[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Consolidated%20Financial%20Statements) This section presents Aware, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, cash flows, equity, and detailed accounting notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) **Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $7,300 | $12,972 | $(5,672) | | Marketable securities | $16,379 | $14,842 | $1,537 | | Total current assets | $28,838 | $32,985 | $(4,147) | | Total assets | $38,097 | $42,644 | $(4,547) | | Total current liabilities | $6,288 | $7,864 | $(1,576) | | Total stockholders' equity | $28,050 | $30,896 | $(2,846) | [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) **Consolidated Statements of Operations Highlights (in thousands, except per share data):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $3,895 | $4,322 | $7,501 | $8,743 | | Operating loss | $(1,961) | $(1,341) | $(3,812) | $(2,603) | | Net loss | $(1,769) | $(1,089) | $(3,367) | $(2,071) | | Net loss per share – basic | $(0.08) | $(0.05) | $(0.16) | $(0.10) | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) **Consolidated Statements of Cash Flows Highlights (in thousands):** | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,091) | $(3,079) | | Net cash (used in) provided by investing activities | $(1,493) | $4,996 | | Net cash (used in) provided by financing activities | $(88) | $38 | | (Decrease) increase in cash and cash equivalents | $(5,672) | $1,955 | | Cash and cash equivalents, end of period | $7,300 | $11,957 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%20June%2030%2C%202024) - Total stockholders' equity decreased from **$30,896 thousand** at December 31, 2024, to **$28,050 thousand** at June 30, 2025, primarily due to net losses[15](index=15&type=chunk) - Accumulated deficit increased to **$(73,310) thousand** at June 30, 2025, from **$(69,943) thousand** at December 31, 2024[15](index=15&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2025, was **$562 thousand**, up from **$407 thousand** in the prior year period[15](index=15&type=chunk) - The company repurchased common stock totaling **$115 thousand** during the six months ended June 30, 2025[15](index=15&type=chunk) [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on accounting policies, revenue recognition, fair value, intangible assets, EPS, equity, stock compensation, and income taxes [Note 1 – Description of the Company and Basis of Presentation](index=7&type=section&id=Note%201%20%E2%80%93%20Description%20of%20the%20Company%20and%20Basis%20of%20Presentation) - Aware, Inc. is a leading biometric authentication company focused on verifying and securing identities through advanced biometric technologies, including fingerprints, facial recognition, iris scans, and voice analysis[18](index=18&type=chunk) - The company's solutions support identity-related functions such as enrollment, identification, and authentication for both government and commercial sectors[18](index=18&type=chunk)[19](index=19&type=chunk)[25](index=25&type=chunk) - The consolidated financial statements include Aware, Inc. and its subsidiaries, Aware Security Corporation and Fortr3ss, Inc[26](index=26&type=chunk) - The company adopted ASU No. 2023-07 (Segment Reporting) effective January 1, 2024, with no material impact, and is assessing ASU No. 2023-09 (Income Taxes) effective December 31, 2025[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2 – Revenue Recognition](index=8&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) - Revenue is categorized as software licenses (recognized at a point in time), software maintenance (recognized over time on a straight-line basis), and services and other (recognized over time using an input method); SaaS revenue is recognized ratably over the subscription period[30](index=30&type=chunk)[37](index=37&type=chunk) - For contracts with multiple performance obligations, the transaction price is allocated based on relative standalone selling price (SSP)[31](index=31&type=chunk)[32](index=32&type=chunk) Revenue by Geographic Region (in thousands) | Region | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | United States | $3,815 | $3,379 | | United Kingdom | $1,431 | $2,493 | | Rest of World | $2,255 | $2,871 | | **Total** | **$7,501** | **$8,743** | Revenue by Timing of Transfer (in thousands) | Timing of Transfer | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Goods or services transferred at a point in time | $1,828 | $2,640 | | Goods or services transferred over time | $5,673 | $6,103 | | **Total** | **$7,501** | **$8,743** | Revenue by Contract Type (in thousands) | Contract Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | License and service contracts | $6,086 | $6,861 | | Subscription-based contracts | $1,415 | $1,882 | | **Total** | **$7,501** | **$8,743** | - As of June 30, 2025, deferred revenue was **$4,224 thousand**, with approximately **96%** expected to be recognized