Item 1. Financial Statements
Item 1. Financial Statements (Unaudited)
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30,
December 31,
2026
2025
Assets
Current assets:
Cash
$
11,913,463
$
270,560
Accounts receivable, net
5,590,579
4,155,230
Prepaid expenses and other current assets
694,910
420,785
Total current assets
18,198,952
4,846,575
Property and equipment, net
1,030,318
268,569
Intangible assets, net
4,759
5,519
Operating lease right-of-use asset
945,954
1,088,181
Capitalized software, net
1,755,147
726,582
Other assets
35,643
30,195
Total non-current assets
3,771,821
2,119,046
Total assets
$
21,970,773
$
6,965,621
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses
$
2,117,986
$
2,802,961
Deferred revenue
954,360
1,382,995
Line of credit
—
1,839,891
Current portion of operating lease liabilities
312,328
306,113
Total current liabilities
3,384,674
6,331,960
Long-term operating lease liabilities
755,967
912,229
Deferred tax liability
13,703
13,703
Other long-term liabilities
8,879
—
Total long-term liabilities
778,549
925,932
Total liabilities
4,163,223
7,257,892
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, par value $ 0.01 ; 100,000,000 shares authorized; 19,080,127 and 15,021,650 shares issued and outstanding as of June 30, 2026, and December 31, 2025, respectively
190,801
150,217
Additional paid-in capital
26,140,399
4,226,455
Accumulated deficit
( 8,523,650
)
( 4,668,943
)
Total stockholders’ equity (deficit)
17,807,550
( 292,271
)
Total liabilities and stockholders’ equity
$
21,970,773
$
6,965,621
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Sales
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
Cost of sales
526,273
974,427
1,069,267
1,634,164
Gross profit
4,566,709
3,994,495
6,572,357
6,508,280
Operating expenses:
Selling, general and administrative
3,272,434
1,821,576
6,205,656
3,798,292
Research and development
2,069,768
1,349,326
4,157,535
2,903,572
Total operating expenses
5,342,202
3,170,902
10,363,191
6,701,864
Operating (loss) income
( 775,493
)
823,593
( 3,790,834
)
( 193,584
)
Other income (expense)
Interest income (expense)
10,705
( 12,895
)
( 8,712
)
( 23,095
)
Other income (expense)
( 51,725
)
—
( 55,161
)
—
Total other expense
( 41,020
)
( 12,895
)
( 63,873
)
( 23,095
)
(Loss) income before tax
( 816,513
)
810,698
( 3,854,707
)
( 216,679
)
Provision for (benefit from) income taxes
—
229,494
—
( 61,319
)
Net (loss) income
$
( 816,513
)
$
581,204
$
( 3,854,707
)
$
( 155,360
)
Earnings (loss) per share — basic
$
( 0.04
)
$
0.04
$
( 0.22
)
$
( 0.01
)
Earnings (loss) per share — diluted
$
( 0.04
)
$
0.04
$
( 0.22
)
$
( 0.01
)
Weighted-average shares — basic
19,080,127
14,999,087
17,859,295
14,992,287
Weighted-average shares — diluted
19,080,127
16,099,632
17,859,295
14,992,287
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED STATEM ENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
Additional
Total
Common Stock
Paid-In
Accumulated
Stockholders'
Shares
Amount
Capital
Deficit
Equity
Balance at January 1, 2026
15,021,650
$
150,217
$
4,226,455
$
( 4,668,943
)
$
( 292,271
)
Stock-based compensation
—
—
142,470
—
142,470
Issuance of common stock from initial public offering, net of issuance costs
4,058,477
40,584
21,441,687
—
21,482,271
Net loss
—
—
—
( 3,038,194
)
( 3,038,194
)
Balance at March 31, 2026
19,080,127
$
190,801
$
25,810,612
$
( 7,707,137
)
$
18,294,276
Stock-based compensation
—
—
329,787
—
329,787
Net loss
—
—
—
( 816,513
)
( 816,513
)
Balance at June 30, 2026
19,080,127
$
190,801
$
26,140,399
$
( 8,523,650
)
$
17,807,550
Additional
Total
Common Stock
Paid-In
Accumulated
Stockholders'
Shares
Amount
Capital
Deficit
Equity
Balance at January 1, 2025
14,985,411
$
149,854
$
3,692,515
$
( 1,992,097
)
$
1,850,272
Stock-based compensation
—
—
89,819
—
89,819
Net loss
—
—
—
( 736,566
)
( 736,566
)
Balance at March 31, 2025
14,985,411
$
149,854
$
3,782,334
$
( 2,728,663
)
$
1,203,525
Stock-based compensation
—
—
90,627
-
90,627
Stock options exercised
36,239
363
7,743
8,106
Net income
—
—
581,204
581,204
Balance at June 30, 2025
15,021,650
$
150,217
$
3,880,704
$
( 2,147,459
)
$
1,883,462
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
RANK ONE COMPUTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
2026
2025
Cash flows from operating activities:
Net loss
$
( 3,854,707
)
$
( 155,360
)
Adjustments to reconcile net income to net cash used in
operating activities:
Stock-based compensation
472,257
180,446
Depreciation and amortization
164,232
69,164
Non-cash lease expense
175,424
175,502
Change in expected credit losses
25,200
104,220
Changes in assets and liabilities:
Accounts receivable, net
( 1,460,549
)
63,568
Prepaid expenses and other current assets
( 274,125
)
41,743
Deferred tax asset
—
( 61,319
)
Other assets
( 5,448
)
—
Deferred revenue
( 428,635
)
( 775,712
)
Accounts payable and accrued expenses
( 684,975
)
404,185
Lease liability
( 183,245
)
( 172,627
)
Other long term liabilities
8,879
—
Net cash used in operating activities
( 6,045,692
)
( 126,190
)
Cash flows from investing activities:
Purchases of property and equipment
( 864,485
)
—
Capitalized software
( 1,089,301
)
( 354,171
)
Net cash used in investing activities
( 1,953,786
)
( 354,171
)
Cash flows from financing activities:
Net proceeds from issuance of common stock
21,482,271
—
Proceeds from the exercise of stock options
—
8,106
Repayment to the line of credit, net
( 1,839,890
)
( 192,859
)
Net cash provided by (used in) financing activities
19,642,381
( 184,753
)
Net change in cash
11,642,903
( 665,114
)
Cash at beginning of period
270,560
726,436
Cash at end of period
$
11,913,463
$
61,322
Supplemental disclosures:
Cash paid for interest
$
70,848
$
23,019
NONCASH INVESTING AND FINANCING ACTIVITIES:
Fair value of warrants issued with initial public offering
$
936,042
$
—
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
RANK ONE COMPUTING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
Initial Public Offering
On February 19, 2026, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with The Benchmark Company, LLC, acting as the representative of the several underwriters (the “Representative”), for a firm commitment underwritten initial public offering (the “IPO”). Pursuant to the Underwriting Agreement, the Company agreed to sell to the Representative an aggregate of 4,000,000 shares of the Company’s common stock at an offering price of $ 6.00 per share.
