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What changed in AWARE INC /MA/'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of AWARE INC /MA/'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+130 added−130 removedSource: 10-K (2026-03-06) vs 10-K (2025-03-13)

Top changes in AWARE INC /MA/'s 2025 10-K

130 paragraphs added · 130 removed · 104 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs of December 31, 2024, two customers combined represented 34% of our net accounts receivable and unbilled receivables, and as of December 31, 2023, one customer represented 16%, of our net accounts receivable and unbilled receivables. 6 Competitive Business Conditions A significant number of established companies have developed or are developing and marketing software and hardware for biometrics products and applications that currently compete with or will compete directly with our offerings.
Biggest changeCompetitive Business Conditions A significant number of established companies have developed or are developing and marketing software and hardware for biometrics products and applications that currently compete with or will compete directly with our 6 offerings. We believe that additional competitors will enter the biometrics market and become significant long-term competitors, and that, as a result, competition will increase.
BioSP has primarily been sold as a perpetual license and is also available as a fixed term license that is priced on users, transactions, or enterprise wide. WebEnroll WebEnroll is a browser-based biometric enrollment and data management solution available as an enhanced version of BioSP™ that utilizes BioComponents™ for capture of biographic data, fingerprints and facial images in a browser.
BioSP has primarily been sold as a perpetual license and is also available as a fixed term license that is priced on users, transactions, or enterprise wide. 4 WebEnroll WebEnroll is a browser-based biometric enrollment and data management solution available as an enhanced version of BioSP™ that utilizes BioComponents™ for capture of biographic data, fingerprints and facial images in a browser.
Imaging products In addition to our biometrics software products, we also sell products used in applications involving medical and advanced imaging. Our principal imaging product is Aware JPEG 2000, which is based on the JPEG2000 standard. The JPEG2000 standard is an image compression standard and coding system that was created by the Joint 5 Photographic Experts Group committee in 2000.
Imaging products In addition to our biometrics software products, we also sell products used in applications involving medical and advanced imaging. Our principal imaging product is Aware JPEG 2000, which is based on the JPEG2000 standard. The JPEG2000 standard is an image compression standard and coding system that was created by the Joint Photographic Experts Group committee in 2000.
Our JPEG2000 product is used to compress, store, and display images. Those images are typically medical images. Software maintenance We also provide and sell software maintenance to many of our customers who purchase our software products and solutions.
Our JPEG2000 product is used to compress, store, and display images. Those images are typically medical images. 5 Software maintenance We also provide and sell software maintenance to many of our customers who purchase our software products and solutions.
Our portfolio enables government agencies and commercial entities to enroll, identify, authenticate and enable using biometrics, which comprise physiological characteristics, such as fingerprints, faces, irises and voices. • Enroll: Register biometric identities into an organization’s secure database • Identify: Utilize an organization’s secure database to accurately identify individuals using biometric data • Authenticate: Provide frictionless, multi-factor, password-less access to secured accounts and databases with biometric verification • Enable: Manage the lifecycle of secure identities through optimized biometric interchanges Our comprehensive portfolio of biometric solutions is based on innovative, robust products designed explicitly for ease of integration, including customer-managed and integration ready biometric frameworks, platforms, software development kits (“SDKs”) and services.
Our portfolio enables government agencies and commercial entities to enroll, identify, authenticate and enable using biometrics, which comprise physiological characteristics, such as fingerprints, faces, irises and voices. • Enroll: Register biometric identities into an organization’s secure database • Identify: Utilize an organization’s secure database to accurately identify individuals using biometric data • Authenticate: Provide frictionless, multi-factor, passwordless access to secured accounts and databases with biometric verification • Enable: Manage the lifecycle of secure identities through optimized biometric interchanges Our comprehensive portfolio of biometric solutions is based on innovative, robust products designed explicitly for ease of integration, including customer-managed and integration ready biometric frameworks, platforms, software development kits (“SDKs”) and services.
AwareABIS has primarily been sold as a fixed term license that is priced based on the size of the biometric system or on a subscription-based model. AFIX Suite of Products Aware’s AFIX suite of products is used for small-scale law enforcement focused biometric identification.
AwareABIS has primarily been sold as a fixed term license that is priced based on the size of the biometric system or on a subscription-based model. AFIX Suite of Products The Aware AFIX suite of products is used for small-scale law enforcement focused biometric identification.
Knomi offers multiple biometric modality options, including facial recognition, and voice authentication as means to enroll, onboard or authenticate. Knomi software components can be used in different combinations and configurations to enable either a server-centric architecture, a web-based or a device-centric implementation.
AwareSDK offers multiple biometric modality options, including facial recognition, and voice authentication as means to enroll, onboard or authenticate. Our software components can be used in different combinations and configurations to enable either a server-centric architecture, a web-based or a device-centric implementation.
AwareID continues to leverage Knomi to provide biometric face and voice matching (1:1 and 1:N), liveness-verification (presentation attack detection), and document validation. The platform uses proprietary Adaptive Authentication technology in cloud-based bundles which can be pre-configured and/or configured by the customer to provide comprehensive authentication functionality with situational awareness for onboarding, access control/management, and authentication of transactions.
This offering continues to provide biometric face and voice matching (1:1 and 1:N), liveness-verification (presentation attack detection), and document validation. The platform uses proprietary Adaptive Authentication technology in cloud-based bundles which can be pre-configured and/or configured by the customer to provide comprehensive authentication functionality with situational awareness for onboarding, access control/management, and authentication of transactions.
AwareABIS™ AwareABIS is an automated biometric identification system (“ABIS”) used for large-scale biometric identification and deduplication using fingerprint, face, and iris recognition. AwareABIS is a highly scalable platform that performs one-to-many ("1:N") search or one-to-one ("1:1") match against large stores of biometrics and other identity data.
AwareABIS™ AwareABIS is an automated biometric identification system (“ABIS”) used for large-scale biometric identification and deduplication using fingerprint, face, and iris recognition. AwareABIS is a highly scalable platform that performs one-to-many (“1:N”) search or one-to-one (“1:1”) match against large stores of biometrics and other identity data.
Of these employees, 47 were based in Massachusetts and 17 were based outside of Massachusetts. None of our employees are represented by a labor union. We consider our employee relations to be good.
Of these employees, 57 were based in Massachusetts and 23 were based outside of Massachusetts. None of our employees are represented by a labor union. We consider our employee relations to be good.
BioSP™ - Biometric Services Platform BioSP is a biometric integration platform-as-a-service ("iPaaS") used to enable biometric data processing and management functionality in a web services architecture. It provides workflow, data management and formatting, and other important utilities for large-scale fingerprint recognition, face recognition, and iris recognition systems.
Awareness Platform (formerly known as BioSP™ - Biometric Services Platform) The Awareness Platform is a biometric integration platform-as-a-service (“iPaaS”) used to enable biometric data processing and management functionality in a web services architecture. It provides workflow, data management and formatting, and other important utilities for large-scale fingerprint recognition, face recognition, and iris recognition systems.
Major Customers All of our revenue in 2024 and 2023 was derived from unaffiliated customers. No customer represented 10% or more of total revenue in 2024, and one customer represented 18% of total revenue in 2023.
Major Customers All of our revenue in 2025 and 2024 was derived from unaffiliated customers. No customer represented 10% or more of total revenue in 2025 or 2024.
Our solutions and services are described below. 3 Integrated Framework and Platform Solutions and Services Knomi® Mobile Framework The Knomi mobile biometric authentication framework is built on our hardened biometric SDK components, which are optimized to operate on mobile devices, and a server that together enable strong, multi-factor, password-free authentication from a mobile device using biometrics.
