{"url_path":"/sec/rdcm/10-k/2026/item-18","section_key":"item-18","section_title":"Item 18 FINANCIAL STATEMENTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-03-31","source_url":"https://www.sec.gov/Archives/edgar/data/1016838/0001213900-26-036862-index.html","accession_number":"0001213900-26-036862","cik":"0001016838","ticker":"RDCM","issuer_name":"RADCOM LTD","edgar_url":"https://www.sec.gov/Archives/edgar/data/1016838/0001213900-26-036862-index.html","primary_entity_key":"0001016838","primary_entity_name":"RADCOM LTD"},"word_count":15264,"has_tables":true,"body_markdown":"**ITEM\n18. FINANCIAL STATEMENTS**\n\n \n\nOur\nconsolidated financial statements and the report of independent registered public accounting firm in connection therewith are filed as\npart of this Annual Report, as noted below:\n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**CONSOLIDATED\nFINANCIAL STATEMENTS**\n\n** **\n\n**AS\nOF DECEMBER 31, 2025**\n\n \n\n**INDEX**\n\n \n\n  **Page**\n\n   \n\n[**Reports of Independent Registered Public Accounting Firm (PCAOB ID 1281)**](#Fin_001) **F-2 - F-5**\n\n   \n\n[**Consolidated Balance Sheets**](#Fin_003) **F-6 - F-7**\n\n   \n\n[**Consolidated Statements of Income**](#Fin_005) **F-8**\n\n   \n\n[**Consolidated Statements of Comprehensive Income**](#Fin_006) **F-9**\n\n   \n\n[**Consolidated Statements of Changes in Shareholders’ Equity**](#Fin_007) **F-10**\n\n   \n\n[**Consolidated Statements of Cash Flows**](#Fin_008) **F-11 - F-12**\n\n   \n\n[**Notes to Consolidated Financial Statements**](#Fin_010) **F-13 - F-47**\n\n \n\n-\n- - - - - - - - - - -\n\n \n\nF-1\n\n \n\n \n\nKost\nForer Gabbay & Kasierer\n\n144\nMenachem Begin Road, Building A,\n\nTel-Aviv\n6492102, Israel\n\n \n\nTel:\n+972-3-6232525\n\nFax:\n+972-3-5622555\n\ney.com\n\n  \n\n**Report\nof Independent Registered Public Accounting Firm**\n\n \n\nTo the Shareholders\nand the Board of Directors of RADCOM Ltd.\n\n** **\n\n**Opinion\non the Financial Statements**\n\n \n\nWe\nhave audited the accompanying consolidated balance sheets of RADCOM Ltd. and subsidiaries (the Company) as of December 31, 2025 and 2024,\nthe related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of\nthe three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial\nstatements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position\nof the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the\nperiod ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.\n\n \n\nWe\nalso have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s\ninternal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework\nissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 31, 2026,\nexpressed an unqualified opinion thereon.\n\n \n\n**Basis\nfor Opinion**\n\n \n\nThese\nfinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s\nfinancial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent\nwith respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities\nand Exchange Commission and the PCAOB.\n\n \n\nWe\nconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits\nincluded performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,\nand performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts\nand disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates\nmade by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a\nreasonable basis for our opinion.\n\n \n\n**Critical\nAudit Matter**\n\n** **\n\nThe\ncritical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated\nor required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial\nstatements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter\ndoes not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the\ncritical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it\nrelates.\n\n \n\nF-2\n\n \n\n \n\n \n\n \n\n \n**Revenue\nRecognition**\n\n \n \n\n*Description\nof the Matter*\n\nAs\nexplained in Note 2(l) to the consolidated financial statements, the Company generates revenues mainly from selling software products,\nmaintenance and managed services. The Company enters into contracts with customers that include combinations of products and services,\nwhich are generally distinct and accounted for as separate performance obligations. The transaction price is then allocated to the\ndistinct performance obligations based on their standalone selling price (“SSP”) and revenue is recognized when control\nof the distinct performance obligation is transferred to the customer.\n\n \n\nAuditing\nthe Company’s recognition of revenue involved a high degree of auditor judgment due to the effort to evaluate i) the identification\nand determination of whether products and services, such as software licenses and related services, are considered distinct performance\nobligations and the timing of revenue recognition and ii) the determination of SSP for each distinct performance obligation.\n\n \n \n\n*How\nWe*\n\n*Addressed\nthe Matter\nin Our Audit*\n\nWe\nobtained an understanding, evaluated the design and tested the operating effectiveness of internal controls related to the identification\nand determination of distinct performance obligation, and the determination of stand-alone selling prices for each distinct performance\nobligation and the timing of revenue recognition.\n\n \n\nOur\naudit procedures also included, among others, selecting a sample of customer contracts and reading contract source documents for\neach selection, including the executed contract and purchase order and evaluating the appropriateness of management’s application\nof significant accounting policies on the contracts. We tested management’s identification of significant contract terms for\ncompleteness, including the identification and determination of distinct performance obligations and the timing of revenue recognition.\nWe also evaluated the reasonableness of management’s estimate of SSP for products and services and tested the mathematical\naccuracy of management’s calculations of revenue. Finally, we assessed the appropriateness of the related disclosures\nin the consolidated financial statements.\n\n \n\n/s/ KOST\nFORER GABBAY & KASIERER\n\nA Member\nof EY Global\n\n \n\nWe\nhave served as the Company’s auditor since 2009.\n\nTel-Aviv,\nIsrael\n\nMarch 31,\n2026\n\n \n\nF-3\n\n \n\n** **\n\n \n\nKost\nForer Gabbay & Kasierer\n\n144 Menachem\nBegin Road, Building A,\n\nTel-Aviv\n6492102, Israel\n\nTel:\n+972-3-6232525\n\nFax:\n+972-3-5622555\n\ney.com\n\n** **\n\n**Report\nof Independent Registered Public Accounting Firm**\n\n \n\nTo the Shareholders\nand the Board of Directors of RADCOM Ltd.\n\n** **\n\n**Opinion\non Internal Control Over Financial Reporting**\n\n \n\nWe\nhave audited RADCOM Ltd. and subsidiaries’ internal control over financial reporting as of December 31, 2025, based on criteria\nestablished in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission\n(2013 framework) (the COSO Criteria). In our opinion, RADCOM Ltd. and subsidiaries (the Company) maintained, in all material respects,\neffective internal control over financial reporting as of December 31, 2025, based on the COSO Criteria.\n\n \n\nWe\nalso have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated\nbalance sheets of the Company as of December 31, 2025 and 2024 ,the related consolidated statements of income, comprehensive income,\nchanges in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025 and the related\nnotes and our report dated March 31, 2026 expressed an unqualified opinion thereon.\n\n \n\n**Basis\nfor Opinion**\n\n \n\nThe\nCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment\nof the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal\nControl over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial\nreporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect\nto the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange\nCommission and the PCAOB.\n\n \n\nWe\nconducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.\n\n \n\nOur\naudit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,\ntesting and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other\nprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.\n\n \n\nF-4\n\n \n\n \n\n \n\n**Definition\nand Limitations of Internal Control Over Financial Reporting**\n\n \n\nA\ncompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability\nof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting\nprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the\nmaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the\ncompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in\naccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance\nwith authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection\nof unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.\n\n \n\nBecause\nof its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of\nany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,\nor that the degree of compliance with the policies or procedures may deteriorate.\n\n \n\n/s/ KOST\nFORER GABBAY & KASIERER\n\nA Member\nof EY Global\n\n \n\nTel-Aviv,\nIsrael\n\nMarch 31,\n2026\n\n \n\nF-5\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nBALANCE SHEETS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nASSETS \n   \n  \n\n  \n   \n  \n\nCURRENT ASSETS: \n   \n  \n\nCash and cash\nequivalents \n$30,486  \n$19,243 \n\nShort-term bank deposits \n 79,437  \n 75,429 \n\nTrade receivables, net \n 20,245  \n 19,038 \n\nInventories, net \n 318  \n 1,667 \n\nOther\naccounts receivable and prepaid expenses \n 2,036  \n 1,819 \n\n  \n    \n   \n\nTotal current\nassets \n 132,522  \n 117,196 \n\n  \n    \n   \n\nNON- CURRENT ASSETS: \n    \n   \n\n  \n    \n   \n\nSeverance pay fund \n 3,431  \n 2,985 \n\nOther long-term assets \n 2,866  \n 3,484 \n\nProperty and equipment, net \n 988  \n 879 \n\nOperating lease right-of-use assets \n 2,898  \n 3,421 \n\nGoodwill \n 1,243  \n 1,243 \n\nIntangible assets, net \n 1,026  \n 1,366 \n\n  \n    \n   \n\nTotal non-current\nassets \n 12,452  \n 13,378 \n\nTotal assets \n$144,974  \n$130,574 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-6\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nBALANCE SHEETS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY \n   \n  \n\n  \n   \n  \n\nCURRENT LIABILITIES: \n   \n  \n\nTrade payables \n$2,632  \n$2,457 \n\nEmployees and payroll\naccruals \n 7,325  \n 7,175 \n\nDeferred revenues \n 1,100  \n 6,848 \n\nCurrent maturities of\nlease liabilities \n 1,099  \n 966 \n\nOther\nliabilities and accrued expenses \n 10,872  \n 10,463 \n\n  \n    \n   \n\nTotal current\nliabilities \n 23,028  \n 27,909 \n\n  \n    \n   \n\nNON-CURRENT LIABILITIES: \n    \n   \n\nAccrued severance pay \n 4,790  \n 3,868 \n\nOperating lease liabilities \n 2,135  \n 2,438 \n\nOther\nliabilities and accrued expenses \n 916  \n 683 \n\n  \n    \n   \n\nTotal non-current\nliabilities \n 7,841  \n 6,989 \n\n  \n    \n   \n\nTotal liabilities \n 30,869  \n 34,898 \n\n  \n    \n   \n\nCOMMITMENTS AND CONTINGENCIES \n \n \n  \n \n \n \n\n  \n    \n   \n\nSHAREHOLDERS’ EQUITY: \n    \n   \n\nShare capital: \n    \n   \n\nOrdinary Shares of NIS 0.20 par value: Authorized: 20,000,000 shares at December 31, 2025 and 2024; 16,628,757 and 15,951,648 shares issued and 16,592,725 and 15,915,616 shares outstanding at December 31, 2025 and 2024, respectively \n 809  \n 769 \n\nAdditional paid-in capital \n 167,172  \n 160,761 \n\nAccumulated other comprehensive\nloss \n (2,923) \n (2,910)\n\nAccumulated\ndeficit \n (50,953) \n (62,944)\n\n  \n    \n   \n\nTotal shareholders’\nequity \n 114,105  \n 95,676 \n\n  \n    \n   \n\nTotal liabilities\nand shareholders’ equity \n$144,974  \n$130,574 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-7\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**CONSOLIDATED\nSTATEMENTS OF INCOME**\n\n \n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\nRevenues: \n   \n   \n  \n\nProducts \n$36,901  \n$28,217  \n$22,840 \n\nServices \n 34,593  \n 32,792  \n 28,760 \n\n  \n    \n    \n   \n\n  \n 71,494  \n 61,009  \n 51,600 \n\n  \n    \n    \n   \n\nCost of revenues: \n    \n    \n   \n\nProducts \n 10,177  \n 7,092  \n 5,662 \n\nServices \n 7,016  \n 8,654  \n 8,111 \n\n  \n    \n    \n   \n\n  \n 17,193  \n 15,746  \n 13,773 \n\n  \n    \n    \n   \n\nGross profit \n 54,301  \n 45,263  \n 37,827 \n\n  \n    \n    \n   \n\nOperating expenses: \n    \n    \n   \n\nResearch and development \n 20,239  \n 18,659  \n 19,575 \n\nLess\n- royalty-bearing participation \n 363  \n 684  \n 736 \n\n  \n    \n    \n   \n\nResearch\nand development, net \n 19,876  \n 17,975  \n 18,839 \n\n  \n    \n    \n   \n\nSales and marketing \n 19,683  \n 17,794  \n 14,592 \n\nGeneral\nand administrative \n 6,439  \n 6,407  \n 5,058 \n\n  \n    \n    \n   \n\nTotal operating\nexpenses \n 45,998  \n 42,176  \n 38,489 \n\n  \n    \n    \n   \n\nOperating income (loss) \n 8,303  \n 3,087  \n (662)\n\n  \n    \n    \n   \n\nFinancial\nincome, net \n 4,283  \n 4,115  \n 4,557 \n\n  \n    \n    \n   \n\nIncome before taxes on income \n 12,586  \n 7,202  \n 3,895 \n\n  \n    \n    \n   \n\nTaxes\non income \n 595  \n 234  \n 182 \n\n  \n    \n    \n   \n\nNet income \n$11,991  \n$6,968  \n$3,713 \n\n  \n    \n    \n   \n\nBasic\nnet income per Ordinary Share \n$0.74  \n$0.44  \n$0.25 \n\nDiluted\nnet income per Ordinary Share \n$0.71  \n$0.43  \n$0.24 \n\n  \n    \n    \n   \n\nWeighted\naverage number of Ordinary Shares used in computing basic net income per Ordinary Share \n 16,266,468  \n 15,666,457  \n 15,098,642 \n\nWeighted\naverage number of Ordinary Shares used in computing diluted net income per Ordinary Share \n 16,835,529  \n 16,155,150  \n 15,297,947 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-8\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nSTATEMENTS OF COMPREHENSIVE INCOME**\n\n**U.S.