over the next 12 months[41](index=41&type=chunk)[42](index=42&type=chunk) [Note 3 – Fair Value Measurements](index=13&type=section&id=Note%203%20%E2%80%93%20Fair%20Value%20Measurements) - The company's assets measured at fair value on a recurring basis, primarily money market funds and marketable securities (U.S. Treasuries), are classified as Level 1, indicating valuations based on quoted prices in active markets[44](index=44&type=chunk)[45](index=45&type=chunk) Assets Measured at Fair Value (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Money market funds (included in cash and cash equivalents) | $6,669 | $10,671 | | Marketable securities | $16,379 | $14,842 | | **Total Assets** | **$23,048** | **$25,513** | - As of June 30, 2025, marketable securities, consisting of U.S. Treasury notes and bonds, had a fair value of **$16,379 thousand**, including gross unrealized gains of **$300 thousand** and gross unrealized losses of **$2 thousand**[47](index=47&type=chunk) [Note 4 – Intangible Assets](index=14&type=section&id=Note%204%20%E2%80%93%20Intangible%20Assets) Intangible Assets, Net (in thousands) as of June 30, 2025 | Category | Net Book Value | | :-------------------- | :------------- | | Customer relationships | $1,528 | | Developed technology | $236 | | Trade name / trademarks | $6 | | **Total** | **$1,770** | - Amortization expense for intangible assets was **$0.1 million** for the three months ended June 30, 2025, and **$0.2 million** for the six months ended June 30, 2025[48](index=48&type=chunk) Expected Amortization Expense (in thousands) | Year | Amount | | :--- | :----- | | 2025 | $198 | | 2026 | $356 | | 2027 | $355 | | 2028 | $338 | | 2029 | $235 | | Thereafter | $288 | | **Total** | **$1,770** | [Note 5 – Computation of Earnings per Share](index=14&type=section&id=Note%205%20%E2%80%93%20Computation%20of%20Earnings%20per%20Share) - Basic earnings per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding[49](index=49&type=chunk) - Diluted earnings per share includes the effect of dilutive potential common shares, such as stock options, unless their inclusion would be anti-dilutive during periods of net loss[49](index=49&type=chunk) [Note 6 – Equity and Stock-based compensation](index=15&type=section&id=Note%206%20%E2%80%93%20Equity%20and%20Stock-based%20compensation) Stock-based Compensation Expense (in thousands) | Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $87 | $20 | | Selling and marketing | $28 | $29 | | General and administrative | $447 | $356 | | **Total Stock-based compensation expense** | **$562** | **$407** | - The 2023 Equity and Incentive Plan was approved on January 17, 2024, replacing the previous 2001 Plan[50](index=50&type=chunk) - An Exchange Offer in February 2024 resulted in the cancellation of **2,180,000** eligible stock options for **933,073** new options with an exercise price of **$2.21 per share**, with no incremental expense recognized[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - During the six months ended June 30, 2025, **1,513,322** stock options were granted, including **1,060,197** options to CEO Ajay Amlani, with both time-based and performance-based vesting conditions[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - **771,184** restricted stock units (RSUs) were granted during the six months ended June 30, 2025, including **166,229** RSUs to CEO Amlani for **80%** of his base salary for March-December 2025, and **354,600** RSUs for **75%** of his base salary for January 2026-December 2027[59](index=59&type=chunk)[60](index=60&type=chunk) - The company's stock repurchase program, extended through December 31, 2025, has seen **$2.1 million** of common stock repurchased as of June 30, 2025[61](index=61&type=chunk) [Note 7 – Income Taxes](index=16&type=section&id=Note%207%20%E2%80%93%20Income%20Taxes) - Income tax provision was **$34 thousand** for the six months ended June 30, 2025, compared to **$39 thousand** in the prior year period, primarily due to limitations on net operating loss carryforwards[62](index=62&type=chunk)[101](index=101&type=chunk) - A full valuation allowance is recorded against net deferred tax assets as of June 30, 2025, and December 31, 2024, due to the unlikelihood of realizing their benefits[63](index=63&type=chunk)[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, and liquidity, highlighting decreased revenue, widening operating losses, and increased expenses from strategic investments [Summary of Operations](index=17&type=section&id=Summary%20of%20Operations) - The company is primarily engaged in the development and sale of biometrics products, solutions, and services for government and commercial applications, including border control, law enforcement, user authentication, and financial transactions[65](index=65&type=chunk) - Ajay Amlani was appointed Chief Executive Officer and a member of the Board of Directors effective February 3, 2025[66](index=66&type=chunk) [Summary