Our solutions and services are described below. 3 Integrated Framework and Platform Solutions and Services AwareSDK AwareSDK, formerly known as “Knomi Mobile Framework” is built on our hardened biometric SDK components, which are optimized to operate on mobile devices, and a server that together enable strong, multi-factor, password-free authentication from a mobile device using biometrics.
If we were found to have infringed any third party’s patents, we could be subject to substantial damages or an injunction preventing us from conducting our business. Employees As of December 31, 2024, we employed 64 people, all based in the U.S., including 33 in engineering and research, 20 in sales and marketing, and 11 in finance and administration.
If we were found to have infringed any third party’s patents, we could be subject to substantial damages or an injunction preventing us from conducting our business. Employees As of December 31, 2025, we employed 80 people, all based in the U.S., including 45 in engineering and research, 21 in sales and marketing, and 14 in finance and administration.
As of December 31, 2024, we had 68 U.S. patents, 4 foreign patents and 7 pending patent applications. Our patents and patent applications pertain primarily to biometrics and imaging compression. We have let certain patents expire that are not aligned with our business and are not relevant to our current or future activities.
As of December 31, 2025, we had 71 U.S. patents, 3 foreign patents and 8 pending patent applications. Our patents and patent applications pertain primarily to biometrics and imaging compression. We have let certain patents expire that are not aligned with our business and are not relevant to our current or future activities.
These services can be used discretely to enhance investments already in place or combined to provide higher functionality. The AwareID solution is built on open architecture and interfaces to maximize interoperability and connection to other biometric and/or digital identity applications and platforms.
These services can be used discretely to enhance investments already in place or combined to provide higher functionality. The solution is built on open architecture and interfaces to maximize interoperability and connection to other biometric and/or digital identity applications and platforms. Pricing for our AwareSDK SaaS offering is typically usage-based or transaction-based.
WebEnroll has primarily been sold as a perpetual license and is also available as a fixed term license that is priced on users, transactions, or enterprise wide. 4 AwareID™ AwareID ™ is a Software-as-a-Service (SaaS) offering that provides advanced identity verification and continuous authentication capabilities. Its modular design ensures flexibility and extensibility across various industries.
AwareSDK has primarily been sold as a fixed term license that is priced on a subscription-based model and is also available as a perpetual license. We also sell AwareSDK as a Software-as-a-Service (SaaS) offering, formerly known as AwareID, that provides advanced identity verification and continuous authentication capabilities. Its modular design ensures flexibility and extensibility across various industries.
We cannot guarantee that we will be able to retain our key managers and employees or that we will be able to attract and retain additional highly qualified personnel in the future. 7 Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on or through our website at www.aware.com as soon as reasonably practicable after such reports are filed with, or furnished to, the Securities and Exchange Commission (“the SEC”).
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on or through our website at www.aware.com as soon as reasonably practicable after such reports are filed with, or furnished to, the Securities and Exchange Commission (“the SEC”). 7 The SEC also maintains a website, www.sec.gov, that contains reports and other information regarding issuers that file electronically with the SEC.
The SEC also maintains a website, www.sec.gov, that contains reports and other information regarding issuers that file electronically with the SEC. Copies of our (i) Corporate Governance Principles, (ii) charters for the Audit Committee, Compensation Committee, and Nominating Committee, and (iii) Code of Ethics are available in the Investor Relations section of our website at www.aware.com.
Copies of our (i) Corporate Governance Principles, (ii) charters for the Audit Committee, Compensation Committee, and Nominating Committee, and (iii) Code of Ethics are available in the Investor Relations section of our website at www.aware.com.
This group of competitors includes companies such as FaceTec, iProov, and Innovatrics. We expect competition to intensify in the near term in the biometrics market. Many current and potential competitors have substantially greater financial, marketing, and research resources than we have. Moreover, low-cost foreign competitors have demonstrated a willingness to sell their products at significantly reduced prices.
Many current and potential competitors have substantially greater financial, marketing, and research resources than we have. Moreover, low-cost foreign competitors have demonstrated a willingness to sell their products at significantly reduced prices.
AwareID is typically provided as a SaaS offering with usage-based or transaction-based pricing, however it is also available on-premises when leveraging Knomi SDKs. Software products We sell a broad range of software components, or “building blocks”, such as SDKs, APIs, and applications that customers use to streamline or develop their systems into more effective solutions.
WebEnroll has primarily been sold as a perpetual license and is also available as a fixed term license that is priced on users, transactions, or enterprise wide. Software products We sell a broad range of software components, or “building blocks”, such as SDKs, APIs, and applications that customers use to streamline or develop their systems into more effective solutions.
Historically, we sold our software products under perpetual or fixed-term licenses. With the introduction of AwareID, we have incorporated SaaS offerings into our product line-up. While we did not recognize material revenues from our SaaS offerings during 2024 and 2023, we continue to invest in and we expect SaaS to become a significant product offering moving forward.
Historically, we sold our software products exclusively under perpetual or fixed-term licenses. With the introduction of AwareID, now the SaaS component of AwareSDK, we have incorporated SaaS offerings into our product line-up. We recognized revenues from our SaaS offerings during 2025 and 2024 of $0.4 million and $0.1 million, respectively.
Our current principal competitors include: • Diversified technology providers that offer integrated biometrics solutions to governments, law enforcement agencies and other commercial organizations. This group of competitors includes companies such as Idemia, Thales, and NEC. • Component providers that offer biometrics software and hardware components for fingerprint, facial, iris and voice biometric identification.
This group of competitors includes companies such as Idemia, Thales, and NEC. • Component providers that offer biometrics software and hardware components for fingerprint, facial, iris and voice biometric identification. This group of competitors includes companies such as FaceTec, iProov, and Innovatrics. We expect competition to intensify in the near term in the biometrics market.
We believe that additional competitors will enter the biometrics market and become significant long-term competitors, and that, as a result, competition will increase. Companies competing with us may introduce solutions that are competitively priced, have increased performance or functionality or incorporate technological advances we have not yet developed or implemented.
Companies competing with us may introduce solutions that are competitively priced, have increased performance or functionality or incorporate technological advances we have not yet developed or implemented. Our current principal competitors include: • Diversified technology providers that offer integrated biometrics solutions to governments, law enforcement agencies and other commercial organizations.
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Knomi has primarily been sold as a fixed term license that is priced on a subscription-based model and is also available as a perpetual license. Going forward we plan to transition the Knomi offering to within the AwareID offering.
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While perpetual and fixed-term licenses remain our primary source of software revenue, we continue to enhance and transition certain legacy software offerings to cloud-based delivery models and expect SaaS to become a significant product portfolio over time.
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As of December 31, 2025, three customers combined represented 53% of our net accounts receivable and unbilled receivables, and as of December 31, 2024, two customers combined represented 34% of our net accounts receivable and unbilled receivables.
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We cannot guarantee that we will be able to retain our key managers and employees or that we will be able to attract and retain additional highly qualified personnel in the future.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditionally, regardless of the form of consideration we pay, acquisitions and investments could negatively impact our operations and earnings per share. We may have additional tax liabilities. We are subject to income taxes in the United States and, in certain cases, in foreign jurisdictions. Significant judgments are required in determining our provisions for income taxes.
Biggest changeWe are subject to income taxes in the United States and, in certain cases, in foreign jurisdictions. Significant judgments are required in determining our provisions for income taxes. In the course of preparing our tax provisions and returns, we must make calculations where the ultimate tax determination may be uncertain.
Unfavorable changes in economic conditions, including recessions, inflation, turmoil in financial markets, changes caused by global crisis such as a pandemic, the ongoing conflict between Russia and Ukraine and resulting economic sanctions, conflicts in the Middle East, or other changes in economic conditions, could harm our business, results of operations, and financial conditions as a result of: • reduced demand for our products; • increased risk of order cancellations or delays; • increased pressure on the prices for our products; • greater difficulty in collecting accounts receivable; • risks to our liquidity, including the possibility that we might not have access to our cash when needed; and • rising interest rates, recessionary cycles, and inflationary pressures, that could make our products more expensive or could increase our costs. 13 • health epidemics, impacting the markets and communities in which we, our partners and clients operate.