On February 23, 2026, the Company consummated the closing of our IPO, generating gross proceeds of approximately $ 24,000,000 , before deducting underwriting discounts and offering expenses.
On March 26, 2026, the Representative partially exercised the over-allotment option pursuant to the Underwriting Agreement. As a result of the partial exercise of the over-allotment option, the Company received additional gross proceeds of $ 350,862 for the offer and sale of 58,477 shares of common stock, before underwriting discounts, commissions, and offering expenses.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2026.
The condensed consolidated balance sheet as of December 31, 2025 included herein was derived from the audited consolidated financial statements as of that date. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated balance sheet at June 30, 2026, the statements of operations, statements of cash flows, and statements of stockholders’ equity (deficit) for the interim periods ended June 30, 2026 and 2025. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The results for the interim periods ended June 30, 2026, are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.
On January 8, 2026, the Company effected a stock split of the Company’s issued and outstanding Common Shares, by a ratio of 167-to-1 (the “Forward Stock Split”). Accordingly, all Common Shares, stock options, warrants, as well as per share information, for all periods presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this Stock Split.
5
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Rank One Computing Corporation and its wholly owned subsidiary, ROC Federal LLC. All intercompany accounts and transactions have been eliminated in consolidation.
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. As an emerging growth company that has elected the extended transition period under the JOBS Act, the Company will adopt this standard for its annual period beginning January 1, 2026 (the effective date applicable to entities other than public business entities). The Company expects the adoption will result in expanded qualitative and quantitative disclosures, including additional rate reconciliation categories and disaggregated income tax payment information, but does not expect the standard to have a material impact on its consolidated financial position, results of operations, or cash flows.
In November 2024, the FASB issued Accounting Standards Update (ASU) No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, Disaggregation of Income Statement Expenses , which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the financial statements. The amendments in this pronouncement will be effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently assessing the potential impacts of adoption on its financial statements and related disclosures.
Effective January 1, 2026, the Company adopted ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . The standard provides a practical expedient that permits entities to assume that current economic conditions as of the balance sheet date remain unchanged for the remaining life of current accounts receivable and current contract assets when estimating expected credit losses. The Company elected to apply this practical expedient. The adoption of ASU 2025-05 did not have a material impact on the Company's consolidated financial statements, results of operations, cash flows, or 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.
Reclassifications
Certain amounts in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current year’s presentation. These reclassifications were immaterial to the financial statements and had no impact on previously reported net loss, total assets, total liabilities, stockholders’ equity, or the previously reported net decrease in cash and cash equivalents.
Estimated Fair Value of Financial Instruments
The Company had no assets or liabilities measured at fair value on a recurring or nonrecurring basis as of June 30, 2026 or December 31, 2025. Management believes the carrying amounts of cash, accounts receivable, and accounts payable approximate fair value due to their short-term nature.
6
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 June 30, 2026, and December 31, 2025, was approximately $ 11.7 and $ 0.0 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
For the three months ended June 30,
For the six months ended June 30,
June 30,
2026
December 31, 2025
2026
2025
2026
2025
Customer A
47
%
15
%
53
%
36
%
35
%
27
%
Customer B
—
11
%
—
—
—
—
Customer C
—
16
%
—
31
%
—
19
%
Prior-year customer concentration information has been reclassified to include unbilled accounts receivable to conform to the current-year presentation. This reclassification had no impact on the Company’s condensed consolidated balance sheets, statements of operations, or cash flows.
Accounts Receivable and 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:
Six months ended
June 30,
2026
Year ended December 31,
2025
Beginning balance
$
161,723
$
60,040
Provision
25,200
101,683
Write-offs (1)
( 65,000
)
—
Ending Balance
$
121,923
$
161,723
(1) Amounts written off as of June 30, 2026 were fully reserved as of December 31, 2025 .
7
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 other income or expense in the consolidated statements of income.
