allocated among individual tasking via SELLER Funding Letter.
Notwithstanding any other provision of this Agreement, the maximum liability of SELLER for any breach or alleged breach of this Agreement shall not exceed the funded amounts of individual tasking as issued by BUYER to SELLER via SELLER Funding Letter, nor shall SELLER be liable for any special, incidental or consequential damages resulting from any such breach or alleged breach.
BUYER shall not be obligated to reimburse the SELLER for costs incurred in excess of the total amount allotted to each tasking via SELLER Funding Letter under this Agreement. SELLER shall furnish services, as required hereunder, to the BUYER, relative to amounts incurred, but under no circumstances for amounts above those amounts allotted to the tasking by BUYER via SELLER Funding Letter.
Any effort undertaken by the SELLER pursuant to oral or written technical directions issued other than in accordance with the provisions herein, as well as any effort undertaken that exceeds the funding amounts allocated to those efforts by BUYER to SELLER via SELLER Funding Letters, shall be at the SELLER’s risk of not recovering related costs incurred.
| Base Agreement | Subcontract Agreement |
4
If at any time the SELLER has reason to believe that costs in the next succeeding sixty (60) days, when added to all costs previously incurred, will exceed seventy-five percent (75%) of the amount allocated to a tasking, the SELLER shall notify the BUYER in writing that funds are required to continue performance and the period through which the funds requested will be adequate for continued performance or completion.
Each of the parties ( the “indemnifying party”) agrees to indemnify the other party and its officers, directors, agents, and employees (the “indemnified party”) from and against any and all damages, claims and liabilities (including expenses and reasonable attorney’s fees) for injury or death to persons, loss of or damage to property, fines and penalties, in each case as may result, in whole or in part, from the indemnifying party’s performance under this Agreement or the use of the goods and services purchased or provided under this Agreement, except to the extent that such damages, claims or liabilities is due to the willful misconduct or gross negligence of the indemnified party.
SELLER shall comply with Article XX: Liability of the Parties as per the Base Agreement attached as Exhibit A.
| 8. | Shipping Instructions |
All items furnished under this Agreement shall be delivered as directed by individual SELLER SOW instructions. Shipments, inclusive of marking, preservation, packaging & packing shall be marked in accordance with ASTM Designation D3951-90, “Standard Practice for Commercial Packaging”. The use of asbestos, excelsior, newspaper or shredded paper for packing material is prohibited. In all cases, a copy of all delivered items, including the cover or transmittal letter, must also be provided to BUYER consistent with Article 9 below.
| 9. | Inspection, Acceptance and Warranty Provisions |
All work delivered under this Agreement shall be inspected and accepted by BUYER and the AOR in accordance with the applicable SELLER SOW requirements. Acceptance by BUYER under this Agreement shall not release the SELLER from responsibility to meet all requirements of this Agreement or a particular SELLER SOW. Inspection and acceptance will not be construed as a limitation of the rights of BUYER and the obligations of the SELLER as provided for in this Agreement.
Each item covered by a warranty shall be stamped or marked. Where this is impracticable, written notice shall be attached to or furnished with the warranted item. Warranted items shall be marked with the following information:
| 1) | National stock number or manufacturer’s part number; |
| 2) | Serial number or other item identifier (if warranty applies to uniquely identified items); |
| Base Agreement | Subcontract Agreement |
5
| 3) | Agreement number; |
| 4) | Indication that a warranty applies; |
| 5) | Manufacturer or entity (if other than SELLER) providing the warranty; |
| 6) | Date or time when the warranty expires; and |
| 7) | Indication of whether or not attempted on-site repair by Buyer or Government personnel will void the warranty. |
The SELLER shall extend to the BUYER the full coverage of any standard commercial warranty normally offered in a similar commercial sale, provided such warranty is available at no additional cost to the BUYER. The standard commercial warranty period shall begin upon final acceptance of the applicable material and/or services under this Agreement.
| 10. | Data Handling |
While performing under this Agreement, it is possible that the SELLER will have access to system performance, program/business sensitive and pre-decisional material/data, which shall not be disclosed to any entity, Government or otherwise, outside of BUYER personnel, unless specifically indicated in SELLER SOW or authorized in writing by the BUYER. The SELLER shall not use for purposes other than performance under this Agreement; nor shall the SELLER release, reproduce, distribute, or publish any data or analysis that is provided as Government Furnished Information (GFI) or produced in the performance of any tasking issued under this Agreement; nor shall the SELLER authorize others to do so, without written permission of the BUYER.
SELLER shall comply with Article VIII: Confidential and/or Proprietary Information as per the Base Agreement attached as Exhibit A.
| 11. | Reports |
The SELLER shall submit an electronic Monthly Status Report (MSR) in the form of Exhibit J, in tandem with SELLER’s invoice, in MS Word by the 5th day of each month. Electronic versions shall be emailed to and (Program Manager). All reports shall include technical activities for the previous month, shall include technical and financial activities for the previous month, and shall follow the format provided as Exhibit J. All other deliverables required by SELLER SOW shall be submitted by the SELLER to the BUYER on or before the specified due date. In addition to the required Monthly Status Reports, there will be required Quarterly Reports, Yearly Reports and Final Reports. The SELLER shall submit electronic Quarterly reports in the form of MS Word in the form of Exhibit K by March 20th, June 20th, September 20th, and December 20rd.
| Base Agreement | Subcontract Agreement |
6
| Reports shall be submitted to: | (Contracts)
|
| (Program Manager) |
| Attn: | ||
The cover of each Monthly Status Report shall prominently display the following information:
| - Name and business address of SELLER. |
| - Agreement number, Task number/TDL number and title |
| - Tasking (funded) dollar amount. |
| - Name, code, and activity of government sponsor. |
| 12. | Direction, Notices and Correspondence |
| A. | BUYER’s technical representative does not possess the authority to direct the accomplishment of effort which is beyond the scope of the SELLER SOW. All notices and correspondence relating to tasking technical performance shall be sent by either party to the following addresses: |
| To the Buyer: |
| ATTN: | |||
| Phone: | |||
| Or electronically to: | |||
To the SELLER: Rank One Computing Corporation
| ATTN: |
| 1290 Broadway, Suite 1200 | |||
| Denver, CO 80203 | |||
| Phone: | |||
| Or electronically to: | |||
| Base Agreement | Subcontract Agreement |
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| B. | All notices and correspondence relating to this Agreement shall be sent by either party to the following addresses: |
| To the Buyer: |
| ATTN: | |||
| Phone: | |||
| Or electronically to: | |||
To the SELLER: Rank One Computing Corporation
| ATTN: | General Counsel |
| 1290 Broadway, Suite 1200 | |||
| Denver, CO 80203 | |||
| Phone: | |||
| Or electronically to: | |||
or any other address provided prior written notice is given to the other party.
| 13. | Marketing |
The SELLER shall notify the BUYER’s technical representation of any tasking successfully marketed by the SELLER and intended to be performed by the SELLER under this Agreement. SELLER must provide all cost estimates to BUYER and UNDER NO CIRCUMSTANCES shall SELLER supply ANY form of cost estimate information to the Government. BUYER shall be the sole point of contact to the Government for cost estimate discussion and submission for the Agreement.
| 14. | Insurance Requirements |
The SELLER shall submit to BUYER proof of insurance upon issuance of this Agreement and shall submit to BUYER evidence of insurance renewal at the expiration of the previously submitted insurance certificate to BUYER until the expiration of this Agreement.
| Base Agreement | Subcontract Agreement |
8
SELLER shall procure and maintain the following kinds of insurance coverage in the amounts herein indicated, throughout the period of performance of this Agreement.
| A. | Comprehensive General Liability: | $200,000 per person | |
| $500,000 per accident for bodily injury | |||
| B. | Automobile Insurance: | $200,000 per person | |
| $500,000 per accident bodily injury | |||
| $500,000 per accident property damage | |||
| C. | Standard Workman’s Compensation and Employer’s Liability Insurance: | ||
| $100,000 minimum | |||
| 15. | Security Requirements |
The work on this Agreement may involve access to, handling of, and generation of classified material. The SELLER is responsible for compliance with all security clearance requirements of the US Government, as set forth in the current edition of the National Industrial Security Program Operating Manual as well as the provisions of the delivery order. Each party agrees that all of its personnel who, pursuant to this Agreement, will have access to classified information, shall have current, and appropriate personnel security clearances prior to being accorded access to such information. SELLER shall comply with security requirements as specified in a DD-254 (Exhibit L), issued by BUYER to SELLER and shall provide Operations Security (OPSEC) Protection for classified information (pursuant to FAR 4.401) and sensitive information (pursuant to Section 3(d)(4) of PL 100-235 (101 Stat 1727)) in conjunction with National Security Directive 298 of 22 January 1988 and DFARS clause 252-239.7016. The SELLER is responsible for developing and maintaining an OPSEC Plan for review at the SELLER’s facility. Should the SELLER be required to transmit classified matter by mail, the transmittal shall be in accordance with DOD Industrial Security Regulation (DD5220.22-R).
SELLER’s personnel shall maintain security clearance eligibility commensurate with the level of classification of the work performed as annotated in the DD-254. The SELLER is responsible for ensuring that all personnel receive the requisite investigation and are favorably adjudicated in accordance with DoDM 5220.22, National Industrial Security Program Operating Manual. SELLER employees who fail to meet security clearance requirements may not access classified information or perform sensitive duties.
| Base Agreement | Subcontract Agreement |
9
SELLER shall comply with Article XV: OPSEC & Security as per the Base Agreement attached as Exhibit A.
SELLER shall comply with FAR Clause 52.204.24 Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment, attached as Exhibit M.
| 16. | Export/Import Requirements |
Services, Products, and/or technical data provided or disclosed in performance of this Agreement may be subject to required and continuing U.S. Government approvals, clearances, regulations, and export/ import and re-export requirements, including the U.S. Department of State International Traffic In Arms Regulations (ITAR – Title 22, CFR Parts 120-130), the U.S. Department of Commerce Export Administration Regulations (Title 15, CFR730-774), and any other U.S. Government regulation applicable to the export/ import, re-export, or disclosure of such controlled technical data (or the products thereof) to Foreign Nationals whether within, or outside, the U.S., including those employed by, or otherwise associated with, the parties. The SELLER acknowledges and agrees to comply with all such U.S. regulations regarding export/ import, re-export, or disclosure and will obtain any and all such registrations, licenses, agreements, approvals and/or certifications, as may be required by regulations for the export of products, services, and/or technical data that may be provided by SELLER under this Agreement before initiating performance. SELLER agrees to cooperate with the BUYER through the provision of information, the execution of any technical assistance agreements, amendments, licenses, non-disclosure agreements or other documentation required of the BUYER by the U.S. Government in accordance with the requirements of the ITAR, the export laws and regulations, or any applicable export authorization issued by the U.S. Government. Furthermore, SELLER agrees that, if it receives technical information under this agreement subject to U.S. Export controls, it will provide a written assurance that such information will not be re-exported to those restricted countries listed in Section 379.4(c) of the Export Administration Regulations or retransferred to other parties who are not authorized to receive controlled products, services or technical information without prior written approval of the BUYER. Any such re-export or retransfer of controlled technical data may be subject to further U.S. Government approvals.
SELLER shall comply with Article XII: Export Control of the Base Agreement attached as Exhibit A.
| 17. | Restriction on the Direct Charging of Material |
BUYER intends, and in all respects reserves the right, to purchase any and all materials for any tasking issued under this Agreement. In the event, however, BUYER, at its sole discretion, determines that the purchase of specific material by the SELLER would be in the best interest of and best value to the Government, BUYER, in response to request for material purchase by SELLER (Exhibit I), shall notify SELLER in writing of BUYER’S consent to SELLER making said purchase. SELLER shall purchase any such materials in accordance with all terms, conditions, and clauses in this Agreement. SELLER shall comply with Article XIII: Title and Disposition of Property as per the Base Agreement attached as Exhibit A.
| Base Agreement | Subcontract Agreement |
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| 18. | Travel |
SELLER may be required to travel to provide the services support required under this Agreement. Travel will be allowable only when it is essential to the performance of the SELLER SOW. Reimbursement for travel costs incurred shall not exceed guidance in accordance with the Department of Defense Joint Travel Regulation (http://www.defensetravel.dod.mil/site/travelreg.cfm). SELLER must provide travel receipts at the time of invoicing to BUYER.
Travel requirements are anticipated to be primarily within the continental United States (CONUS) but are not limited to CONUS. Travel to various worldwide locations to attend meetings, monitor testing, conduct necessary validation and verification exercises and develop technical findings may require passport and country clearances. The costs associated with obtaining passports for contractor personnel shall not be billed as a direct charge to this contract.
| 19. | Organizational Conflicts of Interest |
The financial, contractual, organizational and other interests of SELLER personnel performing work under this Agreement shall be deemed to be the interests of the SELLER for the purposes of determining the existence of an Organizational Conflict of Interest. Any SELLER personnel that perform work relative to this Agreement shall be subject to this clause. Any request for waiver of the provisions of this clause shall be submitted in writing to the BUYER who will forward them to the AOR. The request for waiver shall set forth relevant factors including proposed contractual safeguards or job procedures to mitigate conflicting roles that might produce an Organizational Conflict of Interest. No waiver shall be granted by the Government with respect to prohibitions pursuant to access to proprietary data. For any application for such a waiver, the following definitions are applicable: “System” includes system, major component, subassembly or subsystem, project, or item; “Nondevelopment items” are defined in FAR 2.101; “Systems Engineering” includes, but is not limited to, the activities in FAR 9.505-1(b). The BUYER recognizes that during the term of this Agreement, conditions may change which may give rise to the appearance of a new Organizational Conflict of Interest. In such an event, the SELLER shall disclose to the BUYER information concerning the new Organizational Conflict of Interest. The SELLER shall provide, as a minimum, the following information:
| a. | A description of the new Organizational Conflict of Interest (e.g., additional systems supplier(s), corporate restructuring, new contract) and identity of parties involved. |
| Base Agreement | Subcontract Agreement |
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| b. | A description of work to be performed. |
| c. | The dollar amount. |
| d. | The period of performance. |
| e. | A description of the SELLER’s internal controls and planned actions to avoid a potential Organizational Conflict of Interest. |
SELLER agrees to comply with Article XXI: General, G. Organizational Conflict of Interest as per the Base Agreement attached as Exhibit A.
| 20. | Invention, Rights, Disclosures and Reports |
All inventions and other intellectual property made or generated in the performance of the work by BUYER or SELLER under this Agreement shall be the property of the company employing the person generating said intellectual property. No license, express or implied, shall inure to the benefit of the other participating party as a result of a patent being granted to one of the parties for inventions made exclusively by its employees. Any inventions or discoveries made jointly by the employees of the parties during the performance of this Agreement will be jointly owned with each party having equal proprietary rights. In the event either party disagrees with equal ownership of such inventions the parties agree to further negotiations between the parties to establish their respective rights. This understanding and provisions of the Agreement are subject to any rights that the U.S. Government may possess relative to any inventions conceived pursuant to this Agreement.
Inventions or product improvements paid in whole or part with funding from the U.S. Government customer will be subject to the data rights clauses of the FAR and DFAR. Any ownership rights provided for by this paragraph will survive the termination of this Agreement.
The Government shall receive Unlimited Rights to all technical data, computer software, and computer software documentation developed and/or delivered under the SELLER SOW, or pertaining to any item, component, or process developed or delivered under the SELLER SOW, except for any technical data and computer software items previously developed at private expense and listed in Attachment 1 to the SELLER SOW, which shall be furnished to the Government with restrictions and included in Attachment 1 to the SELLER SOW (if any). Furthermore, the Government shall receive Unlimited Rights to all non-commercial computer software documentation, as well as any non-commercial technical data (regardless of whether it is listed in Attachment 1 to the SELLER SOW) that: comprise studies, analyses, test data, or similar data produced for this SELLER SOW, when the study, analysis, test, or similar work was specified as an element of performance; is form, fit, and function data; or is necessary for installation, operation, maintenance, or training purposes (other than manufacturing or process data).
| Base Agreement | Subcontract Agreement |
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SELLER shall comply with Article IX: Publication and Academic Rights, Article X: Patent Rights, and Article XI: Data Rights and Copyrights as per the Base Agreement attached as Exhibit A. It is the SELLER’s responsibility and obligation to read and understand the language in the entire Base Agreement regarding data rights.
| 21. | Non-Solicitation/Non-Disclosure |
During the period of this Agreement and for one (1) year thereafter, neither party hereto shall solicit for hire any employee of the other associated with the performance of the Agreement; nor hire such employee without the express consent of other party; nor shall such employee, if hired, be assigned to participate directly or indirectly on any tasking issued by BUYER under the Agreement. This clause does not preclude employees of either party from pursuing employment opportunities with the other party on their own initiative or in response to public advertisements published by either party. In such instance, participation on a tasking issued by the BUYER under the Agreement is permitted.
Executed Non-Disclosure Agreement is incorporated and attached as Exhibit N.
SELLER shall comply with Article VIII: Confidential and/or Proprietary Information as per the Base Agreement attached as Exhibit A.
| 22. | Agreement Closeout |
SELLER agrees to provide Agreement closeout documentation as requested by the BUYER. The documentation will include, as applicable, SELLER Release of Claims; SELLER’s Assignment of Refunds, Rebates, Credits, and Other Amounts; SELLER Patents Report; Report of Inventions and SELLER (DD 882); Government Property Inventory; SELLER Closeout Checklist; and any other documentation or request for information considered necessary by BUYER to closeout this Agreement.
SELLER agrees to submit all closeout information and documentation within ninety (90) calendar days of the date of the request.