Unfavorable changes in economic conditions, including recessions, inflation, turmoil in financial markets, changes caused by global crisis such as a pandemic, the ongoing conflict between Russia and Ukraine and resulting economic sanctions, conflicts in the Middle East, or other changes in economic conditions, could harm our business, results of operations, and financial conditions as a result of: • reduced demand for our products; • increased risk of order cancellations or delays; 13 • increased pressure on the prices for our products; • greater difficulty in collecting accounts receivable; • risks to our liquidity, including the possibility that we might not have access to our cash when needed; and • rising interest rates, recessionary cycles, and inflationary pressures, that could make our products more expensive or could increase our costs. • health epidemics, impacting the markets and communities in which we, our partners and clients operate.
We prepare our financial statements in accordance with generally accepted accounting principles and certain critical accounting policies that are relevant to our business. The application of these principles and policies requires us to make significant judgments and estimates.
We prepare our financial statements in accordance with generally accepted accounting principles and certain critical accounting policies and estimates that are relevant to our business. The application of these principles and policies requires us to make significant judgments and estimates.
If we were the subject of such litigation, it could result in substantial costs and divert management's attention and resources. 14 If we are unable to maintain effective internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decline in the price of our common stock.
If we were the subject of such litigation, it could result in substantial costs and divert management's attention and resources. If we are unable to maintain effective internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decline in the price of our common stock.
The expansion of the biometrics market and the market for our biometrics products and services depends on a number of factors, such as: • the cost, performance and reliability of our products and services and the products and services offered by our competitors; • the continued growth in demand for biometrics solutions within the government and law enforcement markets, as well as the development and growth of demand for biometric solutions in markets outside of government and law enforcement; • customers’ perceptions regarding the benefits of biometrics solutions; • public perceptions regarding the intrusiveness of these solutions and the manner in which organizations use the biometric information collected; • public perceptions regarding the confidentiality of private information; • proposed or enacted legislation related to privacy of biometric information; • customers’ satisfaction with biometrics solutions; and • marketing efforts and publicity regarding biometrics solutions.
The expansion of the biometrics market and the market for our biometrics products and services depends on a number of factors, such as: • the cost, performance and reliability of our products and services and the products and services offered by our competitors; • the continued growth in demand for biometrics solutions within the government and law enforcement markets, as well as the development and growth of demand for biometric solutions in markets outside of government and law enforcement; • customers’ perceptions regarding the benefits of biometrics solutions; • public perceptions regarding the intrusiveness, fairness, accuracy, or potential bias of these solutions and the manner in which organizations use the biometric information collected; • public perceptions regarding privacy and the use of biometric information; • proposed or enacted legislation related to collection, use and storage of biometric information; • customers’ satisfaction with biometrics solutions; and • marketing efforts and publicity regarding biometrics solutions.
Our officers and directors and the holders of at least 5% of our outstanding shares currently beneficially own approximately 48% of our outstanding common stock, and 60% on a fully diluted basis assuming the exercise of both vested and unvested options.
Our officers and directors and the holders of at least 5% of our outstanding shares currently beneficially own approximately 42% of our outstanding common stock, and 51% on a fully diluted basis assuming the exercise of both vested and unvested options.
However, the acquisition and successful integration of independent businesses or assets is a complex, costly and time-consuming process, and the benefits we realize may not exceed the costs of the acquisition.
However, the acquisition and successful integration of independent businesses or assets is a complex, costly and time-consuming process, and the benefits we realized in some cases in the past have not and the benefits we realize in the future may not exceed the costs of the acquisition.
The failure to close an order or the deferral or cancellation of an order can result in revenue and net income shortfalls for that quarter. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs are to a large extent fixed.
The failure to close an order or the deferral or cancellation of an order can result in revenue and net income shortfalls for that quarter. We base our current and future expense levels on our internal operating plans and sales forecasts, and our operating costs, including personnel-related costs, may be difficult to reduce in the near term.
Acceptance of biometrics as an alternative to such traditional methods depends upon a number of factors including: i) the performance and reliability of biometric 9 solutions; ii) costs involved in adopting and integrating biometric solutions; iii) public concerns regarding privacy; and iv) potential privacy legislation.
Acceptance of biometrics as an alternative to such traditional methods depends upon a number of factors including: i) the performance and reliability of biometric solutions; ii) costs involved in adopting and integrating biometric solutions; iii) public concerns regarding privacy; and iv) potential privacy legislation. 9 For these reasons, we are uncertain whether there will be significant demand for biometrics technology from commercial markets.
The ultimate success of our acquisitions depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating acquired businesses or assets into our existing businesses.
We have made and may continue to make acquisitions of or investments in companies that offer complementary products, services, and technologies. The ultimate success of our acquisitions depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating acquired businesses or assets into our existing businesses.
In the course of preparing our tax provisions and returns, we must make calculations where the ultimate tax determination may be uncertain. Our tax returns are subject to examination by the Internal Revenue Service (“IRS”) and state tax authorities. There can be no assurance as to the outcome of these examinations.
Our tax returns are subject to examination by the Internal Revenue Service (“IRS”) and state tax authorities. There can be no assurance as to the outcome of these examinations.
Our expectations regarding the future growth rate or the size of the biometrics market may not be accurate.
Our revenues are derived primarily from sales of biometrics products and services. Our expectations regarding the future growth rate or the size of the biometrics market may not be accurate.
Department of Government Efficiency, intended to reduce the size of the federal government and federal spending, • other changes in fiscal policies or decreases in available government funding, • changes in government funding priorities; • changes in government programs or applicable requirements; • the adoption of new laws or regulations or changes to existing laws or regulations relating to the provision of biometrics services or the use of biometric data; • changes in political or social attitudes with respect to security and defense issues; • changes in audit policies and procedures of government entities; • potential delays or changes in the government appropriations process; and • delays in the payment of our invoices by government payment offices.
Among the factors that could adversely affect our business are: • the impact of changes in government priorities, budgetary constraints, continuing resolutions, or other actions that reduce or delay government spending; 8 • other changes in fiscal policies or decreases in available government funding, • changes in government funding priorities; • changes in government programs or applicable requirements; • the adoption of new laws or regulations or changes to existing laws or regulations relating to the provision of biometrics services or the use of biometric data; • changes in U.S. or foreign trade policies, tariffs, export controls, sanctions, or retaliatory measures; • changes in political or social attitudes with respect to security and defense issues; • changes in audit policies and procedures of government entities; • potential delays or changes in the government appropriations process; and • delays in the payment of our invoices by government payment offices.
If the biometrics market does not experience significant growth or if our products do not achieve broad acceptance both domestically and internationally, we may not be able to grow our business. Our revenues are derived primarily from sales of biometrics products and services.
Moreover, even if there is significant demand, there can be no assurance that our biometrics products will achieve market acceptance. If the biometrics market does not experience significant growth or if our products do not achieve broad acceptance both domestically and internationally, we may not be able to grow our business.
We believe that the success and growth of our business will continue to depend on government customers purchasing our products and services either directly from us or indirectly through our channel partners. 8 Changes in government contracting policies or government budgetary constraints may adversely affect our financial performance.
We derive a significant portion of our revenue directly or indirectly from federal, international, state and local governments. We believe that the success and growth of our business will continue to depend on government customers purchasing our products and services either directly from us or indirectly through our channel partners.
Our stock price may also be affected by broader market trends unrelated to our performance. As a result, purchasers of our common stock may be unable at any given time to sell their shares at or above the price they paid for them.