Loss Contingencies
The Company accrues for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. When the reasonably possible loss or range of loss can be estimated, the Company discloses the estimate; otherwise, the Company discloses that an estimate cannot be made. Legal costs incurred in connection with loss contingencies are expensed as incurred.
Insurance recoveries of losses that have been incurred and recognized are recorded when realization of the claim is determined to be probable and the amount is reasonably estimable, measured at an amount not exceeding the related loss recognized. Recoveries in excess of losses recognized are accounted for as gain contingencies and are not recognized until realized. Insurance recovery receivables are presented separately from, and are not offset against, any related accrued liability.
Revenue Recognition
The Company’s revenue primarily consists of sales of software licenses for our products (ROC SDK, ROC Watch, ROC ABIS, ROC Enroll, and ROC Evidence), which generally include post-contract customer support, sales of bundled security solutions that combine our software with cameras, hardware devices, and installation services, and research and development services performed under U.S. government and commercial contracts.
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.
The Company generates revenue from several offerings. ROC SDK consists of software development kits that allow customers to integrate the Company’s biometric and computer vision technologies into their own applications. ROC Watch is a software platform that provides real-time monitoring, threat detection, and analytics for video and camera feeds. ROC ABIS is an automated biometric identification system designed for large-scale identity matching, verification, and forensic investigation. ROC Enroll is a remote identity verification solution used to capture, manage and evaluate biometric and identity document data for use with the Company’s platform and with customers' platforms. ROC Evidence is a cloud-native digital evidence management system (DEMS) used for investigation and litigation support. In addition, the Company performs work under R&D contracts, primarily with U.S. government agencies, which may include software licenses and professional services.
In the following tables, revenue is disaggregated by major product line, geographic area based on customer location, and the timing of revenue recognition for the three and six months ended June 30, 2026, and 2025.
8
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
ROC SDK
$
1,590,311
$
864,635
$
2,912,612
$
2,542,140
ROC Watch
248,121
1,924,583
1,137,601
2,427,230
ROC ABIS
163,646
19,885
233,467
39,554
ROC Enroll
82,697
36,815
124,593
274,460
ROC Evidence
17,500
—
17,500
—
Total Product Revenue
2,102,275
2,845,918
4,425,773
5,283,384
R&D Contracts
2,990,707
2,123,004
3,215,851
2,859,060
Total Revenue
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
2026
2025
2026
2025
United States
$
4,713,203
$
4,690,348
$
6,987,965
$
7,386,070
International
379,779
278,574
653,659
756,374
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
2026
2025
2026
2025
Timing of revenue recognition
Products transferred at a point in time
$
3,541,856
$
2,048,215
$
5,321,608
$
3,944,579
Products and services transferred over time
1,551,126
2,920,707
2,320,016
4,197,865
Total Revenue
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
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, ROC Enroll, and ROC Evidence. 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. Certain license arrangements include consumption-based pricing under which the customer pays a fixed minimum license fee, recognized at a point in time upon delivery of the license key, with incremental fees for usage above the minimum (typically measured on a per-identity-match or per-scan basis). These usage-based overages represent a sales- or usage-based royalty promised in exchange for a license of intellectual property and are recognized in the period in which the underlying usage occurs.
9
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.
Software-as-a-Service (SaaS) Subscription Arrangements
The Company offers certain Vision AI products on a hosted basis, in which the Company hosts the software in its or a third-party provider’s cloud environment and provides the customer with continuous access over a stated subscription term. When the customer does not have the contractual right to take possession of the software at any time during the hosting period without significant penalty, or when it is not feasible for the customer to run the software on its own hardware or to contract with an unrelated third party to host the software, the arrangement is accounted for as a service rather than a software license. For the Company’s hosted arrangements, access to the hosted software, the related ongoing technical support and software updates, and the underlying hosting infrastructure are not capable of being distinct from one another and are accounted for as a single combined performance obligation satisfied over time. Revenue is recognized ratably over the subscription term beginning on the date the customer is granted access to the hosted environment. Implementation and other professional services that do not significantly modify or customize the hosted functionality are accounted for as separate performance obligations and recognized as the services are performed.
Bundled Security Solutions
The Company sells bundled security solutions consisting of hardware (including cameras and computing devices), software licenses, installation services, and post-contract support (“PCS”), which are deployed at customer locations to monitor activity and identify people, vehicles, and other objects. Hardware and software license revenue is recognized at a point in time upon delivery to the customer site, installation services revenue is recognized over time as the services are performed, and PCS revenue is recognized ratably over the support period.
R&D Contracts
The Company enters into research and development ("R&D") contracts with customers (predominantly U.S. Government agencies and prime contractors, along with select commercial customers) under which the Company provides a license to use the software as part of a stated project, together with professional services to perform custom development, simulations, integration, testing, or other applications of the software in support of the customer’s research or development objectives. Most R&D Contracts are priced on a fixed-fee basis, with certain contracts billed on a usage or “time-and-materials” basis. Hardware and software license revenue is recognized at a point in time upon delivery to the customer site, and professional services revenue is recognized over time, as the services are performed over the contract period.
Contract Assets
The Company records a receivable when its right to consideration is unconditional, that is, when only the passage of time is required before payment is due. The Company records a contract asset when it has transferred goods or services to a customer but its right to consideration is conditional on something other than the passage of time, such as the satisfaction of other performance obligations within the same contract. Contract assets are assessed for expected credit losses using the methodology described under Accounts Receivable and Allowance for Credit Losses above.
