0000950170-24-120107 | 10-Q | XBRL Viewer

Income Taxes	9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]
Income Taxes	Note 7 – Income Taxes During the three and nine months ended September 30, 2024, we recorded an income tax provision of $15,000 and $54,000, respectively. We have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets, which primarily consist of net operating loss carryforwards and research and development tax credits. We considered the history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and we have concluded that it is more likely than not that we will not realize the benefits of our deferred tax assets. As a result, as of September 30, 2024 and December 31, 2023, we have a full valuation recorded against our net deferred tax assets.

Income Taxes

9 Months Ended

Sep. 30, 2024

Note 7 – Income Taxes

During the three and nine months ended September 30, 2024, we recorded an income tax provision of $15,000 and $54,000, respectively.

We have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets, which primarily consist of net operating loss carryforwards and research and development tax credits. We considered the history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and we have concluded that it is more likely than not that we will not realize the benefits of our deferred tax assets. As a result, as of September 30, 2024 and December 31, 2023, we have a full valuation recorded against our net deferred tax assets.

- Definition

The entire disclosure for income tax.

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+ Details

Revenue Recognition - Revenue by Timing of Transfer of Goods or Services (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenue	$ 3,849	$ 6,381	$ 12,592	$ 13,870
Goods or services transferred at a point in time
Disaggregation of Revenue [Line Items]
Total revenue	459	4,391	3,099	6,893
Goods or services transferred over time
Disaggregation of Revenue [Line Items]
Total revenue	$ 3,390	$ 1,990	$ 9,493	$ 6,977

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

Amount, including tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value-added and excise.

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+ Details

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2022	$ 40,209	$ 211	$ 98,306	$ (58,198)	$ (110)
Balance (in shares) at Dec. 31, 2022		21,093,000
Issuance of unrestricted stock		$ 1	(1)
Issuance of unrestricted stock (in shares)		62,000
Shares surrendered by employees to pay taxes related to unrestricted stock	(15)		(15)
Shares surrendered by employees to pay taxes related to unrestricted stock (in shares)		(9,000)
Repurchase of common stock	(341)	$ (2)	(339)
Repurchase of common stock (in shares)		(191,000)
Stock-based compensation expense	335		335
Other comprehensive income (loss)	147				147
Net Income (Loss)	(1,568)			(1,568)
Balance at Mar. 31, 2023	38,767	$ 210	98,286	(59,766)	37
Balance (in shares) at Mar. 31, 2023		20,955,000
Balance at Dec. 31, 2022	40,209	$ 211	98,306	(58,198)	(110)
Balance (in shares) at Dec. 31, 2022		21,093,000
Net Income (Loss)	(3,075)
Balance at Sep. 30, 2023	37,865	$ 210	98,976	(61,273)	(48)
Balance (in shares) at Sep. 30, 2023		21,018,000
Balance at Mar. 31, 2023	38,767	$ 210	98,286	(59,766)	37
Balance (in shares) at Mar. 31, 2023		20,955,000
Issuance of common stock under employee stock purchase plan	52	$ 1	51
Issuance of common stock under employee stock purchase plan (in shares)		38,000
Stock-based compensation expense	403		403
Other comprehensive income (loss)	(128)				(128)
Net Income (Loss)	(2,651)			(2,651)
Balance at Jun. 30, 2023	36,443	$ 211	98,740	(62,417)	(91)
Balance (in shares) at Jun. 30, 2023		20,993,000
Issuance of common stock under employee stock purchase plan	2		2
Issuance of common stock under employee stock purchase plan (in shares)		106,000
Repurchase of common stock	(126)	$ (1)	(125)
Repurchase of common stock (in shares)		(81,000)
Stock-based compensation expense	359		359
Other comprehensive income (loss)	43				43
Net Income (Loss)	1,144			1,144
Balance at Sep. 30, 2023	37,865	$ 210	98,976	(61,273)	(48)
Balance (in shares) at Sep. 30, 2023		21,018,000
Balance at Dec. 31, 2023	$ 34,298	$ 210	99,405	(65,512)	195
Balance (in shares) at Dec. 31, 2023	21,017,892	21,018,000
Issuance of unrestricted stock		$ 2	(2)
Issuance of unrestricted stock (in shares)		67,000
Stock-based compensation expense	$ 164		164
Other comprehensive income (loss)	(56)				(56)
Net Income (Loss)	(982)			(982)
Balance at Mar. 31, 2024	33,424	$ 212	99,567	(66,494)	139
Balance (in shares) at Mar. 31, 2024		21,085,000
Balance at Dec. 31, 2023	$ 34,298	$ 210	99,405	(65,512)	195
Balance (in shares) at Dec. 31, 2023	21,017,892	21,018,000
Net Income (Loss)	$ (3,239)
Balance at Sep. 30, 2024	$ 31,891	$ 212	100,057	(68,751)	373
Balance (in shares) at Sep. 30, 2024	21,194,071	21,194,000
Balance at Mar. 31, 2024	$ 33,424	$ 212	99,567	(66,494)	139
Balance (in shares) at Mar. 31, 2024		21,085,000
Issuance of common stock under employee stock purchase plan	40		40
Issuance of common stock under employee stock purchase plan (in shares)		28,000
Stock-based compensation expense	243		243
Other comprehensive income (loss)	(16)				(16)
Net Income (Loss)	(1,090)			(1,090)
Balance at Jun. 30, 2024	32,601	$ 212	99,850	(67,584)	123
Balance (in shares) at Jun. 30, 2024		21,113,000
Issuance of unrestricted stock		$ 1	(1)
Issuance of unrestricted stock (in shares)		86,000
Shares surrendered by employees to pay taxes related to unrestricted stock	(13)	$ (1)	(12)
Shares surrendered by employees to pay taxes related to unrestricted stock (in shares)		(5,000)
Stock-based compensation expense	220		220
Other comprehensive income (loss)	250				250
Net Income (Loss)	(1,167)			(1,167)
Balance at Sep. 30, 2024	$ 31,891	$ 212	$ 100,057	$ (68,751)	$ 373
Balance (in shares) at Sep. 30, 2024	21,194,071	21,194,000