Pursuant to and consistent with the provisions of this Clause, FAR Clauses 42.705(c)(1) and 52.216-7 (d)(6)(i), in the event the SELLER fails to submit the required closeout information and documentation in a timely manner, such failure shall constitute SELLER's express agreement that the amounts paid to date by BUYER pursuant to this Agreement, as determined by BUYER’s records, constitute the full, complete and final extent of BUYER's financial obligation to the SELLER, that the SELLER does forever fully and finally remise, release, and discharge BUYER, its officers, agents and employees, of and from any and all liabilities, obligations, claims, and demands whatsoever arising under or relating to this Agreement, and that the SELLER expressly authorizes BUYER to rely on the foregoing representations and release in connection with BUYER's closeout of or other actions taken with respect to this Agreement. Furthermore, such failure is considered to be a material breach of the terms of this Agreement and may subject the SELLER to forfeiture of all or part of any unpaid amounts.
| Base Agreement | Subcontract Agreement |
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SELLER shall comply with Article II: Term as per the Base Agreement attached as Exhibit A.
| 23. | Disputes |
Disputes under this Agreement shall be referred to each party’s designated executive management for resolution within thirty (30) calendar days before either party may commence formal proceedings. When seeking to resolve a dispute, the parties’ designated executive management shall consider the impact of the disputed matter, the effect of the dispute, the cost to both parties of resolving the dispute and the practical effects on the business of each party resulting from the resolution or failure to resolve any such dispute.
In the event the designated executives are unable to resolve a dispute within thirty (30) calendar days of written notification or longer, if extended by the mutual agreement of both parties, either party may then submit the matter for formal proceedings as indicated below.
Any dispute (other than one concerning the allocability of costs by the U.S. Government) under this Agreement shall be settled by arbitration in the State of Delaware in accordance with the Rules of the American Arbitration Association by a single arbitrator appointed by that Association, and judgment upon the award rendered hereunder may be entered in any Court having jurisdiction thereof.
| 24. | Overtime |
Overtime premiums cannot be charged directly to the contract unless first approved in writing by the AOR. For critical/time-sensitive tasking, with prior approval of the AOR, additional hours may be authorized at the contractor's regular fully burdened hourly rate to the extent consistent with the contractor's accounting practices and the Fair Labor Standards Act.
| 25. | Termination |
| 25.1 | BUYER’s Right to Terminate |
| Base Agreement | Subcontract Agreement |
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In addition to any other rights set forth in this Agreement, BUYER shall have the right to terminate this Agreement in whole or in part upon the occurrence of one or more of the following events:
| (a) | The Government terminates the Base Agreement, or tasking, in whole or in part; |
| (b) | The Government terminates for cause or for convenience the effort(s) the SELLER is supporting; |
| (c) | SELLER defaults in performing its obligations under this Agreement or tasking issued hereunder, and fails to cure the default within 10 days (unless extended by BUYER) after receiving a notice specifying the nature of the default. Default includes, but is not limited to, a failure to make progress in the work so as to endanger performance; |
| (d) | SELLER files, or there is filed against SELLER, a petition, arrangement, or proceeding seeking an order for relief under the bankruptcy laws of the United States, a receivership for any of the assets of SELLER, an assignment for the benefit of its creditors, or the dissolution, liquidation, or insolvency of SELLER; |
| (e) | SELLER fails to agree upon any deletion, amendment or addition to this Agreement which is required by statute, executive order, applicable regulations, or is otherwise a result of or relating to a modification of the Base Agreement; |
| (f) | SELLER is sanctioned, suspended, or debarred by the federal government; or |
| (g) | SELLER has an organizational conflict of interest as defined in FAR Subpart 9.5 that, in the conclusive opinion of BUYER and/or the Government, cannot be mitigated, neutralized or avoided. |
| 25.2 | Notice of Termination |
In the event BUYER, in accordance with Paragraph 25.1, terminates this Agreement, BUYER shall deliver to the SELLER written notice of the termination of the Agreement, specifying whether the termination is for convenience of the Government or default, the extent of the termination, and the effective date. If, after termination for default, it is determined that SELLER was not in default or that the SELLER’s failure to perform or to make progress in performance is due to causes beyond the control and without the fault or negligence of SELLER, the rights and obligations of the parties will be the same as if the termination was for convenience.
| 25.3 | SELLER’s Duties Upon Termination |
After receipt of the termination notice, the SELLER shall immediately do the following:
| (a) | Stop performance as specified in the termination notice; |
| Base Agreement | Subcontract Agreement |
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| (b) | Place no further lower-tier Agreements or orders except as necessary to complete the continued portion of this Agreement; |
| (c) | Terminate all lower-tier Agreements to the extent they relate to the work being terminated; |
| (d) | Settle all outstanding liabilities and termination settlement proposals arising from the termination of lower-tier Agreements or orders under this Agreement |
| (e) | Complete performance of the work not terminated; and, |
| (f) | Deliver to BUYER all documents, specifications, plans and materials relating to the terminated work that were produced by or provided to SELLER for performance under this Agreement. |
| 25.4 | Terminations for Convenience |
Upon Government termination for convenience, SELLER shall submit its termination settlement proposal to the BUYER within sixty (60) days after receipt of notice of termination or such claim shall be absolutely and unconditionally waived. The procedures set forth in FAR 52.249-2 (APR 2012) and/or FAR 52.249-6 (MAY 2004), as applicable, and the cost principles in Part 31 of the Federal Acquisition Regulation in effect on the date of this Agreement, shall govern all costs and expenses claimed under this clause. In no event shall BUYER be liable for lost or anticipated profits, unabsorbed indirect costs or overhead, or for any sum in excess of the funded ceiling price of the Agreement or any terminated tasking. BUYER’s only liability to SELLER for any termination for the convenience of the Government shall be to pay the amounts owing to SELLER for satisfactory services provided up to the date of termination. Payment by BUYER for those amounts associated with the termination shall be contingent upon receipt of payment from the Government.
| 25.5 | Terminations for Default |
In the event of a termination for default, SELLER shall be entitled to payment only for work actually delivered and accepted, and SELLER shall be liable to BUYER for costs incurred by it because of SELLER’s default. The rights and remedies of the BUYER provided in this clause shall not be exclusive and are in addition to any other rights and remedies provided by law or under this Agreement. If the total payments previously made to SELLER exceed the amount finally determined to be due under this Agreement, SELLER shall repay the excess to BUYER upon demand.
SELLER shall comply with Article II: Term as per the Base Agreement attached as Exhibit A.
| Base Agreement | Subcontract Agreement |
16
| 26. | Terms and Conditions |
This Agreement is executed and entered into in accordance with and under the laws of the State of Delaware. SELLER agrees to all Terms and Conditions required by law, all Base Agreement Articles (Exhibit A) and all mandatory flow down regulations from the Base Agreement (Exhibit A). It is the SELLER’s responsibility and obligation to read and understand the language in the Base Agreement regarding terms and conditions and requirements.
| 27. | General Provisions |
No waiver of any rights shall be effective unless agreed to in writing by both parties. Any such waiver shall not constitute a waiver of any other right hereunder.
The headings and subheadings of the sections of this Agreement are intended for convenience or reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.
In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if the result of such action materially changes the economic benefit of this Agreement to the parties.
Neither this Agreement nor any rights or obligations of any party hereunder shall be assigned or otherwise transferred by either party without the prior written consent of the other party except that it is agreed that either party may assign this Agreement to its affiliates or to the successors or assignees of a substantial portion of its business interests to which this Agreement directly pertains without prior written consent.
SELLER shall comply with Article XXI: General Provisions and Article XXII: Assignment of Agency as per the Base Agreement attached as Exhibit A.
| 28. | Documents Incorporated |
All specifications, Exhibits, drawings or other documents to which reference is made in this Agreement, whether or not attached, are incorporated herein by reference. The following Exhibits are attached hereto and are hereby expressly incorporated in full text:
| Exhibit A – Base Agreement | |
| Exhibit B – Project Agreement | |
| Exhibit C – SELLER SOW | |
| Exhibit D – SELLER Cost Estimate |
| Base Agreement | Subcontract Agreement |
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| Exhibit E – SELLER Funding Letter Template | |
| Exhibit F – SELLER Invoice Template | |
| Exhibit G – DD-250 Template | |
| Exhibit H – EFT Request Form Template | |
| Exhibit I – Material Purchase Authorization Template | |
| Exhibit J – Monthly Status Report (MSR) Template | |
| Exhibit K- Quarterly Status Report Template | |
| Exhibit L – DD-254 Template | |
| Exhibit M – Representation Regarding Certain Telecommunications and Video Surveillance Services and Equipment | |
| Exhibit N – Non-Disclosure Agreement |
| 29. | Order of Precedence |
The following order of precedence shall govern in the event of a conflict between the documents of this Agreement.
| 1. | Articles 1 through 28 of the Agreement |
| 2. | Base Agreement |
| 3. | Project Agreement |
| 4. | SELLER SOW |
| 5. | Other Exhibits |
| Base Agreement | Subcontract Agreement |
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated.
| Date: |
| ||
| Name: | ||
| Title: | CEO |
| Rank One Computing Corporation | ||||
| Date: | 04/19/2023 | /s/ B. Scott Swann | ||
| Name: | B. Scott Swann | |||
| Title: | CEO | |||
| Base Agreement | Subcontract Agreement |
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Exhibit 10.6
stockholders AGREEMENT
This Stockholders Agreement (the “Agreement”) is made and effective as of September 18, 2018 (the “Effective Date”), by and among Rank One Computing Corporation, a Colorado corporation (the “Company”) and those holders of the Company’s Common Stock listed on Exhibit A hereto (the “Stockholders”).
Recitals
Whereas, the Company anticipates issuing Capital Stock to existing and future Stockholders pursuant to purchase agreements, subscription agreements or other agreements (the “Purchase Agreements”); and
Whereas, the obligations in the Purchase Agreements are or will be conditioned upon the execution and delivery of this Agreement;
Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, on behalf of themselves and all Stockholders, the parties hereto agree as follows:
Agreement
| 1. | Definitions. |
1.1 “Affiliate” means, with respect to any Person, any other Person which controls, is controlled by or is under common control with such Person and any fund or investment vehicle that (a) is organized by such Person or any other Person which controls, is controlled by or is under common control with such Person for the purpose of making equity or debt investments in one or more companies and (b) is managed, controlled by, or under common control with, such Person, and, in each case, each of their respective shareholders, partners (general or limited), principals or members.
1.2 “Articles” shall mean the Company’s Articles of Incorporation, as then in effect.
1.3 “Board” shall mean the Company’s Board of Directors.
1.4 “Change in Control” shall mean an “Acquisition” or “Asset Transfer” as such terms are defined in the Articles.
1.5 “Capital Stock” shall mean shares of the Company’s Common Stock and any other class or series of the Company’s capital stock, now owned or subsequently acquired.
1.6 “Common Stock” shall mean shares of the Company’s Common Stock issued or issuable upon exercise of any option, warrant or other security or right of any kind convertible into or exchangeable for shares of the Company’s Common Stock, now owned or subsequently acquired.
1.7 “Person” means any corporation, association, joint venture, partnership, limited liability company, organization, business, individual, trust, government or agency or political subdivision thereof or other legal entity.
1.8 “Shares” shall mean shares of Capital Stock held by a Stockholder.
1.9 “Transfer” shall mean any sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or descent, or other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly, of any Capital Stock.
| 2. | Restriction on Sale or Transfer. |
2.1 Each Stockholder agrees not to make any Transfer of all or any portion of their Shares unless and until:
(a) there is then in effect a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or other applicable law covering such proposed Transfer and such Transfer is made in accordance with such registration statement; or
(b) (1) The transferee has agreed in writing to be bound by the terms of this Agreement, (2) such Stockholder shall have notified the Company of the proposed Transfer and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed Transfer, (3) the Company has agreed in writing to such Transfer (other than with respect to Permitted Transfers), and (4) if reasonably requested by the Company, such Stockholder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such Transfer will not require registration of such shares under the Securities Act.
2.2 Permitted Transfers.
(a) Notwithstanding Section 2.1 above and subject to the requirements of this Agreement, a Stockholder may Transfer such Stockholder’s Shares in the following cases: (1) a partnership transferring to its Affiliates (as defined below), partners, limited partners or former partners in accordance with partnership interests, (2) a corporation transferring to any Affiliated entity, including, without limitation, any subsidiary or parent corporation, or Affiliated partnership, limited liability company or investment fund, (3) a limited liability company transferring to Affiliates, including but not limited to affiliated investment funds, its members or former members in accordance with their interest in the limited liability company, (4) to the Company, (5) to any Affiliate, trust or relative of such Stockholder for estate planning purposes, (6) an individual Stockholder transferring to an immediate family member or a trust for the benefit of such immediate family member or (7) to such Stockholder’s executor, administrator, trustee, or personal representative at death or involuntarily by operation of law (each a “Permitted Transfer”).
(b) The transferor and transferee of a Permitted Transfer shall execute and deliver to the Company such documents and instruments of conveyance as may be necessary or appropriate, in the opinion of counsel to the Company, to effect such Transfer and to confirm (1) the transferee’s agreement to be bound by the provisions of this Agreement, plus such transferee’s assumption of all monetary or other obligations of the transferor with respect to the Shares being transferred and (2) the transferor’s agreement to guarantee the prompt payment and performance of such assumed obligations.
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(c) In the case of Transfer of Shares at death or involuntarily by operation of law, the Transfer shall be confirmed by presentation to the Company of legal evidence of such Transfer, in form and substance satisfactory to counsel to the Company, confirming such Transfer and that such transferor (and/or such transferor’s estate) remains liable for all monetary obligations with respect to such interest.
(d) The transferor and transferee shall furnish the Company with the transferee’s taxpayer identification number, sufficient information to determine the transferee’s initial tax basis in the interests transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to recognize any rights of the transferee with respect to any transferred interests until the Company has received such information.
2.3 Legends. Each certificate representing shares of stock of the Company shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws) restrictive legends (each, a “Legend”):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN Stockholders agreement by and between the Stockholder and the company. Copies of such agreement may be obtained upon written request to the secretary of the company.
2.4 The Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration of transfer, reissuance of otherwise), the Legends from any such certificate, except to the extent the Company has received an opinion of counsel satisfactory to the Company that such Legends may be removed, and will place or cause to be placed the Legends on any new certificate issued to represent the Company’s Capital Stock theretofore represented by a certificate carrying the Legends.
3
2.5 In the event of any Transfer or attempted Transfer in violation of this Agreement, the parties engaging in such Transfer or attempted Transfer shall be liable to indemnify and hold the Company and the other Stockholders harmless from all costs, liabilities, and damages to the Company or any of such other Stockholders (including, without limitation, incremental tax liability and fees and expenses of legal counsel) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.
2.6 This Agreement is subject to, and shall in no manner limit, the right which the Company may have to repurchase securities from the Stockholders pursuant to any right of first refusal set forth in the Company’s bylaws.
2.7 The provisions of this Agreement shall be binding upon the successors in interest to any of the Company’s Capital Stock. The Company shall not permit the transfer of any of the Company’s Capital Stock on its books or issue a new certificate representing any of the Company’s Capital Stock unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person were a Stockholder.
| 3. | Covenants of the Company. |
3.1 Confidentiality of Records. Each Stockholder agrees to use the same degree of care as such Stockholder uses to protect its own confidential information to keep confidential any information furnished to such Stockholder pursuant to this Agreement or otherwise (so long as such information is not in the public domain), except that such Stockholder may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of such Stockholder as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.1 or comparable restrictions; (ii) to any of the Stockholder’s attorneys, accountants, consultants, and other professionals, to the extent necessary to obtain their services in connection with monitoring the Stockholder’s investment in the Company and if such professionals are obligated to maintain the confidentiality of the same; (iii) at such time as it enters the public domain through no fault of such Stockholder; (iv) that is communicated to it free of any obligation of confidentiality; (v) that is developed by such Stockholder or its agents independently of and without reference to any confidential information communicated by the Company; or (vi) as required by applicable law.
Notwithstanding anything herein to the contrary, provided that such recipients agree to be subject to similar confidentiality obligations as those set forth herein, such Stockholder may provide any such information (i) to its general partner or fund manager (and its members or officers) and (ii) or to a lender of Stockholder. Furthermore, provided that such recipients agree to be subject to similar confidentiality obligations as those set forth herein, nothing in this paragraph shall restrict any Stockholder’s ability to disclose the existence and nature of its relationship with the Company to its affiliates, members or partners, or to provide its affiliates, members or partners with periodic reports and such other information about the Company prepared by such Stockholder in the ordinary course of its business.
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3.2 Proprietary Information and Intellectual Property Agreement. The Company shall require all officers, employees, independent contractors and consultants that create intellectual property on behalf of the Company to execute and deliver a Proprietary Information and Intellectual Property Agreement substantially in the form delivered to the Stockholders prior to the date of this agreement. In addition, the material terms of such Proprietary Information and Intellectual Property Agreement shall be contained in any consulting agreement the Company entered into or enters into with any former or present consultant of the Company, or, to the extent such material terms are not contained in any consulting agreement with such consultant, the Company shall require such consultant to enter into such Proprietary Information and Intellectual Property Agreement. The Company and Stockholders hereby acknowledge and agree that as of the Effective Date, Brendan F. Klare, Joshua C. Klontz, Scott J. Klum, Benjamin H. Klein, Cody H. Barnes and David S. Ray have executed a Proprietary Information and Intellectual Property Agreement, whereas Anil K. Jain and Robert W. Kocher have not served as an officer, employee, independent contractor or consultant of the Company prior to the Effective Date and thus were not required to and have not executed a Proprietary Information and Intellectual Property Agreement. The Company and Stockholders further acknowledge and agree that Anil K. Jain and Robert W. Kocher may not or will not in the future become or in any way whatsoever be deemed obligated to execute a Proprietary Information and Intellectual Property Agreement for activities prior to the Effective Date, on the Effective Date or after the Effective Date without the prior written mutual consent of at least the Company and Anil K. Jain and Robert W. Kocher (as applicable) with such consent determined by each party for themselves in their sole and absolute discretion.
3.3 New Issuances. The Company shall not, without the prior written consent or prior affirmative vote of Stockholders holding Shares that represent at least 60% of the fully-diluted shares of Capital Stock, issue or obligate itself to issue more than an aggregate total of 10,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Capital Stock in any manner or form whatsoever (including, but not limited to by option, warrant or contract) from or after the Effective Date.