Contract assets were $ 3.8 million as of June 30, 2026 and $ 1.2 million as of December 31, 2025, and are included in accounts receivable, net on the condensed consolidated balance sheets. The increase in contract assets during the six months ended June 30, 2026 was primarily attributable to R&D contracts. Refer to Contract Liabilities below for information regarding the Company's contract liability balances.
10
Costs to Obtain Contracts
The Company accounts for incremental costs of obtaining customer contracts (sales commissions) in accordance with ASC 340-40, Other Assets and Deferred Costs — Contracts with Customers . Under the practical expedient permitted by ASC 340-40-25-4, the Company expenses such costs as incurred for contracts with an expected amortization period of one year or less. For contracts with an expected amortization period greater than one year, the Company capitalizes eligible incremental costs if recovery is expected and amortizes the resulting asset on a straight-line basis over the expected period of benefit. The portion of the asset expected to be amortized within twelve months of the balance sheet date is presented within Prepaid expenses and other current assets, with the remainder presented within Other assets on the condensed consolidated balance sheets. As of June 30, 2026 and December 31, 2025, total capitalized commission costs were $ 47,146 and $ 32,940 , respectively, of which $ 11,503 and $ 2,745 are classified as current and $ 35,643 and $ 30,195 are classified as long-term. The long-term balances have remaining amortization periods extending through 2030.
Contract Liabilities
Sales are generally recorded in the month the service is provided. For customers who are billed on an annual basis, deferred revenue is recorded and amortized over the life of the contract in accordance with the prescribed revenue recognition method. The Company recognized $ 413,394 and $ 346,250 of revenue during the three months ended June 30, 2026, and 2025, respectively, and $ 922,674 and $ 984,735 of revenue during the six months ended June 30, 2026 and 2025, respectively, which was included in the contract liability balance at the beginning of each such period.
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.
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 license contracts with a term of one year or less, PCS services are bundled with the licensed software and provided throughout the contract term. For longer duration license contracts, PCS services are included for the initial twelve-month period following licensed software delivery. Customers may subsequently purchase extended PCS services annually as outlined in the contracts, typically priced at a percentage of the original license fee (the "Extended PCS Percentage") up to a designated maximum term.
Based on the results of the Company's standalone selling price analysis, the transaction price is allocated between the software license and PCS using the observable annual PCS renewal rate as the basis for the standalone selling price of PCS. Where PCS is provided for a one-year period, this results in an allocation to PCS of an amount equal to the applicable Extended PCS Percentage multiplied by the transaction price, with the remainder allocated to the software license. Where PCS is committed over a longer period, the allocation is determined by reference to the aggregate PCS value implied by the annual renewal rate over the committed PCS period relative to the combined value of the license and that implied PCS value, which results in a greater proportion of the transaction price being allocated to PCS as the committed PCS period lengthens. In each case, the allocation reflects the pricing relationship between the license and PCS and maximizes the use of observable inputs. The transaction price is allocated at contract inception and is not subsequently reallocated for changes in estimated standalone selling prices.
11
Effective for arrangements with a contract inception date on or after June 1, 2026 that include committed PCS over more than one year, the Company refined the method used to estimate the relationship between the standalone selling prices of the software license and PCS to more faithfully reflect that relationship over longer committed PCS periods. The refinement was accounted for as a change in accounting estimate and applied prospectively. Arrangements entered into prior to that date, and arrangements with PCS committed for one year or less, were not affected. The effect of the change was not material to the three and six months ended June 30, 2026.
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 SSP for Bundled Security Solutions and R&D Contracts
The Company’s contracts for bundled solutions and R&D 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. For annual license contracts, PCS services are bundled with the licensed software and provided throughout the contract term. For multi-year software licenses bundled with one-year of PCS, an amount equal to the applicable Extended PCS Percentage multiplied by the transaction price is assigned to PCS, and the remainder of the transaction price is assigned to the software license.
Contract and 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. Payment amounts are generally due within 30 days of invoice and can range from 30 to 90-day terms.
Significant Judgment
The Company applies judgment in identifying performance obligations in contracts that include multiple promised goods and services, such as software licenses, hosting arrangements, implementation services, customer support, and other related offerings. In accordance with ASC 606, promised goods or services are evaluated to determine whether they are distinct and therefore accounted for as separate performance obligations, considering the nature of the promise and how the offerings are bundled and delivered to the customer.
When contracts include multiple performance obligations, the Company exercises judgment in determining the standalone selling price of each performance 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.
12
Significant Financing Component
The Company has elected the practical expedient in ASC 606-10-32-18 and does not adjust the transaction price for the effects of a significant financing component if the period between transfer of goods or services and customer payment is one year or less. The Company evaluated whether any of its contracts contain a significant financing component and concluded that no significant financing component exists in its contracts.
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. During the three and six months ended June 30, 2026, and 2025, the Company recognized no impairment charges on long-lived assets.
Advertising Costs
The Company expenses the costs associated with advertising as they are incurred. The Company incurred $ 90,700 and $ 19,648 for advertising costs for the three months ended June 30, 2026 , and 2025, respectively and $ 134,509 and $ 44,645 for advertising costs for the six months ended June 30, 2026, and 2025, respectively. Advertising costs are included within selling, general and administrative expenses in the unaudited condensed consolidated statements of operations.
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 three months ended June 30, 2026 and 2025, the Company recorded approximately $ 2.1 million and $ 1.3 million, respectively, in research and development expense on the unaudited condensed consolidated statements of income. During the six months ended June 30, 2026 and 2025, the Company recorded approximately $ 4.2 million and $ 2.9 million, respectively.