of Financial Results](index=17&type=section&id=Summary%20of%20Financial%20Results) - Revenue for the three months ended June 30, 2025, decreased to **$3.9 million** from **$4.3 million** in the prior year, with operating loss widening to **$2.0 million** from **$1.3 million**[68](index=68&type=chunk) - For the six months ended June 30, 2025, revenue decreased to **$7.5 million** from **$8.7 million**, and operating loss widened to **$3.8 million** from **$2.6 million**[69](index=69&type=chunk) - The decrease in revenue and widening operating loss were primarily due to a **$1.2 million** decrease in software license revenue and a **$0.2 million** increase in operating expenses from additional headcount in the first half of 2025[68](index=68&type=chunk)[69](index=69&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) This section details revenue stream and expense category performance, explaining financial result changes for the three and six months ended June 30, 2025 [Software licenses](index=18&type=section&id=Software%20licenses) - Software license revenue decreased **22%** to **$1.4 million** for the three months ended June 30, 2025, from **$1.8 million** in the prior year, mainly due to fewer one-time perpetual license deals[73](index=73&type=chunk) - For the six months ended June 30, 2025, software license revenue decreased **31%** to **$2.7 million** from **$4.0 million**, driven by an **$0.8 million** decrease in perpetual licenses and a **$0.4 million** decrease in subscription contract licenses[74](index=74&type=chunk) - The company's market strategy focuses on legacy government biometrics markets and expansion into new commercial biometrics markets[75](index=75&type=chunk) [Software maintenance](index=18&type=section&id=Software%20maintenance) - Software maintenance revenue remained stable at **$2.2 million** for the three months ended June 30, 2025, and **$4.3 million** for the six months ended June 30, 2025, compared to the prior year periods[77](index=77&type=chunk)[78](index=78&type=chunk) - As a percentage of total revenue, software maintenance increased from **50%** to **56%** for the three months and from **49%** to **58%** for the six months, reflecting the overall revenue decline[77](index=77&type=chunk)[78](index=78&type=chunk) [Services and other revenue](index=18&type=section&id=Services%20and%20other%20revenue) - Services and other revenue decreased from **$0.4 million** to **$0.3 million** for the three months ended June 30, 2025, and from **$0.5 million** to **$0.4 million** for the six months ended June 30, 2025[80](index=80&type=chunk)[81](index=81&type=chunk) - This revenue stream includes fees for software development, integration, installation, customization services, and hardware sales, and fluctuates based on project commencement and completion[79](index=79&type=chunk)[81](index=81&type=chunk) [Cost of revenue](index=18&type=section&id=Cost%20of%20revenue) - Cost of revenue remained stable at **$0.3 million** for the three months ended June 30, 2025, but increased from **$0.5 million** to **$0.6 million** for the six months ended June 30, 2025[83](index=83&type=chunk)[84](index=84&type=chunk) - For the six months ended June 30, 2025, cost of revenue comprised **$0.2 million** in engineering costs, **$0.2 million** in intangible asset amortization, and **$0.2 million** in software license and hardware costs[84](index=84&type=chunk) - Gross margins are expected to fluctuate based on project nature, complexity, pricing, and product mix[85](index=85&type=chunk) [Research and development expense](index=19&type=section&id=Research%20and%20development%20expense) - Research and development expense increased to **$1.960 million** for the three months ended June 30, 2025, from **$1.867 million** in the prior year, primarily due to increased headcount[10](index=10&type=chunk)[89](index=89&type=chunk) - For the six months ended June 30, 2025, R&D expense decreased to **$3.881 million** from **$4.049 million**, mainly due to decreased headcount partially offset by new hires[10](index=10&type=chunk)[89](index=89&type=chunk) - Total engineering costs are anticipated to increase during the remainder of 2025 to support strategic product development initiatives[89](index=89&type=chunk) [Selling and marketing expense](index=19&type=section&id=Selling%20and%20marketing%20expense) - Selling and marketing expense decreased **6%** to **$2.0 million** for the three months ended June 30, 2025, and **9%** to **$3.6 million** for the six months ended June 30, 2025, primarily due to lower headcount[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - The company expects selling and marketing expense to increase in future periods as it invests in revenue-generating activities, including backfilling key positions and additional sales hires[94](index=94&type=chunk) [General and administrative expense](index=20&type=section&id=General%20and%20administrative%20expense) - General and