3.4 Amendments. In addition to the terms and conditions under Section 7.6 (Amendment or Waiver) of this Agreement, the following additional terms and conditions apply to amendments of certain Company documents as follows: any amendment to this Agreement, the Company’s certificate of incorporation or the Company’s bylaws that would affect the rights or obligations of any Shareholder in a manner that is disproportionately adverse to such Shareholder relative to other Shareholders in respect of Shares of the same class or series shall be effective only with that Shareholder’s consent. Further, the amendment of the last sentence of Section 3.2 with respect to Anil K. Jain and Robert W. Kocher (as applicable) requires their prior written consent, to be determined in each of their respective sole and absolute discretion.
| 4. | Voting. |
4.1 Voting Agreement. The Stockholders each agree to hold all of their Shares subject to, and to vote such Shares in accordance with, the provisions of this Agreement.
4.2 Election of Directors. On all matters relating to the election of directors of the Company, each of the Stockholders agrees to vote such Stockholder’s shares of Capital Stock or execute an action by written consent so as to elect members of the Board as follows:
(a) At each election of directors in which the Stockholders, whether voting as a separate class or together as a single class with other classes of Capital Stock, are entitled to vote to elect directors of the Company, the Stockholders shall vote all of their respective Capital Stock so as to elect one representative nominated by Brendan F. Klare, so long as Brendan F. Klare and his Affiliates hold not fewer than 1,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Capital Stock, which individual shall initially be Brendan F. Klare. Any vote taken to remove any director elected pursuant to this Section 4.2(a), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 4.2(a), shall also be subject to the provisions of this Section 4.2(a).
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(b) At each election of directors in which the Stockholders, whether voting as a separate class or together as a single class with other classes of Capital Stock, are entitled to vote to elect directors of the Company, the Stockholders shall vote all of their respective Capital Stock so as to elect one representative nominated by Joshua C. Klontz, so long as Joshua C. Klontz and his Affiliates hold not fewer than 1,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Capital Stock, which individual shall initially be Joshua C. Klontz. Any vote taken to remove any director elected pursuant to this Section 4.2(b), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 4.2(b), shall also be subject to the provisions of this Section 4.2(b).
(c) At each election of directors in which the Stockholders, whether voting as a separate class or together as a single class with other classes of Capital Stock, are entitled to vote to elect directors of the Company, the Stockholders shall vote all of their respective Capital Stock so as to elect one representative nominated by Scott J. Klum, so long as Scott J. Klum and his Affiliates hold not fewer than 1,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Capital Stock, which individual shall initially be Scott J. Klum. Any vote taken to remove any director elected pursuant to this Section 4.2(c), or to fill any vacancy created by the resignation, removal or death of a director elected pursuant to this Section 4.2(c), shall also be subject to the provisions of this Section 4.2(c).
4.3 No Liability for Election of Recommended Director. None of the parties hereto and no officer, director, stockholder, partner, employee or agent of any party makes any representation or warranty as to the fitness or competence of any director to serve on the Board of Directors by virtue of such party’s execution of this Agreement or by the act of such party in voting for such director pursuant to this Agreement.
4.4 Irrevocable Proxy. To secure each Stockholder’s obligations to vote such Stockholder’s Shares in accordance with this Agreement, each Stockholder hereby appoints the Chairman of the Board, the Chief Executive of the Company or the Secretary of the Company, or any of them from time to time, or their designees, as such Stockholder’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to vote all of such Stockholder’s Shares as set forth in this Agreement and to execute all appropriate instruments consistent with this Agreement on behalf of such Stockholder if, and only if, such Stockholder fails to vote all of such Stockholder’s Shares or execute such other instruments in accordance with the provisions of this Agreement within five (5) days of the Company’s or any other party’s written request for such Stockholder’s written consent or signature. The proxy and power granted by each Stockholder pursuant to this Section are coupled with an interest and are given to secure the performance of such party’s duties under this Agreement. Each such proxy and power will be irrevocable for the term hereof. The proxy and power, so long as any party hereto is an individual, will survive the death, incompetency and disability of such party or any other individual holder of the Shares and, so long as any party hereto is an entity, will survive the merger or reorganization of such party or any other entity holding any Stockholder Shares.
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| 5. | Drag-Along. |
5.1 Change in Control In the event that the Board and the holders of at least a 60% supermajority of the Common Stock (the “Requisite Holders”) approve a Change in Control, in each case whether by means of a merger, consolidation, or sale of stock or assets, or otherwise (each, an “Approved Sale”), all Stockholders shall, in their respective capacities as stockholders of the Company, consent to, and vote all of their shares of Capital Stock in favor of, and raise no objections against the Approved Sale, and if the Approved Sale is structured as (a) a merger or consolidation of the Company or a sale of all or substantially all of the Company’s assets, each Stockholder shall waive any dissenters’ rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (b) a sale of the stock of the Company, each Stockholder shall agree to sell all of such Stockholder’s shares of Capital Stock on the terms and conditions approved by the Requisite Holders and the Board; provided that in an Approved Sale, each Stockholder receives the same total consideration and benefits per share of each class or series held by such Stockholder as such Stockholder would be entitled to under the terms of the Articles and as each other holder of stock within such class or series, and shares the burden of the Approved Sale in like fashion on a pro rata basis. Each Stockholder hereby grants to each of the President and the Secretary of the Company, with full powers of substitution, an irrevocable proxy, coupled with an interest, to vote any and all shares of the Company owned by such holder beneficially or of record, and to take such other actions to the extent necessary to carry out the provisions of this Section 5.1, in the event of any breach by such holder of its obligations hereunder.
5.2 Further Action. In accordance with the terms of Section 5.1 hereof, each Stockholder shall take all reasonably necessary and desirable actions approved by the Requisite Holders in connection with the consummation of the Approved Sale, including the execution and delivery of such agreements and such instruments and other actions reasonably necessary to (i) provide the representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Approved Sale and (ii) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale; provided, however, that no Stockholder shall be required to make any representations or warranties other than as to such holder’s ownership of the shares of Capital Stock which such Stockholder is transferring and/or voting (and not as to any other person’s stock ownership), and; provided further that no Stockholder shall have any liability for indemnification or contribution unless all Stockholders are similarly providing such indemnification and contribution and such required indemnification or contribution obligations shall be several, rather than joint, and the maximum obligation of any Stockholder under such provisions shall be limited to the amount of such Stockholder’s proceeds (whether cash or otherwise) from the Approved Sale.
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| 6. | Market Stand-Off Agreement. |
6.1 Each of the Stockholders agrees that, during the period of duration specified by the Company or an underwriter of Common Stock or other securities of the Company, following the effective date of the first registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company or any such underwriter, (i) lend, offer, pledge, sell, contract to sell (including, without limitation, any short sale), sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, other than to donees who agree to be similarly bound, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities in case or otherwise, except for securities to be sold to such underwriter pursuant to such registration statement; provided, however, that:
(a) Such agreement shall apply only to the Company’s first firm commitment public offering;
(b) All officers and directors of the Company and holders of at least one percent (1%) of the Company’s outstanding Common Stock, and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements;
(c) Such market stand-off time period shall not exceed one hundred eighty (180) days; provided, however, that if either (a) during the last seventeen (17) days of such one hundred eighty (180) day period, the Company issues earnings release or material news or a material event relating to the Company occurs or (b) prior to the expiration of such one hundred eighty (180) day period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the one hundred eighty (180) day period, then the restrictions imposed during such one hundred eighty (180) day period shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the occurrence of the material news or material event; provided, further, that in the event the Company or the underwriter requests that the one hundred eighty (180) day period be extended or modified pursuant to then-applicable law, rules, regulations or trading policies, the restrictions imposed during the one hundred eighty (180) day period shall continue to apply to the extent requested by the Company or the underwriter to comply with such laws, rules, regulations, or trading policies, not to exceed two hundred and seventeen (217) days; and
(d) Such agreement shall provide that any discretionary waiver or termination of the restrictions of the agreement shall apply to Stockholders pro rata based on the number of shares subject to the agreement.
6.2 In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Common Stock of each Stockholder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.
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| 7. | Miscellaneous. |
7.1 Termination. This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety:
(a) the date of the closing of a Qualified IPO (as such term is defined in the Articles);
(b) the consummation of a Change in Control pursuant to which the Stockholders receive cash, marketable securities, and/or securities that are registered under the Securities Act; provided, however, in the event that such Change of Control is a sale of all or substantially all of the assets, this Agreement shall not terminate until the proceeds of such sale have been distributed to the Stockholders in accordance with their liquidation preferences; or
(c) the date as of which the parties hereto terminate this Agreement by written consent of each of (i) Stockholders holding at least a majority of the Common Stock then held by the Stockholders, and (ii) the Company. Notwithstanding the foregoing, solely as to the termination of Sections 4 and 5 only, the consent of the Common Holders holding at least a majority of the Capital Stock then held by the Common Holders then providing services to the Company as employees or consultants shall also be required.
7.2 Additional Holders. Prior to the issuance of additional shares of Capital Stock to any party who would hold as a result in excess of one percent (1%) of the outstanding Capital Stock of the Company, the Company shall require, as a condition to such party’s receipt of such securities, that such party become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed a “Stockholder” and a party hereunder.
7.3 Ownership. Each Stockholder represents and warrants that (a) such Stockholder now owns his, her or its shares of the Company’s Capital Stock, free and clear of liens or encumbrances, and has not, prior to or on the date of this Agreement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement other than one which has expired or terminated prior to the date hereof, and (b) such Stockholder has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, such Stockholder enforceable in accordance with its terms.
7.4 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.
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7.5 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Colorado in all respects as such laws are applied to agreements among Colorado residents entered into and to be performed entirely within Colorado.
7.6 Amendment or Waiver. This Agreement may be amended or modified (or provisions of this Agreement waived) only upon the written consent of (a) Stockholders holding at least a majority of the Common Stock then held by the Stockholders and (b) the Company. Any amendment or waiver so affected shall be binding upon the Company, each of the parties hereto and any assignee of any such party. Notwithstanding the foregoing, solely as to the amendment or waiver of Sections 4 and 5 only, the consent of the Stockholders holding at least a majority of the Common Stock then held by the Stockholders then providing services to the Company as employees or consultants, shall also be required.
7.7 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
7.8 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators and other legal representatives.
7.9 Additional Shares. In the event that subsequent to the date of this Agreement any shares or other securities are issued on, or in exchange for, any of the Capital Stock by reason of any stock dividend, stock split, combination of shares, reclassification or the like, such shares or securities shall be deemed to be Capital Stock, as the case may be, for purposes of this Agreement.
7.10 Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, each of which will be deemed an original, but all of which together shall constitute one instrument.
7.11 Waiver. No waivers of any breach of this Agreement extended by any party hereto to any other party shall be construed as a waiver of any rights or remedies of any other party hereto or with respect to any subsequent breach.
7.12 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of the Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement by law, or otherwise afforded to any party, shall be cumulative and not alternative.
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7.13 Attorney’s Fees. In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
7.14 Notices. All notices required in connection with this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written notification of receipt. All communications shall be sent to the holder appearing on the books of the Company or at such address as such party may designate by ten (10) days advance written notice to the other parties hereto.
7.15 Entire Agreement. This Agreement and the Exhibits hereto, along with the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.
7.16 Aggregation of Stock. All shares held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
7.17 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Capital Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend or the like of such class or series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or series of stock by such subdivision, combination or stock dividend or the like.
[Remainder of Page Intentionally Left Blank]
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In Witness Whereof, the parties hereto have executed this Stockholders Agreement as of the date first above written.
| COMPANY: | ||
| Rank One Computing Corporation | ||
| By: | /s/ Brendan F. Klare | |
| Brendan F. Klare | ||
| Chief Executive Officer | ||
| Address: | 1120 N. Lincoln Street, Suite 1607 | |
| Denver, Colorado 80203 | ||
| COMMON HOLDERS: | ||
| /s/ Brendan F. Klare | ||
| Brendan F. Klare | ||
| Address: | 2655 N. Saint Paul Street | |
| Denver, Colorado 80205 | ||
| /s/ Joshua C. Klontz | ||
| Joshua C. Klontz | ||
| Address: | 1029 E. 8th Avenue, #502 | |
| Denver, Colorado 80218 | ||
| /s/ Scott J. Klum | ||
| Scott J. Klum | ||
| Address: | 2190 E. 11th Avenue, Apt 608 | |
| Denver, Colorado 80206 |
Signature Page to
Stockholders Agreement
| /s/ Anil K. Jain | ||
| Anil K. Jain | ||
| Address: | 3580 Otsego Drive | |
| Okemos, Michigan 48864 | ||
| /s/ Robert W. Kocher | ||
| Robert W. Kocher | ||
| Address: | 1880 Virginia Avenue | |
| McLean, Virginia 22101 | ||
| /s/ Benjamin H. Klein | ||
| Benjamin H. Klein | ||
| Address: | 523 W. 3rd Avenue | |
| Denver, Colorado 80223 | ||
| /s/ Keyurkumar K. Patel | ||
| Keyurkumar K. Patel | ||
| Address: | 10950 Touchstone Loop | |
| Parker Colorado, 80134 | ||
| /s/ Cody H. Barnes | ||
| Cody H. Barnes | ||
| Address: | 1080 Krameria Street | |
| Denver, Colorado 80220 | ||
| /s/ David S. Ray | ||
| David S. Ray | ||
| Address: | 1407 Humboldt Street, Apt 2 | |
| Denver, Colorado 80218 | ||
Signature Page to
Stockholders Agreement
Exhibit A
LIST OF COMMON HOLDERS
| Common Holder | Shares of Common Stock | |||
| Brendan F. Klare | 2,437 | |||
| Joshua C. Klontz | 2,437 | |||
| Scott J. Klum | 1,768 | |||
| Anil K. Jain | 50 | |||
| Robert W. Kocher | 260 | |||
| Benjamin H. Klein | 783 | |||
| Cody H. Barnes | 285 | |||
| Keyurkumar K. Patel | 335 | |||
| David S. Ray | 415 | |||
Exhibit 10.7
AMENDED
& RESTATED
stockholders AGREEMENT
This Amended & Restated Stockholders Agreement (the “Agreement”) is made and effective as of January 18, 2024 (the “Effective Date”), by and among Rank One Computing Corporation, a Colorado corporation (the “Company”) and those holders of the Company’s Common Stock listed on Exhibit A hereto (the “Stockholders”) and amends and restates in its entirety that certain Stockholders Agreement dated September 18, 2018 by and between the Company and its Stockholders.
Recitals
Whereas, the Company anticipates issuing Capital Stock to existing and future Stockholders pursuant to purchase agreements, subscription agreements or other agreements (the “Purchase Agreements”); and
Whereas, the obligations in the Purchase Agreements are or will be conditioned upon the execution and delivery of this Agreement;
Now, Therefore, in consideration of these premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, on behalf of themselves and all Stockholders, the parties hereto agree as follows:
Agreement
| 1. | Definitions. |
1.1 “Affiliate” means, with respect to any Person, any other Person which controls, is controlled by or is under common control with such Person and any fund or investment vehicle that (a) is organized by such Person or any other Person which controls, is controlled by or is under common control with such Person for the purpose of making equity or debt investments in one or more companies and (b) is managed, controlled by, or under common control with, such Person, and, in each case, each of their respective shareholders, partners (general or limited), principals or members.
1.2 “Articles” shall mean the Company’s Articles of Incorporation, as then in effect.
1.3 “Board” shall mean the Company’s Board of Directors.
1.4 “Change in Control” shall mean an “Acquisition” or “Asset Transfer” as such terms are defined in the Articles.
1.5 “Capital Stock” shall mean shares of the Company’s Common Stock and any other class or series of the Company’s capital stock, now owned or subsequently acquired.
1.6 “Common Stock” shall mean shares of the Company’s Common Stock issued or issuable upon exercise of any option, warrant or other security or right of any kind convertible into or exchangeable for shares of the Company’s Common Stock, now owned or subsequently acquired.
1.7 “Person” means any corporation, association, joint venture, partnership, limited liability company, organization, business, individual, trust, government or agency or political subdivision thereof or other legal entity.
1.8 “Shares” shall mean shares of Capital Stock held by a Stockholder.
1.9 “Transfer” shall mean any sale, assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift, transfer by request, devise or descent, or other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly, of any Capital Stock.
| 2. | Restriction on Sale or Transfer. |
2.1 Each Stockholder agrees not to make any Transfer of all or any portion of their Shares unless and until:
(a) there is then in effect a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or other applicable law covering such proposed Transfer and such Transfer is made in accordance with such registration statement; or
(b) (1) The transferee has agreed in writing to be bound by the terms of this Agreement, (2) such Stockholder shall have notified the Company of the proposed Transfer and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed Transfer, (3) the Company has agreed in writing to such Transfer (other than with respect to Permitted Transfers), and (4) if reasonably requested by the Company, such Stockholder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such Transfer will not require registration of such shares under the Securities Act.
2.2 Permitted Transfers.
(a) Notwithstanding Section 2.1 above and subject to the requirements of this Agreement, a Stockholder may Transfer such Stockholder’s Shares in the following cases: (1) a partnership transferring to its Affiliates (as defined below), partners, limited partners or former partners in accordance with partnership interests, (2) a corporation transferring to any Affiliated entity, including, without limitation, any subsidiary or parent corporation, or Affiliated partnership, limited liability company or investment fund, (3) a limited liability company transferring to Affiliates, including but not limited to affiliated investment funds, its members or former members in accordance with their interest in the limited liability company, (4) to the Company, (5) to any Affiliate, trust or relative of such Stockholder for estate planning purposes, (6) an individual Stockholder transferring to an immediate family member or a trust for the benefit of such immediate family member or (7) to such Stockholder’s executor, administrator, trustee, or personal representative at death or involuntarily by operation of law (each a “Permitted Transfer”).
(b) The transferor and transferee of a Permitted Transfer shall execute and deliver to the Company such documents and instruments of conveyance as may be necessary or appropriate, in the opinion of counsel to the Company, to effect such Transfer and to confirm (1) the transferee’s agreement to be bound by the provisions of this Agreement, plus such transferee’s assumption of all monetary or other obligations of the transferor with respect to the Shares being transferred and (2) the transferor’s agreement to guarantee the prompt payment and performance of such assumed obligations.