\ndollars in thousands**\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nNet income \n$11,991  \n$6,968  \n$3,713 \n\n  \n    \n    \n   \n\nOther comprehensive income (loss), net of\ntaxes: \n    \n    \n   \n\nForeign\ncurrency translation adjustments \n (13) \n 120  \n (122)\n\n  \n    \n    \n   \n\nTotal other comprehensive\nincome (loss) \n (13) \n 120  \n (122)\n\n  \n    \n    \n   \n\nComprehensive income \n$11,978  \n$7,088  \n$3,591 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-9\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n  \nNumber\nof\nshares  \nShare\n\ncapital\namount  \nAdditional\n\npaid-in\ncapital  \nAccumulated\n\nother\ncomprehensive\nloss  \nAccumulated\n\ndeficit  \nTotal\n\nshareholders’\nequity \n\n  \n   \n   \n   \n   \n   \n  \n\nBalance as of January 1, 2023 \n 14,739,082  \n$706  \n$148,610  \n$(2,908) \n$(73,625) \n$72,783 \n\n  \n    \n    \n    \n    \n    \n   \n\nShare-based\ncompensation \n -  \n -  \n 6,117  \n -  \n -  \n 6,117 \n\nRSUs vested \n 568,650  \n 30  \n (30) \n -  \n -  \n - \n\nNet income \n -  \n -  \n -  \n -  \n 3,713  \n 3,713 \n\nOther comprehensive\nloss \n -  \n -  \n -  \n (122) \n -  \n (122)\n\n  \n    \n    \n    \n    \n    \n   \n\nBalance as of December 31, 2023 \n 15,307,732  \n$736  \n$154,697  \n$(3,030) \n$(69,912) \n$82,491 \n\n  \n    \n    \n    \n    \n    \n   \n\nShare-based\ncompensation \n -  \n -  \n 6,097  \n -  \n -  \n 6,097 \n\nRSUs vested \n 607,884  \n 33  \n (33) \n -  \n -  \n - \n\nNet income \n -  \n -  \n -  \n -  \n 6,968  \n 6,968 \n\nOther comprehensive\nincome \n -  \n -  \n -  \n 120  \n -  \n 120 \n\n  \n    \n    \n    \n    \n    \n   \n\nBalance as of December 31, 2024 \n 15,915,616  \n$769  \n$160,761  \n$(2,910) \n$(62,944) \n$95,676 \n\n  \n    \n    \n    \n    \n    \n   \n\nShare-based\ncompensation \n -  \n -  \n 6,116  \n -  \n -  \n 6,116 \n\nRSUs vested \n 635,339  \n 38  \n (38) \n -  \n -  \n - \n\nProceeds from exercise of stock options \n 41,770  \n 2  \n 333  \n -  \n -  \n 335 \n\nNet income \n -  \n -  \n -  \n -  \n 11,991  \n 11,991 \n\nOther comprehensive\nincome \n -  \n -  \n -  \n (13) \n -  \n (13)\n\n  \n    \n    \n    \n    \n    \n   \n\nBalance as of December 31, 2025 \n 16,592,725  \n$809  \n$167,172  \n$(2,923) \n$(50,953) \n$114,105 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-10\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nSTATEMENTS OF CASH FLOWS**\n\n**U.S.\ndollars in thousands**\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\nCash flows from operating activities: \n   \n   \n  \n\n  \n   \n   \n  \n\nNet income \n$11,991  \n$6,968  \n$3,713 \n\nAdjustments to reconcile net income to net\ncash provided by operating activities: \n    \n    \n   \n\nDepreciation and amortization \n 694  \n 679  \n 621 \n\nShare-based compensation \n 6,116  \n 6,097  \n 6,117 \n\nChange in: \n    \n    \n   \n\nSeverance pay, net \n 476  \n 297  \n 137 \n\nTrade receivables, net \n (1,201) \n (5,642) \n (2,332)\n\nOther account receivables\nand prepaid expenses and other long-term assets \n 425  \n (2,185) \n 1,381 \n\nInventories, net \n 1,266  \n (1,421) \n 552 \n\nTrade payables \n 181  \n (175) \n (17)\n\nEmployees and payroll\naccruals \n 128  \n 1,816  \n 192 \n\nOther liabilities and\naccrued expenses \n 465  \n 1,537  \n 2,225 \n\nDeferred revenue \n (5,749) \n 5,390  \n (5,580)\n\nChanges\nin operating lease right-of-use assets and liabilities, net \n 353  \n 11  \n (48)\n\nAccrued\ninterest on bank deposits and other \n (538) \n (1,984) \n (2,255)\n\n  \n    \n    \n   \n\nNet cash provided by\noperating activities \n 14,607  \n 11,388  \n 4,706 \n\n  \n    \n    \n   \n\nCash flows from\ninvesting activities: \n    \n    \n   \n\n  \n    \n    \n   \n\nBusiness acquisitions, net of cash acquired\n(Refer to Note 10) \n -  \n -  \n (2,477)\n\nInvestment in short-term deposits \n (95,010) \n (75,500) \n (65,000)\n\nProceeds from short-term deposits \n 91,383  \n 73,189  \n 64,115 \n\nPurchase of property\nand equipment \n (384) \n (427) \n (232)\n\n  \n    \n    \n   \n\nNet cash used in investing\nactivities \n (4,011) \n (2,738) \n (3,594)\n\n  \n    \n    \n   \n\nCash flows from\nfinancing activities: \n    \n    \n   \n\n  \n    \n    \n   \n\nProceeds from exercise of options \n 335  \n -  \n - \n\n  \n    \n    \n   \n\nNet cash provided by\nfinancing activities \n 335  \n -  \n - \n\n  \n    \n    \n   \n\nForeign currency translation adjustments on\ncash and cash equivalents \n$312  \n$(299) \n$253 \n\n  \n    \n    \n   \n\nIncrease in cash and cash equivalents \n 11,243  \n 8,351  \n 1,365 \n\nCash and cash equivalents\nat beginning of the year \n 19,243  \n 10,892  \n 9,527 \n\n  \n    \n    \n   \n\nCash and cash equivalents\nat end of the year \n$30,486  \n$19,243  \n$10,892 \n\n \n\nF-11\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**CONSOLIDATED\nSTATEMENTS OF CASH FLOWS**\n\n**U.S.\ndollars in thousands**\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n(a) Non-cash investing\nactivities: \n   \n   \n  \n\n  \n   \n   \n  \n\nPurchase\nof property and equipment \n$33  \n$41  \n$43 \n\nReclassification\nfrom inventories to fixed assets \n$83  \n$-  \n$- \n\nLease\nliabilities arising from obtaining right-of-use-assets \n$341  \n$2,709  \n$202 \n\n  \n    \n    \n   \n\n(b) Cash paid during\nthe year: \n    \n    \n   \n\n  \n    \n    \n   \n\nTaxes\non income \n$485  \n$278  \n$190 \n\n \n\nThe\naccompanying notes are an integral part of the consolidated financial statements.\n\n \n\nF-12\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n1: - GENERAL**\n\n \n\n  a. RADCOM Ltd. (the “Company”), an Israeli corporation, is a leader in advanced, intelligent assurance solutions with integrated artificial intelligence operations (AIOps) capabilities. The Company’s flagship intelligent assurance platform, RADCOM ACE, leverages AI-driven analytics and generative artificial intelligence (GenAI) to enhance customer experiences. With solutions that scale from laboratory testing to full-scale deployment, the Company leverages advanced networking technologies to capture real-time data. The Company provides end-to-end, comprehensive network observability from the radio access network (RAN) to the core with an advanced 5G portfolio. The Company’s solutions are designed to be open, vendor-neutral, and cloud-agnostic, driving next-generation network automation, optimization, and efficiencies. Harnessing the power of intelligence, the Company reduces operational costs and enables predictive customer intent insights while integrating with business support systems/operational support systems (BSS/OSS) and service management systems. The Company’s solutions depict 100% of the real-time data on mobile and fixed networks. The Company empowers exceptional quality and service through cutting-edge technologies with valuable performance and subscriber intelligence analytics for customer-centric networks. The Company’s ordinary shares (the “Ordinary Shares”) are listed on the Nasdaq Capital Market under the symbol “RDCM”.\n\n \n\nThe\nCompany has wholly-owned subsidiaries in the United States, Canada, India and Brazil.\n\n \n\n  b. The Company depends on a limited number of customers for selling its solution. Such customers accounted for 86% of the Company’s revenues for the year ended December 31, 2025. If these customers become unable or unwilling to continue to buy the Company’s solution, it could adversely affect the Company’s results of operations and financial position (see also Note 13b2).\n\n \n\nThe\nloss of any major customer, a significant decrease in business from any such customer or a reduction in customer revenue due to adverse\nchanges in the market, economic or competitive conditions or other factors could have a material adverse effect on the Company’s\nbusiness, results of operations and financial condition.\n\n \n\n  c. On April 30, 2023, the Company acquired certain assets and liabilities of Continual Ltd. (“Continual”), an Israel corporation for total gross consideration of $2,477 (see also to Note 10).\n\n \n\nF-13\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\nThe\nconsolidated financial statements are prepared according to United States generally accepted accounting principles (“U.S. GAAP”).\n\n \n\n  a. Use of estimates:\n\n \n\nThe\npreparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that\naffect the amounts reported in the consolidated financial statements and accompanying notes. Such management estimates and assumptions\nare related, but not limited to contingent liabilities, income tax uncertainties, deferred taxes, share-based compensation, fair value\nof assets acquired and liabilities assumed in business combinations, as well as the determination of standalone selling prices in revenue\ntransactions with multiple performance obligations and the estimated period of benefit for deferred contract costs. The Company’s\nmanagement believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they\nare made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent\nassets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during\nthe reporting periods. Actual results could differ from those estimates.\n\n \n\n  b. Financial statements in U.S. dollars (“$” “dollar” or “dollars”):\n\n \n\nThe\nrevenues of the Company and its subsidiaries, other than the Company’s subsidiary in Brazil, are substantially denominated in U.S.\ndollars. Financing activities are made in U.S. dollars. Therefore, the Company’s management believes that the currency of the primary\neconomic environment in which the operations of the Company and its subsidiaries are conducted is the dollar, which is used as the functional\ncurrency.\n\n \n\nTransactions\nand balances originally denominated in dollars are presented at their original amounts. Transactions and balances in other currencies\nare re-measured into dollars in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification\n(“ASC”) No. 830 “Foreign Currency Matters”.\n\n \n\nOther\nthan in the Company’s subsidiary in Brazil, all exchange gains and losses from re-measurement of monetary balance sheet items denominated\nin non-dollar currencies are reflected in the consolidated statement of income when they arise.\n\n \n\nFor the Company’s subsidiary in\nBrazil whose functional currency is the BRL, all amounts on the balance sheets have been translated into the dollar using the exchange\nrates in effect on the relevant balance sheet dates. All amounts in the statements of income have been translated into dollars using the\naverage exchange rate for the relevant period in which those elements were recognized. The resulting translation adjustments are reported\nas a component of accumulated other comprehensive income (loss) in the statements of changes in shareholders’ equity.