Equity and Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expenses Included in Unaudited Consolidated Statements of Operations and Comprehensive Loss

The following table presents stock-based compensation expenses included in our unaudited consolidated statements of operations and comprehensive loss (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of services and other revenue	$	—	$	5	$	—	$	13
Research and development		37		60		110		180
Selling and marketing		22		21		52		71
General and administrative		161		273		465		833
Stock-based compensation expense	$	220	$	359	$	627	$	1,097

Subscription Agreement - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Schedule Of Capitalization Longterm Debt [Line Items]
Interest income	$ 315	$ 397	$ 886	$ 982

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2024

Revenue from Contract with Customer [Abstract]

Schedule of Revenue Generated from Geographic Regions

Revenue generated from the following geographic regions was (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
United States	$	1,849	$	5,247	$	5,263	$	9,365
United Kingdom		762		323		3,255		934
Rest of World		1,238		811		4,074		3,571
	$	3,849	$	6,381	$	12,592	$	13,870

Schedule of Revenue by Timing of Transfer of Goods or Services

Revenue by timing of transfer of goods or services was (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Goods or services transferred at a point in time	$	459	$	4,391	$	3,099	$	6,893
Goods or services transferred over time		3,390		1,990		9,493		6,977
	$	3,849	$	6,381	$	12,592	$	13,870

Schedule of Revenue by Contract Type

Revenue by contract type was (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
License and service contracts	$	3,070	$	5,982	$	9,930	$	11,586
Subscription-based contracts		779		399		2,662		2,284
	$	3,849	$	6,381	$	12,592	$	13,870

Schedule of Changes in Contract Assets and Liabilities

The following tables present changes in our contract assets and liabilities during the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Three months ended September 30, 2024
Contract assets:
Unbilled receivables	$	1,299	$	634	$	(525	)	$	1,408

Three months ended September 30, 2023
Contract assets:
Unbilled receivables	$	2,820	$	924	$	(1,972	)	$	1,772

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Three months ended September 30, 2024
Contract liabilities:
Deferred revenue	$	4,444	$	3,220	$	(2,257	)	$	5,407

Three months ended September 30, 2023
Contract liabilities:
Deferred revenue	$	4,359	$	3,442	$	(1,889	)	$	5,912


	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Nine months ended September 30, 2024
Contract assets:
Unbilled receivables	$	1,401	$	2,770	$	(2,763	)	$	1,408

Nine months ended September 30, 2023
Contract assets:
Unbilled receivables	$	2,929	$	2,601	$	(3,758	)	$	1,772