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(c) In the case of Transfer of Shares at death or involuntarily by operation of law, the Transfer shall be confirmed by presentation to the Company of legal evidence of such Transfer, in form and substance satisfactory to counsel to the Company, confirming such Transfer and that such transferor (and/or such transferor’s estate) remains liable for all monetary obligations with respect to such interest.
(d) The transferor and transferee shall furnish the Company with the transferee’s taxpayer identification number, sufficient information to determine the transferee’s initial tax basis in the interests transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to recognize any rights of the transferee with respect to any transferred interests until the Company has received such information.
2.3 Legends. Each certificate representing shares of stock of the Company shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws) restrictive legends (each, a “Legend”):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN Stockholders agreement by and between the Stockholder and the company. Copies of such agreement may be obtained upon written request to the secretary of the company.
2.4 The Company agrees that, during the term of this Agreement, it will not remove, and will not permit to be removed (upon registration of transfer, reissuance of otherwise), the Legends from any such certificate, except to the extent the Company has received an opinion of counsel satisfactory to the Company that such Legends may be removed, and will place or cause to be placed the Legends on any new certificate issued to represent the Company’s Capital Stock theretofore represented by a certificate carrying the Legends.
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2.5 In the event of any Transfer or attempted Transfer in violation of this Agreement, the parties engaging in such Transfer or attempted Transfer shall be liable to indemnify and hold the Company and the other Stockholders harmless from all costs, liabilities, and damages to the Company or any of such other Stockholders (including, without limitation, incremental tax liability and fees and expenses of legal counsel) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.
2.6 This Agreement is subject to, and shall in no manner limit, the right which the Company may have to repurchase securities from the Stockholders pursuant to any right of first refusal set forth in the Company’s bylaws.
2.7 The provisions of this Agreement shall be binding upon the successors in interest to any of the Company’s Capital Stock. The Company shall not permit the transfer of any of the Company’s Capital Stock on its books or issue a new certificate representing any of the Company’s Capital Stock unless and until the person to whom such security is to be transferred shall have executed a written agreement, substantially in the form of this Agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person were a Stockholder.
| 3. | Covenants of the Company. |
3.1 Confidentiality of Records. Each Stockholder agrees to use the same degree of care as such Stockholder uses to protect its own confidential information to keep confidential any information furnished to such Stockholder pursuant to this Agreement or otherwise (so long as such information is not in the public domain), except that such Stockholder may disclose such proprietary or confidential information (i) to any partner, subsidiary or parent of such Stockholder as long as such partner, subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 3.1 or comparable restrictions; (ii) to any of the Stockholder’s attorneys, accountants, consultants, and other professionals, to the extent necessary to obtain their services in connection with monitoring the Stockholder’s investment in the Company and if such professionals are obligated to maintain the confidentiality of the same; (iii) at such time as it enters the public domain through no fault of such Stockholder; (iv) that is communicated to it free of any obligation of confidentiality; (v) that is developed by such Stockholder or its agents independently of and without reference to any confidential information communicated by the Company; or (vi) as required by applicable law.
Notwithstanding anything herein to the contrary, provided that such recipients agree to be subject to similar confidentiality obligations as those set forth herein, such Stockholder may provide any such information (i) to its general partner or fund manager (and its members or officers) and (ii) or to a lender of Stockholder. Furthermore, provided that such recipients agree to be subject to similar confidentiality obligations as those set forth herein, nothing in this paragraph shall restrict any Stockholder’s ability to disclose the existence and nature of its relationship with the Company to its affiliates, members or partners, or to provide its affiliates, members or partners with periodic reports and such other information about the Company prepared by such Stockholder in the ordinary course of its business.
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3.2 Proprietary Information and Intellectual Property Agreement. The Company shall require all officers, employees, independent contractors and consultants that create intellectual property on behalf of the Company to execute and deliver a Proprietary Information and Intellectual Property Agreement substantially in the form delivered to the Stockholders prior to the date of this agreement. In addition, the material terms of such Proprietary Information and Intellectual Property Agreement shall be contained in any consulting agreement the Company entered into or enters into with any former or present consultant of the Company, or, to the extent such material terms are not contained in any consulting agreement with such consultant, the Company shall require such consultant to enter into such Proprietary Information and Intellectual Property Agreement. The Company and Stockholders hereby acknowledge and agree that as of the Effective Date, Brendan F. Klare, Joshua C. Klontz, Scott J. Klum, Benjamin H. Klein, Cody H. Barnes and David S. Ray have executed a Proprietary Information and Intellectual Property Agreement, whereas Anil K. Jain and Robert W. Kocher have not served as an officer, employee, independent contractor or consultant of the Company prior to the Effective Date and thus were not required to and have not executed a Proprietary Information and Intellectual Property Agreement. The Company and Stockholders further acknowledge and agree that Anil K. Jain and Robert W. Kocher may not or will not in the future become or in any way whatsoever be deemed obligated to execute a Proprietary Information and Intellectual Property Agreement for activities prior to the Effective Date, on the Effective Date or after the Effective Date without the prior written mutual consent of at least the Company and Anil K. Jain and Robert W. Kocher (as applicable) with such consent determined by each party for themselves in their sole and absolute discretion.
3.3 New Issuances. The Company shall not, without the prior written consent or prior affirmative vote of Stockholders holding Shares that represent at least 60% of the fully-diluted shares of Capital Stock, issue or obligate itself to issue more than an aggregate total of 10,000 shares (as adjusted for stock splits, stock dividends, recapitalizations and the like) of Capital Stock in any manner or form whatsoever (including, but not limited to by option, warrant or contract) from or after the Effective Date.
3.4 Amendments. In addition to the terms and conditions under Section 6.6 (Amendment or Waiver) of this Agreement, the following additional terms and conditions apply to amendments of certain Company documents as follows: any amendment to this Agreement, the Company’s certificate of incorporation or the Company’s bylaws that would affect the rights or obligations of any Shareholder in a manner that is disproportionately adverse to such Shareholder relative to other Shareholders in respect of Shares of the same class or series shall be effective only with that Shareholder’s consent. Further, the amendment of the last sentence of Section 3.2 with respect to Anil K. Jain and Robert W. Kocher (as applicable) requires their prior written consent, to be determined in each of their respective sole and absolute discretion.
| 4. | Drag-Along. |
4.1 Change in Control In the event that the Board and the holders of at least a 60% supermajority of the Common Stock (the “Requisite Holders”) approve a Change in Control, in each case whether by means of a merger, consolidation, or sale of stock or assets, or otherwise (each, an “Approved Sale”), all Stockholders shall, in their respective capacities as stockholders of the Company, consent to, and vote all of their shares of Capital Stock in favor of, and raise no objections against the Approved Sale, and if the Approved Sale is structured as (a) a merger or consolidation of the Company or a sale of all or substantially all of the Company’s assets, each Stockholder shall waive any dissenters’ rights, appraisal rights or similar rights in connection with such merger, consolidation or asset sale, or (b) a sale of the stock of the Company, each Stockholder shall agree to sell all of such Stockholder’s shares of Capital Stock on the terms and conditions approved by the Requisite Holders and the Board; provided that in an Approved Sale, each Stockholder receives the same total consideration and benefits per share of each class or series held by such Stockholder as such Stockholder would be entitled to under the terms of the Articles and as each other holder of stock within such class or series, and shares the burden of the Approved Sale in like fashion on a pro rata basis. Each Stockholder hereby grants to each of the President and the Secretary of the Company, with full powers of substitution, an irrevocable proxy, coupled with an interest, to vote any and all shares of the Company owned by such holder beneficially or of record, and to take such other actions to the extent necessary to carry out the provisions of this Section 4.1, in the event of any breach by such holder of its obligations hereunder.
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4.2 Further Action. In accordance with the terms of Section 4.1 hereof, each Stockholder shall take all reasonably necessary and desirable actions approved by the Requisite Holders in connection with the consummation of the Approved Sale, including the execution and delivery of such agreements and such instruments and other actions reasonably necessary to (i) provide the representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Approved Sale and (ii) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale; provided, however, that no Stockholder shall be required to make any representations or warranties other than as to such holder’s ownership of the shares of Capital Stock which such Stockholder is transferring and/or voting (and not as to any other person’s stock ownership), and; provided further that no Stockholder shall have any liability for indemnification or contribution unless all Stockholders are similarly providing such indemnification and contribution and such required indemnification or contribution obligations shall be several, rather than joint, and the maximum obligation of any Stockholder under such provisions shall be limited to the amount of such Stockholder’s proceeds (whether cash or otherwise) from the Approved Sale.
| 5. | Market Stand-Off Agreement. |
5.1 Each of the Stockholders agrees that, during the period of duration specified by the Company or an underwriter of Common Stock or other securities of the Company, following the effective date of the first registration statement of the Company filed under the Securities Act, it shall not, to the extent requested by the Company or any such underwriter, (i) lend, offer, pledge, sell, contract to sell (including, without limitation, any short sale), sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, other than to donees who agree to be similarly bound, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities in case or otherwise, except for securities to be sold to such underwriter pursuant to such registration statement; provided, however, that:
(a) Such agreement shall apply only to the Company’s first firm commitment public offering;
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(b) All officers and directors of the Company and holders of at least one percent (1%) of the Company’s outstanding Common Stock, and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements;
(c) Such market stand-off time period shall not exceed one hundred eighty (180) days; provided, however, that if either (a) during the last seventeen (17) days of such one hundred eighty (180) day period, the Company issues earnings release or material news or a material event relating to the Company occurs or (b) prior to the expiration of such one hundred eighty (180) day period, the Company announces that it will release earnings results during the sixteen (16) day period beginning on the last day of the one hundred eighty (180) day period, then the restrictions imposed during such one hundred eighty (180) day period shall continue to apply until the expiration of the eighteen (18) day period beginning on the issuance of the earnings release or the occurrence of the material news or material event; provided, further, that in the event the Company or the underwriter requests that the one hundred eighty (180) day period be extended or modified pursuant to then-applicable law, rules, regulations or trading policies, the restrictions imposed during the one hundred eighty (180) day period shall continue to apply to the extent requested by the Company or the underwriter to comply with such laws, rules, regulations, or trading policies, not to exceed two hundred and seventeen (217) days; and
(d) Such agreement shall provide that any discretionary waiver or termination of the restrictions of the agreement shall apply to Stockholders pro rata based on the number of shares subject to the agreement.
5.2 In order to enforce the foregoing covenant, the Company may impose stop transfer instructions with respect to the Common Stock of each Stockholder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.
| 6. | Miscellaneous. |
6.1 Termination. This Agreement shall continue in full force and effect from the date hereof through the earliest of the following dates, on which date it shall terminate in its entirety:
(a) the date of the closing of a Qualified IPO (as such term is defined in the Articles);
(b) the consummation of a Change in Control pursuant to which the Stockholders receive cash, marketable securities, and/or securities that are registered under the Securities Act; provided, however, in the event that such Change of Control is a sale of all or substantially all of the assets, this Agreement shall not terminate until the proceeds of such sale have been distributed to the Stockholders in accordance with their liquidation preferences; or
(c) the date as of which the parties hereto terminate this Agreement by written consent of each of (i) Stockholders holding at least a majority of the Common Stock then held by the Stockholders, and (ii) the Company. Notwithstanding the foregoing, solely as to the termination of Section 4 only, the consent of the Common Holders holding at least a majority of the Capital Stock then held by the Common Holders then providing services to the Company as employees or consultants shall also be required.
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6.2 Additional Holders. Prior to the issuance of additional shares of Capital Stock to any party who would hold as a result in excess of one percent (1%) of the outstanding Capital Stock of the Company, the Company shall require, as a condition to such party’s receipt of such securities, that such party become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed a “Stockholder” and a party hereunder.
6.3 Ownership. Each Stockholder represents and warrants that (a) such Stockholder now owns his, her or its shares of the Company’s Capital Stock, free and clear of liens or encumbrances, and has not, prior to or on the date of this Agreement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement other than one which has expired or terminated prior to the date hereof, and (b) such Stockholder has full power and capacity to execute, deliver and perform this Agreement, which has been duly executed and delivered by, and evidences the valid and binding obligation of, such Stockholder enforceable in accordance with its terms.
6.4 Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto or his heirs, personal representatives, or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.
6.5 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Colorado in all respects as such laws are applied to agreements among Colorado residents entered into and to be performed entirely within Colorado.
6.6 Amendment or Waiver. This Agreement may be amended or modified (or provisions of this Agreement waived) only upon the written consent of (a) Stockholders holding at least a majority of the Common Stock then held by the Stockholders and (b) the Company. Any amendment or waiver so affected shall be binding upon the Company, each of the parties hereto and any assignee of any such party. Notwithstanding the foregoing, solely as to the amendment or waiver of Section 4 only, the consent of the Stockholders holding at least a majority of the Common Stock then held by the Stockholders then providing services to the Company as employees or consultants, shall also be required.
6.7 Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
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6.8 Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors, assigns, heirs, executors and administrators and other legal representatives.
6.9 Additional Shares. In the event that subsequent to the date of this Agreement any shares or other securities are issued on, or in exchange for, any of the Capital Stock by reason of any stock dividend, stock split, combination of shares, reclassification or the like, such shares or securities shall be deemed to be Capital Stock, as the case may be, for purposes of this Agreement.
6.10 Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, each of which will be deemed an original, but all of which together shall constitute one instrument.
6.11 Waiver. No waivers of any breach of this Agreement extended by any party hereto to any other party shall be construed as a waiver of any rights or remedies of any other party hereto or with respect to any subsequent breach.
6.12 Delays or Omissions. It is agreed that no delay or omission to exercise any right, power or remedy accruing to any party, upon any breach, default or noncompliance by another party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of or in any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on any party’s part of any breach, default or noncompliance under this Agreement or any waiver on such party’s part of any provisions or conditions of the Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement by law, or otherwise afforded to any party, shall be cumulative and not alternative.
6.13 Attorney’s Fees. In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
6.14 Notices. All notices required in connection with this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written notification of receipt. All communications shall be sent to the holder appearing on the books of the Company or at such address as such party may designate by ten (10) days advance written notice to the other parties hereto.
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6.15 Entire Agreement. This Agreement and the Exhibits hereto, along with the Purchase Agreement and the other documents delivered pursuant thereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any oral or written representations, warranties, covenants and agreements except as specifically set forth herein and therein. Each party expressly represents and warrants that it is not relying on any oral or written representations, warranties, covenants or agreements outside of this Agreement.
6.16 Aggregation of Stock. All shares held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
6.17 Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of Capital Stock of the Company of any class or series, then, upon the occurrence of any subdivision, combination or stock dividend or the like of such class or series of stock, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the affect on the outstanding shares of such class or series of stock by such subdivision, combination or stock dividend or the like.
[Remainder of Page Intentionally Left Blank]
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In Witness Whereof, the parties hereto have executed this Amended & restated Stockholders Agreement as of the date first above written.
| COMPANY: | ||
| Rank One Computing Corporation | ||
| By: | /s/ B. Scott Swann | |
| B. Scott Swann | ||
| Chief Executive Officer | ||
| Address: | 1290 Broadway, Suite 1200 | |
| Denver, Colorado 80203 |
| COMMON HOLDERS: | ||
| /s/ Brendan F. Klare | ||
| Brendan F. Klare | ||
| Date: 01/22/2024 | ||
| /s/ Joshua C. Klontz | ||
| Joshua C. Klontz | ||
| Date: 01/19/2024 | ||
| /s/ Scott J. Klum | ||
| Scott J. Klum | ||
| Date: 01/22/2024 | ||
| Anil K. Jain | ||
| Date: | ||
| Robert W. Kocher | ||
| Date: | ||
Signature
Page to
Stockholders Agreement
| Benjamin H. Klein | ||
| Date: | ||
| Keyurkumar K. Patel | ||
| Date: | ||
| Cody H. Barnes | ||
| Date: | ||
| David S. Ray | ||
| Date: | ||
| Trevor D. McDonald | ||
| Date: | ||
| Michael W. Chifala | ||
| Date: | ||
| Alexandra M. Kearney | ||
| Date: | ||
| Jason G. Renner | ||
| Date: | ||
Signature
Page to
Stockholders Agreement
Exhibit A
LIST OF COMMON HOLDERS
| Common Holder | Shares of Common Stock | |||
| Brendan F. Klare | 24,370 | |||
| Joshua C. Klontz | 24,370 | |||
| Scott J. Klum | 17,680 | |||
| Anil K. Jain | 500 | |||
| Robert W. Kocher | 2,600 | |||
| Benjamin H. Klein | 7,830 | |||
| Cody H. Barnes | 2,850 | |||
| Keyurkumar K. Patel | 3,700 | |||
| David S. Ray | 4,150 | |||
| Trevor D. McDonald | 1,000 | |||
| Michael W. Chifala | 83 | |||
| Alexandra M. Kearney | 100 | |||
| Jason G. Renner | 500 | |||
Exhibit 14.1
CODE OF BUSINESS CONDUCT AND ETHICS
OF
RANK ONE COMPUTING CORPORATION
Effective as of __________, 2025
| 1. | Introduction |
The Board of Directors of Rank One Computing Corporation (the “Company”) has adopted this code of ethics (the “Code”), which is applicable to all directors, officers, and employees of the Company, with the intent to:
| ● | promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
| ● | promote the full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”), as well as in other public communications made by or on behalf of the Company; |
| ● | promote compliance with applicable governmental laws, rules, and regulations; |
| ● | deter wrongdoing; and |
| ● | require prompt internal reporting of breaches of, and accountability for adherence to, this Code. |
This Code may be amended only by resolution of the Company’s Board of Directors. In this Code, references to the “Company” include, in appropriate context, the Company’s subsidiaries, if any.
| 2. | Honest, Ethical, and Fair Conduct |
Each person owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest, fair, and candid. Deceit, dishonesty, and subordination of the Company’s interests to personal interests are inconsistent with integrity. Service to the Company should never be subordinated to personal gain or advantage.