\n\n \n\nF-14\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  c. Principles of consolidation:\n\n \n\nThe\nconsolidated financial statements include the financial statements of the Company and its wholly owned subsidiaries. All intercompany\ntransactions and balances have been eliminated upon consolidation.\n\n \n\n  d. Cash and cash equivalents:\n\n \n\nThe\nCompany considers all highly liquid deposit instruments with an original maturity of three months or less at the date of purchase to\nbe cash equivalents.\n\n \n\n  e. Short-term and long-term bank deposits:\n\n \n\nShort-term\nbank deposits are deposits with maturities of more than three months but less than one year and which do not meet the definition of cash\nequivalents. Long-term bank deposits are deposits with maturities of more than one year. Such deposits include annual interest rates\nranging between 4.91%-7.25% resulting in accrued interest of $2,221 and $1,845 as of December 31, 2025 and 2024, respectively. The deposits\nare presented according to their terms including accrued interest.\n\n \n\n  f. Trade receivables:\n\n \n\nTrade\nreceivables are recognized when the Company’s right to consideration is unconditional, net of any estimated credit losses. The\nCompany generally does not require collateral or security from its customers. The Company makes estimates of expected credit losses based\nupon its assessment of various factors, including historical experience, the age of the trade receivable balances, credit quality of\nits customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that\nmay affect its ability to collect from customers. The estimated credit loss allowance is recorded as general and administrative expenses\non the Company’s consolidated statements of income. Allowance for credit losses as of December 31, 2025 and as of December 31,\n2024 was immaterial.\n\n \n\n  g. Concentration of credit risk:\n\n \n\nFinancial\ninstruments that may subject the Company to significant concentration of credit risk consist mainly of cash and cash equivalents, short-term\nand long-term bank deposits, severance pay fund and trade receivables.\n\n \n\nCash\nand cash equivalents and short-term bank deposits are maintained with major financial institutions mainly in Israel. Assets held for\nseverance benefits are maintained with major insurance companies and financial institutions in Israel. Such deposits are not insured.\nHowever, management believes that such financial institutions are financially sound and, accordingly, low credit risk exists with respect\nto these investments.\n\n \n\nThe\ntrade receivables of the Company are mainly derived from sales to a diverse set of customers located primarily in the United States,\nEMEA (Europe, the Middle East, and Africa) and Asia. The Company performs ongoing credit evaluations of its customers and, to date, has\nnot experienced any significant losses \n\n \n\nF-15\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  h. Inventories, net:\n\n \n\nInventories\nare stated at the lower of cost and net realizable value and valued on a specific identification cost basis. The cost of inventories\ncomprises costs of purchase and costs incurred in bringing the inventories to their present location and condition. Inventory write-offs\nare provided to cover technological obsolescence, excess inventories and discontinued products.\n\n \n\nInventory\nwrite-off is measured as the difference between the cost of the inventory and net realizable value based upon assumptions about future\ndemand and is charged to the cost of revenues. At the point of the loss recognition, a new, lower-cost basis for that inventory is established,\nand subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.\n\n \n\nInventory\nwrite-off expenses for the year ended December 31, 2025 amounted to $92. No inventory write-off expenses were recorded during the years\nended December 31, 2024 and 2023.\n\n \n\n  i. Property and equipment:\n\n \n\nProperty\nand equipment are stated at cost less accumulated depreciation. Maintenance and repairs are charged to operations as incurred.\n\n \n\nDepreciation\nis calculated on the straight-line method over the estimated useful lives of the assets.\n\n \n\nAnnual\nrates of depreciation are as follows:\n\n \n\n** ** ** ** **%**\n\nComputers and electronic equipment   15 - 33\n\nOffice furniture and equipment   6 - 20\n\nLeasehold improvements   At the shorter of the lease period or useful life of the leasehold improvement\n\n \n\n  j. Impairment of long-lived assets:\n\n \n\nThe\nCompany’s long-lived assets, including finite-lived intangible assets, are reviewed for impairment in accordance with ASC No. 360,\n“Property, plants and equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset\nmay not be recoverable. Recoverability of an asset to be held and used is assessed by a comparison of the carrying amount of the asset\nto the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment\nto be recognized is measured at the amount by which the carrying amount of the asset exceeds its fair value. During the years ended December\n31, 2025, 2024 and 2023, no impairment losses have been recognized.\n\n \n\nF-16\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n** **\n\n  k. Leases\n\n \n\nUnder\nASC No. 842, “Leases” (“ASC 842”), the Company determines if an arrangement is a lease at inception. The Company’s\nassessment is based on: (1) whether the contract includes an identified asset, (2) whether the Company obtains substantially all of the\neconomic benefits from the use of the asset throughout the period of use, and (3) whether the Company has the right to direct how and\nfor what purpose the identified asset is used throughout the period.\n\n \n\nThe\nCompany elected to combine lease and non-lease components for all contract leases. For short-term leases with a term of 12 months or\nless, operating lease right-of use (“ROU”) assets and liabilities are not recognized and the Company records lease payments\non a straight-line basis over the lease term.\n\n \n\nROU\nassets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s\nobligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at commencement date\nbased on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that\nare fixed and determinable at the time of commencement. The Company uses its incremental borrowing rate because the rate implicit in\nthe Company’s leases is not readily determinable. The Company’s incremental borrowing rate is based on the information available\nat the commencement date to determine the present value of the lease payments.\n\n \n\nSeveral\nof the Company’s leases include options to extend the lease and some have termination options that are factored into the Company’s\ndetermination of the lease when appropriate. For purposes of calculating lease liabilities, lease terms include options to extend or\nterminate the lease when it is reasonably certain that the Company will exercise such options. The Company’s lease agreements do\nnot contain any residual value guarantees.\n\n \n\nSee\nNote 9 for further information on leases.\n\n \n\nF-17\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  l. Revenue recognition:\n\n \n\nThe\nCompany’s solution is sold to customers directly, through resellers and to lesser extent through distributors.\n\n \n\nThe\nCompany recognizes revenues in accordance with ASC No. 606, “Revenue from Contracts with Customers”. As such, the Company\nidentifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates\nthe transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance\nobligation as follows:\n\n \n\n \na)\nIdentify the contract\nwith a customer:\n\n \n\nThe\nCompany generally considers either agreements or purchase orders, which in some cases are governed by master agreements, to be contracts\nwith customers. In evaluating the contract with a customer, the Company analyzes the customer’s intent and ability to pay the amount\nof promised consideration and considers the probability of collecting substantially all of the consideration.\n\n \n\n \nb)\nIdentify the performance\nobligations in the contract:\n\n \n\nAt\na contract’s inception, the Company assesses the goods or services promised in a contract with a customer and identifies the performance\nobligations.\n\n \n\nThe\nmain performance obligations would generally include:\n\n \n\nLicense\nfor the Company’s software solutions, professional services, managed services, service type warranty and post-contract customer\nsupport, each of which are generally distinct as these promises are capable of being distinct and are separately identifiable.\n\n \n\n \nc)\nDetermine the transaction\nprice:\n\n \n\nThe\ntransaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or services\nto a customer. Revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities.\nThe Company accounts for shipping and handling activities as fulfillment activities. Shipping and handling activities are classified\nas part of cost of revenues.\n\n \n\nGenerally,\nthe Company doesn’t grant its customers a right to return the products sold. However, in some cases, the arrangements may include\nrefunds, liquidated damages, penalties or other damages if the Company fails to deliver future goods or services or if the goods or services\nfail to meet certain specifications. All of the above are accounted for as variable considerations, which may result in an adjustment\nto the transaction price. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant\nreversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.\n\n \n\nF-18\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\nThe\nCompany’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price\nare based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted)\nthat is reasonably available.\n\n \n\nThe\nCompany uses the practical expedient and does not assess the existence of a significant financing component when the difference between\npayment and revenue recognition is a year or less. As the period of time between delivery and payment for most of the Company’s\ncontracts is less than one year, these contracts are not assessed for a significant financing component. In other contracts, the Company\ndetermined that those contracts generally do not include a significant financing component, as the primary purpose of the invoicing terms\nfor these contracts is to provide customers with simplified and predictable ways of purchasing the Company’s products and services,\nnot to receive or provide financing. Payment terms generally are 30 to 90 days.\n\n \n\n \nd)\nAllocate the transaction\nprice to the performance obligations in the contract:\n\n \n\nTo\ndetermine standalone selling price (“SSP”), the Company maximizes the use of observable standalone sales and observable data,\nwhere available. In instances where performance obligations do not have observable standalone sales, the Company utilizes available observable\ninputs or uses the expected cost-plus margin approach to estimate the price the Company would charge if the products and services were\nsold separately. For software licenses where the SSP cannot be determined based on observable prices, given the same products are sold\nfor a broad range of amounts and the selling price is highly variable, the SSP included in a contract with multiple performance obligations\nis determined by applying a residual approach. SSP of services are typically estimated based on observable transactions when these services\nare sold on a standalone basis or on a cost-plus margin basis. The transaction price is allocated to the separate performance obligations\non a relative SSP basis.\n\n \n\n \ne)\nRecognize revenue when\na performance obligation is satisfied:\n\n \n\nRevenue\nis recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control\nis either transferred over time or at a point in time.\n\n \n\nProducts:\nRevenues from software solutions which include customer acceptance or software license only contracts, are recognized at a point in time\nof the acceptance of the solution or the point in time the software license is delivered.\n\n \n\nServices:\nRevenues related to managed services, maintenance, support and post-contract customer support are recognized ratably over the contract\nperiod since these services have a consistent continuous pattern of transfer to a customer during the contract period. Professional services\nrevenues are recognized as services are performed, using the method that best depicts the transfer of services to the customer, generally\nusing an input method, based on labor hours consumed or ratably, when professional services have a consistent pattern of transfer to\nthe customer.