administrative expense increased **11%** to **$1.6 million** for the three months ended June 30, 2025, and **17%** to **$3.2 million** for the six months ended June 30, 2025[96](index=96&type=chunk)[97](index=97&type=chunk) - The increase for the six-month period was primarily due to a **$0.1 million** signing bonus for CEO Amlani, **$0.1 million** in professional services for CEO transition, and increases in stock compensation and other compensation expenses[98](index=98&type=chunk) [Interest Income](index=20&type=section&id=Interest%20Income) - Interest income decreased to **$0.2 million** for the three months and **$0.5 million** for the six months ended June 30, 2025, from **$0.3 million** and **$0.6 million** respectively in the prior year, mainly due to lower average cash balances[99](index=99&type=chunk) - Interest income is expected to decrease slightly over the remainder of 2025 due to a lower projected average cash balance[100](index=100&type=chunk) [Income taxes](index=20&type=section&id=Income%20taxes) - Total income tax expense was **$26 thousand** for the three months and **$34 thousand** for the six months ended June 30, 2025, related to limitations on net operating loss carryforwards[101](index=101&type=chunk) - A full valuation allowance is maintained against net deferred tax assets due to the unlikelihood of realizing their benefits[103](index=103&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled **$23.7 million**, a **$4.1 million** decrease from December 31, 2024[104](index=104&type=chunk) - Cash used in operating activities was **$4.1 million**, in investing activities was **$1.5 million** (primarily for marketable securities purchases), and in financing activities was **$88 thousand** (primarily for common stock repurchases) during the first six months of 2025[104](index=104&type=chunk)[105](index=105&type=chunk) - Management believes current cash and cash equivalents are sufficient to fund operations for at least the next twelve months[106](index=106&type=chunk) [Recent Accounting Pronouncements](index=21&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 1 of the Consolidated Financial Statements for details on recent accounting pronouncements[108](index=108&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they are effective - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[109](index=109&type=chunk) [PART II. OTHER INFORMATION](index=21&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - Aware, Inc. is not a party to any lawsuit or proceeding that is considered material to its business[112](index=112&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's common stock involves a high degree of risk. No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, have occurred during the three months ended March 31, 2025 - Investing in the company's common stock involves a high degree of risk[113](index=113&type=chunk) - There have been no material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, during the three months ended March 31, 2025[113](index=113&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activities under its authorized program - The Board of Directors extended the 2022 Repurchase Plan through December 31, 2025, authorizing repurchases of up to **$10.0 million** of common stock[114](index=114&type=chunk) - During the three months ended June 30, 2025, the company purchased **41,020 shares** at an average price of **$1.51 per share** in April 2025[115](index=115&type=chunk) - As of June 30, 2025, **$7,860,376** remains available for repurchase under the plan[115](index=115&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, employment agreements, certifications, and financial statements in iXBRL format - Key exhibits include Amended and Restated Articles of Organization, By-Laws, employment agreements for Ajay K. Amlani and Lona Therrien, CEO/CFO certifications (Sarbanes-Oxley Act), and financial statements formatted in iXBRL[120](index=120&type=chunk) [Signatures](index=24&type=section&id=Signatures) The report is duly signed on August 1, 2025, by Ajay K. Amlani, Chief Executive Officer & President, and David K. Traverse, Chief Financial Officer, certifying its submission - The report was signed by Ajay K. Amlani (Chief Executive Officer & President) and David K. Traverse (Chief Financial Officer) on August 1, 2025[124](index=124&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $3.9 million, down from $4.3 million in the prior year, primarily due to the timing of perpetual license sales [15] - Recurring revenue increased by 2% year-over-year to $2.7 million, attributed to higher software maintenance [15] - Operating loss was $2 million compared to a loss of $1.3 million in the same period last year [16] - GAAP net loss was $1.8 million or $0.08 per diluted share, compared to a net loss of $1.1 million or $0.05 per diluted share in the prior year [16] - Adjusted EBITDA loss for Q2 was $1.4 million, worsening from a loss