Each person must:
| ● | Act with integrity, including being honest and candid while still maintaining the confidentiality of the Company’s information where required or in the Company’s interests. |
| ● | Observe all applicable governmental laws, rules, and regulations. |
| ● | Comply with the requirements of applicable accounting and auditing standards, as well as Company policies, in order to maintain a high standard of accuracy and completeness in the Company’s financial records and other business-related information and data. |
| ● | Adhere to a high standard of business ethics and not seek competitive advantage through unlawful or unethical business practices. |
| ● | Deal fairly with the Company’s customers, suppliers, competitors, and employees. |
| ● | Refrain from taking advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice. |
| ● | Protect the assets of the Company and ensure their proper use. |
| ● | Refrain from taking for themselves personally opportunities that are discovered through the use of corporate assets and refrain from using corporate assets, information, or position for general personal gain outside the scope of employment with the Company. |
| ● | Avoid conflicts of interest, wherever possible, except under guidelines or resolutions approved by the Board of Directors (or the appropriate committee of the Board of Directors). Anything that would be a conflict for a person subject to this Code also will be a conflict if it is related to a member of his or her family or a close relative. Examples of conflict of interest situations include, but are not limited to, the following: |
| o | any significant ownership interest in any supplier or customer; |
| o | any consulting or employment relationship with any customer, supplier, or competitor; |
| o | any outside business activity that detracts from an individual’s ability to devote appropriate time and attention to his or her responsibilities with the Company; |
| o | the receipt of any money, non-nominal gifts, or excessive entertainment from any company with which the Company has current or prospective business dealings; |
| o | being in the position of supervising, reviewing, or having any influence on the job evaluation, pay, or benefit of any close relative; |
| o | selling anything to the Company or buying anything from the Company, except on the same terms and conditions as comparable officers or directors are permitted to so purchase or sell; and |
| o | any other circumstance, event, relationship, or situation in which the personal interest of a person subject to this Code interferes, or even appears to interfere, with the interests of the Company as a whole. |
| 3. | Disclosure |
The Company strives to ensure that the contents of and the disclosures in public communications and in the reports and documents that the Company files with the SEC shall be full, fair, accurate, timely, and understandable in accordance with applicable disclosure standards, including standards of materiality, where appropriate. Each person must:
| ● | not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s independent auditors, governmental regulators, self-regulating organizations, and other governmental officials, as appropriate; and |
| ● | in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness. |
In addition to the foregoing, the Chief Executive Officer and Chief Financial Officer (or Principal Financial Officer) of the Company and each subsidiary of the Company (or persons performing similar functions), if any, and each other person that typically is involved in the financial reporting of the Company must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company.
Each person must promptly bring to the attention of the Chairman of the Audit Committee of the Company’s Board of Directors (or the Chairman of the Company’s Board of Directors if no Audit Committee exists) any information he or she may have concerning (a) significant deficiencies in the design or operation of internal and/or disclosure controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures, or internal controls.
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| 4. | Compliance |
It is the Company’s obligation and policy to comply with all applicable governmental laws, rules, and regulations. It is the personal responsibility of each person to, and each person must, adhere to the standards and restrictions imposed by those laws, rules, and regulations, including those relating to accounting and auditing matters.
| 5. | Reporting and Accountability |
The Board of Directors or Audit Committee, if one exists, of the Company is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any person who becomes aware of any existing or potential breach of this Code is required to notify the Chairman of the Board of Directors or the Audit Committee promptly. Failure to do so is itself a breach of this Code.
Specifically, each person must:
| ● | Notify the Chairman promptly of any existing or potential violation of this Code. |
| ● | Not retaliate against any other person for reports of potential violations that are made in good faith. |
| ● | The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code: |
| o | The Board of Directors or Audit Committee, if one exists, will take all appropriate action to investigate any breaches reported to it. |
| o | If the Audit Committee (if one exists) determines by majority decision that a breach has occurred, it will inform the Board of Directors. |
| o | Upon being notified that a breach has occurred, the Board of Directors by majority decision will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Audit Committee (if one exists) and/or the Company’s counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities. |
No person following the above procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion, suspension, threat, harassment, or, in any manner, discrimination against such person in terms and conditions of employment.
| 6. | Waivers and Amendments |
Any waiver (defined below) or an implicit waiver (defined below) from a provision of this Code for the principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code is required to be disclosed in the Company’s Annual Report on Form 10-K or in a Current Report on Form 8-K filed with the SEC.
A “waiver” means the approval by the Company’s Board of Directors of a material departure from a provision of the Code. An “implicit waiver” means the Company’s failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. An “amendment” means any amendment to this Code other than minor technical, administrative, or other non-substantive amendments hereto.
All persons should note that it is not the Company’s intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance with this Code.
| 7. | Other Policies and Procedures |
Any other policy or procedure set out by the Company in writing or made generally known to employees, officers, or directors of the Company prior to the date hereof or hereafter are separate requirements and remain in full force and effect.
| 8. | Inquiries |
All inquiries and questions in relation to this Code or its applicability to particular people or situations should be addressed to the Company’s Secretary.
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Exhibit 14.2
RANK ONE COMPUTING CORPORATION
WHISTLEBLOWER POLICY
Effective as of __________, 2025
| 1. | Introduction |
Rank One Computing Corporation, a Colorado corporation (the “Company”), has adopted a Code of Ethics applicable to all employees that urges employees promptly to discuss with or disclose to the Chairman of the Board of Directors or the Audit Committee events of questionable, fraudulent, or illegal nature.
The Company is committed to full and accurate financial disclosure and to maintaining its books and records in compliance with all applicable laws, rules, and regulations. The Company wishes to encourage employees, independent contractors, third-party vendors, customers, and business partners to make the Company aware of any practices, procedures, or circumstances that raise concerns about the integrity of its financial disclosures, books, and records. As an additional measure to support our commitment to ethical conduct, the Audit Committee of our Board of Directors has adopted the following policies and procedures for (i) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal controls, or auditing matters; and (ii) to protect the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
For purposes of this Policy, a “Compliance Complaint” is a complaint about accounting, internal accounting controls, auditing matters, or questionable financial practices, including but not limited to complaints of:
| ● | fraud against investors, securities fraud, mail or wire fraud, bank fraud, or fraudulent statements to the Securities and Exchange Commission (the “SEC”) or the investing public; |
| ● | violations of SEC rules and regulations or any other laws applicable to the Company’s financial accounting, maintenance of financial books and records, internal accounting controls, and financial statement reviews or audits; |
| ● | fraud or deliberate error in the preparation, evaluation, review, or audit of any financial statement of the Company; |
| ● | significant deficiencies in or intentional noncompliance with the Company’s internal accounting controls; |
| ● | misrepresentations or false statements regarding a matter contained in the financial records, financial reports, or audit reports of the Company; and |
| ● | deviation from the full and fair reporting of the Company’s financial condition. |
| 2. | Compliance Officer |
We have designated a compliance officer (“Compliance Officer”) who is responsible for administering this Policy. The Compliance Officer is responsible for receiving, collecting, reviewing, processing, and resolving concerns and reports by employees and others on the matter described above and other similar matters. Employees are encouraged to discuss issues and concerns of the type covered by this Policy with their supervisor, who is in turn responsible for informing the Compliance Officer of any concerns raised. If the employee prefers not to discuss these sensitive matters with his or her own supervisor, the employee may instead discuss such matters with a higher-level manager, the Office of the General Counsel, if applicable, or the Compliance Officer. The Compliance Officer will refer complaints submitted, as he or she determines to be appropriate, as required under the directives of the Board of Directors (or a Committee of the Board) or as required by applicable law, to the Board or an appropriate Committee of the Board.
The Compliance Officer’s responsibilities under this Policy include:
| ● | Administering, implementing, and overseeing ongoing compliance under this Policy. |
| ● | Establishing and administering procedures to assure that employee complaints will be collected, reviewed promptly (including, if appropriate, through an independent investigation into the issues raised). |
| ● | resolved in an appropriate manner, and that documents related to such matters will be retained in accordance with this Policy. |
| ● | Making himself or herself available to discuss with employees any complaints raised. |
| ● | With respect to employee concerns relating to questionable accounting or auditing matters, establish and administering procedures that enable employees to submit concerns in a confidential and anonymous manner. |
| ● | With respect to complaints from employees or non-employees received by us relating to our accounting, internal accounting controls, or auditing matters, establishing and administering procedures to assure that such complaints will be collected, reviewed promptly, treated or resolved in an appropriate manner, and retained. The Compliance Officer will present any such complaints received to the Audit Committee of the Board of Directors. |
| ● | Administering and overseeing our training and educational programs designed to ensure that our employees with supervisory authority with respect to other employees, or who are otherwise involved in the administration of our policies, are aware of this Policy, know to involve the Compliance Officer in any matters involving this Policy that arise (including informing the Compliance Officer of every complaint that arises), and are trained in the proper handling of employee complaints covered by this Policy. |
To ensure that the persons responsible for preparing and reviewing our public filings and other public disclosures are made aware of complaints involving our accounting, internal accounting controls, or auditing matters made by employees or by others, the Compliance Officer will present to such persons at least once per quarter either a copy or a summary of each complaint received.
| 3. | Reporting Compliance Complaints |
The Company urges any person desiring to make a Compliance Complaint to contact the acting Compliance Officer as may be designated from time to time. For persons who wish to report a Compliance Complaint but do not wish to contact the Compliance Officer directly, the Company has established the following alternative procedures to report a Compliance Complaint:
| (a) | Telephone Hotline: Any person may call the numbers listed below to report a Compliance Complaint. The phone call will be received by a third-party contractor specifically engaged to provide Compliance Complaint services. |
Phone Number: (303) 317 - 6118
| (b) | Website: https://roc.ai/ |
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| (c) | Written Complaints: Any person may report a Compliance Complaint to the Compliance Officer in writing, marked CONFIDENTIAL, and mailed to the following address: COMPLIANCE OFFICER (CONFIDENTIAL), 1290 Broadway, Suite 1200, Denver, CO 80203. |
| (d) | Audit Committee: Any person may report a Compliance Complaint to the Audit Committee directly, orally, or in writing marked CONFIDENTIAL and mailed to the following address: AUDIT COMMITTEE (CONFIDENTIAL), 1290 Broadway, Suite 1200, Denver, CO 80203. |
Upon receipt of a Compliance Complaint, the Compliance Officer or the Audit Committee, as applicable, will acknowledge receipt to the person reporting the Compliance Complaint if possible.
| 4. | Review and Investigation of Compliance Complaints |
Compliance Complaints received by the Compliance Officer or the Audit Committee, as applicable, will be reviewed and investigated either by themselves or by a designated employee, outside counsel, advisor, expert, or third-party service provider. If determined to be necessary by the Compliance Officer or the Audit Committee, as applicable, the Company shall provide for appropriate funding to obtain and pay for additional resources that may be necessary to conduct the investigation, including, without limitation, retaining outside counsel and/or expert witnesses. Unless otherwise directed by the Compliance Officer or the Audit Committee, as applicable, any person assigned to investigate a Compliance Complaint will report his or her findings and recommendations to both the Compliance Officer and the Audit Committee.
At least once each calendar quarter and whenever else as deemed necessary, the Compliance Officer shall submit a report to the Audit Committee (and any member of Company management that the Audit Committee directs to receive such report) that summarizes each Compliance Complaint made to the Compliance Officer within the last twelve (12) months and show specifically: (i) the complainant (unless anonymous, in which case the report will so indicate), (ii) a description of the substance of the Compliance Complaint, (iii) the status of the investigation, (iv) any conclusions reached by the investigator and (v) findings and recommendations. The Audit Committee shall review all Compliance Complaints periodically.
| 5. | Confidentiality and Anonymity of Persons Reporting Compliance Complaints |
While the Company prefers that persons reporting Compliance Complaints identify themselves to aid in the investigation, if necessary, reports may be made anonymously if desired. If requested by the employee, the Company will protect the confidentiality and anonymity of an employee who makes a Compliance Complaint to the fullest extent possible, consistent with the need to conduct an adequate review and investigation of the Compliance Complaint. The Company is not obligated to protect the confidentiality and anonymity of a non-employee person who makes a Compliance Complaint.
| 6. | Access to Reports and Records Regarding Compliance Complaints |
All reports and records associated with Compliance Complaints are considered confidential information, and access will be restricted to the Compliance Officer, the members of the Audit Committee, and such other persons reasonably determined by the Compliance Officer or the Audit Committee to require such access.
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| 7. | Disclosure of Investigation Results |
Compliance Complaints and any resulting investigations, reports, or resulting actions will generally not be disclosed to the public except as required by any legal requirements or regulations or by any Company policy in place at the time.
| 8. | Retention of Records |
All Compliance Complaints and documents relating to a Compliance Complaint made through the procedures outlined in this Policy shall be retained for at least five (5) years from the date of the complaint, after which time the information may be destroyed unless the information may be relevant to any pending or potential litigation, inquiry or investigation, in which case the information may not be destroyed and must be retained for the duration of that litigation, inquiry or investigation and thereafter as necessary.
| 9. | Retaliation |
Any individual who, in good faith, reports a possible violation of the Company’s Code of Ethics or of law, or any concerns regarding questionable accounting or auditing matters, even if the report is mistaken, or who assists in the investigation of a reported violation, will be protected by the Company. Retaliation in any form against these individuals will not be tolerated. Any act of retaliation should be reported immediately and will be disciplined appropriately.
Specifically, the Company will not discharge, demote, suspend, threaten, harass, or in any other manner discriminate or retaliate against any employee in the terms and conditions of the employee’s employment because of any lawful act done by that employee to either (a) provide information, cause information to be provided, or otherwise assist in any investigation regarding any conduct that the employee reasonably believes constitutes a violation of any Company code of conduct, law, rule, or regulation, including any rule or regulation of the Securities and Exchange Commission or any provision of federal or state law relating to fraud against shareholders, or (b) file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or, to the employee’s knowledge, about to be filed relating to an alleged violation of any such law, rule, or regulation.
| 10. | Periodic Reviews and Amendments |
The Audit Committee will periodically review this Policy. Any amendments to this Policy must be approved by the Audit Committee.
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Exhibit 19.1
Rank one computing corporation
POLICY ON INSIDER TRADING
Effective as of __________, 2025
This Insider Trading Policy (“Policy”) sets forth the policies of Rank One Computing Corporation (the “Company”) on trading and causing the trading of securities while in possession of confidential information.
Purpose
The Board of Directors of the Company has adopted this Policy to provide guidance to the Company’s directors, officers, and employees about trading in the Company’s securities and the securities of any publicly traded companies with which the Company has a business relationship.
This Policy is designed to (i) promote compliance with applicable securities laws in order to preserve the Company's reputation for integrity and ethical conduct, (ii) provide guidelines for transactions in the securities of the Company, and (iii) provide guidelines for the handling of confidential information about the Company and any companies with which the Company does business.
Scope
The Policy applies to the following “Persons”: (i) all directors of the Company; (ii) all officers of the Company and its subsidiaries; and (iii) all employees of the Company and its subsidiaries. In addition, the Policy also applies in certain circumstances to transactions by the Company as described herein.
Sections 4 and 7 of this Policy specifically apply to the following “Covered Persons”: (i) all directors of the Company; (ii) all officers of the Company and its subsidiaries; and (iii) all employees in the finance, accounting, analytics, legal, and corporate development and strategy functions—as well as personal or administrative assistants to any of the aforementioned—that have regular access to material, nonpublic information about the Company in the normal course of their duties.
Sections 1 through 3 and 5 of this Policy also apply to the following “Associated Person(s)”: members of your immediate family and persons sharing your household; it also covers venture capital funds and other entities (such as partnerships, trusts, and corporations) that are affiliated or associated with such person(s). Affiliated means directly or indirectly controlled or controlled by, or under common control with, such person(s). Associated means (1) a corporation or organization (other than the Company or a majority-owned subsidiary of the Company) of which such person(s) is an officer or partner or is directly or indirectly the beneficial owner of 10% or more of any class of equity securities or (2) any trust in which such person(s) has a substantial beneficial interest or as to which such person serves as trustee or in a similar capacity.
| 1. | The Basic Policy—No Trading or Causing Trading While in Possession of Material Non-Public Information |
| (a) | No Person may purchase or sell any security, whether or not issued by the Company, while in possession of material non-public information concerning the security. (The terms “material” and non-public” are defined in Section 2 of this Policy.) |
| (b) | No Person who knows of material non-public information may communicate that information to any other person if he or she has reason to believe that the information may be improperly used in connection with securities trading. |
| (c) | Persons and Covered Persons must “preclear” all trading in securities of the Company in accordance with the procedures set forth in Section 4 of this Policy. |
| (d) | This Policy applies to all transactions in the Company’s equity securities, including common stock and any other type of securities that the Company may issue, such as preferred stock, notes, bonds, convertible debentures and warrants, and exchange-traded options (including puts and calls) and other derivative securities. This Policy applies to sales, purchases, gifts, exchanges, pledges, options, puts, calls, and short sales. |
| (e) | This Policy does not apply to a surrender of shares to the Company or the retention and withholding from delivery to the applicable officer, director or employee of shares by the Company (i.e., a so-called “net settlement”) upon vesting of restricted stock in satisfaction of any tax withholding obligations in a manner permitted by the applicable equity award agreement (if any) or the Company plan pursuant to which the restricted stock was granted. |
| (f) | The Company may not engage in, and no Person may effect on the Company’s behalf, transactions in the Company’s securities while the Company is aware of material, non-public information relating to the Company or the Company’s securities. |
| 2. | The Law Against “Insider Trading” |
One of the principal purposes of the federal securities laws is to prohibit so-called insider trading. In recent years, this has become a major focus of the enforcement program of the Securities and Exchange Commission and of criminal prosecutions brought by United States Attorneys.
| (a) | Application to Non-Insiders and to Securities Other Than Securities of the Company |
Prohibitions against “insider trading” apply to trades, tips, and recommendations by any person—including all persons associated with the Company —if the information involved is “material” and “non-public.” Thus, for example, the prohibitions would apply if you trade on the basis of material non-public information you obtain regarding the Company, its borrowers, customers, suppliers, or other corporations with which the Company has contractual relationships or may be negotiating transactions. For compliance purposes, you should never trade, tip, or recommend securities (or otherwise cause the purchase or sale of securities) while in possession of information that you have reason to believe is material and non-public unless you first consult with, and obtain the advance approval of, the Company’s Chief Compliance Officer (the “Compliance Officer”). The current Compliance Officer referred to herein is the Chief Executive Officer of the Company.