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Nine months ended September 30, 2024
Contract liabilities:
Deferred revenue	$	5,537	$	6,441	$	(6,571	)	$	5,407

Nine months ended September 30, 2023
Contract liabilities:
Deferred revenue	$	3,733	$	7,670	$	(5,491	)	$	5,912

Equity and Stock-based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Equity and Stock-based Compensation

Note 6 – Equity and Stock-based compensation

The following table presents stock-based compensation expenses included in our unaudited consolidated statements of operations and comprehensive loss (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of services and other revenue	$	—	$	5	$	—	$	13
Research and development		37		60		110		180
Selling and marketing		22		21		52		71
General and administrative		161		273		465		833
Stock-based compensation expense	$	220	$	359	$	627	$	1,097

Stock Options - On January 17, 2024, our stockholders approved the Aware Inc. 2023 Equity and Incentive Plan (the “2023 Plan”). Following approval of the 2023 Plan, we ceased making awards under our previous 2001 Nonqualified Stock Plan (as amended, the “2001 Plan”).

Also on January 17, 2024, our stockholders approved a stock option exchange program (the “Exchange Offer”) pursuant to which eligible employees, primarily consisting of our executive officers and senior management, were able to exchange certain stock options (the “Eligible Options”) for replacement stock options with modified terms (the “New Options”) as described below. We commenced the Exchange Offer on January 19, 2024, pursuant to the Offer to Exchange certain outstanding stock options for New Options under Aware’s 2023 Equity and Incentive Plan.

The Exchange Offer expired on February 20, 2024. Pursuant to the Exchange Offer, nine employees elected to exchange their Eligible Options, and we accepted for cancellation Eligible Options to purchase an aggregate of 2,180,000 shares of common stock, representing approximately 96% of the total shares of common stock underlying the Eligible Options. Following the expiration of the Exchange Offer, on February 20, 2024, we granted New Options to purchase 933,073 shares of Common Stock, pursuant to the terms of the Exchange Offer and our 2023 Plan.

The exercise price per share of the New Options granted pursuant to the Exchange Offer was $2.21 per share. Each New Option will vest and become exercisable, with respect to 50% of the shares of common stock underlying such New Option on the first anniversary of the grant date and, with respect to the remaining shares of common stock underlying such New Option, in twelve equal monthly installments thereafter, subject to the continuous service of the holder. The other terms and conditions of the New Options will be governed by the terms and conditions of the 2023 Plan and the nonstatutory stock option agreements entered into thereunder.

There was no incremental expense for the New Options as calculated using the Black-Scholes option pricing model. The unamortized expense remaining on the Eligible Options, as of the modification date, will be recognized over the new vesting schedule.

We did not grant any other stock options and no stock options were exercises in the three or nine months ended September 30, 2024 or 2023.

Restricted Stock Units - The 2023 Plan permits us to grant restricted stock units to our directors, officers, and employees. Upon vesting, each restricted stock unit entitles the recipient to receive a number of shares of common stock as set forth in the relevant restricted stock unit agreement. Stock-based compensation expense for restricted stock units is determined based on the fair market value of our stock on the date of grant, provided the number of shares in the grant is fixed on the grant date.

We granted 0 and 284,814 restricted stock units to directors, officers, and employees during the three and nine months ended September 30, 2024, respectively. Of the restricted stock units granted in the nine

months ended September 30, 2024, 70,406 vested shortly after June 30, 2024. 60,000 of remaining shares are scheduled to vest in 15,000 share increments in October 2024, and April 2025, 2026 and 2027. Also, 24,000 restricted stock units are scheduled to vest in 6,000 share increments in December 2024 and June 2025, 2026 and 2027 and 70,406 are scheduled to vest shortly after December 3,1 2024. 60,000 restricted stock units were scheduled to be issued in 15,000 increments in July 2024 and January 2025, 2026 and 2027 but were forfeited in April 2024 as a result of an employee termination.

Unrestricted Stock Grants - Our 2001 Plan, which was replaced by our 2023 Plan, permitted us to grant shares of unrestricted shares of stock to our directors, officers, and employees. Stock-based compensation expense for stock grants is determined based on the fair market value of our stock on the date of grant, provided the number of shares in the grant is fixed on the grant date.

We issued 0 and 67,107 shares of unrestricted stock to directors, officers, and employees during the three and nine months ended September 30, 2024, respectively, in settlement of previously issued unrestricted stock grants.