Intangible Assets - Software Development Costs
Costs incurred prior to establishing technological feasibility for a component are expensed as research and development costs as incurred. Beginning in 2025, the Company commenced development of a new software project comprising multiple modular components, each with its own development cycle, for which technological feasibility was established prior to general release. For this project, eligible development costs incurred subsequent to the establishment of technological feasibility for specific modules and enhancements are being capitalized in accordance with ASC 985-20. Capitalized amounts are presented as capitalized software within the condensed consolidated balance sheets and are amortized to cost of sales over the estimated economic life of the related product once available for general release. Amortization is determined for each software component as the greater of (i) the ratio of current gross revenues for the component to the total of current and anticipated future gross revenues for that component, or (ii) the straight-line amount over the remaining estimated economic life of the component, which the Company estimates to be three years. For the periods presented, the straight-line method produced the greater amount.
Capitalization of development costs for a component ceases, and amortization of that component begins, when the component is available for general release to customers. The first components became available for general release during the second quarter of 2026. Refer to Note 5 – Intangible Assets for the components of capitalized software and the related amortization expense.
13
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 granted 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 does not yet have sufficient history of public trading and therefore utilizes 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 $ 88,765 and $ 78,648 for the three months ended June 30, 2026 and 2025 , respectively, and $ 185,296 and $ 146,721 for the six months ended June 30, 2026 and 2025 , respectively.
Net Loss 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:
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
Options
9,151,961
—
9,151,961
8,929,991
Warrants
284,093
—
284,093
—
Total
9,436,054
—
9,436,054
8,929,991
14
Note 3 – Prepaids and other current assets
Prepaids and other current assets consist of the following:
June 30,
December 31,
2026
2025
Prepaid expenses
$
242,434
$
105,394
Other receivables
226,145
—
Prepaid insurance
155,014
33,941
Inventory
34,470
26,563
Deposits
25,344
25,344
Deferred commission expense
11,503
2,745
Deferred offering costs
—
226,798
Total prepaid and other current assets
$
694,910
$
420,785
Offering costs related to the initial public offering completed in February 2026 were deferred and, at closing, offset against gross proceeds and recorded as a reduction of additional paid-in capital (Note 8 – Stockholders’ Equity).
Note 4 – Property and Equipment
Property and equipment, at cost, consist of the following:
June 30,
December 31,
2026
2025
Computers
$
1,558,235
$
693,750
Furniture and fixtures
92,269
92,269
Gross property and equipment
1,650,504
786,019
Less: accumulated depreciation
( 620,186
)
( 517,450
)
Net property and equipment
$
1,030,318
$
268,569
Depreciation expense for the six months ended June 30, 2026 and 2025 was $ 102,736 and $ 68,404 . Depreciation expense for the three months ended June 30, 2026 and 2025 was $ 63,768 and $ 34,135 .
15
Note 5 – Intangible Assets
Intangible assets consisted of purchased software and capitalized software development costs. The components of purchased software were as follows:
June 30,
December 31,
2026
2025
Software
$
10,966
$
10,966
Less: accumulated amortization
( 6,207
)
( 5,447
)
Net intangible assets
$
4,759
$
5,519
Amortization expense was $ 760 for both the six months ended June 30, 2026, and 2025 and $ 380 for both the three months ended June 30, 2026 and 2025.
Capitalized Software Development Costs
The following table presents capitalized software as of June 30, 2026 and December 31, 2025:
June 30,
2026
December 31,
2025
Components available for general release
$
1,416,315
$
—
Accumulated amortization
( 60,736
)
—
Components available for general release, net
1,355,579
—
Components not yet available for general release
399,568
726,582
Capitalized software, net
$
1,755,147
$
726,582
Costs capitalized during the six months ended June 30, 2026 and 2025 were $ 1,089,301 and $ 354,171 , respectively. Amortization expense, recorded in cost of sales, was $ 60,736 for each of the three and six months ended June 30, 2026 and $ 0 for each of the three and six months ended June 30, 2025. At each balance sheet date the Company compares the unamortized capitalized costs of each component to its net realizable value; no write-downs to net realizable value were recorded during the three and six months ended June 30, 2026 or 2025.
The Company's estimates of anticipated future gross revenues and of the remaining estimated economic life of each component are inherently uncertain and are based on the Company's product roadmap, contracted backlog, and expected procurement awards. It is reasonably possible that those estimates could change in the near term, which could result in an increase in periodic amortization or in a write-down of capitalized costs to net realizable value in amounts that could be material to the Company's results of operations.
Note 6 – Leases
Operating Leases
The Company’s significant operating leases include the following at June 30, 2026:
The Company leases approximately 6,600 square feet of office space in Morgantown, West Virginia. The lease requires aggregate payments of $ 799,956 over the five-year lease 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 aggregate payments of $ 1,221,363 over the eight-year lease 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 aggregate payments of $ 98,558 over the three-year lease term. The lease expires in February 2027, subject to extension.
16
The Company’s lease agreements do not contain material variable lease payments, residual value guarantees, or restrictive covenants. Renewal and termination options are not included in the lease term unless the Company is reasonably certain to exercise such options. As of June 30, 2026, the Company had no renewal or termination options that were reasonably certain to be exercised, and therefore none are reflected in the lease term or related lease liabilities.