As a result, purchasers of our common stock may be unable at any given time to sell their shares at or above the price they paid for them. 14 Moreover, companies that have experienced volatility in the market price of their stock often are subject to securities class action litigation.
In the event that our judgments and estimates differ from actual results, we may have to change them, which could materially affect our financial position and results of operations. Moreover, accounting standards have been subject to rapid change and evolving interpretations by accounting standards setting organizations over the past few years.
The most significant estimates are discussed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates,” included elsewhere in this Annual Report on Form 10-K. Moreover, accounting standards have been subject to rapid change and evolving interpretations by accounting standards setting organizations over the past few years.
These factors could have a material adverse effect on our business, financial condition, operating results and cash flows. Additionally, our acquisitions have provided, in the case of Fortress ID, and may in the future provide for future contingent acquisition payments, based on the achievement of performance targets or milestones.
These factors could have a material adverse effect on our business, financial condition, operating results and cash flows. Additionally, regardless of the form of consideration we pay, acquisitions and investments could negatively impact our operations and earnings per share. We may have additional tax liabilities.
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We derive a significant portion of our revenue directly or indirectly from federal, international, state and local governments.
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Changes in government contracting policies or government budgetary constraints may adversely affect our financial performance.
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Among the factors that could adversely affect our business are: • the impact of actions, such as those recently announced by the U.S.
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We may also be subject to a growing array of laws aimed at regulating the use of artificial intelligence technologies, creating the potential for compliance and litigation risks.
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For these reasons, we are uncertain whether there will be significant demand for biometrics technology from commercial markets. Moreover, even if there is significant demand, there can be no assurance that our biometrics products will achieve market acceptance.
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For example, the European Union’s comprehensive Artificial Intelligence Act, which became effective in August 2024 with a staggered series of implementation deadlines stretching into 2027, provides for noncompliance fines up of to either 35 million euros or 7% of global turnover. AI regulation also continues to increase in the United States.
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We may make acquisitions of or investments in companies that offer complementary products, services, and technologies, such as our acquisition of FortressID in December of 2021 and our investment in Omlis Limited.
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For example, the California Transparency in Frontier Artificial Intelligence Act, which creates AI-related governance disclosure requirements for certain kinds of AI models, came into force in January 2026, and provides for noncompliance fines of up to $1 million and the Colorado AI Act, which takes effect in June 2026, imposes fines of up to $20,000 per violation.
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These arrangements can impact or restrict integration of acquired businesses and can result in disputes, including litigation. In addition, there is uncertainty regarding the realizability of investments in private companies, such as our investment in Omlis Limited that was written down to $0 in 2023.
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Our stock price may also be affected by broader market trends unrelated to our performance.
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Moreover, companies that have experienced volatility in the market price of their stock often are subject to securities class action litigation.
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The most significant estimates included in the financial statements pertain to revenue recognition, allowance for credit losses, valuation of acquired assets and assumed liabilities in business combinations, valuation of contingent acquisition payments, valuation of investment in note receivable, goodwill and long-lived asset impairment and valuation allowance for deferred income tax assets. Actual results could differ from those estimates.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAlthough the Company did not experience a material cybersecurity incident during the year ended December 31, 2024, the scope and impact of any future incident cannot be predicted. See “Item 1A. Risk Factors” for more information on the Company’s cybersecurity-related risks. Governance The Board of Directors, primarily through its Audit Committee, oversees the Company’s cybersecurity program.
Biggest changeRisk Factors” for more information on the Company’s cybersecurity-related risks. Governance The Board of Directors, primarily through its Audit Committee, oversees the Company’s cybersecurity program. Management regularly reports to the Audit Committee on the current state of the Company’s cybersecurity program, including the current threat landscape, cybersecurity risks, and any significant incidents.
ITEM 1C. CYBERSECUTIY Cybersecurity Risk Management and Strategy To help protect the Company from a major cybersecurity incident that could have a material impact on operations or the Company’s financial results, the Company has implemented policies, programs and controls, including technology investments that focus on cybersecurity incident prevention, identification and mitigation.
ITEM 1C. CYBERSECUrItY Cybersecurity Risk Management and Strategy To help protect the Company from a major cybersecurity incident that could have a material impact on operations or the Company’s financial results, the Company has implemented policies, programs and controls, including technology investments that focus on cybersecurity incident prevention, identification and mitigation.
The Policy includes requirements for incident disclosure and reporting, protocols for incident 15 evaluation, including the use of third-party service providers and partners, and processes for notification and internal escalation of information to the Company’s senior management, incident response team, and Board of Directors (the "Board") and appropriate Board committees.
The Policy includes requirements for incident disclosure and reporting, protocols for incident evaluation, including the use of third-party service providers and partners, and processes for notification and internal escalation of information to the Company’s senior management, incident response team, and Board of Directors (the “Board”) and appropriate Board committees. The Policy also addresses requirements for the Company’s external reporting obligations.
The steps the Company takes to reduce its vulnerability to cyberattacks and to mitigate impacts from cybersecurity incidents include, but are not limited to: establishing information security policies and standards, implementing information protection processes and technologies, monitoring its information technology systems for cybersecurity threats, assessing cybersecurity risk profiles of key third-parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
The steps the Company takes to reduce its vulnerability to cyberattacks and to mitigate impacts from cybersecurity incidents include, but are not limited to: establishing information security policies and standards, implementing information protection processes and technologies, monitoring its information technology systems for cybersecurity threats, assessing cybersecurity risk profiles of key third-parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices. 15 The Company has implemented a Cybersecurity Policy (the “Policy”) that provides a framework for responding to cybersecurity incidents.
Management regularly reports to the Audit Committee on the current state of the Company’s cybersecurity program, including the current threat landscape, cybersecurity risks, and any significant incidents. The Audit Committee may provide updates to the Board on the substance of these reports and any recommendations for improvements that the Audit Committee deems appropriate.
The Audit Committee may provide updates to the Board on the substance of these reports and any recommendations for improvements that the Audit Committee deems appropriate.
The Policy also addresses requirements for the Company’s external reporting obligations. The Plan is reviewed and updated, as necessary but no less frequently than once a year, under the leadership of the Company’s Chief Security Officer (“CSO”).
The Policy is reviewed and updated, as necessary but no less frequently than once a year, under the leadership of the Company’s Chief Security Officer (“CSO”). Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2025, the scope and impact of any future incident cannot be predicted. See “Item 1A.
Removed
The Company has implemented a Cybersecurity Policy (the “Policy”) that provides a framework for responding to cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease approximately 20,730 rentable square feet in Burlington, Massachusetts, which we use as our headquarters. We believe that this facility is adequate for our current needs and for the foreseeable future. See Note 9 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding our leases.
Biggest changeITEM 2. PROPERTIES We lease approximately 20,730 square feet in Burlington, Massachusetts, which we use as our headquarters. We believe that this facility is adequate for our current needs and for the foreseeable future. See Note 9 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding our leases.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePursuant to the 2022 Repurchase Plan, the Company was authorized to repurchase up to $10,000,000 of its common stock from time to time through December 31, 2023. On November 30, 2023, we announced that our Board of Directors had approved the extension of the 2022 Repurchase Plan through December 31, 2025. ITEM 6. [RESERVED] 17
Biggest changeOn November 30, 2023, we announced that our Board of Directors had approved the extension of our previously announced 2022 Repurchase Plan through December 31, 2025. The 2022 Repurchase Plan authorized the Company to repurchase up to $10,000,000 of our common stock from time to time.
This number does not include shareholders who hold our shares in a “nominee” or “street” name. We paid no dividends in 2024 or 2023. We anticipate that we will continue to reinvest any earnings to finance our future operations although we may also pay special cash dividends if our Board of Directors deems it appropriate.