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| (b) | Materiality |
Insider trading restrictions come into play if the information you possess is “material.” Materiality, however, involves a low threshold.
Information is generally regarded as “material” if it has market significance, that is, if its public dissemination is likely to affect the market price of securities, or if it otherwise is information that a reasonable investor would want to know before making an investment decision. Information dealing with the following subjects is reasonably likely to be found material in particular situations:
| ● | Significant changes in the Company’s prospects; |
| ● | Significant write-downs in assets or increases in reserves; |
| ● | Developments regarding significant litigation or government agency investigations; |
| ● | Liquidity problems; |
| ● | Changes in earnings estimates or unusual gains or losses in major operations; |
| ● | Major changes in management; |
| ● | Changes in dividends; |
| ● | Extraordinary borrowings; |
| ● | Award or loss of a significant contract; |
| ● | Changes in debt ratings; |
| ● | Proposals, plans, or agreements, even if preliminary in nature, involving mergers, acquisitions, divestitures, recapitalizations, strategic alliances, licensing arrangements, or purchases or sales of substantial assets; |
| ● | Public offerings; and |
| ● | Pending statistical reports (e.g., consumer price index, money supply, and retail figures, or interest rate developments). |
Material information is not limited to historical facts but may also include projections and forecasts. With respect to a future event, such as a merger, acquisition, or introduction of a new product, the point at which negotiations or product development are determined to be material is determined by balancing the probability that the event will occur against the magnitude of the effect the event would have on a company’s operations or stock price should it occur. Thus, information concerning an event that would have a large effect on stock price, such as a merger, may be material even if the possibility that the event will occur is small. When in doubt about whether particular non-public information is material, exercise caution. Consult the Compliance Officer before making a decision to disclose such information (other than to persons who need to know it) or to trade in or recommend securities to which that information relates.
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| (c) | Non-Public Information |
Insider trading prohibitions come into play when you possess information that is material and “non-public.” The fact that information has been disclosed to a few members of the public does not make it public for insider trading purposes. To be “public,” the information must have been disseminated in a manner designed to reach investors generally. Even after public disclosure of information regarding the Company, you must wait two full business days for the information to be absorbed by public investors before you can treat the information as public.
Non-public information may include:
| ● | Information available to a select group of analysts or brokers, or institutional investors; |
| ● | Undisclosed facts that are the subject of rumors, even if the rumors are widely circulated; and |
| ● | Information that has been entrusted to the Company on a confidential basis until a public announcement of the information has been made and enough time has elapsed for the market to respond to a public announcement of the information (two full business days). |
As with questions of materiality, when in doubt about whether information is non-public, call the designated Compliance Officer or assume that the information is “non-public” and, therefore, treat it as confidential.
| 3. | Severe Penalties for Violating Insider Trading Laws |
Penalties for trading on or communicating material non-public information are severe, both for individuals involved in such unlawful conduct and their employers and supervisors. A person who violates the insider trading laws can be sentenced to a substantial jail term and required to pay a penalty of several times the amount of profits gained or losses avoided.
Moreover, Congress has passed insider trading legislation that, in a significant departure from prior law, explicitly empowers the Securities and Exchange Commission to seek substantial penalties from any person who, at the time of an insider trading violation, “directly or indirectly controlled the person who committed such violation.” Such persons may be held liable for up to the greater of $1 million or three times the amount of the profit gained or loss avoided. Thus, even for violations that result in a small or no profit, the Securities and Exchange Commission can seek a minimum of $1 million from the Company and various management and supervisory personnel.
Given the severity of the potential penalties, compliance with the policies set forth in Section 1 of this Policy is absolutely mandatory, and noncompliance is a ground for dismissal. Exceptions to these policies, if any, may only be granted by the Compliance Officer and must be provided before any activity contrary to the above policies takes place.
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| 4. | Preclearance of Securities Transactions |
Because Covered Persons are likely to obtain material non-public information on a regular basis, the Company requires all such persons to preclear all purchases and sales of the Company’s securities in accordance with the following procedures:
| (a) | Subject to the exemption in part “(d)” below, no Covered Person may, directly or indirectly, purchase or sell any security issued by the Company without first obtaining prior approval from the Compliance Officer. These procedures also apply to transactions by such person’s spouse, other persons living in such person’s household, and minor children, and to transactions by entities over which such person exercises control. |
| (b) | The Compliance Officer shall record the date each request is received and the date and time each request is approved or disapproved. Unless revoked, a grant of permission will normally remain valid until the close of trading two business days following the day on which it was granted. |
| (c) | Requests are most likely to be approved for trading that is to occur in the following “window periods”: |
| (i) | Commencing at the close of trading on the second full business day following the date of public disclosure of the financial results for a particular fiscal quarter or year and continuing until the tenth business day of the third month of the next fiscal quarter. For example, if public disclosure occurs on Monday, May 14th, trading requests would likely be approved from Thursday, May 17th, through Thursday, June 14th; or |
| (ii) | Following the wide dissemination of information on the status of the Company and current results. |
| (d) | Preclearance is not required for purchases and sales of securities under a preexisting written plan, contract, instruction, or arrangement that is adopted pursuant to Securities and Exchange Commission Rule 10b5-1(c) (17 C.F.R. § 240.10b5-1(c)) and approved in writing by the Compliance Officer or such other person as the Board of Directors may designate from time to time (the “Authorizing Officer”). Generally, Rule 10b5-1(c) trading plans are developed in consultation with individual counsel and are not the responsibility of the Compliance Officer. For more information about Rule 10b5-1 trading plans, see Section 5 of this Policy. |
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| 5. | Rule 10b5-1 Trading Plans, Section 16, and Rule 144 |
| A. | Rule 10b5-1 Trading Plans |
(1) Overview.
Rule 10b5-1 will protect directors, officers and other employees from insider trading liability under Rule 10b5-1 for transactions under a previously established contract, plan or instruction to trade in the Company’s stock (a “Trading Plan”) entered into in good faith and has acted in good faith with respect to the Trading Plan and in accordance with the terms of Rule 10b5-1 and all applicable state laws and will be exempt from the trading restrictions set forth in this Policy. The initiation of, and any modification to, any such Trading Plan will be deemed to be a transaction in the Company’s securities, and such initiation or modification is subject to all limitations and prohibitions relating to transactions in the Company’s securities. Each such Trading Plan, and any modification thereof, must be submitted to and pre-approved by the Compliance Officer, or such other Authorizing Officer, who may impose such conditions on the implementation and operation of the Trading Plan as the Authorizing Officer deems necessary or advisable. However, compliance of the Trading Plan with the terms of Rule 10b5-1 and the execution of transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the Trading Plan, not the Company or the Authorizing Officer.
Trading Plans do not exempt individuals from complying with Section 16 short swing profit rules or liability.
Rule 10b5-1 presents an opportunity for insiders to establish arrangements to sell (or purchase) Company stock without the restrictions of trading windows and blackout periods, even when there is undisclosed material information. A Trading Plan may also help reduce negative publicity that may result when key executives sell the Company’s stock. Rule 10b5-1 only provides an “affirmative defense” in the event there is an insider trading lawsuit. It does not prevent someone from bringing a lawsuit.
A director, officer, or employee may enter into a Trading Plan only when he or she is not in possession of material, non-public information, and only during a trading window period outside of the trading blackout period. Although transactions effected under a Trading Plan will not require further pre-clearance at the time of the trade, any transaction (including the quantity and price) made pursuant to a Trading Plan of a Section 16 reporting person must be reported to the Company promptly on the day of each trade to permit the Company’s Securities Counsel to assist in the preparation and filing of a required Form 4. Such reporting may be oral or in writing (including by e-mail) and should include the identity of the reporting person, the type of transaction, the date of the transaction, the number of shares involved, and the purchase or sale price. However, the ultimate responsibility and liability for timely filing remains with the Section 16 reporting person.
The Company reserves the right from time to time to suspend, discontinue, or otherwise prohibit any transaction in the Company’s securities, even pursuant to a previously approved Trading Plan, if the Authorizing Officer or the Board of Directors, in its discretion, determines that such suspension, discontinuation, or other prohibition is in the best interests of the Company. Any Trading Plan submitted for approval hereunder should explicitly acknowledge the Company’s right to prohibit transactions in the Company’s securities. Failure to discontinue purchases and sales as directed shall constitute a violation of the terms of this Section 5 and result in a loss of the exemption set forth herein.
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Officers, directors, and employees may adopt Trading Plans with brokers that outline a pre-set plan for trading of the Company’s stock, including the exercise of options.
Under Rule 10b5-1, trading under any Trading Plan entered into by a director or officer may not begin until the later of (i) 90 days after the adoption of the Trading Plan or (ii) two business days following the Company’s filing of the Company’s financial results in a Form 10-K or Form 10-Q for the fiscal year in which the plan was adopted (subject to a maximum “cooling-off” period of 120 days). Trading under any Trading Plan adopted by any person other than a director or officer may not begin until 30 days after the adoption of the Trading Plan. Certain modifications made to a Trading Plan after adoption, including changes in the amount, price, or timing of the purchase or sale of securities, will also trigger a new cooling-off period.
Rule 10b5-1 generally permits a person (1) to have only one Trading Plan in effect at any time (i.e., prohibits “overlapping” plans) and (2) to have only one “single-trade” plan in any 12-month period. This limitation does not apply to the Company.
The Company requires that all Trading Plans be approved in writing in advance by the Compliance Officer or the Authorizing Officer. Trading Plans may not be adopted when the person adopting the plan is aware of material nonpublic information and, for Covered Persons, may not be adopted during a blackout period.
Please review the following description of how a Trading Plan works.
Pursuant to Rule 10b5-1, an individual’s purchase or sale of securities will not be “on the basis of” material, non-public information if:
| ● | First, before becoming aware of the information, the individual enters into a binding contract to purchase or sell the securities, provides instructions to another person to sell the securities, or adopts a written plan for trading the securities (i.e., the Trading Plan). |
| ● | Second, the Trading Plan must either: |
| ● | specify the amount of securities to be purchased or sold, the price at which the securities are to be purchased or sold, and the date on which the securities are to be purchased or sold; |
| ● | include a written formula or computer program for determining the amount, price, and date of the transactions; or |
| ● | prohibit the individual from exercising any subsequent influence over the purchase or sale of the Company’s stock under the Trading Plan in question. |
| ● | Third, the purchase or sale must occur pursuant to the Trading Plan, and the individual must not enter into a corresponding hedging transaction or alter or deviate from the Trading Plan. |
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| (2) | Revocation of and Amendments to Trading Plans |
Revocation of Trading Plans should occur only in unusual circumstances. Effectiveness of any revocation or amendment of a Trading Plan will be subject to the prior review and approval of the Compliance Officer or the Authorizing Officer.
Rule 10b5-1 provides that any modification or change to the amount, price, or timing of the purchase or sale of the securities underlying a Trading Plan is a termination of such Trading Plan and the adoption of a new Trading Plan. In addition, a modification to a Trading Plan, such as the substitution or removal of a broker that is executing trades pursuant to a Rule 10b5-1 arrangement on behalf of the person, that changes the price or date on which purchases or sales are to be executed, is a termination of such Trading Plan and the adoption of a new Trading Plan.
Revocation is effected upon written notice to the broker. Once a Trading Plan has been revoked, the participant should wait at least 30 days before trading outside of a Trading Plan and 180 days before establishing a new Trading Plan.
Under certain circumstances, a Trading Plan must be revoked. This may include circumstances such as the announcement of a merger or the occurrence of an event that would cause the transaction either to violate the law or to have an adverse effect on the Company. The Compliance Officer or the Authorizing Officer is authorized to notify the broker in such circumstances, thereby insulating the insider in the event of revocation.
| (3) | Discretionary Plans |
Although non-discretionary Trading Plans are preferred, discretionary Trading Plans, where the discretion or control over trading is transferred to a broker, are permitted if pre-approved by the Compliance Officer or the Authorizing Officer.
The Compliance Officer or the Authorizing Officer of the Company must pre-approve any Trading Plan, arrangement, or trading instructions, etc., involving potential sales or purchases of the Company’s stock or option exercises, including but not limited to, blind trusts, discretionary accounts with banks or brokers, or limit orders. The actual transactions effected pursuant to a pre-approved Trading Plan will not be subject to further pre-clearance for transactions in the Company’s stock once the Trading Plan or other arrangement has been pre-approved.
| (4) | Reporting (if Required) |
If required, an SEC Form 144 will be filled out and filed by the individual/brokerage firm in accordance with the existing rules regarding Form 144 filings. A footnote at the bottom of the Form 144 should indicate that the trades “are in accordance with a Trading Plan that complies with Rule 10b5-1 and expires _____.” For Section 16 reporting persons, Form 4s should be filed before the end of the second business day following the date that the broker, dealer, or plan administrator informs the individual that a transaction was executed, provided that the date of such notification is not later than the third business day following the trade date. A similar footnote should be placed at the bottom of the Form 4 as outlined above.
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| (5) | Options |
Exercises of options for cash may be executed at any time. “Cashless exercise” option exercises through a broker are subject to trading windows. However, the Company will permit same-day sales under Trading Plans. If a broker is required to execute a cashless exercise in accordance with a Trading Plan, then the Company must have exercise forms attached to the Trading Plan that are signed, undated, and with the number of shares to be exercised left blank.
Once a broker determines that the time is right to exercise the option and dispose of the shares in accordance with the Trading Plan, the broker will notify the Company in writing, and the Compliance Officer or the Authorizing Officer will fill in the number of shares and the date of exercise on the previously signed exercise form. The insider should not be involved with this part of the exercise.
| (6) | Trades Outside of a Trading Plan |
Adoption of a Trading Plan does not preclude trading outside of the Trading Plan that otherwise is in accordance with the Policy. However, persons should be cognizant of the fact that the Rule 10b5-1 affirmative defense will not apply to such trades outside of a Trading Plan. In addition, under Rule 10b5-1, the person may not have further influence over whether, when, or how the trades under the plan are made once the plan is put in place, and therefore, his trading outside of the plan must not have direct or indirect influence on the trading instructions under the plan. In other words, securities subject to the plan (e.g., shares underlying unexercised stock options) should not be purchased or sold outside the plan.
| (7) | Public Announcements |
The Company may make a public announcement that Trading Plans are being implemented in accordance with Rule 10b5-1. It will consider in each case whether a public announcement of a particular Trading Plan should be made. It may also make public announcements or respond to inquiries from the media as transactions are made under a Trading Plan.
| (8) | Prohibited Transactions |
The transactions prohibited under this Section 5, including, among others, short sales and hedging transactions, may not be carried out through a Trading Plan or other arrangement or trading instruction involving potential sales or purchases of the Company’s securities.
| (9) | Limitation on Liability |
None of the Company, the Compliance Officer, the Authorizing Officer, or the Company’s other employees will have any liability for any delay in reviewing, or refusal of, a Trading Plan submitted pursuant to this Section 5 or a request for pre-clearance submitted pursuant to this Section 5. Notwithstanding any review of a Trading Plan pursuant to this Section 5 or pre-clearance of a transaction pursuant to this Section 5, none of the Company, the Compliance Officer, the Authorizing Officer, or the Company’s other employees assumes any liability for the legality or consequences of such Trading Plan or transaction to the person engaging in or adopting such Trading Plan or transaction.
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| B. | Section 16: Insider Reporting Requirements, Short-Swing Profits and Short Sales |
| (1) | Reporting Obligations Under Section 16(a): SEC Forms 3, 4 and 5 |
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), generally requires all officers, directors and 10% stockholders (“insiders”), within 10 days after the insider becomes an officer, director or 10% stockholder, to file with the SEC an “Initial Statement of Beneficial Ownership of Securities” on SEC Form 3 listing the amount of the Company’s stock, options and warrants which the insider beneficially owns. Following the initial filing on SEC Form 3, changes in beneficial ownership of the Company’s stock, options, and warrants must be reported on SEC Form 4, generally within two business days after the date on which such change occurs, or in certain cases on Form 5, within 45 days after the fiscal year end. A Form 4 must be filed even if, as a result of balancing transactions, there has been no net change in holdings. In certain situations, purchases or sales of Company stock made within six months prior to the filing of a Form 3 must be reported on Form 4. Similarly, certain purchases or sales of Company stock made within six months after an officer or director ceases to be an insider must be reported on Form 4.
| (2) | Recovery of Profits Under Section 16(b) |
For the purpose of preventing the unfair use of information which may have been obtained by an insider, any profits realized by any officer, director, or 10% stockholder from any “purchase” and “sale” of Company stock during a six-month period, so-called “short-swing profits,” may be recovered by the Company. When such a purchase and sale occurs, good faith is no defense. The insider is liable even if compelled to sell for personal reasons, and even if the sale takes place after full disclosure and without the use of any inside information.
The liability of an insider under Section 16(b) of the Exchange Act is only to the Company itself. The Company, however, cannot waive its right to short swing profits, and any Company stockholder can bring suit in the name of the Company. Reports of ownership filed with the SEC on Form 3, Form 4, or Form 5 pursuant to Section 16(a) (discussed above) are readily available to the public, and certain attorneys carefully monitor these reports for potential Section 16(b) violations. In addition, liabilities under Section 16(b) may require separate disclosure in the Company’s annual report to the SEC on Form 10-K or its proxy statement for its annual meeting of stockholders. No suit may be brought more than two years after the date the profit was realized. However, if the insider fails to file a report of the transaction under Section 16(a), as required, the two-year limitation period does not begin to run until after the transactions giving rise to the profit have been disclosed. Failure to report transactions and late filing of reports requires separate disclosure in the Company’s proxy statement.
Officers and directors should consult the attached “Short-Swing Profit Rule Section 16(b) Checklist” attached hereto as “Attachment A” in addition to consulting the Compliance Officer prior to engaging in any transactions involving the Company’s securities, including, without limitation, the Company’s stock, options, or warrants.
| (3) | Short Sales Prohibited Under Section 16(c) |
Section 16(c) of the Exchange Act prohibits insiders absolutely from making short sales of the Company’s equity securities. Short sales include sales of stock which the insider does not own at the time of sale, or sales of stock against which the insider does not deliver the shares within 20 days after the sale. Under certain circumstances, the purchase or sale of put or call options, or the writing of such options, can result in a violation of Section 16(c). Insiders violating Section 16(c) face criminal liability.