Operating lease expense, including short term leases, is recognized within cost of sales, selling, general and administrative expense, and research and development expense in the consolidated statements of operations, based on the nature of the activities supported by the leased space. The components of operating lease expense for the three and six months ended June 30, 2026 and 2025 were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
Operating lease:
Fixed lease cost
$
87,713
$
87,751
$
175,424
$
175,502
Short-term lease cost
16,153
13,725
34,580
23,077
Total operating lease cost
$
103,866
$
101,476
$
210,004
$
198,579
Supplemental balance sheet information related to operating leases was as follows:
June 30,
2026
December 31,
2025
Operating Leases:
Operating lease right-of-use asset
$
945,954
$
1,088,181
Current operating lease liabilities
$
312,328
$
306,113
Noncurrent operating lease liabilities
755,967
912,229
Total operating lease liabilities
$
1,068,295
$
1,218,342
Weighted average remaining lease terms and discount rates to operating leases were as follows:
June 30,
2026
December 31,
2025
Operating Leases:
Weighted average remaining lease term (in years):
3.16
3.63
Weighted average discount rate:
5.91
%
5.94
%
17
At June 30, 2026, the future minimum lease payments under these operating leases are as follows:
Fiscal Years Ending
Operating Leases
December 31, 2026 (1)
$
184,604
December 31, 2027
354,991
December 31, 2028
363,640
December 31, 2029
267,346
Total lease payments
1,170,581
Less: Amounts representing interest
( 102,286
)
Total lease obligations
$
1,068,295
(1) Represents scheduled payments for the remaining six-month period ending December 31, 2026.
As of June 30, 2026, the Company had no additional significant operating or finance leases that had not yet commenced.
Supplemental cash flow information at June 30, 2026 and 2025 related to operating leases was as follows:
Six Months Ended
June 30,
2026
2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases
$
183,245
$
172,627
Note 7 – Commitments and Contingencies
Line of Credit
The Company maintains a revolving demand line of credit with a bank, collateralized by the Company’s assets, which may be cancelled by either party at any time upon formal written notice. As amended on December 31, 2025 , the facility provides for maximum advances of $ 2,500,000 at an adjustable rate equal to the Prime Rate plus two percent per annum. At June 30, 2026 , the total interest rate was 8.25 %. The line of credit balance outstanding as of June 30, 2026 and December 31, 2025, was $ 0 and $ 1,839,891 , respectively.
Litigation
In March 2026, Eye Corp IT Solutions LLC filed a claim in the High Court of England and Wales (Case No. CL-2026-000062) that named Rank One Computing Corporation and certain other defendants. The plaintiff is seeking damages of approximately $ 179.1 million. The Company was served with the claim form in March 2026, and the matter remains in its preliminary stages. The Company believes the claim is without merit and intends to defend the matter vigorously. Given the early stage of the proceedings, the Company is unable to predict the outcome or estimate a range of reasonably possible loss, if any, that may result from the matter. No accrual for loss contingencies related to this matter has been recorded as of June 30, 2026. While the Company does not currently believe the claim will result in a material adverse effect on its financial condition, results of operations, or cash flows, litigation is inherently uncertain and an unfavorable outcome could differ from this expectation.
The Company is currently not involved in any other litigation. Other than as discussed above, 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 officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
18
From time to time, we may become involved in legal proceedings and claims that arise in the ordinary course of business.
During the three months ended June 30, 2026, the Company received a reservation of rights letter from its insurance carrier acknowledging coverage for a portion of the legal defense costs incurred in connection with the matter described above. The related defense costs had previously been incurred and charged to expense, and the Company concluded that recovery of the acknowledged portion is probable and reasonably estimable. Accordingly, the Company recorded an insurance recovery receivable of $ 226,145 as of June 30, 2026, with a corresponding reduction of selling, general and administrative expenses of $ 226,145 for each of the three and six months ended June 30, 2026. The receivable is presented within prepaid expenses and other current assets on the condensed consolidated balance sheet and has not been offset against any liability. Any additional amounts that may ultimately be recovered in excess of defense costs incurred to date represent a gain contingency and will be recognized only when realized. The recognition of an insurance recovery does not reflect any change in the Company’s assessment of the underlying claim, for which no loss accrual has been recorded.
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.
Equipment Purchases
As of June 30, 2026, the Company had approximately $ 0.7 million of non-cancelable purchase commitments related to equipment purchases to expand its computing infrastructure. The Company expects these commitments to be fulfilled within the next 12 months.
Pending Acquisition
On June 23, 2026, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with ZTC Holdco, Inc. (the “Seller”), Anthony J. Zuccaro, Emily J. Sverchek, and Zuccaro Technical Consulting LLC (“ZTC”), pursuant to which the Company agreed to acquire 100 % of the issued and outstanding equity interests of ZTC. The aggregate consideration payable to the Seller consists of (i) a cash payment at closing of $ 500,000 , subject to reduction for ZTC’s indebtedness and transaction expenses and to adjustment based on ZTC’s closing net working capital, (ii) $ 2,500,000 in shares of restricted common stock of the Company, of which $ 875,000 vests at closing, $ 1,125,000 vests on the first anniversary of closing, and the remaining $ 500,000 vests over the following eight quarters through the third anniversary of closing, and (iii) revenue share payments equal to 15 % of ROC Evidence Advanced Revenue (as defined in the Purchase Agreement) for each fiscal quarter during a seven-year revenue share term, subject to an aggregate cap of $ 7,000,000 . Separately from the purchase consideration, the Company has committed to grant up to $ 500,000 of retention restricted stock units to continuing employees of ZTC, vesting over five years .