This number does not include shareholders who hold our shares in a “nominee” or “street” name. We paid no dividends in 2025 or 2024. We anticipate that we will continue to reinvest any earnings to finance our future operations although we may also pay special cash dividends if our Board of Directors deems it appropriate.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is the only class of stock we have outstanding, and it trades on the Nasdaq Global Market under the symbol AWRE. As of March 1, 2025, we had 60 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is the only class of stock we have outstanding, and it trades on the Nasdaq Global Market under the symbol AWRE. As of March 1, 2026, we had 60 shareholders of record.
Removed
Share repurchase activity during the three months ended December 31, 2024 was as follows: Issuer Purchases of Equity Securities Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) (d) Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs October 1 through 31, 2024 — $ — — $ 8,182,358 November 1 through 30, 2024 80,093 $ 1.50 80,093 $ 8,062,219 December 1 through 31, 2024 56,958 $ 1.53 56,958 $ 7,975,073 Total 137,051 $ 1.51 137,051 (1) All reported purchases were made pursuant to a repurchase plan announced by the Company on March 22, 2022 (the “2022 Repurchase Plan”).
Added
During the three months ended December 31, 2025 we did not purchase any shares under this plan. As of December 31, 2025 the plan expired. We purchased an aggregate of $2,139,705 worth of shares of our common stock over the lifetime of the plan. ITEM 6. [RESERVED] 17

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash provided by operations was primarily the result of a $2.4 million decrease in unbilled and accounts receivables, a $1.8 million increase in deferred revenue, add back of $1.5 million of non-cash stock-based compensation, $2.7 million write-off of Note, and $1.4 million related to a tax refund received as a result of our federal income tax carryback claim, which was partially offset by our $7.3 million net loss and a $0.8 million change in the fair value of contingent acquisition payments. 21 Cash flows from investing activities A discussion of cash flow from investing activities for each of the last two years is as follows: Year ended December 31, 2024.
Biggest changeCash used in operating activities was $3.2 million in 2024, which was primarily the result of a $4.4 million net loss and $0.6 million of working capital adjustments, which was partially offset by $0.6 million of depreciation and amortization expense and $1.1 million of non-cash stock-based compensation. Cash flows from investing activities Year ended December 31, 2025.
As part of the process of preparing our consolidated financial statements we are required to estimate our actual current tax expense. We must also estimate temporary and permanent differences that result from differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and 24 liabilities, which are included in our consolidated balance sheet.
As part of the process of preparing our consolidated financial statements we are required to estimate our actual current tax expense. We must also estimate temporary and permanent differences that result from differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet.
We have identified the following as our significant accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions. Revenue recognition .
We have identified the following as our significant accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions. 22 Revenue recognition .
General and Administrative Expense General and administrative expense consists primarily of costs for: i) officers, directors and administrative personnel, including salaries, bonuses, director compensation, stock-based compensation, fringe benefits, and facilities; ii) professional fees, including legal and audit fees; iii) public company expenses; and iv) other administrative expenses, such as insurance costs and bad debt provisions.
General and Administrative Expense General and administrative expense consists primarily of costs for: i) officers, directors and administrative personnel, including salaries, bonuses, director compensation, stock-based compensation, fringe benefits, and facilities; ii) 20 professional fees, including legal and audit fees; iii) public company expenses; and iv) other administrative expenses, such as insurance costs and bad debt provisions.
Accordingly, we are not exposed to any financing, liquidity, market or credit risk. 22 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report.
Accordingly, we are not exposed to any financing, liquidity, market or credit risk. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our financial statements included elsewhere in this Annual Report.
Any royalties not subject to the guaranteed 23 minimum or earned in excess of the minimum amount are recognized as revenue when the subsequent usage occurs. Revenue allocated to the software maintenance is recognized over the contract term.
Any royalties not subject to the guaranteed minimum or earned in excess of the minimum amount are recognized as revenue when the subsequent usage occurs. Revenue allocated to the software maintenance is recognized over the contract term.
In accordance with Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods and services.
In accordance with Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods and services. The amount of revenue recognized reflects the consideration that we expect to be entitled to receive in exchange for these goods and services.
Our revenue arrangements are typically accounted for under such expedient, as payment is typically due within 30 to 60 days. As of December 31, 2024 and 2023, none of our contracts contained a significant financing component. Goodwill and intangible assets impairment. Our goodwill and intangible assets result from our previous business acquisitions.
Our revenue arrangements are typically accounted for under such expedient, as payment is typically due within 30 to 60 days. As of December 31, 2025 and 2024, none of our contracts contained a significant financing component. Goodwill and intangible assets impairment. Our goodwill and intangible assets result from our previous business acquisitions.
To assess if goodwill is impaired, we first review qualitative factors to determine whether further impairment testing is necessary. If based on the qualitative assessment, we consider it more-likely-than-not that our reporting units fair value is less than its carrying amount, we perform a quantitative impairment test.
To assess if goodwill is impaired, we first review qualitative factors to determine whether further impairment testing is necessary. If based on the qualitative assessment, we consider it more-likely-than-not that our reporting unit's fair value is less than its carrying amount, we perform a quantitative impairment test.
Also, with the delivery of our current products in a hosted environment with AwareID, we recognize revenue from our SaaS arrangements ratably over the subscription period. Our arrangements can include variable fees, such as the option to purchase additional usage of a previously delivered software license.
Also, with the delivery of certain products in a hosted environment through AwareID, we recognize revenue from our SaaS arrangements ratably over the subscription period. Our arrangements can include variable fees, such as the option to purchase additional usage of a previously delivered software license.
For variable fees arising from the client’s purchase of additional usage of a previously delivered software license, we apply the sales and usage-based royalties guidance related to a license of intellectual property and recognizes the revenue in the period the underlying sale or usage occurs.
For variable fees arising from the client’s purchase of additional usage of a previously delivered 23 software license, we apply the sales and usage-based royalties guidance related to a license of intellectual property and recognize revenue in the period the underlying sale or usage occurs.
Cash used in operating activities was $3.2 million in 2024, which was primarily the result of a $4.4 million net loss and $0.6 million of working capital adjustments, which was partially offset by $0.6 million of depreciation and amortization expense and $1.1 million of non-cash stock-based compensation. Year ended December 31, 2023.
Cash used in operating activities was $5.4 million in 2025, which was primarily the result of a $5.9 million net loss and $1.3 million of working capital adjustments, which was partially offset by $0.6 million of depreciation and amortization expense and $1.2 million of non-cash stock-based compensation. Year ended December 31, 2024.
As of December 31, 2024 and 2023, we had $3.1 million of goodwill. As of December 31, 2024 and 2023, we had $2.0 million and $2.4 million of intangible assets, respectively. Impairment in the valuation of long-lived assets could materially impact our operating results and financial position. To date, there have been no impairments of goodwill or intangible assets.
As of December 31, 2025 and 2024, we had $3.1 million of goodwill. As of December 31, 2025 and 2024, we had $1.6 million and $2.0 million of intangible assets, respectively. Impairment in the valuation of long-lived assets could materially impact our operating results and financial position. To date, there have been no impairments of goodwill or intangible assets.
Financing activity cash used of $0.2 million was primarily the result of $0.2 million used to buy back stock under our stock repurchase program, which was partially offset by $0.1 million of proceeds from the issuance of common stock from stock grants. Year ended December 31, 2023.
Financing activity cash used of $31 thousand was primarily the result of $0.1 million used to buy back stock under our stock repurchase program, which was partially offset by $0.1 million of proceeds from the issuance of common stock from stock grants. Year ended December 31, 2024.
Services revenue is recognized over time as the services are delivered using an input method (i.e., labor hours incurred as a percentage of total labor hours budgeted), provided all other revenue recognition criteria are met.