We granted 0 and 134,211 unrestricted stock awards and issued 0 and 61,462 shares of unrestricted stock to directors, officers, and employees during the three and nine months ended September 30, 2023, respectively. Of the shares granted in the nine months ended September 30, 2023, 67,104 were issued shortly after June 30, 2023 and 67,107 were issued shortly after December 31, 2023. Also, 15,000 shares vested in August 2024 related to a grant in 2022.

Share Purchases - On March 1, 2022, our Board of Directors authorized a new stock repurchase program pursuant to which we may purchase up to $10.0 million of our common stock. On November 30, 2023, our Board of Directors extended the program through December 31, 2025. As of September 30, 2024 we have repurchased $1.8 million of our common stock pursuant to this program. During the three and nine months ended September 30, 2024 we purchased 0 and 35 shares of common stock, respectively. During the three and nine months ended September 30, 2023 we purchased 81,083 and 271,991 shares of common stock, respectively. The program does not obligate us to acquire any particular amount of common stock and the program may be modified or suspended at any time at our Board of Directors' discretion.

Fair Value Measurements - Summary of Marketable Securities by Security Type (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Debt Securities, Available-for-Sale [Line Items]
Amortized Cost	$ 15,793	$ 20,718
Gross Unrealized Gains	373	215
Gross Unrealized Losses	0	(20)
Fair Value	16,167	20,913
U.S. Treasury Notes and Bonds
Debt Securities, Available-for-Sale [Line Items]
Amortized Cost	15,793	15,332
Gross Unrealized Gains	373	176
Gross Unrealized Losses	0	(19)
Fair Value	$ 16,167	15,489
Corporate Bonds
Debt Securities, Available-for-Sale [Line Items]
Amortized Cost		5,386
Gross Unrealized Gains		39
Gross Unrealized Losses		(1)
Fair Value		$ 5,424

- Definition

Amount of investment in debt security measured at fair value with change in fair value recognized in other comprehensive income (available-for-sale).

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- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

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+ Details

Revenue Recognition - Changes in Contract Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue from Contract with Customer [Abstract]
Deferred revenue, Balance at Beginning of Period	$ 4,444	$ 4,359	$ 5,537	$ 3,733
Deferred revenue, Billings	3,220	3,442	6,441	7,670
Deferred revenue, Revenue Recognized	(2,257)	(1,889)	(6,571)	(5,491)
Deferred revenue, Balance at End of Period	$ 5,407	$ 5,912	$ 5,407	$ 5,912

Description of the Company and Basis of Presentation

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of the Company and Basis of Presentation

Note 1 – Description of the Company and Basis of Presentation

Description of the Company

We are a global biometric platform company that uses data science, machine learning, and artificial intelligence to tackle everyday business and identity challenges through biometric 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, passwordless access to secured accounts and databases with biometric verification

•

Enable: Manage the lifecycle of secure identities through optimized biometric interchanges

We have been engaged in this business since 1993. 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. 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.

Our products span multiple biometric modalities including fingerprint, face, iris and voice, and provide interoperable, standards-compliant, field-proven biometric functionality. Our products are used to capture, verify, format, compress and decompress biometric images as well as aggregate, analyze, process, match and transport those images and templates within biometric systems. For large deployments, we may provide project management and software engineering services. We sell our 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 end user customers.

Certain amounts in the consolidated financial statements and associated notes may not add due to rounding. All percentages have been calculated using unrounded amounts.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the two years ended December 31, 2023 in conjunction with our 2023 Annual Report on Form 10-K. This Form 10-Q should be read in conjunction with that Form 10-K.

The accompanying unaudited consolidated balance sheets, statements of operations and comprehensive loss, statements of cash flows, and statements of stockholders’ equity reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at September 30, 2024, and of operations and cash flows for the interim periods ended September 30, 2024 and 2023.

The results of operations for the interim periods ended September 30, 2024 are not necessarily indicative of the results to be expected for the year.

Principles of Consolidation

The consolidated financial statements include the accounts of Aware, Inc. and its subsidiaries, Aware Security Corporation and Fortr3ss, Inc. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates included in the financial statements pertain to revenue recognition, reserves for credit losses, valuation of the contingent acquisition payment, valuation of the investment in the note receivable, goodwill and long-lived asset impairment and valuation allowance for deferred income tax assets. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”). This ASU will be effective for our fiscal year ending on December 31, 2024 and interim periods beginning in fiscal 2025, with early adoption permitted. We are assessing the impact of the standard on our consolidated financial statements.