Closing of the acquisition is subject to the satisfaction or waiver of customary conditions, including the accuracy of the parties’ representations and warranties, receipt of required regulatory approvals and third-party consents, execution of employment agreements with key personnel and proprietary information and invention assignment agreements with employees, and completion of an audit of ZTC’s 2024 and 2025 annual financial statements. The acquisition had not closed as of June 30, 2026 and remains pending as of the date of this Quarterly Report, and there can be no assurance that it will be consummated. Accordingly, no assets acquired or liabilities assumed have been recognized in the accompanying condensed consolidated balance sheet as of June 30, 2026.
The Company is evaluating the accounting for the transaction under ASC 805, Business Combinations, including whether the revenue share payments and the post-closing vesting tranches of the restricted shares represent consideration transferred or post-combination compensation cost. The Company has incurred acquisition-related costs which are expensed as incurred and included in selling, general and administrative expenses for the three and six months ended June 30, 2026.
19
Note 8 – Stockholders’ Equity
Capital Stock
As of June 30, 2026, the Company has 100,000,000 authorized shares of Common Stock, par value $ 0.01 .
Initial Public Offering
On February 19, 2026, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with The Benchmark Company, LLC, acting as the representative of the several underwriters (the “Representative”), for a firm commitment underwritten initial public offering (the “Offering”). On February 23, 2026, the Company consummated the closing of the Offering, consisting of 4,000,000 shares of common stock at a public offering price of $ 6.00 per share. The Company received gross proceeds of approximately $ 24.0 million and paid approximately $ 2.9 million in transaction costs. This includes $ 226,798 of deferred offering costs as of December 31, 2025. See Note 3 for additional information. The Company’s common stock began trading on the Nasdaq Capital Market on February 20, 2026, under the ticker symbol “ROC”.
Pursuant to the Underwriting Agreement, the Company granted the Representative a 30 -day option (the “Over-Allotment Option”) to purchase up to an additional 600,000 shares of common stock at the offering price, less the underwriting discount, to cover over-allotments. On March 26, 2026, the Representative exercised a partial overallotment option, resulting in the issuance of an additional 58,477 shares and additional gross proceeds of approximately $ 0.4 million.
In addition, as partial compensation for services rendered in connection with the Offering, the Company issued to the Representative warrants (the “Representative Warrants”) to purchase an aggregate of 284,093 shares of common stock at an exercise price of $ 7.50 per share, representing 125 % of the public offering price. The Representative Warrants are exercisable beginning August 22, 2026 (for the 280,000 warrants issued at the IPO closing) and August 24, 2026 (for the 4,093 warrants issued at the over-allotment closing), subject to the 180-day lock-up under FINRA Rule 5110(e), and expire on February 19, 2031. The warrants had a fair value of $ 936,042 at the time of issuance.
2018 Equity Incentive Plan
On September 18, 2018, our Board adopted and our shareholders approved the 2018 Equity Incentive Plan (as amended, “2018 Plan”), which will terminate automatically on September 18, 2028, unless terminated earlier by the Company, and no grants may be granted under the 2018 Plan following such termination. The 2018 Plan provides for (a) the grant of incentive stock options, (b) nonstatutory stock options, (c) stock appreciation rights, and (d) restricted stock.
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.
20
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.
2026 Equity Incentive Plan
On January 8, 2026, our Board adopted and our shareholders approved the 2026 Equity Incentive, which will terminate automatically on January 7, 2036, unless terminated earlier by the Company, and no grants may be granted under the 2026 Plan following such termination. The 2026 Plan provides for (a) the grant of incentive stock options, (b) nonstatutory stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) restricted stock unit awards, (f) performance awards and (g) other stock awards.
The total number of shares of common stock reserved and available for issuance pursuant to the 2026 Plan will not exceed the initial share reserve of 1,000,000 shares plus an annual automatic increase on January 1, 2027 and each year thereafter equal to the lesser of (i) 3 % of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares of common stock as may be determined by the Board. If any equity incentive under the 2026 Plan (i) expires or otherwise terminates without all of the shares of common stock having been issued or (ii) is settled in cash, such expiration, termination or settlement will not reduce the number of shares available for issuance under the 2026 Plan. If any shares of common stock issued pursuant to any form of stock award under the 2026 Plan are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the 2026 Plan. Any shares reacquired by or withheld by the Company in satisfaction of tax withholding obligations on any form of stock award or as consideration for the exercise or purchase price of any form of stock award will again become available for issuance under the 2026 Plan.
During the three and six months ended June 30, 2026, there were no stock options exercised. During the three and six months ended June 30, 2025, there were 36,239 stock options exercised.
Common Stock Options
Options granted under the 2018 Plan and 2026 Plan generally vest over three , four or five years , with 33 %, 25 % or 20 % vesting on the first anniversary of the grant date, respectively, and the remainder vesting in equal monthly installments thereafter, subject to the recipient’s continued service. Options have a maximum term of 10 years and become exercisable as they vest. The exercise price equals the grant-date fair value of the Company’s common stock, which was based on an independent Section 409A valuation before the initial public offering and the quoted market price on the grant date after the initial public offering.