Services revenue is recognized over time as the services are delivered using an input method, based on labor hours incurred as a percentage of total labor hours budgeted, provided all other revenue recognition criteria are met.
As of December 31, 2023, we had a total of $13.0 million of deferred tax assets and $0.5 million of deferred tax liabilities for which we have recorded a $12.5 million valuation allowance. We will continue to assess the level of valuation allowance required in future periods.
As of December 31, 2024, we had a total of $13.7 million of deferred tax assets and $0.5 million of deferred tax liabilities for which we have recorded a $13.2 million valuation allowance. We will continue to assess the level of valuation allowance required in future periods.
As of December 31, 2024, our material cash requirements from known contractual and other obligations consisted of payments under the operating lease for our corporate headquarters, which we estimate will be approximately $0.7 million in each of 2025, 2026, and 2027, approximately $0.8 million in 2028 and 2029, and $2.7 million thereafter.
As of December 31, 2025, our material cash requirements from known contractual and other obligations consisted primarily of payments under the operating lease for our corporate headquarters. We estimate lease payments will be approximately $0.7 million in each of 2026 and 2027, approximately $0.8 million in each of 2028, 2029 and 2030, and $1.9 million thereafter.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction.
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction.
While we expect general and administrative expenses to increase in absolute terms as we continue to invest in our business, the trajectory of these costs as a percentage of total revenue will depend on revenue growth.
As a percentage of total revenue, general and administrative expense increased from 39% in 2024 to 40% in 2025. While we expect general and administrative expenses to increase in absolute terms as we continue to invest in our business, the trajectory of these costs as a percentage of total revenue will depend on revenue growth.
Financing activity cash used of $0.4 million was primarily the result of $0.5 million used to buy back stock under our stock repurchase program, which was partially offset by $0.1 million of proceeds from the issuance of common stock from stock grants. At December 31, 2024, we had cash, cash equivalents, and marketable securities of $27.8 million.
Financing activity cash used of $0.2 million was primarily the result of $0.2 million used to buy back stock under our stock repurchase program, which was partially offset by $0.1 million of proceeds from the issuance of common stock from stock grants. At December 31, 2025, we had cash, cash equivalents, and marketable securities of $22.3 million.
Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied. We categorize revenue as software licenses, software maintenance, or services and other revenue.
Identify the contract with the customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied.
Revenue from software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. We recognize software maintenance revenue over time on a straight-line basis over the contract period.
We categorize revenue as software licenses, software maintenance, and services and other revenue, which includes SaaS subscription arrangements. Revenue from software licenses is recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. We recognize software maintenance revenue and revenue from SaaS subscription arrangements, over time on a straight-line basis over the contract period.
Lower revenue in 2024 as compared to 2023 was primarily due to decreases in revenue from our perpetual software licenses of $1.2 million and software subscriptions of $0.7 million, which were partially offset by an increase in revenue from software maintenance of $0.9 million.
Lower revenue in 2025 as compared to 2024 was primarily due to decreases in revenue from our software licenses of $0.3 million, which were partially offset by an increase and services and other revenue of $0.1 million and an increase in revenue from software maintenance of $0.1 million.
Cash flows from operating activities A discussion of cash flow from operating activities for each of the last two years is as follows: Year ended December 31, 2024.
Cash flows from operating, investing and financing activities are described below. Cash flows from operating activities A discussion of cash flow from operating activities for each of the last two years is as follows: Year ended December 31, 2025.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the years indicated, certain line items from our consolidated statements of operations stated as a percentage of total revenue: Year ended December 31, Revenue: 2024 2023 Software licenses 44 % 52 % Software maintenance 50 42 Services and other 6 6 Total revenue 100 100 Costs and expenses: Cost of services and other 7 7 Research and development 45 50 Selling and marketing 44 43 General and administrative 37 36 Loss on write-off of note receivable - 15 Fair value adjustment to contingent acquisition payment - (4 ) Total costs and expenses 133 147 Operating loss (33 ) (47 ) Interest and other income 7 7 Loss before provision for income taxes (26 ) (40 ) Provision for income taxes 1 - Net loss (25 %) (40 %) Summary of Operations We are primarily engaged in the development and sale of biometrics products, solutions and services.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth, for the years indicated, certain line items from our consolidated statements of operations stated as a percentage of total revenue: Year ended December 31, Revenue: 2025 2024 Software licenses 42 % 44 % Software maintenance 51 50 Services and other 7 6 Total revenue 100 100 Costs and expenses: Cost of revenue 8 5 Research and development 48 45 Selling and marketing 42 44 General and administrative 40 39 Total costs and expenses 138 133 Operating loss (38 ) (33 ) Interest and other income 5 7 Loss before provision for income taxes (33 ) (26 ) Provision for income taxes 1 1 Net loss (34 %) (25 %) Summary of Operations We are primarily engaged in the development and sale of biometrics products, solutions and services.
The dollar decrease in interest income was primarily due to lower interest rates within our money market accounts. Income Taxes We are subject to income taxes in the United States, and we use estimates in determining our provisions for income taxes. We account for income taxes using the asset and liability method for accounting and reporting income taxes.
The dollar decrease in interest income was primarily due to lower average cash balances during the year and lower interest rates within our money market accounts. Income Taxes We are subject to income taxes in the United States, and we use estimates in determining our provisions for income taxes.
The change in cost of services gross margin loss was primarily due to the profitability mix of customer projects. Gross margins on services and other revenue are a function of: i) the nature of the projects; ii) the level of engineering difficulty and labor hours required to complete project tasks; and iii) how much we were able to charge.
Gross margins on revenue are a function of: i) the nature of the projects; ii) the level of engineering difficulty and labor hours required to complete project tasks; iii) how much we were able to charge; and iv) product mix.
Software Maintenance Revenue Software maintenance revenue consists of revenue from the sale of software maintenance contracts. Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the contract. Software maintenance revenue increased 12% from $7.7 million in 2023 to $8.6 million in 2024.
Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the contract. SaaS revenue represents a relatively small portion of both software maintenance revenue and total revenue. Software maintenance revenue increased 2% from $8.6 million in 2024 to $8.7 million in 2025.
Investing activity provided $6.3 million of cash, primarily as the result of net sales of marketable securities. Year ended December 31, 2023. Investing activity used of $3.1 million of cash, primarily as the result of net purchases of marketable securities.
Investing activity used $0.3 million of cash, primarily as the result of purchases of equipment of $0.2 million and net purchases of marketable securities of $0.1 million. 21 Year ended December 31, 2024. Investing activity provided $6.3 million of cash, primarily as the result of net sales of marketable securities. Cash flows from financing activities Year ended December 31, 2025.
A majority of our customers purchase software maintenance contracts when they initially purchase software licenses. Since our software is used in active biometrics systems, many of our customers continue to renew their maintenance contracts in subsequent years while systems remain operational.
Because our software is used in active biometrics systems, many customers continue to renew their maintenance contracts in subsequent years while those systems remain operational.
Engineering costs incurred to develop our technology and products are classified as research and development expense. As described in the cost of services section, engineering costs incurred to provide engineering services for customer projects are classified as cost of services and are not included in research and development expense.
As described in the cost of revenue section, engineering costs incurred to provide engineering services for customer projects are classified as cost of revenue and are not included in research and development expense. Certain engineering personnel costs are allocated to cost of revenue based on the nature of the activities performed.
See Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information on our operating lease.
These amounts represent fixed contractual obligations under the lease agreement. See Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our operating lease.
As of December 31, 2024, we had a total of $13.7 million of deferred tax assets and $0.5 million of deferred tax liabilities for which we have recorded a $13.2 million valuation allowance.
As of December 31, 2025, we had a total of $15.7 million of deferred tax assets and $1.4 million of deferred tax liabilities for which we have recorded a 24 $14.3 million valuation allowance.
