AWARE INC /MA/

Aware, Inc. is a leading biometric identification company that validates and secures identities using proven and trusted biometrics. The company's software offerings address the growing challenges that government and commercial enterprises face in knowing, authenticating and securing individuals through frictionless and highly secure user experiences. Principal government applications of biometrics systems include border control, visa applicant screening, law enforcement, national defense, intelligence, secure credentialing, access control, and background checks. Principal commercial applications include mobile enrollment, user authentication, identity proofing, and secure transaction enablement. The company's products span multiple biometric modalities, including fingerprint, face, iris and voice.

Aware's current principal competitors include diversified technology providers such as Idemia, Thales, and NEC, as well as component providers such as FaceTec, iProov, and Innovatrics. The company expects 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 Aware has. Moreover, low-cost foreign competitors have demonstrated a willingness to sell their products at significantly reduced prices. No customer represented 10% or more of total revenue in 2025 or 2024. As of December 31, 2025, three customers combined represented 53% ¹ of net accounts receivable and unbilled receivables.

Aware generates revenue through the sale of biometrics software products and services globally through a multifaceted distribution strategy using systems integrators, original equipment manufacturers (OEMs), value-added resellers (VARs), partners, and directly to select end user customers. The company's revenue is categorized as software licenses, software maintenance, and services and other revenue. Software maintenance has historically been made available by contracts that typically have a one-year term. The company also sells services for a fixed fee. With the introduction of AwareID, now the SaaS component of AwareSDK, the company has incorporated SaaS offerings into its product line-up.

Aware's product portfolio includes AwareSDK, which offers multiple biometric modality options including facial recognition and voice authentication, and is sold as a fixed term license on a subscription-based model, a perpetual license, or as a SaaS offering. AwareABIS is an automated biometric identification system used for large-scale biometric identification and deduplication using fingerprint, face, and iris recognition, sold as a fixed term license or on a subscription-based model. The AFIX suite of products is used for small-scale law enforcement focused biometric identification, with AFIX Tracker designed to serve between 15,000 and 2 million identities ². The Awareness Platform is a biometric integration platform-as-a-service (iPaaS). WebEnroll is a browser-based biometric enrollment and data management solution. The company also sells building blocks such as SDKs, APIs, and applications, including Nexa for biometric search and match and AwareXM for fingerprint matching. The company's principal imaging product is Aware JPEG 2000, used to compress, store, and display images, typically medical images.

Revenue from SaaS offerings was $0.4 million ³ in 2025 and $0.1 million ⁴ in 2024. Software licenses revenue was $7,314,000 ⁵ in 2025 and $7,650,000 ⁶ in 2024. Software maintenance revenue was $8,712,000 ⁷ in 2025 and $8,577,000 ⁸ in 2024. Services and other revenue was $1,267,000 ⁹ in 2025 and $1,162,000 ¹⁰ in 2024.

During the year ended December 31, 2025, the company revised the presentation of subscription-based SaaS revenue to classify it within services and other revenue rather than software licenses revenue, reclassifying $0.1 million ¹¹ of revenue for the year ended December 31, 2024. In November 2025, the company entered into a short-term bridge financing arrangement with Anonybit, Inc., advancing $0.2 million ¹² under a secured promissory note. The broader contemplated transaction was not completed, and during the fourth quarter of 2025, the company determined that Anonybit was insolvent and recorded a full write-off of the $0.2 million ¹³ note receivable. The company's 2022 Repurchase Plan authorized the repurchase of up to $10,000,000 ¹⁴ of common stock and expired as of December 31, 2025, with an aggregate of $2,139,705 ¹⁵ worth of shares repurchased over the lifetime of the plan. As of December 31, 2025, the company had 71 ¹⁶ U.S. patents, 3 ¹⁷ foreign patents and 8 ¹⁸ pending patent applications.

Total revenue in 2025 was $17,293,000 ¹⁹ compared to $17,389,000 ²⁰ in 2024. Operating loss in 2025 was $6,557,000 ²¹ compared to $5,545,000 ²² in 2024. Net loss in 2025 was $5,873,000 ²³ compared to $4,431,000 ²⁴ in 2024. Diluted net loss per share was $0.28 ²⁵ in 2025 and $0.21 ²⁶ in 2024.

A component of the company's strategy to grow revenue includes expansion into commercial markets. To date, biometrics technology has received only limited acceptance and slow adoption in these markets. Although the recent appearance of biometric readers on popular consumer products, such as smartphones, has increased interest in biometrics, commercial markets for biometrics technology are still developing and evolving. The company expects to derive a growing percentage of its revenue from the sale of cloud-based services. While perpetual and fixed-term licenses remain the primary source of software revenue, the company continues to enhance and transition certain legacy software offerings to cloud-based delivery models and expects SaaS to become a significant product portfolio over time.