The Compliance Officer should be consulted if you have any questions regarding reporting obligations, short-swing profits, or short sales under Section 16.
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| C. | Rule 144 |
Rule 144 provides a safe harbor exemption to the registration requirements of the Securities Act of 1933, as amended, for certain resales of “restricted securities” and “control securities.” “Restricted securities” are securities acquired from an issuer, or an affiliate of an issuer, in a transaction or chain of transactions not involving a public offering. “Control securities” are any securities owned by directors, executive officers, or other “affiliates” of the issuer, including stock purchased in the open market and stock received upon exercise of stock options. Sales of Company restricted and control securities must comply with the requirements of Rule 144, which are summarized below:
| ● | Holding Period. Restricted securities must be held for at least six months before they may be sold in the market. |
| ● | Current Public Information. The Company must have filed all SEC-required reports during the last 12 months or such shorter period that the Company was required to file such reports. |
| ● | Volume Limitations. For affiliates, total sales of Company common stock for any three-month period may not exceed the greater of: (i) 1% of the total number of outstanding shares of Company common stock, as reflected in the most recent report or statement published by the Company, or (ii) the average weekly reported volume of such shares traded during the four calendar weeks preceding the filing of the requisite Form 144. |
| ● | Method of Sale. For affiliates, the shares must be sold either in a “broker’s transaction” or in a transaction directly with a “market maker.” A “broker’s transaction” is one in which the broker does no more than execute the sale order and receive the usual and customary commission. Neither the broker nor the selling person can solicit or arrange for the sale order. In addition, the selling person or Board member must not pay any fee or commission other than to the broker. A “market maker” includes a specialist permitted to act as a dealer, a dealer acting in the position of a block positioner, and a dealer who holds himself out as being willing to buy and sell Company common stock for his own account on a regular and continuous basis. |
| ● | Notice of Proposed Sale. For affiliates, a notice of the sale (a Form 144) may be required to be filed with the SEC at the time of the sale. Brokers generally have internal procedures for executing sales under Rule 144 and will assist you in completing the Form 144 and in complying with the other requirements of Rule 144. |
If you are subject to Rule 144, you must instruct your broker who handles trades in Company securities to follow the brokerage firm’s Rule 144 compliance procedures in connection with all trades.
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| 6. | Prohibited Activities |
(a) Prohibitions. Except for limited exceptions described below, the following activities are prohibited under this Policy:
(i) No Person may purchase, sell, transfer, or effectuate any other transaction in Company securities while in possession of material nonpublic information concerning the Company or its securities. This prohibition includes sales of shares received upon exercise of stock options or upon vesting of Restricted Stock Units and Awards, and shares held in the Company’s 401(k) plan or equivalent plan.
(ii) No Person may “tip” or disclose material nonpublic information concerning the Company or its securities to any outside person (including family members, affiliates, analysts, investors, members of the investment community, and news media). Should a Person inadvertently disclose such information to an outsider, the Person must promptly inform the Compliance Officer regarding this disclosure. The Company will take steps necessary to preserve the confidentiality of the information, including requiring the outsider to agree in writing to comply with the terms of this Policy and/or sign a confidentiality agreement.
(iii) No Person may purchase Company securities on margin, hold Company securities in a margin account, or otherwise pledge Company securities as collateral for a loan because, in the event of a margin call or default on the loan, the broker or lender could sell the shares at a time when the Person is in possession of material nonpublic information, resulting in liability for insider trading. In addition, pledging of securities by Persons, including margin arrangements, can be perceived to undermine the alignment of their interests and incentives with the long-term interests of other stockholders.
(iv) Short-term and speculative trading in Company securities, as well as hedging and other derivative transactions involving Company securities, can create the appearance of impropriety and may become the subject of an SEC investigation, particularly if the trading occurs before a major Company announcement or is followed by unusual activity or price changes in the Company’s stock. These types of transactions can also result in inadvertent violations of insider trading laws and/or liability for short-swing profits under Section 16(b) of the Exchange Act. Therefore, it is the Company’s policy to prohibit the following activities, even if you are not in possession of material nonpublic information:
| 1. | No Person may trade in any interest or position relating to the future price of Company securities, such as put or call options or other derivatives, or short sale of Company securities. |
| 2. | No Person may hedge Company securities. A “hedge” is a transaction designed to offset or reduce the risk of a decline in the market value of an equity security, and can include, but is not limited to, prepaid variable forward contracts, equity swaps, collars, and exchange funds. |
| 3. | Persons may not trade in securities of the Company on an active basis, including short-term speculation. |
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(v) No Person may trade in securities of another company if the Person is in possession of material nonpublic information about that other company which the Person learned in the course of their work for the Company.
(vi) “Quiet” Periods. The Company's announcement of its quarterly financial results has the potential to have a material effect on the market for the Company's securities. Therefore, to avoid even the appearance of trading on the basis of material non-public information, Persons who are subject to the pre-clearance procedure set forth above may not, except as expressly permitted under this Policy, carry out any transaction in the Company's securities during the period beginning on the 15th day of the last month of each quarter and ending on the third business day following the release of the Company's earnings for that quarter.
(vii) Event-Specific Quiet Periods. The Company reserves the right to close any open window period at any time if the Compliance Officer, or his or her designee, determines, in his or her sole discretion, that there may be material non-public information with respect to the Company. If the Company closes an open window, it will not pre- clear any transaction that is not expressly permitted by this Policy during the period that such open window is closed.
The Company may, on occasion, issue interim earnings guidance or other potentially material information by means of a press release, Current Report on Form 8-K, or other means designed to achieve widespread dissemination of the information. Persons should anticipate that trading will be prohibited while the Company is in the process of assembling the information to be released and until the information has been released and absorbed by the market.
From time to time, an event may occur that is material to the Company and is known by only a few directors, executives, or other employees. So long as the event remains material and non-public, the persons who are aware of the event, as well as all Covered Persons, may not trade in the Company’s securities.
The existence of an event-specific quiet period will not be announced, other than to those who are aware of the event giving rise to the quiet period. If, however, a person whose trades are subject to the pre-clearance requirements set forth above desires to effect a transaction during an event-specific quiet period, the Compliance Officer may refuse to grant permission to carry out the transaction and will have no obligation to disclose to the person the reason for the refusal or the reason for the event-specific quiet period. Any person who becomes aware of the existence of an event-specific quiet period shall not disclose the existence of the quiet period to any other person. The failure of the Compliance Officer to inform a person that they are subject to an event-specific quiet period will not relieve that person of the obligation not to trade while aware of material non-public information.
(b) Exceptions to Prohibited Activities. Prohibitions in trading securities under this Policy do not include:
(i) 401(k) Investments or equivalent investments. The investment of 401(k) plan contributions in a Company stock fund in accordance with the terms of the Company's 401(k) plan. However, any changes in your investment election regarding the Company’s stock are subject to trading restrictions under this Policy, including: an election to increase or decrease the percentage of periodic contributions that will be allocated to the Company securities fund; an election to make an intra-plan transfer of an existing account balance into or out of the Company securities fund; an election to borrow money against a 401(k) plan account if the loan will result in a liquidation of some or all of the Company securities fund balance; and an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company securities fund.
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(ii) Mutual Fund Investments. To the extent a Person has mutual fund holdings which, in turn, invest in the Company stock, transactions under such fund are excluded from this Policy.
(iii) Stock Option Exercises. The exercise of vested employee stock options, where no Company stock is sold to fund the option exercise. This Policy does apply, however, to any sale of shares as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option, as well as the subsequent sale of exercised shares.
(iv) Stock Award Vesting. The receipt of Company stock upon vesting of Restricted Stock Units and Awards, as well as the withholding of Company stock by the Company in payment of tax obligations.
(v) Trading Plan. Company securities purchased or sold under a Company authorized Rule 10b5-1 Trading Plan (see Section 4(d) of this Policy).
(vi) Trusts. Transfers of Company stock by a Person into a trust for which the Person is a trustee, or from the trust back into the name of the Person.
| 7. | Blackout Periods Applicable to Covered Persons |
(a) No Trading During Blackout Periods. No Covered Person may trade or effectuate any other transactions in Company securities during regular blackout periods or during any special blackout periods designated by the Compliance Officer (except for the limited exceptions described in Section 5.A of this Policy). Remember that even during an open trading window, you may not trade in Company securities if you are in possession of material nonpublic information concerning the Company or its securities.
(b) Regular Blackout Periods Defined. Subject to obtaining trading pre-approval from the Compliance Officer, Covered Persons may not trade in Company securities during the period beginning on the 15th day of the last month of each quarter and ending on the third business day following the release of the Company's earnings for that quarter. To provide clarity, the Compliance Officer will notify Covered Persons, in advance of each quarter end, of the date on which the blackout period begins and ends. Trades made pursuant to an approved 10b5-1 Trading Plan (see Section 4(d) of this Policy) are exempted from this restriction.
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(c) Special Blackout Periods. From time to time, the Compliance Officer may determine that trading in Company securities is inappropriate during an otherwise open trading window due to the existence of material nonpublic information. Accordingly, the Compliance Officer may prohibit trading at any time by announcing a special blackout period. The Compliance Officer will provide notice of any modification of the trading blackout policy or any additional prohibition on trading during the period when trading is otherwise permitted under this Policy. The existence of a special blackout period should be considered confidential information, and Covered Persons are prohibited from communicating the existence of a special blackout period to anyone who is not a Covered Person.
(d) Blackout Periods Required by the Sarbanes-Oxley Act of 2002. In order to comply with certain provisions of the Sarbanes-Oxley Act of 2002, no director or executive officer of the Company may, directly or indirectly, purchase, sell or otherwise acquire or transfer any equity security of the Company during any period of time that participants in the Company’s 401(k) plan are prohibited from trading interests in the Company’s equity securities under such plan. The “blackout period” is defined for purposes of this rule as any period of more than three consecutive business days during which the ability of 50 percent or more of the participants or beneficiaries located in the United States under all individual account plans of the Company to purchase or sell any equity securities of the Company under any such plan is suspended by action of the Company or a fiduciary of the plan. The Sarbanes-Oxley Act requires the Company to timely notify affected directors and executive officers and the SEC of any such blackout period. If you are a director or executive officer of the Company, the Compliance Officer will disapprove any requested transaction involving equity securities of the Company that would occur during a blackout period for participants in the Company’s 401(k) plan.
(e) Hardship Trading Exceptions. The Compliance Officer may, on a case-by-case basis, authorize trading in Company securities during a trading blackout period due to financial or other hardship. Any person wanting to rely on this exception must first notify the Compliance Officer in writing of the circumstances of the hardship and the amount and nature of the proposed trade. Such a person will also be required to certify to the Compliance Officer in writing, no earlier than two business days prior to the proposed trade, that he or she is not in possession of material nonpublic information concerning the Company or its securities. Upon authorization from the Compliance Officer, the person may trade, although such person will be responsible for ensuring that any such trade complies in all other respects with this Policy.
| 8. | Inquiries |
If you have any questions regarding any of the provisions of this Policy, please contact the Compliance Officer at scott.swann@roc.ai.
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| 9. | Acknowledgment and Certification |
The undersigned does hereby acknowledge receipt of the Company’s Policy on Insider Trading regarding trading on material non-public information. The undersigned has read and understands (or has had explained to them by someone who understands) such Policy and agrees to be governed by such Policy at all times in connection with the purchase and sale of securities and the confidentiality of non-public information. The undersigned understands that if the undersigned is a Covered Person, the entire policy applies to them. The undersigned understands that if the undersigned is an Associated Person, Sections 1 through 3 and 5 of this Policy apply to them.
| (Signature) | |||
| (Please print name) | Title/Relationship to the Company | ||
| Date: | |||
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ATTACHMENT A
SHORT-SWING PROFIT RULE SECTION 16(B) CHECKLIST
Note: ANY combination of PURCHASE AND SALE or SALE AND PURCHASE within six months of each other by an officer, director or 10% stockholder (or any family member living in the same household or certain affiliated entities) results in a violation of Section 16(b), and the “profit” must be recovered by Rank One Computing Corporation (the “Company”). It makes no difference how long the shares being sold have been held or, for officers and directors, that you were an insider for only one of the two matching transactions. The highest-priced sale will be matched with the lowest-priced purchase within the six-month period.
Sales
If a sale is to be made by an officer, director, or 10% stockholder (or any family member living in the same household or certain affiliated entities):
| 1. | Have there been any purchases by the insider (or family members living in the same household or certain affiliated entities) within the past six months? |
| 2. | Have there been any option grants or exercises not exempt under Rule 16b-3 within the past six months? |
| 3. | Are any purchases (or non-exempt option exercises) anticipated or required within the next six months? |
| 4. | Has a Form 4 been prepared? |
Note: If a sale is to be made by an affiliate of the Company, has a Form 144 been prepared, and has the broker been reminded to sell pursuant to Rule 144?
Purchases and Option Exercises
If a purchase or option exercise for Company stock is to be made:
| 1. | Have there been any sales by the insider (or family members living in the same household or certain affiliated entities) within the past six months? |
| 2. | Are any sales anticipated or required within the next six months (such as tax-related or year-end transactions)? |
| 3. | Has a Form 4 been prepared? |
Before proceeding with a purchase or sale, consider whether you are aware of material, non-public information that could affect the price of the Company stock. All transactions in the Company’s securities by officers and directors must be pre-cleared by contacting the Company’s Compliance Officer.
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Exhibit 21.1
List of Subsidiaries of Rank One Computing Corporation
| Name | State or Other Jurisdiction of Incorporation or Organization | |
| ROC Federal LLC | West Virginia |
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 which the date is December 2, 2025, 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, NJ | |
| December 2, 2025 |
Exhibit 99.1
Rank One Computing Corporation
Charter of the Audit Committee of the Board of Directors
| I. | Audit Committee Purpose |
The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Rank One Computing Corporation (the “Company”) is to oversee the processes of accounting and financial reporting of the Company and the audits and financial statements of the Company. The Committee’s primary duties and responsibilities are to:
| A. | Monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance. |
| B. | Monitor the independence and performance of the Company’s independent auditors and the Company’s accounting personnel. |
| C. | Provide an avenue of communication among the independent auditors, management, the Company’s accounting personnel, and the Board. |
| D. | Appoint and provide oversight for the independent auditors engaged to perform the audit of the financial statements. |
| E. | Discuss the scope of the independent auditors’ examination. |
| F. | Review the financial statements and the independent auditors’ report. |
| G. | Review areas of potential significant financial risk to the Company. |
| H. | Monitor compliance with legal and regulatory requirements. |
| I. | Solicit recommendations from the independent auditors regarding internal controls and other matters. |
| J. | Make recommendations to the Board. |
| K. | Resolve any disagreements between management and the auditors regarding financial reporting. |
| L. | Prepare the report required by Item 407(d) of Regulation S-K, as required by the rules of the Securities and Exchange Commission (the “SEC”). |
| M. | Perform other related tasks as requested by the Board. |
The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct access to the independent auditors as well as anyone in the organization. The Committee has the ability to retain, at the Company’s expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties.