Such costs primarily include: i) engineering salaries, stock-based compensation, fringe benefits, and facilities; ii) engineering consultants and contractors; iii) software license fees; and iv) hardware costs. Cost of services and other revenue decreased 11% from $1.3 million in 2023 to $1.1 million in 2024.
Such costs primarily include: i) engineering salaries, fringe benefits, and facilities; ii) engineering consultants and contractors; iii) software license fees; and iv) hardware costs. Cost of revenue increased 58% from $0.8 million in 2024 to $1.3 million in 2025. Cost of revenue as a percentage of total revenue increased from 5% in 2024 to 8% in 2025.
Services and Other Revenue Services revenue consists of fees we charge to perform software development, integration, installation, and customization services. Similar to software license revenue, services revenue depends on our ability to win biometrics systems projects either directly with end user customers or in conjunction with channel partners.
Similar to software license revenue, services revenue depends on our ability to win biometrics systems projects either directly with end user customers or in conjunction with channel partners. SaaS revenue reflects recurring subscription fees for access to our biometric software solutions.
This ASU is effective for the Company’s fiscal December 31, 2024 year-end and interim periods beginning in fiscal 2025, with early adoption permitted. The Company adopted this standard as of January 1, 2024 and the adoption did not have a material impact on the Company’s consolidated financial statements.
This ASU is effective for the Company’s fiscal year ended December 31, 2025 and has been adopted in these consolidated financial statements on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.
We expect that gross margins on services and other revenue will continue to fluctuate in future periods based on the nature, complexity, and pricing of future projects. 19 Research and Development Expense Research and development expense consists of costs for: i) engineering personnel, including salaries, stock-based compensation, fringe benefits, and facilities; ii) engineering consultants and contractors, and iii) other engineering expenses such as supplies, equipment depreciation, dues and memberships and travel.
Research and Development Expense Research and development expense consists of costs for: i) engineering personnel, including salaries, stock-based compensation, fringe benefits, and facilities; ii) engineering consultants and contractors, and iii) other engineering expenses such as supplies, equipment depreciation, dues and memberships and travel. Engineering costs incurred to develop our technology and products are classified as research and development expense.
Software license revenue decreased 18% from $9.5 million in 2023 to $7.8 million in 2024. As a percentage of total revenue, software license revenue decreased from 52% in 2023 to 45% in 2024. The $1.7 million decrease in software license revenue was primarily due to a decrease in perpetual licenses sales, which can fluctuate from period to period.
As a percentage of total revenue, software licenses revenue decreased from 44% in 2024 to 42% in 2025. The $0.4 million decrease in software licenses revenue was primarily due to a decrease in perpetual license sales, which can fluctuate from period to period. Software Maintenance Revenue Software maintenance revenue consists of revenue from software maintenance contracts and SaaS subscription arrangements.
Selling and Marketing Expense Selling and marketing expense primarily consists of costs for: i) sales and marketing personnel, including salaries, sales commissions, stock-based compensation, fringe benefits, travel, and facilities; and ii) advertising and promotion expenses. Selling and marketing expense decreased 3% from $8.0 million in 2023 to $7.7 million in 2024.
We expect research and development expenses to increase in absolute dollars and as a percentage of revenues in the next year. Selling and Marketing Expense Selling and marketing expense primarily consists of costs for: i) sales and marketing personnel, including salaries, sales commissions, stock-based compensation, fringe benefits, travel, and facilities; and ii) advertising and promotion expenses.
Software License Revenue Software license revenue consists of revenue from the sale of biometrics and imaging software products. Sales of software products depend on our ability to win proposals to supply software for biometrics systems projects either directly to end user customers or indirectly through channel partners.
Licensing of software products depends on our ability to win proposals to supply software for biometric systems projects either directly to end user customers or indirectly through channel partners. Software licenses revenue decreased 4% from $7.7 million in 2024 to $7.3 million in 2025.
Summary of Financial Results We used revenue and operating loss to summarize financial results over the past two years as we believe these measurements are the most meaningful way to understand our operating performance. 2024 compared to 2023 Revenue and operating loss in 2024 were $17.4 million and $5.5 million, respectively, which compared to revenue and operating loss in 2023 of $18.2 million and $8.5 million, respectively.
Summary of Financial Results We used revenue and operating loss to summarize our financial results over the past two years, as we believe these measures provide the most meaningful understanding of our operating performance.
General and administrative expense decreased 3% from $6.5 million in 2023 to $6.4 million in 2024. As a percentage of total revenue, general and administrative expense increased from 36% in 2023 to 37% in 2024.
Selling and marketing expense decreased 5% from $7.7 million in 2024 to $7.3 million in 2025. As a percentage of total revenue, selling and marketing decreased from 44% in 2024 to 42% in 2025.
Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. Total income tax expense for the years ended December 31, 2024 and 2023 was $65 thousand and $59 thousand, respectively.
We account for income taxes using the asset and liability method for accounting and reporting income taxes. Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates.
We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe recovery is not likely, we must establish a valuation allowance. The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.
We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe recovery is not likely, we must establish a valuation allowance. Management judgment is required in determining our provision for income taxes, our deferred tax assets, and any valuation allowance recorded against our net deferred tax assets.
As a percentage of total revenue, software maintenance revenue increased from 42% in 2023 to 49% in 2024. The dollar increase in software maintenance revenue was primarily due to software maintenance related to perpetual license sales during the second half of 2023 as well as for the year ended December 31, 2024.
As a percentage of total revenue, software maintenance revenue increased from 50% in 2024 to 51% in 2025. The dollar increase in software maintenance revenue was primarily due to software maintenance related to perpetual license sales. A majority of our customers enter into software maintenance contracts when they initially license our software products.
The classification of total engineering costs to research and development expense and cost of services for the years ended December 31, 2024 and 2023 was (in thousands): Years ended December 31, 2024 2023 Research and development expense $ 7,757 $ 9,124 Cost of services and other 1,132 1,273 Total engineering costs $ 8,889 $ 10,397 Total engineering costs decreased 15% from $10.4 million in 2023 to $8.9 million in 2024.
The following table presents the classification of total engineering costs between research and development expense and cost of revenue and other for the years ended December 31, 2025 and 2024 (in thousands): Years ended December 31, 2025 2024 Research and development expense $ 8,300 $ 7,757 Engineering costs allocated to cost of revenue 385 399 Total engineering costs $ 8,685 $ 8,156 Total engineering costs increased 6% from $8.2 million in 2024 to $8.7 million in 2025.
Lower operating loss in 2024 as compared 2023 was primarily due a negative adjustment of $2.7 million to a note receivable in 2023 that did not recur in 2024 and a year-over-year 18 decrease in research and development expense of $1.4 million, which were partially offset by decreased revenue of $0.9 million and the impact of a 2023 fair value adjustment to contingent consideration of $0.8 million that did not recur in 2024.
Higher operating loss in 2025 as compared to 2024 was primarily due to a decrease in revenue of $0.1 million and increases in research and development expenses of $0.5 million, cost of revenue of $0.5 million and general and administrative expenses of $0.2 million, which were partially offset by a decrease in sales and marketing expense of $0.3 million. 18 Software Licenses Revenue Software licenses revenue consists of revenue from the licensing of biometrics and imaging software products.
As a percentage of total revenue, selling and marketing expense was 44% in both 2024 and 2023. The dollar decrease in selling and marketing expense was primarily due to decreased bonus and commission expense of $0.2 million as a result of decreased revenue. We expect to be strategic in expanding our sales and marketing force to pursue future opportunities.
The decrease in selling and marketing expense was primarily due to a $0.2 million decrease in travel expense, a $0.1 million decrease in bonus and commission expense and a $0.1 million decrease in trade show costs. We expect selling and marketing expense to increase primarily due to the full-year impact of sales and marketing personnel hired during 2025.