The company intends to introduce new products that will allow it to offer more complete biometrics solutions, believing this strategy will allow it to sell more software into biometrics systems projects in order to grow revenue. The company's preference is to develop such products internally, but to the extent it is unable to do that, it may purchase or license technologies from third parties. The company anticipates that it will continue to focus future research and development activities on enhancing existing products and developing new products.

The company expects research and development expenses to increase in absolute dollars and as a percentage of revenues in the next year. The company expects engineering costs to increase in 2026 primarily due to the full-year impact of engineering personnel hired during 2025. The company expects selling and marketing expense to increase primarily due to the full-year impact of sales and marketing personnel hired during 2025. The company expects general and administrative expenses to increase in absolute terms as it continues to invest in its business, though the trajectory of these costs as a percentage of total revenue will depend on revenue growth.

The company expects to be strategic in expanding its sales and marketing force to pursue future opportunities. The company's engineering headcount increased from 33 ²⁷ in 2024 to 45 ²⁸ in 2025. As of December 31, 2025, the company employed 80 ²⁹ people, all based in the U.S., including 45 ³⁰ in engineering and research, 21 ³¹ in sales and marketing, and 14 ³² in finance and administration.

The company believes that its cash, cash equivalents, and marketable securities will be sufficient to fund its operations for at least the next twelve months from the filing date of the Annual Report on Form 10-K and to meet its known long-term cash requirements including operating expenses, contractual obligations, and planned strategic investments. The company estimates lease payments will be approximately $0.7 million ³³ in each of 2026 and 2027, approximately $0.8 million ³⁴ in each of 2028, 2029 and 2030, and $1.9 million ³⁵ thereafter. The company paid no dividends in 2025 or 2024. The company anticipates that it will continue to reinvest any earnings to finance its future operations although it may also pay special cash dividends if the Board of Directors deems it appropriate.

The company faces the risk that the biometrics market may not experience significant growth or that its products may not achieve broad acceptance both domestically and internationally. The expansion of the biometrics market depends on factors such as the cost, performance and reliability of products, the continued growth in demand for biometrics solutions within government and law enforcement markets, customers' perceptions regarding the benefits of biometrics solutions, public perceptions regarding privacy and the use of biometric information, and proposed or enacted legislation related to collection, use and storage of biometric information. Certain industries, such as security and government, have been slower to transition to cloud-based solutions due to concerns over data control, privacy, and regulatory compliance. If the adoption of cloud-based solutions in these sectors grows more slowly than anticipated or fails to gain traction, demand for the company's services could be negatively affected.

The company derives a significant portion of its revenue directly or indirectly from federal, international, state and local governments. Changes in government contracting policies or government budgetary constraints may adversely affect financial performance. Factors that could adversely affect the business include the impact of changes in government priorities, budgetary constraints, continuing resolutions, or other actions that reduce or delay government spending, changes in fiscal policies or decreases in available government funding, changes in U.S. or foreign trade policies, tariffs, export controls, sanctions, or retaliatory measures, and potential delays or changes in the government appropriations process.

The company derives a significant portion of its revenue directly or indirectly from government customers, and changes in government contracting policies, budgetary constraints, or fiscal policies could adversely affect financial performance. The biometrics industry is characterized by rapid technological change and evolving industry standards, which could render existing products obsolete. The company faces intense competition from diversified technology providers such as Idemia, Thales, and NEC, and component providers such as FaceTec, iProov, and Innovatrics, many of which have substantially greater financial, marketing, and research resources. The company's operational systems, networks and products are subject to continually evolving cybersecurity risks, which could result in disclosure of confidential information, damage to reputation, additional costs, regulatory penalties and financial losses. The company is subject to a growing array of laws aimed at regulating the use of artificial intelligence technologies, including the European Union's Artificial Intelligence Act which provides for noncompliance fines up to either 35 million euros ³⁶ or 7% ³⁷ of global turnover, and the Colorado AI Act which imposes fines of up to $20,000 ³⁸ per violation.

Management's message emphasizes that Aware is a leading biometric identity platform company that validates and secures identities using proven and trusted biometrics. The company's comprehensive portfolio of biometric solutions is based on innovative, robust products designed explicitly for ease of integration. Management highlights that the company's algorithms are based on diverse data sets from around the world and can be tailored to the unique security requirements of each customer. The strategic priorities emphasized include continuing to enhance and transition certain legacy software offerings to cloud-based delivery models, expecting SaaS to become a significant product portfolio over time, and introducing new products to offer more complete biometrics solutions in order to grow revenue. Management also notes the intention to continue to focus future research and development activities on enhancing existing products and developing new products.