| II. | Audit Committee Composition and Meetings |
| A. | The Committee shall be composed of three or more directors as determined by the Board. Each member must be independent of the management of the Company and is free of any relationship that, in the opinion of the Board, would interfere with their exercise of independent judgment as a Committee member. Further, each member of the Committee shall meet the independence and experience requirements of the listing rules of any securities exchange or association in which the Company’s securities are traded and the rules and regulations of the SEC, including Rule 10A-3. All members of the Committee shall have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement. At least one member of the Committee must have past employment experience in finance or accounting, professional certification in accounting, or any other comparable experience or background that results in the member’s financial sophistication, including being or having been a Chief Executive Officer (“CEO”) or Chief Financial Officer (“CFO”) or other senior officer with financial oversight responsibilities. |
| B. | Committee members shall be appointed by the Board after due consideration of recommendations of the Nominating and Corporate Governance Committee, and the Board may designate a Chair of the Committee. If an Audit Committee Chair is not designated or present, the members of the Committee may designate a Chair by majority vote of the Committee membership. The Board may, at any time and at its complete discretion, replace a Committee member. |
| C. | Committee members shall meet (either in person or telephonically) at least four times each fiscal year and more often if the Committee, at its discretion, deems this desirable. The Committee shall meet, at its discretion, with management, the Company’s principal accounting officer, the independent auditors, and as a committee to discuss any matters that the Committee or each of these groups believes should be discussed. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. |
| III. | Audit Committee Responsibilities and Duties |
Review Procedures
| A. | Review the Company’s annual audited financial statements prior to distribution. The review should include a discussion with management and independent auditors of significant issues regarding accounting principles, practices, and judgments. |
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| B. | In consultation with the management, the independent auditors, and the Company’s principal accounting officer, consider the integrity of the Company’s financial reporting processes and controls, including any major issues as to the adequacy of the Company’s internal controls, and any special steps adopted in light of any identified material control deficiencies. Discuss significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. Review significant findings prepared by the independent auditors and the Company’s principal accounting officer, together with management’s responses. |
| C. | The Committee shall review with the management and the independent auditors any correspondence with regulators and any published reports that raise material issues regarding the Company’s accounting policies. |
Independent Auditors
| A. | The Committee shall have the sole authority to appoint or replace the independent auditor. The Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolutions of disagreements between management and the independent auditor regarding final reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Committee. The Committee shall approve in advance the provision by the independent auditors of all services to the Company, whether or not related to the audit. However, neither the Committee nor any person with authority delegated from the Committee may approve an auditor providing the services that are described in Section 10A(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) as “prohibited activities.” |
| B. | The Committee shall obtain, review and discuss reports from the independent auditor regarding (1) all critical accounting policies and practices to be used; (2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management officials of the Company, ramifications of the use of these alternative disclosures and treatments, and the treatment preferred by the independent auditor and the reasons for favoring that treatment; and (3) other material written communications between the independent auditor and Company management, such as any management letter or schedule of unadjusted differences. |
| C. | The Committee shall assure the regular rotation of the lead audit partner as required by Section 10A(j) of the Exchange Act. |
| D. | The Committee shall assure that hiring policies for employees or former employees of the independent auditor are consistent with Section 10A(l) of the Exchange Act. |
| E. | The Committee shall discuss with the independent auditor and then disclose the matters required to be discussed and disclosed by applicable accounting and auditing guidance, including any difficulties the independent auditor encountered in the course of the audit work, any restrictions on the scope of the independent auditor’s activities or on access to requested information, and any significant disagreements with management. |
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| F. | The Committee shall ascertain annually from the independent auditor whether the Company has issues under Section 10A(b) of the Exchange Act. |
| G. | The Committee shall determine the independence of the auditors and receive from the independent auditors a formal written statement delineating all relationships between the auditor and the company (consistent with PCAOB Independence Standards Board Standard 1 or any other applicable standards), and thereafter actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor and for taking, or recommending that the full Board take, appropriate action to oversee the independence of the outside auditor. |
Accounting Department and Legal Compliance
The Committee shall:
| A. | Review the personnel activities and qualifications of the Company’s accounting personnel, as needed. |
| B. | Review the appointment and performance of the principal accounting officer, and review financial and accounting personnel succession planning with the Company. |
| C. | Review significant reports prepared by the Company’s principal accounting officer, together with management’s response and follow-up to these reports. |
| D. | On at least an annual basis, review with the Company’s counsel any legal matters that could have a significant impact on the Company’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies. |
| E. | Establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. |
| F. | The Committee shall review the CEO and CFO’s disclosure and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act. |
| G. | Conduct an appropriate review of and approve all related party transactions on an ongoing basis, and the Committee shall review potential conflict of interest situations where appropriate. |
| H. | Conduct an annual risk review with respect to the matters within the role and the responsibilities of the Committee. |
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The Committee shall:
| (a) | Report regularly to the Board on its activities; |
| (b) | Maintain minutes of its meetings and records relating to those meetings and the Committee’s activities; |
| (c) | Have authority to obtain, at the expense of the Company, advice and assistance from internal or external legal, consulting, or other advisors; |
| (d) | Form and delegate authority to subcommittees of one or more Committee members when desired and appropriate; |
| (e) | Review and reassess the adequacy of this Charter annually and recommend to the Board any proposed changes to this Charter; and |
| (f) | Periodically review the Committee’s own performance. |
General
In performing their responsibilities, Committee members are entitled to rely in good faith on information, opinions, reports, or statements prepared or presented by:
| (a) | One or more officers or employees of the Company whom the Committee member reasonably believes to be reliable and competent in the matters presented; |
| (b) | Counsel, independent auditors, or other persons as to matters which the Committee member reasonably believes to be within the professional or expert competence of such person; and |
| (c) | Other committees of the Board as to matters within their respective designated authority which the Committee member reasonably believes to merit confidence. |
The Committee has the powers and responsibilities delineated in this Charter. It is not, however, the Committee’s responsibility to prepare and certify the Company’s financial statements, to guarantee the independent auditor’s report, or to guarantee other disclosures by the Company. These are fundamental responsibilities of management and the independent auditor. Committee members are not full-time Company employees and are not performing the functions of auditors or accountants.
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Exhibit 99.2
Rank One Computing Corporation
Charter of the Compensation Committee of the Board of Directors
| I. | Authority and Composition |
The Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Rank One Computing Corporation (the “Company”) is established pursuant to Section 3.14 of Article III of the Bylaws of the Company. Committee members are appointed annually by the Board on the recommendation of the Nominating and Corporate Governance Committee, and may be replaced by the Board. The Committee must consist of at least two directors, each of whom shall meet the independence requirements of the Nasdaq Corporate Governance Rules (subject to any applicable transition periods or exceptions permitted under Nasdaq requirements) and the standards of independence prescribed by Nasdaq and/or for purposes of any federal securities, tax or other laws relating to the Committee’s duties and responsibilities, including Section 162(m) of the Internal Revenue Code. Without limiting the foregoing, to be considered as independent, the Board will consider all relevant factors, including (a) the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by, or on behalf of, the Company, and (b) whether the director is affiliated with the Company, any subsidiary of the Company or any affiliate of a subsidiary of the Company.
The Board shall appoint a Chairman of the Committee upon the recommendation of the Nominating and Corporate Governance Committee. The Committee may also appoint a Secretary, who need not be a director.
This Charter may be amended only by the Board.
| II. | Purposes of the Committee |
The primary purposes of the Committee are to: (i) develop recommendations for the Board with respect to the compensation of the Company’s Chief Executive Officer (the “CEO”) and non-employee directors; (ii) discharge the responsibilities of the Board relating to the approval of the compensation of the Company’s executive officers, other than the CEO; (iii) make determinations with respect to the compensation programs and policies of the Company; (iv) review and discuss with the Company’s management, the Compensation Discussion and Analysis (the “CD&A”) and other Committee or executive compensation disclosures to be included in the Company’s annual proxy statement and/or annual report on Form 10-K, and determine whether to recommend to the Board that the CD&A be included in the proxy statement and/or annual report on Form 10-K; and (v) provide the Compensation Committee Report for inclusion in the Company’s annual proxy statement and/or annual report on Form 10-K that complies with the rules and regulations of the Securities and Exchange Commission (the “SEC”).
| III. | Duties and Responsibilities of the Committee |
The following activities are set forth as a guide with the understanding that the Committee may diverge from this guide as it considers appropriate, subject to compliance with applicable Nasdaq, securities, tax, and other legal and self-regulatory requirements. Although the Board may consider other duties from time to time, the Committee, to the extent it deems necessary or appropriate, will have the following responsibilities:
| A. | The Committee shall annually review goals and objectives relevant to the CEO’s compensation, evaluate the CEO’s performance in light of those goals and objectives, determine the CEO’s cash and equity-based compensation based on this evaluation, and recommend such goals, objectives, and compensation to the Board for its approval. In determining any incentive component of the CEO’s compensation, the Committee will consider appropriate factors, which may include the Company’s performance and relative shareholder return, the achievement of the CEO’s performance milestones, the value of similar incentive grants or awards to chief executive officers at comparable companies, and the grants or awards given to the CEO in past years. The CEO may not be present for such discussions and determinations. |
| B. | The Committee shall annually review and approve the compensation of the Company’s “executive officers” (as that term is defined in the regulations promulgated by the SEC and the Nasdaq Rules) other than the CEO. In making such compensation decisions, the Committee will take into account peer group practices and other appropriate factors, such as corporate and individual performance and historical compensation practices for such officers. The Committee will solicit the recommendations of the CEO in connection with the foregoing. The Committee will also provide general oversight of the Company’s compensation and benefits plans, policies, and programs that pertain to employees other than executive officers. |
| C. | The Committee shall annually review and recommend to the Board for its approval, the fees and equity compensation paid to the Company’s non-employee directors, based on appropriate factors as determined by the Committee. Such review and recommendations shall ensure that no agreements or arrangements for providing professional or consulting services to the Company or an affiliate or an individual officer of the Company or one of their affiliates are made with any director, immediate family members of a director or persons (including entities) with an existing business or personal relationship with any director, without a full review and evaluation of potential conflicts of interest. |
| D. | The Committee shall have the sole authority to retain and terminate any compensation consultant to be used by the Committee or the Company to assist in the evaluation of the compensation of non-employee directors, the CEO or the other executive officers, shall have sole authority to approve such compensation consultant’s fees and other retention terms, and shall have sole authority to oversee the work of such compensation consultant. In determining whether to engage a compensation consultant, the Committee shall consider the independence factors set forth in the Nasdaq Corporate Governance Rules. Management will advise the Committee of any compensation consultant to be retained with respect to other compensation matters in advance of such retention. |
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| E. | The Committee shall periodically review and make recommendations to the Board with respect to incentive-compensation programs and equity-based plans, and shall periodically review and make recommendations to the Board with respect to the adoption of or material changes in material employee benefit, bonus, severance, and other compensation plans of the Company. As appropriate in connection with this process, the Committee shall seek appropriate input from internal or external advisors. |
| F. | The Committee shall determine the need for and the appropriateness of employment agreements and change in control agreements for each of the Company’s executive officers and any other officers recommended by the CEO or the Board. |
| G. | The Committee shall determine and approve the options and other equity-based compensation to be granted to executive officers, other than the CEO; and shall recommend to the Board for approval options and other equity-based compensation to be granted to the CEO and non-employee directors. The Committee shall, in conjunction with the CEO, determine the issuance of options and other equity-based compensation under the Company’s incentive compensation and other stock-based plans to all other officers and employees of the Company. The Committee may delegate the determination with respect to persons other than officers to the CEO, but will approve the aggregate amount granted to all employees and all new hire grants. Any equity awards to the CEO shall be determined by the Committee and recommended to the Board for its review and approval. |
| H. | The Committee shall perform such duties and responsibilities as may be assigned to the Committee by the Board and/or under the terms of any compensation plan of the Company. |
The Committee shall:
| (a) | Report regularly to the Board on its activities; |
| (b) | Maintain minutes of its meetings and records relating to those meetings and the Committee’s activities; |
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| (c) | Have authority to obtain, at the expense of the Company, advice and assistance from internal or external legal, consulting, or other advisors; |
| (d) | Form and delegate authority to subcommittees of one or more Committee members when desired and appropriate; |
| (e) | Review and reassess the adequacy of this Charter annually and recommend to the Board any proposed changes to this Charter; and |
| (f) | Periodically review the Committee’s own performance. |
| IV. | General |
In performing their responsibilities, Committee members are entitled to rely in good faith on information, opinions, reports, or statements prepared or presented by:
| (a) | One or more officers or employees of the Company whom the Committee member reasonably believes to be reliable and competent in the matters presented; |
| (b) | Counsel, independent auditors, or other persons as to matters which the Committee member reasonably believes to be within the professional or expert competence of such person; and |
| (c) | Other committees of the Board as to matters within their respective designated authority, which committee the Committee member reasonably believes to merit confidence. |
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Exhibit 99.3
Rank One Computing Corporation
Charter of the Nominating and Corporate Governance Committee of the Board of Directors
The purpose of the Nominating and Corporate Governance Committee (the “Committee”) of the Board of Directors (the “Board”) of Rank One Computing Corporation (the “Company”) shall be as set forth in this charter (the “Charter”). The Committee has been delegated authority by the Board to: (1) identify qualified individuals to become Board members; (2) determine the composition of the Board and its committees; (3) monitor the self-assessment practices of the Board and its committees; and (4) develop and implement the Company’s corporate governance guidelines.
Authority and Responsibilities
In furtherance of these purposes, the Committee has the following authority and responsibilities:
| 1. | To oversee the administration of the Company’s Code of Ethics and related policies. |
| 2. | To lead the search for individuals qualified to become members of the Board and to select director nominees to be presented for election by the shareholders at each annual meeting. The Committee shall select individuals as director nominees who shall have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment, and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the shareholders. |
| 3. | To ensure, in cooperation with the Compensation Committee, that no agreements or arrangements are made with directors or relatives of directors for providing professional or consulting services to the Company or an affiliate or an individual officer of the Company or one of their affiliates, without appropriate review and evaluation for conflicts of interest. |
| 4. | To ensure that Board members do not serve on more than three other for-profit public company boards that have a class of securities registered under the Securities Exchange Act of 1934, in addition to the Company’s Board. Newly appointed or elected directors shall have a grace period of nine (9) months to gain compliance with this condition. |
| 5. | To review the Board’s committee structure and to recommend to the Board for its approval, directors to serve as members of each committee, as well as recommendations for committee chairs. The Committee shall review and recommend committee positions, including chairs of such committees, annually, and shall recommend additional committee members to fill vacancies. |
| 6. | To review recommendations received from shareholders for persons to be considered for nomination to the board of directors, and to designate a member of the Committee to receive such communications directly from shareholders, and to publish the name and contact information of such person in the Company’s proxy statement for each of its annual meetings of shareholders. |
| 7. | To monitor compliance with the Company’s corporate governance guidelines. The Committee shall review the guidelines at least annually and recommend changes as necessary to the Board. |
| 8. | To develop and implement an annual self-evaluation of the Board, both individually and as a Board, and of its committees. The Committee shall oversee the annual self-evaluations, with a focus on the effectiveness of the directors, Board, and committees as representatives of the shareholders. |
| 9. | To review and recommend changes to procedures whereby shareholders may communicate with the Board. |
| 10. | To assess the independence of directors annually and report to the Board. |
| 11. | To recommend to the Board for its approval, the leadership structure of the Board, including whether the Board should have an executive or non-executive Chair, whether the roles of Chair and Chief Executive Officer should combine, and whether a Lead Director of the Board should be appointed. |
Actions and Recommendations
In carrying out its responsibilities under its charter, the Committee is required to:
| (a) | Establish criteria for selection of potential directors, taking into consideration the following desired attributes: leadership, independence, interpersonal skills, financial acumen, business experiences, industry knowledge, diversity of viewpoints, and any other experiences as the Committee deems important to the effectiveness of the Board. The Committee will periodically assess the criteria to ensure it is consistent with the best practices and the goals of the Company. |
| (b) | Identify individuals who satisfy the criteria for selection to the Board and make recommendations to the Board on new candidates for Board membership. |
| (c) | Receive and evaluate nominations for Board membership which are recommended by existing directors, officers, or shareholders in accordance with procedures established by the Committee in accordance with the Company’s corporate governance guidelines and applicable law. |
| (d) | Oversee the process for conducting background checks on new candidates for Board membership, including the process of validating candidate credentials. |
| (e) | Review any potential conflicts of interest for Board members in the event of a particular member’s change of employment and recommend to the Board the Committee’s belief as to whether that director should continue his or her board service or resign from the Board. |
| (f) | Establish criteria for the evaluation of existing directors and the reelection or removal of directors based on the needs of the Company. |
| (g) | Monitor the requirement that Board members shall not serve on more than three other for-profit public company boards in addition to the Company’s Board. Determinations regarding the definition of “for-profit public company board” shall be made by the Committee. |
| (h) | Review the qualifications, performance, and independence of existing Board members and make recommendations to the Board on whether they should stand for reelection. |
| (i) | Recommend to the Board the removal of a director where appropriate. |
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| (j) | Recommend to the Board a slate of nominees for the next annual meeting of shareholders. |
| (k) | Oversee the orientation process for new directors. |
Shareholder Recommendations
The Committee will consider all recommendations for nominations to the Board from any person (or group) who has (or collectively if a group has) held more than 3% of the Company’s voting securities for longer than one year. Shareholders desiring to submit recommendations to the Committee should submit information regarding such recommendations in writing or by electronic mail to the person designated in the proxy statement circulated in advance of each annual meeting of shareholders. Each proxy statement shall set forth the information to be provided either directly in the proxy statement or by reference to the Company’s website. When the required information has been received, the Committee will evaluate the proposed nominee based on the criteria described above, with the principal criteria being the needs of the Company and the qualifications of such proposed nominee to fulfill those needs.
The Committee shall:
| (a) | Report regularly to the Board on its activities; |
| (b) | Maintain minutes of its meetings and records relating to those meetings and the Committee’s activities; |
| (c) | Have authority to obtain, at the expense of the Company, advice and assistance from search firms and internal or external legal, consulting, or other advisors; |
| (d) | Form and delegate authority to subcommittees of one or more Committee members when desired and appropriate; |
| (e) | Review and reassess the adequacy of this Charter annually and recommend to the Board any proposed changes to this Charter; and |
| (f) | Periodically review the Committee’s own performance. |
In performing their responsibilities, Committee members are entitled to rely in good faith on information, opinions, reports, or statements prepared or presented by:
| (a) | One or more officers or employees of the Company whom the Committee member reasonably believes to be reliable and competent in the matters presented; |
| (b) | Counsel, independent auditors, or other persons as to matters which the Committee member reasonably believes to be within the professional or expert competence of such person; and |
| (c) | Other committees of the Board as to matters within their respective designated authority, which committee the Committee member reasonably believes to merit confidence. |
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Exhibit 99.4
CONSENT OF DIRECTOR NOMINEE
In connection with the filing by Rank One Computing Corporation (the “Company”) of a registration statement on Form S-1 and all subsequent amendments and post-effective amendments or supplements thereto (the “Registration Statement”), with the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering of shares of common stock of the Company, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement. I also consent to the filing of this consent as an exhibit to the Registration Statement and any amendments thereto.
Dated: December 3, 2025
| /s/ Edward Davis | |
| Name: Edward Davis |
Exhibit 99.5
CONSENT OF DIRECTOR NOMINEE
In connection with the filing by Rank One Computing Corporation (the “Company”) of a registration statement on Form S-1 and all subsequent amendments and post-effective amendments or supplements thereto (the “Registration Statement”), with the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering of shares of common stock of the Company, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement. I also consent to the filing of this consent as an exhibit to the Registration Statement and any amendments thereto.
Dated: December 3, 2025
| /s/ Brian Hibbeln | |
| Name: Brian Hibbeln |
Exhibit 99.6
CONSENT OF DIRECTOR NOMINEE
In connection with the filing by Rank One Computing Corporation (the “Company”) of a registration statement on Form S-1 and all subsequent amendments and post-effective amendments or supplements thereto (the “Registration Statement”), with the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering of shares of common stock of the Company, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement. I also consent to the filing of this consent as an exhibit to the Registration Statement and any amendments thereto.
Dated: December 3, 2025
| /s/ Steve Martinez | |
| Name: Steve Martinez |
Exhibit 99.7
CONSENT OF DIRECTOR NOMINEE
In connection with the filing by Rank One Computing Corporation (the “Company”) of a registration statement on Form S-1 and all subsequent amendments and post-effective amendments or supplements thereto (the “Registration Statement”), with the U.S. Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), in connection with the initial public offering of shares of common stock of the Company, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of the Company in the Registration Statement. I also consent to the filing of this consent as an exhibit to the Registration Statement and any amendments thereto.
Dated: December 3, 2025
| /s/ Dawn Meyerriecks | |
| Name: Dawn Meyerriecks |