of $1 million in the previous year [17] - For the first six months of 2025, total revenue was $7.5 million, down from $8.7 million in 2024 [17] Business Line Data and Key Metrics Changes - The company is focusing on enhancing its awareness platform, which integrates best-in-class biometric algorithms into a single solution [9] - Improvements in facial matching speed and mobile face capture reliability were noted, enhancing user experience [9][21] - The company secured national ID programs for two Middle Eastern governments, indicating growth in the federal space [13] Market Data and Key Metrics Changes - Aware was recognized as a luminary in core identity technology, highlighting its capabilities in deepfake detection and liveness [8] - The company is seeing increased demand for biometric solutions in both commercial and government sectors, particularly in law enforcement [23] Company Strategy and Development Direction - The strategic transformation focuses on building a scalable business grounded in operational rigor and differentiated technology [4] - The company aims to deepen strategic partnerships across public and commercial sectors, enhancing its visibility and alignment with government priorities [12] - Aware is positioning itself as a trusted biometric infrastructure partner for governments and enterprises, emphasizing continuous product innovation [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about early traction from foundational work in go-to-market strategy and leadership additions, expecting improved revenue performance as 2025 progresses [19] - The company is focused on purposeful investments aimed at accelerating deployments and strengthening customer experience [28] - Management highlighted the importance of federal government work and law enforcement as key growth levers for the future [32] Other Important Information - The company welcomed a new Chief Marketing Officer to enhance brand visibility and accelerate pipeline velocity [10] - Aware's cash, cash equivalents, and marketable securities totaled $23.7 million as of June 30, 2025, down from $27.8 million at the end of 2024, indicating a well-capitalized position [18] Q&A Session Summary Question: Insight on Aware's partnership with Leidos following FBI task order announcement - Management expressed excitement about ongoing investments by the US federal government in the biometric industry and looks forward to participating in these growth opportunities [30] Question: Revenue expectations for 2025 and influencing factors - Management views 2025 as a period of progress, focusing on pipeline advancement and customer onboarding, but remains cautious about revenue timing [31] Question: Key revenue growth levers for 2026 and beyond - Key growth levers include federal government work, law enforcement market expansion, and increasing interest in biometric technology in the commercial market [32][34] Question: Steps to accelerate subscription-based business - The company continues to invest in its go-to-market process and teams, focusing on scalable biometric projects and solutions [35] Question: Improving sales cycle velocity and current bottlenecks - Management emphasized strengthening the end-to-end sales process and aligning closely with customer requirements to reduce time to value [36] Question: Trends in global government biometric deployments - Management highlighted significant opportunities in federal government issued digital identities and the growing demand for biometrics in global travel [38][42] Question: Current pipeline and deal flow compared to the first quarter - Management noted significant acceleration in pipeline volume and value, with expectations for revenue acceleration in the second half of the year [47] Question: Customer and revenue retention rates - Retention rates remain consistent with previous years, with ongoing focus on improving customer relationship management [49] Question: Notable recent RFP wins or losses - Management refrained from commenting on specific projects but noted high market activity and validation of their technology [50][51] Question: Aware's M&A pipeline - The company is focused on internal execution and investments rather than external M&A to drive growth [52]