\n\n \n\nF-19\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n** **\n\nDeferred\nrevenues represent unrecognized fees collected, for which revenue has not yet been recognized. Deferred revenues are classified as short-term\nand long-term deferred revenues based on the period in which revenues are expected to be recognized. See also Note 3 for additional revenue\nrecognition disclosures.\n\n \n\n  m. Cost of revenues:\n\n \n\nCost\nof revenues is comprised of cost of third-party hardware and software license fees, maintenance fees related to such third-party hardware\nand software, employees’ salaries and related costs, shipping and handling costs, subcontractors, inventory write-offs, indirect\ntaxes, importation taxes and royalties to the Israel Innovation Authority (the “IIA”).\n\n \n\n  n. Share-based compensation:\n\n \n\nThe\nCompany accounts for share-based compensation in accordance with ASC No. 718, “Compensation — Stock Compensation”,\nwhich requires companies to estimate the fair value of share-based payment awards on the grant date using an option-pricing model.\n\n \n\nThe\nCompany recognizes compensation expenses for the value of its awards over the requisite service period of each of the awards. For graded\nvesting awards subject to service conditions only, the Company uses the straight-line attribution method. The Company estimates expected\nforfeitures.\n\n \n\nThe\nCompany selected the Black-Scholes option-pricing model as the most appropriate fair value method for its share-options awards. The option-pricing\nmodel requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option\nterm. Expected volatility was calculated based upon actual historical share price movements over the most recent periods ending on the\ngrant date, equal to the expected option term. The expected term was estimated pursuant historical option exercise information. The risk-free\ninterest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term to the expected term of the options.\nHistorically the Company has not paid dividends and in addition has no foreseeable plans to pay dividends, and therefore uses an expected\ndividend yield of zero in the option-pricing model.\n\n \n\nNo\noptions were granted in 2023. The fair value for options granted in 2025 and 2024 is estimated at the date of grant with the following\nweighted average assumptions:\n\n \n\n   2025   2024 \n\n         \n\nDividend yield   0%   0%\n\nExercise price   11.89    10.01 \n\nExpected volatility   40.06%   40.06%\n\nRisk-free interest   4.03%   4.03%\n\nExpected life (in years)   10    10 \n\n \n\nF-20\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  o. Advertising and marketing expenses:\n\n \n\nAdvertising\nand marketing expenses consist primarily of marketing campaigns and tradeshows. Advertising and marketing expenses are charged to the\nconsolidated statement of income, as incurred. Advertising and marketing expenses for the years ended December 31, 2025, 2024 and 2023,\namounted to $746, $534 and $622, respectively.\n\n \n\n  p. Research and development costs:\n\n \n\nResearch\nand development costs are charged to the consolidated statement of income as incurred except for royalty-bearing participation from the\nIIA as described in Note 2q.\n\n \n\nASC\nNo. 985-20, “Software - Costs of Computer Software to be Sold, Leased or Otherwise Marketed”, requires capitalization of\ncertain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product\ndevelopment process, technological feasibility is established upon completion of a working model. Costs incurred by the Company between\ncompletion of the working models and the point at which the products are ready for general release have been insignificant. Therefore,\nall research and development costs have been expensed.\n\n \n\n  q. Government grants:\n\n \n\nThe\nCompany receives royalty-bearing grants, which represent participation of the IIA in approved programs for research and development.\nThese amounts are recognized on the accrual basis as a reduction of research and development costs as such costs are incurred. Royalties\nto the IIA are recorded under cost of revenues, when the related sales are recognized (see also Note 8a1).\n\n \n\n  r. Basic and diluted net income per share:\n\n \n\nBasic\nand diluted income per Ordinary Share is presented in conformity with ASC No. 260, “Earnings Per Share”, for all periods\npresented. Basic income per Ordinary Share is computed by dividing net income for each reporting period by the weighted average number\nof Ordinary Shares outstanding during the period.\n\n \n\nDiluted\nincome per Ordinary Share is computed by dividing net income for each reporting period by the weighted average number of Ordinary Shares\noutstanding during the period plus any additional Ordinary Shares that would have been outstanding if potentially dilutive securities\nhad been exercised during the period, calculated under the treasury stock method.\n\n \n\nF-21\n\n \n\n \n\n **RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n** **\n\nCertain\nsecurities were not included in the computation of diluted income per share since they were anti-dilutive. The total weighted average\nnumber of shares related to the outstanding options and restricted share units (“RSUs”) excluded from the calculation of\ndiluted net income per share was 78,974, 50,459 and 342,583 for the years ended December 31, 2025, 2024 and 2023, respectively.\n\n \n\n  s. Income taxes:\n\n \n\nThe\nCompany accounts for income taxes in accordance with ASC No. 740, “Income Taxes” (“ASC 740”). Deferred tax asset\nand liability account balances are recognized for the future tax consequences attributable to differences between the financial statement\ncarrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards.\nDeferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those\ntemporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates\nis recognized in the consolidated statement of income in the period that includes the enactment date. Deferred tax assets and liabilities\nare classified as noncurrent on the balance sheet.\n\n \n\nThe\nCompany evaluates the realizability of deferred tax assets based on all available positive and negative evidence, including historical\noperating results, projections of future taxable income and tax planning strategies. A valuation allowance is established when, based\non the weight of such evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.\n\n \n\nIn\naccordance with ASC 740, the Company recognizes the effect of income tax positions only if those positions are more likely than not to\nbe sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% of the amount likely to be\nrealized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. When applicable,\nthe Company accounts for interest and penalties related to unrecognized tax benefits as a component of income tax expense.\n\n** **\n\n  t. Severance pay:\n\n \n\nThe\nCompany’s liability for severance pay is recorded mainly with respect to its Israeli employees and is calculated pursuant to Israeli\nseverance pay law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance\nsheet date. After completing one full year of employment, the Company’s Israeli employees are entitled to one month’s salary\nfor each year of employment or a portion thereof. The Company’s liability is partially provided by monthly deposits with severance\npay funds, insurance policies and by an accrual. The liability for employee severance pay benefits included on the balance sheet represents\nthe total liability for such severance benefits, while the assets held for severance benefits included on the balance sheet represent\nthe current redemption value of the Company’s contributions made to severance pay funds and to insurance policies.\n\n \n\nF-22\n\n \n\n \n\n  **RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\nThe\ncarrying value of deposited funds includes profits (losses) accumulated up to the balance sheet date. The deposited funds may be withdrawn\nonly upon the fulfillment of the obligation pursuant to Israeli severance pay law or labor agreements.\n\n \n\nThe\nCompany’s agreements with new employees in Israel are in accordance with section 14 of the Severance Pay Law – 1963, which\nprovides that the Company’s contributions to the severance pay fund shall cover its entire severance obligation. Upon termination,\nthe release of the contributed amounts from the fund to the employee shall relieve the Company from any further severance obligation\nand no additional payments shall be made by the Company to the employee. As a result, the related obligation and amounts deposited on\nbehalf of such obligation are not recorded as part of the balance sheet, as the Company is legally released from its severance obligation\nto employees once the amounts have been deposited, and the Company has no further legal ownership of the amounts deposited.\n\n \n\nSeverance\nexpenses for the years ended December 31, 2025, 2024 and 2023 amounted to $1,518, $1,194, and $1,112, respectively.\n\n \n\n  u. U.S. defined contribution plan:\n\n \n\nThe\nU.S. subsidiaries have a 401(k) defined contribution plan covering certain full time and part time employees in the U.S. who meet certain\neligibility requirements, excluding leased employees and contractors. All eligible employees may elect to contribute up to an annual\nmaximum of 100% of their annual compensation to the plan through salary deferrals, subject to Internal Revenue Service limits, but not\ngreater than $23.5 per year (for certain employees between ages 50-59, the maximum contribution is $31 per year).\n\n \n\nThe\nU.S. subsidiaries match amounts equal to 100% of the first 5% of the employee’s base compensation that they contribute to the defined\ncontribution plan per year per employee. For the years ended December 31, 2025, 2024 and 2023, the U.S. subsidiary recorded expenses\nfor matching contributions of $155, $140 and $117, respectively.\n\n \n\n  v. Fair value of financial instruments:\n\n \n\nThe\nCompany follows the provisions of ASC No. 820, “Fair Value Measurement” (“ASC 820”), which defines fair value\nas the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants\nat the measurement date.\n\n \n\nIn\ndetermining a fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring\nfair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable\ninputs be used when available. Observable inputs are inputs that market participants would use in pricing an asset or liability, based\non market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect assumptions that market\nparticipants would use in pricing an asset or liability, based on the best information available under given circumstances.\n\n \n\nF-23\n\n \n\n ** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\nThe\nhierarchy is broken down into three levels, based on the observability of inputs and assumptions, as follows:\n\n \n\nLevel\n1 - Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.\n\n \n\nLevel\n2 - Other inputs that are directly or indirectly observable in the marketplace.\n\n \n\nLevel\n3 - Unobservable inputs which are supported by little or no market activity.\n\n \n\nThe\nfinancial instruments of the Company consist mainly of cash and cash equivalents, bank deposits, trade receivables, trade payables and\nother liabilities and accrued expenses. The fair values of the Company cash and cash equivalents, bank deposits, trade receivables, other\nliabilities and accrued expenses and trade payables approximate their carrying amounts due to their short-term nature.\n\n \n\n  w. Legal contingencies:\n\n \n\nFrom time to time, the Company may be\ninvolved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure.\nIf the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company\naccrues a liability for the estimated loss. The Company’s estimations and related accruals if any are reviewed at least quarterly\nand adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events relating\nto a particular matter.