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, 2026
9,376,716
$
2.16
6.81
Options Granted
—
—
—
Exercised
—
—
—
Expired/Cancelled
( 224,755
)
2.40
—
Options Outstanding at June 30, 2026
9,151,961
$
2.15
6.27
Options Exercisable at June 30, 2026
5,996,620
$
2.01
6.00
21
Share-based compensation expense recognized for stock options granted totaled $ 329,787 and $ 90,627 for the three months ended June 30, 2026 and 2025, respectively. Share-based compensation expense recognized for stock options granted totaled $ 472,257 and $ 180,446 for the six months ended June 30, 2026 and 2025, respectively.
The intrinsic value of outstanding stock options as of June 30, 2026 and December 31, 2025 was $ 28,535,011 and $ 4,801,673 , respectively.
Warrants
In connection with the Company’s initial public offering completed in February 2026 and the subsequent exercise of the underwriters’ over-allotment option in March 2026, the Company issued an aggregate of 284,093 Representative’s Warrants to The Benchmark Company, LLC as compensation pursuant to the underwriting agreement. The Representative’s Warrants have an exercise price of $ 7.50 per share ( 125 % of the $ 6.00 IPO offering price), are exercisable beginning August 22, 2026 for the 280,000 warrants issued at the IPO closing and August 24, 2026 for the 4,093 warrants issued at the over-allotment closing, in each case subject to the 180-day lock-up under FINRA Rule 5110(e), and expire February 19, 2031. Unexercised warrants are subject to automatic cashless exercise on the termination date. The Representative’s Warrants include a 9.99% beneficial ownership limitation, one demand registration right, and piggyback registration rights.
The Company concluded that the Representative’s Warrants qualify for equity classification under ASC 480 and ASC 815-40. The warrants were measured at fair value on their respective issuance dates using the Black-Scholes option pricing model with the assumptions shown below. The aggregate fair value of $ 936,042 was recorded as a non-cash issuance cost with an offsetting credit to additional paid-in capital, resulting in no net impact on stockholders’ equity. As equity-classified instruments, the Representative’s Warrants are not remeasured after initial recognition.
IPO Closing
Over-allotment Closing
Date of issuance
February 23, 2026
March 26, 2026
Warrants issued
280,000
4,093
Exercise price
$
7.50
$
7.50
Risk-free rate
3.59
%
4.08
%
Volatility
69
%
69
%
Aggregate fair value
$
918,860
$
17,182
As the exercise price of $ 7.50 exceeded the Company’s average stock price during the three and six months ended June 30, 2026, the Representative’s Warrants were deemed to be antidilutive and excluded from diluted earnings per share. All 284,093 of the Representative’s Warrants remain outstanding and unexercised as of June 30, 2026 .
Note 9 – Income Taxes
The Company computes its provision for (benefit from) income taxes for interim periods by applying an estimated annual effective tax rate to its year-to-date pretax results, adjusted for discrete items recognized during the period. For the three and six months ended June 30, 2026 and 2025, the Company determined that an estimated annual effective tax rate could not be reliably calculated because relatively small changes in projected pretax results produce significant changes in the estimated annual effective rate. Accordingly, the Company computed its income tax provision using the actual year-to-date results.
For the three and six months ended June 30, 2026 , the Company recorded no provision for or benefit from income taxes, compared to a provision of $ 229,494 and a benefit of $ 61,319 for the three and six months ended June 30, 2025, respectively. No tax benefit was recognized on the pretax loss for the current period because the Company maintains a full valuation allowance against its U.S. federal and state net deferred tax assets, as more fully described in Note 9 to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Management continues to evaluate the realizability of its deferred tax assets each reporting period; the valuation allowance will be reduced when management concludes it is more likely than not that some or all of the deferred tax assets will be realized.
22
The deferred tax liability of $ 13,703 as of June 30, 2026 and December 31, 2025 represents the residual net position of taxable temporary differences consisting primarily of depreciation and accrual-to-cash adjustments, that exceed the deductible temporary differences supportable by reversal scheduling, after application of the valuation allowance.
No material changes occurred during the three and six months ended June 30, 2026 in the Company’s positions with respect to unrecognized tax benefits.
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
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the Chief Operating Decision Maker (the “CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer .
While the Company generates revenue in multiple ways (sale of access to its software platforms, maintenance services, and professional services), these services are often bundled and difficult to assess individually. The CODM manages the business activities and receives financial reporting information on a consolidated basis as a single operating segment. While the CODM reviews sales by product offering, no profit measures are provided at that level. Accordingly, the Company has determined it has one operating segment, which is its only reportable segment.
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 does not consider the impact of any intercompany sales or transfers; their analysis is performed on a consolidated basis.
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 assets considered by the CODM in assessing the single reportable segment performance and allocating resources are included in the consolidated balance sheet and are located in the United States.
23
The Company’s total revenue for the single reportable segment is presented at Note 2, which includes a disaggregation of revenue by product, revenue by geographic location, and significant revenue concentrations for the three and six months ended June 30, 2026 and 2025, respectively.
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
Total Revenue
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
Products and services
The Company generates revenue from the following major product and service categories:
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
ROC SDK
$
1,590,311
$
864,635
$
2,912,612
$
2,542,140
ROC Watch
248,121
1,924,583
1,137,601
2,427,230
ROC ABIS
163,646
19,885
233,467
39,554
ROC Enroll
82,697
36,815
124,593
274,460
ROC Evidence
17,500
—
17,500
—
Total Product Revenue
2,102,275
2,845,918
4,425,773
5,283,384
R&D Contracts
2,990,707
2,123,004
3,215,851
2,859,060
Total Revenue
$
5,092,982
$
4,968,922
$
7,641,624
$
8,142,444
24
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.