Company Overview and Strategic Context Aware, Inc. outlines its strategic transformation, core technology advancements, and leadership in biometric identity [Introduction and Management Commentary](index=1&type=section&id=Introduction%20and%20Management%20Commentary) Management highlighted Aware's strategic transformation, core technology advancements, and H2 focus on sales and growth - CEO Ajay Amlani emphasized the company's substantial progress in strategic transformation, core technology advancements, partner network expansion, and commercial execution[3](index=3&type=chunk) - The strategic roadmap is based on three pillars: advancing purpose-built platforms, strengthening go-to-market efforts, and deepening strategic partnerships in public and commercial sectors[3](index=3&type=chunk) - In the second half of 2025, the company will focus on converting growing late-stage sales leads, accelerating customer onboarding, and driving sustainable growth[4](index=4&type=chunk) [About Aware](index=3&type=section&id=About%20Aware) Aware (NASDAQ: AWRE) is a global leader in biometric identity and authentication solutions, using its Awareness platform for identity verification and fraud prevention - Aware is a global leader in biometric identity and authentication solutions[12](index=12&type=chunk) - Its "Awareness platform" transforms biometric data into actionable intelligence for identity verification and fraud prevention, designed for mission-critical enterprise environments[12](index=12&type=chunk) Second Quarter 2025 Operational Highlights Aware achieved significant product innovations, including enhanced facial matching and mobile capture technology, alongside industry recognition and a key leadership appointment [Product and Technology Innovations](index=1&type=section&id=Product%20and%20Technology%20Innovations) In Q2 2025, Aware made significant product innovations, including a 14x improvement in facial matching performance and smarter mobile facial capture technology - Developed new product innovations, including a **14x improvement in facial matching performance**[5](index=5&type=chunk) - Launched smarter mobile facial capture technology[5](index=5&type=chunk) [Industry Recognition and Leadership Appointments](index=1&type=section&id=Industry%20Recognition%20and%20Leadership%20Appointments) Aware was recognized as an industry leader in core identity technology and excelled in DHS RIVTD passive liveness detection tests, also appointing Lona Therrien as CMO - Recognized as an industry leader in core identity technology in Prism Project's deepfake and synthetic identity report[5](index=5&type=chunk) - Achieved best-in-class performance in the Department of Homeland Security Remote Identity Verification Technology Demonstration (RIVTD) passive liveness detection test[5](index=5&type=chunk) - Appointed Lona Therrien as Chief Marketing Officer, bringing 15 years of cybersecurity marketing experience[5](index=5&type=chunk) Financial Performance Summary Aware's Q2 and six-month 2025 financial results show revenue declines and increased net losses, primarily due to the timing of perpetual license sales and strategic investments [Second Quarter 2025 Financial Results](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Results) Aware's Q2 2025 revenue decreased to $3.9 million, driven by perpetual license sales timing, leading to an increased net loss of $1.8 million and an Adjusted EBITDA loss of $1.4 million, with cash and equivalents at $23.7 million | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | YoY Change | | :--------------------- | :-------------------- | :-------------------- | :--------- | | Revenue | $3.9 | $4.3 | -9.3% | | Operating Expenses | $5.9 | $5.7 | +3.5% | | Net Loss | $(1.8) | $(1.1) | +63.6% | | Diluted EPS | $(0.08) | $(0.05) | +60.0% | | Adjusted EBITDA Loss | $(1.4) | $(1.0) | +40.0% | - Revenue decline was primarily attributed to the timing of perpetual license sales, which can vary due to customer procurement cycles[6](index=6&type=chunk) - The increase in Adjusted EBITDA loss was mainly due to lower total revenue and higher personnel-related expenses, reflecting strategic investments in headcount[8](index=8&type=chunk) - Cash, cash equivalents, and marketable securities totaled **$23.7 million** as of June 30, 2025, down from $27.8 million as of December 31, 2024[8](index=8&type=chunk) [Six-Month 2025 Financial Results](index=2&type=section&id=Six-Month%202025%20Financial%20Results) For the first six months of 2025, Aware's revenue decreased to $7.5 million due to perpetual license sales timing, resulting in an expanded net loss of $3.4 million and an Adjusted EBITDA loss of $3.0 million | Metric | Six Months 2025 (in millions) | Six Months 2024 (in millions) | YoY Change | | :--------------------- | :---------------------------- | :---------------------------- | :--------- | | Revenue | $7.5 | $8.7 | -13.8% | | Operating Expenses | $11.3 | $11.3 | 0.0% | | Net Loss | $(3.4) | $(2.1) | +61.9% | | Diluted EPS | $(0.16) | $(0.10) | +60.0% | | Adjusted EBITDA Loss | $(3.0) | $(1.9) | +57.9% | - The six-month revenue decline was primarily attributed to the timing of perpetual license sales[9](index=9&type=chunk) - The increase in Adjusted EBITDA loss was primarily due to lower revenue[10](index=10&type=chunk) Detailed Financial Statements This section presents Aware's unaudited consolidated statements of operations and comprehensive loss, and condensed consolidated balance sheets, detailing revenue breakdown, expenses, assets, and liabilities [Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents Aware's unaudited consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2025 