\n\n \n\n  x. Comprehensive income:\n\n** **\n\nThe\nCompany accounts for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which establishes standards\nfor the reporting and displays of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive\nincome generally represents all changes in shareholders’ equity during the period except those resulting from investments by, or\ndistributions to, shareholders. The Company determined that its only item of other comprehensive income relates to foreign currency translation\nadjustment and gains or losses on intercompany foreign currency transactions that are of a long-term investment nature in connection\nwith its subsidiary in Brazil.\n\n \n\nF-24\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  y. Business combination:\n\n \n\nThe\nCompany accounts for its business acquisitions in accordance with ASC No. 805, “Business Combinations.” The Company uses\nits best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed\nat the business combination date. The total purchase price allocated to the tangible and intangible assets acquired is assigned based\non the fair values as of the date of the acquisition. During the measurement period, which does not exceed one year from the acquisition\ndate, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Goodwill\ngenerated from the business combinations is primarily attributable to synergies between the Company and acquired companies’ respective\nproducts and services. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. \n\n** **\n\n  z. Goodwill and Other Intangible Assets:\n\n** **\n\nGoodwill\nand certain other purchased intangible assets have been recorded in the Company’s financial statements as a result of acquisitions.\n\n \n\nGoodwill\nrepresents excess of the purchase price in a business combination over the fair value of identifiable tangible and intangible assets\nacquired. Goodwill is not amortized, but rather is subject to an impairment test.\n\n \n\nASC\nNo. 350, “Intangible—Goodwill and Other” requires goodwill to be tested for impairment at least annually and, in certain\ncircumstances, between annual tests. The accounting guidance gives the option to perform a qualitative assessment to determine whether\nfurther impairment testing is necessary. The qualitative assessment includes judgement and considers events and circumstances that might\nindicate that a reporting unit’s fair value is less than its carrying amount. The Company operates as one reporting unit. The Company\nelects to perform an annual impairment test of goodwill as of December 31 of each year, or more frequently if impairment indicators are\npresent.\n\n \n\nFor\nthe three years ended December 31, 2025, no impairment losses were identified.\n\n \n\nPurchased\nintangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful\nlives of the respective assets.\n\n \n\nAmortization\nis calculated using the straight-line method over the estimated useful lives of the assets at the following:\n\n \n\n  **December 31, 2025**\n\nTechnology   4.67 years\n\nCustomer relationships   7.67 years\n\n \n\nF-25\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)**\n\n \n\n  aa. Recently adopted accounting standards:\n\n \n\n \n1.\nIn December\n2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) - Improvements to Income\nTax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation, as well as\nprovide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures\nof state versus federal income tax expense and taxes paid. The amendments in this ASU were required to be adopted for fiscal years\nbeginning after December 15, 2024. The Company adopted this standard for its annual period beginning January 1, 2025, on a prospective\nbasis, which resulted in updated income tax disclosures. See Note 11 for further information.\n\n ** **\n\n \nab.\nRecently\nissued accounting standards:\n\n \n\n \n1.\nIn July 2025, the FASB\nissued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable\nand Contract Assets. This amendment introduces a practical expedient for the application of the Current Expected Credit Loss (“CECL”)\nmodel to current accounts receivable and contract assets. ASU 2025-05 is effective for fiscal years beginning after December 15,\n2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating\nthe timing of adoption and impact of this amendment on its consolidated financial statements and related disclosures.\n\n \n \n \n\n \n2.\nIn September 2025, the\nFASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) - Targeted Improvements to the\nAccounting for Internal-Use Software. The ASU was updated to consider different methods of software development and requires\ninternal use software costs to be capitalized when management has authorized and committed to funding the software project and when\nsignificant uncertainty associated with the development of the software has been resolved. The amendments in this ASU are required\nto be adopted for annual and interim reporting periods beginning after December 15, 2027, with early adoption permitted, and may\nbe applied either through a prospective, retrospective or a modified transition approach. The Company is currently evaluating the\neffect of adopting the ASU on its consolidated financial statements.\n\n \n \n \n\n \n3.\nIn December 2025, the FASB\nissued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The update provides\nrecognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related\nto an asset and grants related to income. The amendments introduce two permitted approaches for asset-related grants: a deferred\nincome approach or a cost accumulation approach. The guidance is effective for the Company beginning January 1, 2029, with early\nadoption permitted. The Company is currently evaluating the impact on its consolidated financial statements.\n\n** **\n\nF-26\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n3: - REVENUE RECOGNITION**\n\n \n\nRevenue\nis recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control\nis either transferred over time or at a point in time, which affects the revenue recognition schedule.\n\n \n\nCosts\nto obtain contracts:\n\n \n\nThe\nCompany capitalizes an asset for the incremental costs of obtaining a contract whenever such expenses are expected to be recovered. Capitalized\ncosts derive primarily from sales commissions or incentives granted to employees and partners. The Company’s contracts with customers\ninclude performance obligations related to products and services, some of which are satisfied at a point in time and others over time.\nCommission costs related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue\nis recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time are deferred and\nrecognized on a systematic basis that is consistent with the transfer of the products or services to which the asset relates.\n\n \n\nAmortization\nexpense is included in sales and marketing expenses in the accompanying consolidated statements of income. The Company elected to apply\nthe practical expedient and recognize incremental\n\ncosts\nof obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized\nis one year or less.\n\n \n\nDeferred\ncommission costs capitalized are periodically reviewed for impairment. As of December 31, 2025 and 2024, the deferred commission costs\ncapitalized included within other long-term receivables in the consolidated balance sheets were $2,408 and $3,057, respectively. During\nthe year ended December 31, 2025, the Company recorded new contract acquisition assets in the amount of $1,245.\n\n \n\nDuring\nthe years ended December 31, 2025, 2024 and 2023 the Company amortized $1,894, $2,112 and $1,319, respectively, of capitalized contract\nacquisition costs which are substantially included in the sales and marketing expenses. No impairment losses were recognized during such\nperiod.\n\n** **\n\nContract\nbalances:\n\n \n\nThe\nCompany receives payments from customers based upon contractual payment schedules. Trade receivables are recorded when the right to consideration\nbecomes unconditional. Billed receivables are recorded when an invoice is issued to the customer. Unbilled receivables include amounts\nrelated to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. As of December\n31, 2025 and 2024, unbilled receivables balances amounted to $9,359 and $7,336, respectively and are included within trade receivables\nbalance in the Company’s balance sheets.\n\n** **\n\nTransaction\nprice allocated to remaining performance obligations represents non-cancelable contracts that have not yet been recognized, which includes\ndeferred revenues and amounts not yet received that will be recognized as revenue in future periods.\n\n \n\nAs\nof December 31, 2025, the Company had $65,463 of remaining performance obligations not yet satisfied or partly satisfied related to revenues.\nThe Company expects to recognize approximately 67% of this amount as revenues during the next 12 months and the remainder thereafter.\n\n \n\nF-27\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n3: - REVENUE RECOGNITION (Cont.)**\n\n \n\nContract\nliabilities consist of deferred revenue and include unearned amounts received that do not meet the revenue recognition criteria as of\nthe balance sheet date.\n\n \n\nAs of December 31, 2025, the Company\nhad a balance of $1,100 of deferred revenues compared to $6,848 as of December 31, 2024. The change in the deferred revenues and advances\nfrom customers mainly derived from recognizing revenue in the current period related to performance obligations for which payments were\nreceived in prior periods.\n\n \n\nDuring\nthe year ended December 31, 2025, the Company recognized $6,848 that were included in deferred revenue (short-term contract liability)\nas of December 31, 2024.\n\n \n\nFor\ndisaggregation of revenues please see Note 13b1. \n\n \n\n**NOTE\n4: - INVENTORIES**\n\n** **\n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\nFinished\nproducts (*) \n$318  \n$1,667 \n\n \n\n(*) Includes amounts of $0 and $1,483 as of December 31, 2025 and 2024, respectively, with respect to inventory delivered to customers for which control has not been transferred.\n\n** **\n\n**NOTE\n5: - OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES**\n\n \n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nGovernmental\nauthorities \n$848  \n$628 \n\nPrepaid expenses \n 982  \n 1,033 \n\nOthers \n 206  \n 158 \n\n  \n$2,036  \n$1,819 \n\n \n\nF-28\n\n \n\n \n\n **RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n6: - PROPERTY AND EQUIPMENT, NET**\n\n \n\nComposition\nof assets, grouped by major classification, is as follows:\n\n \n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nCost: \n   \n  \n\nComputers\nand electronic equipment \n$5,205  \n$4,827 \n\nOffice furniture and\nequipment \n 414  \n 407 \n\nLeasehold\nimprovements \n 353  \n 334 \n\n  \n 5,972  \n 5,568 \n\nAccumulated depreciation: \n    \n   \n\nComputers and electronic\nequipment \n 4,500  \n 4,263 \n\nOffice furniture and\nequipment \n 255  \n 232 \n\nLeasehold\nimprovements \n 229  \n 194 \n\n  \n 4,984  \n 4,689 \n\n  \n$988  \n$879 \n\n \n\nDepreciation\nexpenses for the years ended December 31, 2025, 2024 and 2023 amounted to $354, $338 and $393, respectively.\n\n \n\n**NOTE\n7: - OTHER CURRENT LIABILITIES AND ACCRUED EXPENSES**\n\n** **\n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nRoyalties - IIA payable \n$1,535  \n$1,378 \n\nAccrued commissions \n 4,150  \n 3,725 \n\nAccrued expenses \n 5,187  \n 5,360 \n\n  \n$10,872  \n$10,463 \n\n** **\n\n**NOTE\n8: - COMMITMENTS AND CONTINGENCIES**\n\n \n\n \na.\nRoyalty commitments:\n\n \n\n \n1.\nThe Company receives research\nand development grants from the IIA. In consideration for the research and development grants received from the IIA, the Company\nhas undertaken to pay royalties as a percentage of revenues from services and products related to research and development projects\nfinanced. If the Company does not generate sales of related services and products developed with funds provided by the IIA, the Company\nis not obligated to pay royalties or repay the grants.\n\n \n\nF-29\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n8: - COMMITMENTS AND CONTINGENCIES (Cont.)**\n\n \n\n   \nRoyalties are payable at the rate of 3% from the time of commencement of sales of all of the Company’s products until the cumulative amount of the royalties paid equals 100% of the dollar-linked amounts of the grants received, plus Secured Overnight Financing Rate (“SOFR”) interest.