As a percentage of total revenue, total engineering costs decreased from 57% in 2023 to 51% in 2024. Our engineering headcount decreased from 42 in 2023 to 33 in 2024. The decrease in engineering costs is primarily a result of reducing our engineering headcount by approximately 10% in 2023 and 20% in 2024.
As a percentage of total revenue, total engineering costs increased from 47% in 2024 to 50% in 2025. Prior period amounts have been reclassified to conform to the current period presentation. Our engineering headcount increased from 33 in 2024 to 45 in 2025. The increase in engineering costs is primarily a result of increasing our engineering headcount during the year.
The income tax expense for both years relates to limitations on the usage of net operating loss carryforwards generated in years beginning after December 31, 2017. LIQUIDITY AND CAPITAL RESOURCES In recent years, we have financed the company with our cash and cash equivalent balances. Cash flows from operating, investing and financing activities are described below.
In addition, we had state income taxes of $14 thousand and $31 thousand for the years ended December 31, 2025 and 2024, respectively. The Company did not incur U.S. federal income tax expense in either period. LIQUIDITY AND CAPITAL RESOURCES In recent years, we have financed the company with our cash and cash equivalent balances.
This ASU will be effective for the Company’s fiscal December 31, 2025 year-end, with early adoption permitted. We are assessing the impact of the standard on our consolidated financial statements. 25
The Company is currently evaluating the impact that adoption of this ASU will have on the Company's consolidated financial statements. 25
As a percentage of total revenue, services and other revenue was 6% in each of 2024 and 2023. Cost of Services and Other Revenue Cost of services and other revenue consists primarily of engineering costs to perform customer services projects.
Cost of Revenue Cost of revenue consists primarily of engineering costs to perform customer services projects, amortization of intangible technology assets related to acquisitions, and other third-party costs that are included with some of our software licenses.
Removed
With the introduction of AwareID, we have incorporated SaaS offering into our product line-up. For the year ended December 31, 2024 we generated $0.1 million of revenue from SaaS contracts compared to a de minimis amount for the year ended December 31, 2023. We expect SaaS revenue to continue to grow as a component of software license revenue going forward.
Added
The comparisons below reflect certain reclassifications described in more detail in Note 2 to the consolidated financial statements 2025 compared to 2024 Revenue and operating loss in 2025 were $17.3 million and $6.6 million, respectively, compared to revenue and operating loss in 2024 of $17.4 million and $5.5 million, respectively.
Removed
Other revenue consists of hardware fees that are included with some of our software licenses. Services and other revenue fluctuate when we commence new projects and/or when we complete projects that were started in previous periods. Services and other revenue was $1.0 million for the years ended December 2024 and 2023.
Added
Services and Other Revenue Services and other revenue consists of fees we charge to perform software development, integration, installation, customization, and other professional services, as well as subscription-based SaaS offerings and hardware included with certain software licenses.
Removed
When compared to services and other revenue, cost of services and other revenue as a percentage decreased from 122% in 2023 to 110% in 2024, which resulted in reduced gross margin loss from 22% in 2023 to 10% gross margin loss in 2024.
Added
Services and other revenue may fluctuate based on the timing of commencement and completion of customer projects, the mix of professional services and subscription-based arrangements, and the timing of hardware delivered in connection with software licenses. Services and other revenue increased 9% from $1.2 million in 2024 to $1.3 million in 2025.
Removed
Gross margins in these years reflect the profitability mix of customer projects.
Added
As a percentage of total revenue, services and other revenue was 7% in both 2024 and 2025. The increase was primarily due to growth in SaaS revenue, which increased from $0.1 million in 2024 to $0.4 million in 2025, partially offset by a decrease in professional services revenue of $0.2 million.
Removed
The reduction was driven by strategic initiatives to optimize resources, improve operational efficiency, and align our engineering capabilities with current business priorities. We believe our current engineering organization is adequately staffed to support our product roadmap, customer commitments, and innovation efforts.
Added
The increase in SaaS revenue reflects expansion of subscription-based customer arrangements, while the decrease in professional services revenue was primarily due to lower project-based activity during 2025.
Removed
We expect research and development expenses to decrease in absolute dollars and as a percentage of revenues in the next year and then to increase in absolute dollars in proceeding years.
Added
The $0.5 million increase was the result of increased software license costs. Prior period amounts have been reclassified to conform to the current period presentation.
Removed
Future trends will be influenced by our ability to scale operations efficiently and drive revenue expansion . 20 Fair value adjustment to note receivable In March 2022, we entered into a subscription agreement with Omlis Limited, a limited company incorporated and registered in England and Wales and the parent of MIRACL (“Omlis”).
Added
We expect 19 that gross margins will continue to fluctuate in future periods based on the nature, complexity, and pricing of future projects and product mix.
Removed
We purchased $2.5 million of Omlis’ Note Receivable (“Note”) that accrues interest at 5% annually with a maturity date of March 11, 2026. We recorded the fair value of the Note as $0 as of both December 31, 2024 and 2023 as a result of our evaluation of the impact of Omlis's liquidity issues on the collectability of the Note.
Added
Total engineering costs represent the combined amounts classified to research and development expense and cost of revenue.
Removed
In addition, in January 2024, Omlis and MIRACL petitioned to enter the United Kingdom administration process, which remains ongoing, adding to our unlikely recoverability of the Note's carrying value.
Added
The increase was driven by strategic initiatives and to align our engineering capabilities with current business priorities. We expect engineering costs to increase in 2026 primarily due to the full-year impact of engineering personnel hired during 2025.
Removed
Fair value adjustment to contingent acquisition payment In December 2021, we acquired 100% of the outstanding shares and acquired all of the assets and liabilities of FortressID for a purchase price of $3.4 million, which consisted of $2.5 million of cash consideration and contingent acquisition payments which was fair valued at $0.9 million at the acquisition date.
Added
We expect to be strategic in expanding our sales and marketing force to pursue future opportunities.
Removed
The maximum contingent acquisition payments at the time of the acquisition were $4.0 million, which consisted of a cash payment of up to $2.0 million for the achievement of set revenue targets in 2022 and an additional $2.0 million cash payment for the achievement of set revenue targets in 2023.
Added
In November 2025, we entered into a short-term bridge financing arrangement with Anonybit, Inc. (“Anonybit”) in connection with a potential strategic transaction. Pursuant to this arrangement, we advanced $0.2 million to Anonybit under a secured promissory note.
Removed
No revenue targets were achieved and the earnout period was closed as of December 31, 2023. We recorded a fair value adjustment of $0.8 million to contingent acquisition payment for the year ended December 31, 2023. Interest Income Interest income decreased from $1.3 million in 2023 to $1.2 million in 2024.
Added
We also entered into a software license agreement with Anonybit; however, the broader contemplated transaction was not completed, and no additional amounts were funded under the note. During the fourth quarter of 2025, we determined that Anonybit was insolvent and unable to satisfy its obligations after we ceased further funding and called the note.
Removed
Cash provided by operating activities was $1.8 million in 2023.
Added
As a result, we recorded a full write-off of the $0.2 million note receivable, which is included in general and administrative expense for the year ended December 31, 2025. General and administrative expense increased 3% from $6.7 million in 2024 to $6.9 million in 2025 primarily as a result of the write-off of the Anonybit note receivable.
Removed
Cash flows from financing activities A discussion of cash flow from financing activities for each of the last two years is as follows: Year ended December 31, 2024.
Added
Future trends will be influenced by our ability to scale operations efficiently and drive revenue expansion . Prior period amounts have been reclassified to conform to the current period presentation. Interest Income Interest income decreased from $1.2 million in 2024 to $0.9 million in 2025.

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