and 2024, detailing revenue by category and various costs and expenses leading to net and comprehensive losses | Revenue Category (in thousands) | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :------------------------------ | :------ | :------ | :------ | :------ | | Software licenses | $1,420 | $1,815 | $2,736 | $3,962 | | Software maintenance | $2,198 | $2,154 | $4,349 | $4,314 | | Services and other | $277 | $353 | $416 | $467 | | **Total revenue** | **$3,895** | **$4,322** | **$7,501** | **$8,743** | | Cost of revenue | $339 | $270 | $579 | $546 | | Research and development | $1,960 | $1,867 | $3,881 | $4,049 | | Selling and marketing | $1,964 | $2,091 | $3,627 | $3,982 | | General and administrative | $1,593 | $1,435 | $3,226 | $2,769 | | **Total costs and expenses** | **$5,856** | **$5,663** | **$11,313** | **$11,346** | | Operating loss | $(1,961) | $(1,341) | $(3,812) | $(2,603) | | Net loss | $(1,769) | $(1,089) | $(3,367) | $(2,071) | | Net loss per share – diluted | $(0.08) | $(0.05) | $(0.16) | $(0.10) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides Aware's unaudited condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024, detailing assets like cash and receivables, liabilities including accounts payable and deferred revenue, and total stockholders' equity | Balance Sheet Item (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $7,300 | $12,972 | | Marketable securities | $16,379 | $14,842 | | Accounts and unbilled receivables, net | $3,833 | $4,002 | | Total assets | $38,097 | $42,644 | | Accounts payable and accrued expenses | $1,711 | $2,341 | | Deferred revenue | $4,224 | $5,163 | | Operating lease liability | $4,112 | $4,244 | | Total stockholders' equity | $28,050 | $30,896 | | Total liabilities and stockholders' equity | $38,097 | $42,644 | Non-GAAP Financial Measures This section defines Aware's non-GAAP financial measures, including Adjusted EBITDA and recurring revenue, and provides reconciliations to GAAP net loss [Definition of Non-GAAP Measures](index=5&type=section&id=Definition%20of%20Non-GAAP%20Measures) Aware defines Adjusted EBITDA as GAAP net loss adjusted for depreciation, amortization, stock-based compensation, other income/expense, and income tax provision, used for internal forecasting and performance evaluation, while recurring revenue reflects stable income from periodic arrangements like maintenance or subscriptions - Adjusted EBITDA is defined as U.S. GAAP net loss adjusted for depreciation and amortization of fixed and intangible assets, stock-based compensation expense, other (expense) income, net, and provision for income taxes[19](index=19&type=chunk) - Adjusted EBITDA is used for internal forecasting, operating budgets, and evaluating operating trends[19](index=19&type=chunk) - Recurring revenue is defined as the portion of Aware's revenue that is based on periodic arrangements and is expected to continue in the

Core Viewpoint - Aware, Inc. reported a decrease in revenue for the second quarter of 2025, primarily due to the timing of perpetual license sales, while continuing to focus on strategic transformation and growth in biometric identity solutions [4][3]. Financial Results - Revenue for Q2 2025 was $3.9 million, down from $4.3 million in Q2 2024, reflecting a year-over-year decrease of approximately 9.3% [4][5]. - Operating expenses increased to $5.9 million in Q2 2025 from $5.7 million in Q2 2024 [5]. - The net loss for Q2 2025 was $1.8 million, or $(0.08) per diluted share, compared to a net loss of $1.1 million, or $(0.05) per diluted share, in Q2 2024 [5][8]. - Adjusted EBITDA loss for Q2 2025 was $1.4 million, compared to a loss of $1.0 million in Q2 2024 [6]. Six-Month Financial Overview - Revenue for the first half of 2025 was $7.5 million, down from $8.7 million in the same period of 2024 [7]. - Operating expenses remained stable at $11.3 million for both the first half of 2025 and the previous year [7]. - The net loss for the first half of 2025 totaled $3.4 million, or $(0.16) per diluted share, compared to a net loss of $2.1 million, or $(0.10) per diluted share, in the same period of 2024 [8]. Operational Highlights - Aware developed new product innovations, including a 14X faster face matching performance and smarter face capture for mobile applications [9]. - The company was recognized as an industry Luminary in Core Identity Technology in the Prism Project's Deepfake and Synthetic Identity Report [9]. - Aware achieved best-in-class performance in the Department of Homeland Security's Remote Identity Validation Technology Demonstration for passive liveness detection [9]. Strategic Focus - The management emphasized a clear roadmap focused on advancing the purpose-built platform, strengthening go-to-market efforts, and deepening strategic partnerships [3]. - The company aims to convert its growing late-stage pipeline and drive durable growth as it enters the second half of 2025 [4].