\n\n \n\nGrants received from the IIA for applications that had been approved before June 30, 2017, bear an annual interest rate that applied at the time of the approval of the applicable IIA filing, and that interest rate will apply to all of the funding received under that IIA approval, Grants received from the IIA for applications approved after June 30, 2017, bear an annual interest rate based on the 12-month LIBOR, until December 31, 2023, bear an annual interest rate based on the 12-month SOFR, or at an alternative rate published by the Bank of Israel, with the addition of 0.72%. Grants for applications approved after January 1, 2024 and until December 31, 2024 bear the higher of (i) the 12 months SOFR interest rate, plus 1%, or (ii) a fixed annual interest rate of 4%.\n\n \n\nAs of December 31, 2025, the Company’s total commitment with respect to royalty-bearing participation received or accrued, net of royalties paid or accrued, amounted to $56,016. The total research and development grants that the Company received from the IIA as of December 31, 2025 were $50,226. The accumulated interest as of December 31, 2025, was $30,442 and the accumulated royalties paid to the IIA were $24,652.\n\n \n\nRoyalty expenses relating to the IIA grants included in cost of revenues during the years ended December 31, 2025, 2024 and 2023 were $2,144, $1,825, and $1,528, respectively.\n\n \n\nIn May 2010, the Company received a notice from the IIA regarding alleged miscalculations of the amount of royalties paid by the Company to the IIA for the years 1992-2009 and the revenues basis on which the Company had to pay royalties. The Company believes that all royalties due to the IIA from the sale of products developed with funding provided by the IIA during such years were properly paid or were otherwise accrued. During 2011, the Company reviewed with the IIA the alleged miscalculations. The Company assessed the merits of the aforesaid arguments raised by the IIA and recorded a liability for an estimated loss.\n\n \n\n  2. In April 2012 and in April 2014, the MOE approved the Company’s application for participation in funding the setting up of the Company’s India subsidiary and China branch as part of a designated grants plan for setting up and establishing a marketing agency in India and China. The grant was intended to cover up to 50% from the costs of the office establishment, logistics expenses and hiring employees and consultants in India and China, based on the approved budget for the plan over a period of three years. The total marketing grants received by the Company from the MOE during the years 2012 to 2017 were in the amount of $668. No further grants are expected to be received from such plans.\n\n \n\nThe\nCompany is obligated to pay to the MOE royalties of 3% on the increased sales in the target market, with respect to the year during which\nthe grant was approved over a period of five years, but not more than the total linked amount of the grant received.\n\n \n\nNo\nroyalties were paid to the MOE during the years ended December 31, 2025, 2024 and 2023.\n\n \n\nF-30\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n8: - COMMITMENTS AND CONTINGENCIES (Cont.)**\n\n \n\n  3. According to the Company’s agreements with the Israel-U.S Bi-National Industrial Research and Development Foundation (“BIRD-F”), the Company is required to pay royalties at a rate of 5% of sales of products developed with funds provided by the BIRD-F, up to an amount equal to 150% of the BIRD-F’s grant, linked to the United States CPI relating to such products. The last funds from the BIRD-F were received in 1996. In the event the Company does not generate sales of products developed with funds provided by the BIRD-F, the Company is not obligated to pay royalties or repay the grants.\n\n \n\nThe\ntotal research and development funds that the Company has received from the BIRD-F were $340 (CPI linked amount of $710). According to\nthe above, as of December 31, 2025, the total royalties commitment the Company may be required to pay is an amount of up to $1,064 out\nof which $586 was paid by the Company in previous years. The remaining commitment with respect to royalty-bearing participation received,\nnet of royalties paid or accrued, amounted to $478 as of December 31, 2025.\n\n** **\n\nSince\n2003, the Company has not generated sales of products developed with the funds provided by the BIRD-F. Therefore, the Company has not\nbeen obligated to pay royalties or repay the grant since such date. \n\n \n\n \nb.\nBank guarantees:\n\n \n\n  1. As of December 31, 2025, the Company issued a bank guarantees to the Israeli Customs Authority that amounted to $31, which will expire on April 30, 2026.\n\n \n\n  2.\nAs of December 31, 2025, the Company issued a bank guarantees to a\nIsrael entity in Israel as follow:\n\n \n\n(a) Approximately $44, which will expire on February 28, 2026.\n\n \n\n(b) Approximately $767, which will expire on December 31, 2026.\n\n \n\n(c) Approximately $165, which will expire on March 31, 2027.\n\n \n\n \nc.\nLegal\nproceedings\n\n \n\nOn\nJuly 8, 2025, a former service provider filed a claim against the Company alleging that, notwithstanding his engagement as an external\nlegal service provider and subsequently as a non-employee director, an employment relationship existed with the Company. The claim includes\ndemands for statutory labor-related payments, severance-related penalties, moral damages, and attorneys’ fees, totaling approximately\nUSD 1,255.\n\n \n\nThe\nCompany disputes the allegations. The Company has recognized a provision for the full amount of the claim in its financial statements\n\n \n\nF-31\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n9: - LEASES**\n\n** **\n\nThe\nCompany has entered into various operating lease agreements for certain of its offices and car leases with original lease periods expiring\nbetween 2028 and 2029. Most of the lease agreements include one or more options to renew. The Company does not assume renewals in determination\nof the lease term unless the renewals are deemed to be reasonably assured at lease commencement.\n\n** **\n\nLease\npayments included in the measurement of the operating lease liability comprise the following: the fixed non-cancelable lease payments\nand payments for optional renewal periods where it is reasonably certain the renewal period will be exercised. The Company’s lease\nagreements do not contain any material residual value guarantees or material restrictive covenants.\n\n \n\nThe\nimplicit rate within the operating leases is generally not determinable; therefore, the Company uses its Incremental Borrowing Rate (“IBR”)\nbased on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is\nestimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in the economic environment\nwhere the leased asset is located.\n\n \n\nOn\nMarch 31, 2025, the Company’s lease of its offices in India was amended. As a result of the amendment, the operating lease ROU\nand the operating lease liability increased by $341.\n\n \n\nThe\nfollowing table represents the weighted-average remaining lease term and discount rate:\n\n** **\n\n   December 31,   December 31, \n\n   2025   2024 \n\n         \n\nWeighted average remaining lease term   2.87 years    3.82 years \n\n           \n\nWeighted average discount rate   5.48%   5.26%\n\n \n\nThe\ncomponents of lease expense for the year ended December 31, 2025 were as follows:\n\n \n\n  \nYear ended  \nYear ended  \nYear ended \n\n  \nDecember 31,\n\n2025  \nDecember 31,\n\n2024  \nDecember 31,\n\n2023 \n\n  \n   \n   \n  \n\nFixed lease costs \n$1,197  \n$1,150  \n$1,108 \n\nShort-term lease costs \n 6  \n 9  \n 28 \n\nTotal\nlease expense \n$1,203  \n$1,159  \n$1,136 \n\n \n\nCash\npaid for amounts included in the measurement of operating lease liabilities was $822, $822, and 818 during the years ended December 31,\n2025, 2024 and 2023, respectively.\n\n** **\n\nF-32\n\n \n\n \n\n **RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n9: - LEASES (Cont.)**\n\n** **\n\nMaturities\nof the Company’s operating lease liabilities as of December 31, 2025 are as follows:\n\n \n\n  \nOperating\n\nLeases \n\n  \n  \n\n2026 \n$1,233 \n\n2027 \n 1,224 \n\n2028 \n 1,013 \n\n2029 \n 21 \n\nTotal\nundiscounted lease payments \n$3,491 \n\nLess:\nimputed interest \n (257) \n\nPresent\nvalue of lease liabilities \n$3,234 \n\n \n\n**NOTE 10: -\nGOODWILL, AND INTANGIBLE ASSETS, NET**\n\n** **\n\nOn\nApril 30, 2023, the Company acquired certain assets and liabilities of Continual for total gross consideration of $2,477. The asset acquisition\nwas accounted for as a business combination. The Goodwill acquired amounted to $ 1,243. Continual is a leading mobility experience analytics\ncompany that uses Artificial Intelligence (AI) and Machine Learning (ML) to deliver advanced insights to help telecom operators improve\ntheir subscribers mobility experience. The Company expensed the related acquisition costs of $57 in General and administrative.\n\n \n\nGoodwill\ngenerated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies\nfrom integrating Continual’s technology into the Company’s portfolio. Goodwill is deductible for tax purposes.\n\n** **\n\nThe\ncomposition of intangible assets is as follows:\n\n** **\n\n  \nYear ended\n\nDecember 31,  \nYear ended\n\nDecember 31, \n\n  \n2025  \n2024 \n\nOriginal amount: \n   \n  \n\nTechnology \n$1,048  \n$1,048 \n\nCustomer relationships \n 887  \n 887 \n\n  \n$1,935  \n$1,935 \n\nLess - accumulated amortization \n    \n   \n\nTechnology \n$600  \n$376 \n\nCustomer relationships \n 309  \n 193 \n\n  \n 909  \n 569 \n\nIntangible assets,\nnet \n$1,026  \n$1,366 \n\n \n\nAmortization\nexpenses for the years ended December 31, 2025, 2024 and 2023 amounted to $340, $341 and $228, respectively.\n\n** **\n\nF-33\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n** **\n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE 10: - GOODWILL, AND INTANGIBLE ASSETS,\nNET (Cont.)**\n\n** **\n\nThe\nestimated future amortization expense of intangible assets as of December 31, 2025 is as follows:\n\n \n\n  \nAmortization\nexpenses \n\n  \n  \n\n2026 \n$340 \n\n2027 \n 339 \n\n2028 \n 116 \n\n2029 \n 116 \n\n2030 \n 115 \n\nTotal\nfuture amortization expenses \n$1,026 \n\n \n\n**NOTE\n11: - TAXES ON INCOME**\n\n \n\n \na.\nIsraeli taxation:\n\n \n\nTaxable\nincome of the Company is subject to the Israeli corporate tax at the rate of 23% for all years presented.\n\n \n\nTax\nbenefits under the Law for the Encouragement of Capital Investments, 1959 (“the Law”):\n\n \n\nIn\nAugust 2013, the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which\nincludes Amendment 71 to the Law (“Amendment 71”) was enacted. Per Amendment 71, the tax rate on preferred income from a\npreferred enterprise in 2014-2016 will be 9% in certain areas in Israel (“Development Area A”) and 16% in other areas. In\n2017, the tax rate at Development Area A was reduced to 7.5%.\n\n \n\nThe\nCompany may claim the tax benefits offered by Amendment 71 in its tax returns, provided that its facilities meet the criteria for tax\nbenefits set out by Amendment 71. A company is also granted a right to approach the Israeli Tax Authorities for a pre-ruling regarding\nits eligibility for benefits under Amendment 71 (and in some cases is required to apply for such approval).\n\n \n\nIn\nDecember 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years),\n2016 which includes Amendment 73 to the Law (“Amendment 73”) was published. Amendment 73, which came into effect in January\n2017, prescribes special tax tracks for technological enterprises, granting such enterprises a tax rate of 7.5% (in Development Area\nA) and 12% (in other areas).\n\n \n\nUnder\nAmendment 73, any dividends distributed to “foreign companies”, as defined in such law, by companies having over 90% foreign\n(i.e., non-Israeli) ownership, deriving from income from the technological enterprises will be subject to tax at a rate of 4%.\n\n \n\nIn\norder to comply with the new track determined in Amendment 73, a company must meet certain criteria defined within law (among others\nR&D expenses and employees at a certain rate).\n\n \n\nThe\nCompany has yet to claim the above-mentioned tax benefits offered and accordingly such reduced taxes were not considered in the computation\nof the deferred taxes and valuation allowance as of December 31, 2025.\n\n \n\nF-34\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n11: - TAXES ON INCOME (Cont.)**\n\n** **\n\nIn\naccordance with the tax laws, tax returns submitted up to and including the 2020 tax year can be regarded as final. As of December\n31, 2025, no final tax assessments have been received for such years.\n\n \n\nTax\nloss carryforward:\n\n \n\nAs\nof December 31, 2025, the Company’s estimated tax loss carryforward and capital loss were $27,607 and $1,726, respectively.\nSuch losses can be carried forward indefinitely to offset any future taxable income of the Company.\n\n \n\nAs\nof December 31, 2025, the Company’s research and development expenses carryforward for tax purposes in Israel amounted to approximately\n$1,138.\n\n** **\n\n \nb.\nForeign subsidiaries:\n\n** **\n\nU.S.\nsubsidiary:\n\n** **\n\n  1. The U.S. subsidiary is taxed under United States federal and state tax rules. Income tax is calculated based on a U.S. federal tax rate of 21%.\n\n \n\n \n2.\nThe U.S.\nsubsidiary utilized the federal tax loss carryforward from previous years and has no tax loss carryforward as of December 31, 2025.\n\n** **\n\n \n3.\nThe U.S. subsidiary has\nnot received final tax assessments since incorporation. In accordance with the tax laws, tax returns submitted up to and including\nthe 2021 tax year can be regarded as final.\n\n \n\nBrazilian\nsubsidiary:\n\n** **\n\n  1. The Brazilian subsidiary is taxed under Brazilian tax rules. Income tax is calculated based on a 34% rate.\n\n \n\n  2. The Brazilian subsidiary’s tax loss carryforward amounted to $2,746 as of December 31, 2025, for tax purposes. Tax losses may be carried forward indefinitely but can only be offset up to 30% of the subsidiary’s taxable income for a tax period.\n\n \n\n \n3.\nThe Brazilian subsidiary\nhas not received final tax assessments since incorporation. In accordance with the tax laws, tax returns submitted up to and including\nthe 2020 tax year can be regarded as final.\n\n \n\nF-35\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n11: - TAXES ON INCOME (Cont.)**\n\n** **\n\nIndian\nsubsidiary:\n\n** **\n\n  1. The Indian subsidiary is taxed under Indian tax rules. Income tax is calculated based on a 25% rate.\n\n \n\n \n2.\nThe Indian subsidiary has\nnot received final tax assessments since incorporation. In accordance with the tax laws, tax returns submitted up to and including\nthe 2019 tax year can be regarded as final.\n\n \n\nCanadian\nsubsidiary:\n\n** **\n\n  1. The Canadian subsidiary is taxed under Canadian tax rules. Income tax is calculated based on a 26.5% rate, as a non-Canadian controlled entity.\n\n  \n\n \n2.\nThe Canadian\nsubsidiary has not received final tax assessments since incorporation. In accordance with the tax laws, tax returns submitted up\nto and including the 2023 tax year and not yet regarded as final.\n\n \n\n \nc.\nDeferred taxes:\n\n \n\nDeferred\ntaxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting\npurposes and for tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:\n\n \n\n  \nDecember\n31 \n\n  \n2025  \n2024 \n\nDeferred tax assets: \n   \n  \n\nCarryforward\ntax losses \n$7,378  \n$10,093 \n\nResearch and development \n 262  \n 1,423 \n\nOperating lease liabilities \n 752  \n 810 \n\nShare-based compensation \n 3,124  \n 2,500 \n\nAccrued\nsocial benefits and other \n 699  \n 520 \n\n  \n    \n   \n\nDeferred tax assets before valuation allowance \n 12,215  \n 15,346 \n\nLess - valuation allowance \n (11,434) \n (14,416)\n\nTotal deferred tax assets \n 781  \n 930 \n\n  \n    \n   \n\nDeferred tax liabilities: \n    \n   \n\nOperating lease ROU assets \n$(675) \n$(815)\n\nOther \n (106) \n (115)\n\nTotal deferred tax liabilities \n (781) \n (930)\n\n  \n    \n   \n\nNet deferred tax assets \n$-  \n$- \n\n \n\nF-36\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n11: - TAXES ON INCOME (Cont.)**\n\n** **\n\nThe\nnet change in the total valuation allowance for the year ended December 31, 2025 was a decrease of $2,982. In assessing the realization\nof deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not\nbe realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in\nwhich those temporary differences and tax loss carryforward are deductible. Management considers the projected taxable income and tax-planning\nstrategies in making this assessment.\n\n \n\nThe\nCompany recorded a valuation allowance for certain of its deferred tax assets. The Company concluded that, based on the weight of available\npositive and negative evidence, it was more likely than not that the deferred tax assets would not be recoverable due to uncertainty\nregarding future taxable income. In assessing the realizability of deferred tax assets, the key assumptions used to determine positive\nand negative evidence included the Company’s current trends related to actual taxable earnings or losses, and expected future reversals\nof existing taxable temporary differences, as well as projections for future annual results.\n\n \n\n \nd.\nTaxes on income are mainly\ncomprised from state tax accrual with regards to the U.S. subsidiary, withholding taxes that were deducted by the Company’s\ncustomers as well as tax expenses of the Indian subsidiary.\n\n \n\n  e. The components of income before income taxes are as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nDomestic\n(Israel) \n$11,106  \n$5,642  \n$2,610 \n\nForeign \n 1,480  \n 1,560  \n 1,285 \n\nIncome\n(loss) before income taxes \n$12,586  \n$7,202  \n$3,895 \n\n \n\n  f.\nThe components of income tax expenses are as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nCurrent: \n   \n   \n  \n\nDomestic\n(Israel) \n$286  \n$-  \n$- \n\nForeign \n 309  \n 234  \n 182 \n\nTotal\nIncome tax expenses \n$595  \n$234  \n$182 \n\nDeferred: \n    \n    \n   \n\nDomestic\n(Israel) \n$-  \n$-  \n$- \n\nForeign \n -  \n -  \n - \n\nTotal\nIncome tax expenses \n$595  \n$234  \n$182 \n\n \n\nF-37\n\n \n\n** **\n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n11: - TAXES ON INCOME (Cont.)**\n\n \n\n  g.\n**Uncertain tax benefits**\n\n \n\nA reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:\n\n \n\n  \nYear ended\nDecember 31, \n\n  \n2025 \n\n  \n  \n\nBalance at beginning of the year \n$- \n\nAdditions for taxes positions \n 286 \n\nBalance\nat the end of the year \n$286 \n\n \n\nDuring\nthe year 2025, the Company did not incur any interest or penalties related to its uncertain tax benefits.\n\n \n\n  h. A reconciliation of the Company’s theoretical income tax benefit to actual income tax expense (benefit) following the adoption of ASU 2023-09 is as follows:\n\n \n\n  \nYear Ended\n\nDecember 31, \n\n  \n2025 \n\n  \n   \n  \n\nTax at Israel statutory rate \n$2,895  \n 23.0%\n\nForeign tax effects: \n (29) \n (0.2)\n\nChange in valuation allowances \n (2,617) \n (20.8)\n\nNontaxable or nondeductible items: \n    \n   \n\n  Share-based\ncompensation \n 39  \n 0.3 \n\n  Other \n 23  \n 0.2 \n\nChange in unrecognized tax benefits \n 264  \n 2.3 \n\nOther \n 20  \n 0.2 \n\nEffective\ntax rate \n$595  \n 5.0%\n\n \n\nF-38\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n11: - TAXES ON INCOME (Cont.)**\n\n \n\n    A reconciliation of the Company’s theoretical income tax benefit to actual income tax expense (benefit) before the adoption of ASU 2023-09 is as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2024  \n2023 \n\n  \n   \n  \n\nIncome (loss)\nbefore income taxes, as reported in the consolidated statements of income (loss) \n$7,202  \n$3,895 \n\nStatutory tax rate in\nIsrael \n 23% \n 23%\n\nTheoretical tax expense (benefit) \n$1,656  \n$896 \n\nIncrease (decrease) in income taxes resulting\nfrom: \n    \n   \n\nTax rate differential\non foreign subsidiaries \n (15) \n (25)\n\nNon-deductible expenses\nand other permanent differences \n (328) \n 654 \n\nDifferences in taxes\narising from foreign currency exchange, net \n 218  \n (81)\n\nChanges\nin carry forward tax losses and other temporary differences for which valuation allowance was provided \n (1,346) \n (1,267)\n\nOther \n 49  \n 5 \n\nIncome\ntaxes \n$234  \n$182 \n\n** **\n\n  i.\nTax paid:\n\n \n\nCash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:\n\n** **\n\n  \nYear Ended\nDecember 31, \n\n  \n2025 \n\n  \n  \n\nIsrael \n$21 \n\nU.S. \n   \n\n   U.S. federal \n 297 \n\n   U.S.\nstate \n 33 \n\nTotal U.S. \n 330 \n\nIndia \n 132 \n\nOther \n 2 \n\nEffective\ntax rate \n$485 \n\n** **\n\nF-39\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n12: - SHAREHOLDERS’ EQUITY**\n\n \n\n  a. The number of Ordinary Shares outstanding at December 31, 2025, and 2024 does not include 5,189 Ordinary Shares issued, which are held by a subsidiary, and 30,843 Ordinary Shares issued which are held by the Company.\n\n \n\nOrdinary\nShares confer all rights to their holders, e.g. voting, equity and receipt of dividends.\n\n \n\n \nb.\nShare option plan:\n\n \n\n \n1.\nThe Company has granted\noptions under an option plan as follows:\n\n \n\n \na)\nThe 2013 Share Option Plan:\n\n \n\nOn\nApril 3, 2013, the Company approved a new share option plan (the “2013 Share Option Plan”). The 2013 Share Option Plan provides\nfor the grant of options to purchase Ordinary Shares to provide incentives to employees, directors, consultants and contractors of the\nCompany. In accordance with Section 102 of the Income Tax Ordinance (New Version) - 1961, the Company’s Board of Directors (the\n“Board”) elected the “Capital Gains Route”.\n\n** ** \n\nOn\nFebruary 19, 2015, the Board adopted an amendment to the 2013 Share Option Plan pursuant to which the Company may grant options to purchase\nits Ordinary Shares and RSUs to its employees, directors, consultants and contractors. The 2013 Share Option Plan expired on April 2,\n2023.\n\n \n\n  b) During the year ended December 31, 2023, the Company’s Board approved the grant of 235,000 RSUs to certain employees and directors of the Company. Such RSUs have vesting schedules of 2-4 years, commencing as of the date of grant under the 2013 Share Option Plan.\n\n \n\n \nc)\nThe 2023 Equity Incentive\nPlan:\n\n \n\nOn\nMarch 28, 2023, the Company’s Board adopted a new equity incentive plan named the “2023 Equity Incentive Plan” pursuant\nto which the Company may grant options to purchase its Ordinary Shares and RSUs to its employees, directors, consultants and contractors.\nThe 2023 Equity Incentive Plan expires on March 28, 2033.\n\n \n\n  d) During the year ended December 31, 2023, the Company’s Board approved the grant of 963,500 RSUs to certain employees and directors of the Company. Such RSUs have vesting schedules of 2-4 years, commencing as of the date of grant under the 2023 Equity Incentive Plan.\n\n \n\n  e) During the year ended December 31, 2024, the Company’s Board approved the grant of 997,364 RSUs and 112,028 options to certain employees and directors of the Company. Such RSUs have vesting schedules of 1-4 years, commencing as of the date of grant under the 2023 Equity Incentive Plan.\n\n \n\nF-40\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n12: - SHAREHOLDERS’ EQUITY (Cont.)**\n\n** **\n\n  f) During the year ended December 31, 2025, the Company’s Board approved the grant of 348,184 RSUs and 22,960 options to certain employees and directors of the Company. Such RSUs have vesting schedules of 2-4 years, commencing as of the date of grant under the 2023 Equity Incentive Plan.\n\n** **\n\nAs\nof December 31, 2025, the aggregate total number of shares reserved under the 2023 Equity Incentive Plan, is 3,000,000, out of which\n853,939 Ordinary Shares are still available for future grants under the 2023 Equity Incentive Plan as of that date.\n\n** **\n\n  2. Stock options for the year ended December 31, 2025 under the Company’s plans are as follows:\n\n \n\n   Number of\noptions   Weighted\naverage\nexercise\nprice  \n**Weighted**\n\n**average**\n\n**grant date fair value per share**\n  \n**Weighted**\n\n**average**\n\n**remaining**\n\n**contractual**\n\n**term**\n\n**(in years)**\n   Aggregate\nintrinsic\nvalue \n\nOutstanding as of January 1, 2025   151,625   $9.48   $5.56    7.43    437 \n\nGranted   22,960    11.89    6.27           \n\nExercised   (41,770)   7.98    3.87           \n\nOutstanding as of December 31, 2025   132,815    10.37   $6.21    8.59    360 \n\nVested and expected to vest at December 31, 2025   86,983    10.34    6.19    8.45    238 \n\nExercisable as of December 31, 2025   80,313   $10.37   $6.18    8.42    217 \n\n \n\nThe\naggregate intrinsic value in the table above represents the total intrinsic value (the difference between the deemed fair value of the\nCompany’s Ordinary Shares on the last day of fiscal 2025 and the exercise price, multiplied by the number of in-the-money options)\nthat would have been received by the option holders had all option holders exercised their options on December 31, 2025. This amount\nis impacted by the changes in the fair market value of the Company’s Ordinary Shares.