Company Overview - Aware, Inc. is a leading global biometrics company that utilizes data science and machine learning to address business and identity challenges through biometrics [3] - The company has over 30 years of experience in the field and is recognized for its ethical and responsible approach to biometric technology [3] Upcoming Financial Event - Aware will hold a webcast on July 30, 2025, at 5:00 p.m. Eastern time to discuss its financial results for the second quarter ended June 30, 2025 [1][2] - Financial results will be released in a press release prior to the webcast, which will include a presentation followed by a question-and-answer session [1] Investor Engagement - Interested parties can submit questions in advance of the webcast via email [2] - The presentation will be available for replay in the investor relations section of the company's website for approximately 90 days after the live event [2]

Company Overview - Aware, Inc is a global biometric identity platform company using data science, machine learning, and AI to address business and identity challenges[7] - The company has a 30-year legacy of innovation and market leadership in biometric technology[23] - Aware has a strong financial foundation for growth, focusing on recurring revenue and profitability[29] Market and Growth - The global biometric system market is projected to grow to $82.9 billion by 2027[11] - Aware experienced a 15% top-line revenue CAGR from 2020 to 2023[33] - The company achieved 20% ARR & Recurring Revenue Growth[33] Technology and Differentiation - Aware's technology combines liveness and authentication, multi-modal automated biometric identification system, integration-ready middleware, and biometric orchestration[35] - Aware is leading in preventing bias in biometric technologies, with competitors having 2X to 4X more bias in liveness detection and matching[41] - The company has ~80 U S & International Patents[36] Financial Highlights - Aware has $28.5 million in cash, cash equivalents & marketable securities with no debt[28] - The company maintains a >90% customer retention rate[26]

Core Insights - Aware, Inc. has been recognized as an industry Luminary in Core Identity Technology in the Prism Project's Deepfake and Synthetic Identity Report, highlighting its leadership in biometric authentication [1][2] - The company announced enhancements to its Awareness Platform, improving face matching performance and mobile face capture reliability [1][3] Company Recognition - The Prism Project's report evaluates over 200 organizations and emphasizes Aware's strengths in injection detection, deepfake detection, and liveness detection [2] - Aware's recognition as a Luminary reflects its long-standing commitment to secure and scalable biometric solutions, validated by independent testing from RIVTD and NIST [3] Platform Enhancements - Key improvements to the Awareness Platform include: 1. **Faster Face Matching**: Achieves up to 14x faster 1:N face search performance, reducing server resource usage and infrastructure costs while maintaining matching accuracy [5][7] 2. **Smarter Face Capture**: New mobile capture updates for iOS and Android enhance first-time success rates and optimize image quality, improving user experience and conversion rates [5][7] Industry Context - The report provides strategic guidance for decision-makers in the identity fraud landscape, emphasizing the need for organizations to verify identities confidently amid rising threats from deepfakes and digital deception [2][4] - Aware's innovations aim to help customers navigate the evolving digital identity landscape, balancing speed, security, and usability [5][7]

Core Insights - Aware, Inc. achieved best-in-class performance in the U.S. Department of Homeland Security's Remote Identity Validation Technology Demonstration, particularly excelling in passive liveness detection for presentation attack detection [1][3][4] - The DHS RIVTD program aims to challenge industry leaders to develop secure and user-friendly remote identity validation technologies to combat identity fraud during digital onboarding [2][4] - Aware's passive liveness detection technology is more efficient and user-friendly compared to active systems, which require user interaction and result in longer transaction times and higher failure rates [3][4] Company Performance - Aware's solution demonstrated top-tier performance in passive liveness detection, reaffirming its capabilities in combating identity fraud and reducing user friction [3][4] - The company is committed to delivering fast, accurate, and secure biometric solutions validated by leading government agencies like DHS [4][5] Future Outlook - Aware plans to participate in the upcoming RIVR 2025 testing to showcase advanced liveness features not included in previous tests, such as a patented bright screen reflection algorithm and behavioral algorithms [5][6] - The company emphasizes the importance of independent evaluations like RIVTD for establishing trust and improving biometric performance standards [5]

Core Insights - Aware, Inc. has appointed Lona Therrien as the new Chief Marketing Officer, signaling a commitment to accelerate growth in the biometric authentication sector [1][4] - Therrien has over 15 years of experience in the cybersecurity industry and has a proven track record in building marketing teams and executing successful go-to-market strategies [2][3] - The appointment is part of a broader strategy to enhance Aware's leadership team, which includes other key hires in the cybersecurity domain [4][5] Company Overview - Aware, Inc. is a global biometric platform company that leverages data science and machine learning to address identity challenges through biometric solutions [6] - The company has been a trusted name in the biometric field for over 30 years, focusing on providing secure and frictionless user experiences for government and commercial enterprises [6] Leadership and Strategy - Lona Therrien's leadership is expected to align marketing efforts with business growth, enhancing Aware's market presence and customer engagement [4][5] - The company aims to deliver fast, secure, accurate, and scalable biometric solutions to meet the growing demand in the market [5]

Core Insights - Research Solutions has integrated advanced search capabilities into its Article Galaxy platform, allowing researchers to search across citation statements from full-text articles, marking a significant improvement over traditional search methods [1][3][4] Company Developments - The upgraded search system reflects Research Solutions' commitment to innovation and feature enhancement based on customer feedback, enabling more relevant literature discovery through both basic and sophisticated search methods [3][5] - The new search functionality aims to improve research efficiency and strengthen Article Galaxy's position as a comprehensive platform for managing scientific literature [4][5] Industry Context - The enhanced literature discovery tools represent a growth area within scientific research technologies, addressing the challenges posed by the increasing volume of published research [5] - The integration of AI-powered tools and advanced search capabilities positions Research Solutions as a key player in simplifying research workflows for academic institutions and life science companies [7]