\n\n \n\nA\nsummary of options data for the years ended December 31, 2023, 2024 and 2025, is as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nWeighted-average\ngrant date fair value of options granted \n$6.27  \n$6.27  \n$           - \n\nTotal\nintrinsic value of the options exercised \n$231  \n$-  \n$- \n\n \n\nF-41\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n12: - SHAREHOLDERS’ EQUITY (Cont.)**\n\n \n\n  3. RSUs for the year ended December 31, 2025 under the Company’s 2013 Share Option Plan and 2023 Equity Incentive Plan are as follows:\n\n \n\n  \nNumber\nof\nRSUs  \nWeighted\n\naverage\ngrant date fair value per share \n\n  \n   \n  \n\nOutstanding as of January 1, 2025 \n 1,470,926  \n$9.05 \n\nGranted \n 348,184  \n 12.38 \n\nVested \n (635,339) \n 9.49 \n\nCancelled \n (44,775) \n 8.95 \n\nOutstanding as of December 31, 2025 \n 1,138,996  \n$9.83 \n\n \n\n  4. The weighted average fair value of options granted during the year ended December 31, 2025 and 2024 was $6.27. No options were granted during the year ended December 31, 2023.\n\n \n\n  5. The weighted average fair values of RSUs granted during the years ended December 31, 2025, 2024 and 2023 were $12.38, $9.67 and $8.43 per share, respectively.\n\n \n\n  6. The total fair value of RSUs, as of their respective release dates, was $8,326, $6,138, and $5,421 during the years ended December 31, 2025, 2024, and 2023, respectively.\n\n \n\n  7. The total fair value of options, as of their respective release dates, was $162 during the year ended December 31, 2025 and there were no options exercised during the years ended December 31, 2024, and 2023.\n\n \n\n  8. The following table summarizes the allocation of the Company’s share-based compensation within the consolidated statements of income:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nCost of\nrevenues \n$387  \n$381  \n$440 \n\nResearch and development,\nnet \n 1,776  \n 2,047  \n 2,690 \n\nSales and marketing \n 2,265  \n 2,024  \n 1,819 \n\nGeneral\nand administrative \n 1,688  \n 1,645  \n 1,168 \n\n  \n$6,116  \n$6,097  \n$6,117 \n\n \n\n  9. As of December 31, 2025, there are $10,144 of total unrecognized costs\nrelated to non-vested options and RSUs that are expected to be recognized over a weighted average period of 2 years.\n\n \n\nF-42\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n13: - SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION**\n\n \n\n  a. The Company identifies its operating segments in accordance with ASC Topic No. 280, “Segment Reporting.” Operating segments are defined as components of an entity for which separate financial information is available and it is regularly reviewed by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and evaluating financial performance. The Company determined it operates in one reportable segment as the Company’s CODM is the Chief Executive Officer who makes operating decisions, assesses performance and allocates resources on a consolidated basis. There is no expense or asset information that are supplemental to those disclosed in these consolidated financial statements that are regularly provided to the CODM. The Company’s CODM uses consolidated net income to review actual results and decide where to allocate additional resources within the business to continue growth. Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.\n\n     \n\n  b. The following tables present total revenues for the years ended December 31, 2025, 2024 and 2023 and long-lived assets, net as of December 31, 2025 and 2024 by geographic regions:\n\n \n\n  1. Revenues by geographic region are as follows:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nUnited States \n$38,849  \n$36,087  \n$31,829 \n\nAsia (*) \n 9,900  \n 12,725  \n 9,786 \n\nLatin America \n 222  \n 327  \n 1,266 \n\nEMEA (including Israel) \n 22,523  \n 11,870  \n 8,719 \n\n  \n$71,494  \n$61,009  \n$51,600 \n\n \n\n(*) Includes Japan which accounted for more than 10% of the Company’s revenues in all years presented.\n\n \n\nTotal\nrevenues are attributed to geographic areas are based on the location of the end-customer.\n\n \n\nIn\n2025, 2024 and 2023, the amount of export revenues represented 79%, 89% and 96%, respectively, of the Company’s total revenues.\n\n \n\n  2. Major customer data as a percentage of total revenues:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n% \n\nA \n 48  \n 51  \n 52 \n\nB (*) \n 17  \n 26  \n 24 \n\nC \n 21  \n 11  \n (**)\n\n  \n 86% \n 88% \n 76%\n\n \n\n(*) For the year ended December 31, 2025, operating both in Asia and EMEA.\n\n \n\n(**) Less than 1%.\n\n \n\nF-43\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n** **\n\n**NOTE\n13: - SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION (Cont.)**\n\n \n\n  3. Long-lived assets by geographic areas:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024 \n\n  \n   \n  \n\nIsrael \n$3,103  \n$3,643 \n\nUnited States \n 356  \n 480 \n\nOther \n 427  \n 177 \n\nTotal long-lived assets\n(1) \n$3,886  \n$4,300 \n\n \n\n(1) Long-lived assets are comprised of property and equipment, net and operating lease right-of use.\n\n** **\n\n**NOTE\n14: - SELECTED STATEMENTS OF INCOME DATA**\n\n** **\n\n  a. Financial income, net:\n\n \n\n  \nYears\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\n  \n   \n   \n  \n\nFinancial Income: \n   \n   \n  \n\nInterest income \n$4,969  \n$4,692  \n$4,304 \n\nForeign currency exchange\ngain \n 1,031  \n 927  \n 730 \n\n  \n 6,000  \n 5,619  \n 5,034 \n\nFinancial expenses: \n    \n    \n   \n\nBank charges \n (207) \n (189) \n (135)\n\nForeign\ncurrency exchange loss \n (1,510) \n (1,315) \n (342)\n\n  \n (1,717) \n (1,504) \n (477)\n\n  \n$4,283  \n$4,115  \n$4,557 \n\n \n\n \ne.\nNet income per Ordinary\nShare:\n\n \n\nThe\nfollowing table sets forth the computation of basic and diluted net income (loss) per Ordinary Share:\n\n \n\n  \nYears\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\nNumerator: \n   \n   \n  \n\nNumerator\nfor basic net income per Ordinary Share \n$11,991  \n$6,968  \n$3,713 \n\nNumerator for dilutive\nnet income per Ordinary Share \n$11,991  \n$6,968  \n$3,713 \n\n  \n    \n    \n   \n\nDenominator: \n    \n    \n   \n\nDenominator\nfor basic net income per Ordinary Share - weighted average number of Ordinary Shares \n 16,266,468  \n 15,666,457  \n 15,098,642 \n\nEffect of dilutive securities: \n    \n    \n   \n\nShare-based\ncompensation granted \n 569,061  \n 488,693  \n 199,305 \n\nDenominator\nfor diluted net income per Ordinary Share - adjusted weighted average number of Ordinary Shares \n 16,835,529  \n 16,155,150  \n 15,297,947 \n\n \n\nF-44\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n15: - RELATED PARTY BALANCES AND TRANSACTIONS**\n\n \n\n \na.\nThe Company carries out\ntransactions with related parties as detailed below.\n\n \n\n \n1.\nOn May 19, 2023, Zohar\nZisapel, a co-founder of the Company, a member of the Company’s Board of Directors and a major shareholder, passed away. His\nheirs Mr. Michael Zisapel and Mrs. Klil Zisapel are significant shareholders.\n\n \n\n  2. Certain premises occupied by the Company are rented in part from an entity in which Mr. Michael Zisapel and Mrs. Klil Zisapel hold an interest and in part from Zisapel Properties (1992) Ltd and certain premises occupied by the Company U.S. subsidiary are rented in part from an entity in which Mr. Michael Zisapel and Mrs. Klil Zisapel hold an interest and in part from Yehuda Zisapel Properties, Inc (see also Note 9). On May 19, 2023, Zisapel Properties (1992) Ltd and Yehuda Zisapel Properties, Inc. ceased being related parties to the Company. The aggregate net amounts of lease and related maintenance expenses related to entities affiliated with related parties were $204, $206 and $443 in 2025, 2024 and 2023, respectively.\n\n \n\n  3. Mr. Michael Zisapel and Mrs. Klil Zisapel also hold an interest in various entities known as the RAD-BYNET Group. Certain entities within the RAD-BYNET Group provide the Company and its U.S. subsidiary with administrative and IT services. The aggregate amount of administrative and IT services provided was $12 in 2023. In 2024 and 2025, there were no administrative and IT services paid to related parties. Such amounts expensed by the Company are disclosed in Note 15d below as part of “Expenses” and “Capital expenses”.\n\n \n\n  4. From time to time, the Company purchases certain products and services from members of the RAD-BYNET Group. In 2025, 2024 and 2023, the aggregate amounts of such purchases were approximately $15, $17 and $17, respectively. Such amounts expensed by the Company are disclosed in Note 15d below as part of “Expenses”.\n\n  \n\n  5. The Company’s director also served as a director in the parent company of two of our vendors, from which the Company purchased in 2025 and in 2024 certain services, in the aggregate amount of $1,234 and $566, respectively. Such amounts expensed by the Company are disclosed in Note 15d below as part of “Expenses”.\n\n \n\n  b. The former executive chairman of the Board, Ms. Rachel (Heli) Bennun (the “Executive Chairman”) was Mr. Zohar Zisapel’s significant other until he passed away on May 19, 2023. The Executive Chairman was entitled to a fixed monthly salary. During the year ended December 31, 2023 the Company recorded salary expenses with respect to the Executive Chairman in the amount of $291. On December 31, 2024, the Executive Chairman retired from her position as Executive Chairman and is no longer considered as a related party to the Company. Such amounts expensed by the Company are disclosed in Note 15d below as part of “Expenses”.\n\n \n\nF-45\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n15: - RELATED PARTY BALANCES AND TRANSACTIONS (Cont.)**\n\n \n\nIn\n2023 in addition to the fixed monthly salary, the Executive Chairman earned annual bonus amounting to approximately $233.\n\n \n\n  c. Balances with related parties:\n\n \n\n  \nDecember\n31, \n\n  \n2025  \n2024 \n\nAssets: \n   \n  \n\nOther\naccounts receivable and prepaid \n$14  \n$11 \n\nOperating\nlease right-of-use assets \n$628  \n$829 \n\n  \n    \n   \n\nLiabilities: \n    \n   \n\nTrade\npayables \n$222  \n$219 \n\nOther\nliabilities and accrued expenses \n$317  \n$200 \n\nOperating\nlease liabilities - current \n$231  \n$223 \n\nOperating\nlease liabilities – non-current \n$472  \n$606 \n\n \n\n  d. Transactions with related parties:\n\n \n\n  \nYear\nended December 31, \n\n  \n2025  \n2024  \n2023 \n\nExpenses (1): \n   \n   \n  \n\nCost\nof revenues \n$52  \n$58  \n$205 \n\nOperating expenses: \n    \n    \n   \n\nResearch\nand development, net \n$115  \n$118  \n$249 \n\nSales\nand marketing \n$1,331  \n$663  \n$119 \n\nGeneral\nand administrative \n$17  \n$15  \n$545 \n\n \n\n(1) Including utilities expenses charged to the related party and reimbursed by the Company.\n\n \n\nF-46\n\n \n\n \n\n**RADCOM\nLTD. AND ITS SUBSIDIARIES**\n\n \n\n**NOTES\nTO CONSOLIDATED FINANCIAL STATEMENTS**\n\n**U.S.\ndollars in thousands, except share and per share data**\n\n \n\n**NOTE\n16: - SUBSEQUENT EVENTS**\n\n \n\n \na.\nOn February 8, 2026, the Board’s then chairman, Sami Totah, was\nsucceeded by Mr. Rami Schwartz, a member of the Board.\n\n \n\n  b. On February 10, 2026, the Board approved the compensation terms of\nthe Company’s Chief Financial Officer, including the grant of 50,000 RSUs. The RSUs vest over a period of 2 years, commencing on\nthe grant date.\n\n** **\n\n  c. On March 19, 2026, the Chairman of the Board was granted with additional\n6,560 RSUs and 8,747 options for his service as Chairman. The RSUs and options vest over a period of 8 months, in equal monthly installments\ncommencing on the grant date. The options have an exercise price of $12.82 per share and expire 10 years from the grant date. See also\nNote 16a.\n\n \n\n-------------------------------\n\n \n\nF-47"}