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. This ASU will be effective for our fiscal year ending on December 31, 2025, with early adoption permitted. We are assessing the impact of the standard on our consolidated financial statements.

Equity and Stock-based Compensation - Summary of Stock-based Compensation Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 220	$ 359	$ 627	$ 1,097
Cost of services and other revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense		5		13
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	37	60	110	180
Selling and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	22	21	52	71
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation expense	$ 161	$ 273	$ 465	$ 833

Fair Value Measurements - Additional information (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Schedule of Available-for-sale Securities
Cash and cash equivalents	$ 11,223	$ 10,002
Marketable securities	16,167	20,913
U.S. Treasuries and Corporate Bonds [Member]
Schedule of Available-for-sale Securities
Marketable securities	$ 16,200	20,900
Fair Value, Measurements, Recurring [Member]
Schedule of Available-for-sale Securities
Total fair value of the instrument		$ 0

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

+ Details

Intangible Assets

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Note 4 – Intangible Assets

Intangible assets and their estimated useful lives as of September 30, 2024 are as follows (dollars in thousands):


	Useful Life	Gross Amount		Accumulated Amortization			Net Book Value
Customer relationships	8 and 10 years	$	2,680	$	(933	)	$	1,747
Developed technology	5 and 7 years		710		(385	)		325
Trade name trademarks	3 and 7 years		30		(22	)		8
		$	3,420	$	(1,340	)	$	2,080

During each of the three months ended September 30, 2024 and 2023, we recorded $0.1 million of intangible assets amortization expense, and during each of the nine months ended September 30, 2024 and 2023, we recorded $0.3 million of intangible assets amortization expense. We expect to record amortization expense for the remainder of 2024 and each subsequent year and thereafter as follows (in thousands):


2024	$	103
2025		405
2026		356
2027		345
2028		338
Thereafter		533
	$	2,080

Intangible Assets - Summary of Intangible Assets and Estimated Useful Lives (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 3,420
Accumulated Amortization	(1,340)
Net Book Value	2,080
Customer Relationships
Finite-Lived Intangible Assets [Line Items]
Gross Amount	2,680
Accumulated Amortization	(933)
Net Book Value	$ 1,747
Customer Relationships \| Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life	8 years
Customer Relationships \| Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life	10 years
Developed Technology
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 710
Accumulated Amortization	(385)
Net Book Value	$ 325
Developed Technology \| Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life	5 years
Developed Technology \| Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life	7 years
Trade Name Trademarks
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 30
Accumulated Amortization	(22)
Net Book Value	$ 8
Trade Name Trademarks \| Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life	3 years
Trade Name Trademarks \| Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life	7 years

Revenue Recognition - Additional Information (Details)	3 Months Ended		9 Months Ended
Revenue Recognition - Additional Information (Details)	Sep. 30, 2024 USD ($) Contract	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) Contract	Sep. 30, 2023 USD ($)
Disaggregation of Revenue [Line Items]
Practical expedient for financing components			true
Percentage of remaining performance obligations	97.00%		97.00%
Minimum period of payment of transaction price in contract with customer			30 days
Maximum period of payment of transaction price in contract with customer			60 days
Interest income	$ 315,000	$ 397,000	$ 886,000	$ 982,000
remaining deferred revenue			12 months
Revenue recognition performance obligation transaction price	300,000		$ 300,000
Revenue, Practical Expedient, Incremental Cost of Obtaining Contract [true false]			true
Revenue from contracts	$ 3,849,000	$ 6,381,000	$ 12,592,000	$ 13,870,000
Contract Contains Significant Financing Component
Disaggregation of Revenue [Line Items]
Number of contract contains significant financing component \| Contract	1		1
Payment terms exceeding period	1 year		1 year
Interest rate on adjusted transaction price	11.00%		11.00%
Interest income	$ 2,000		$ 2,000
Revenue recognized excluding financing adjustment	200,000		200,000
Software as a Service
Disaggregation of Revenue [Line Items]
Revenue from contracts	$ 100,000		$ 100,000

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	70,000,000	70,000,000
Common stock, shares issued	21,194,071	21,017,892
Common stock, shares outstanding	21,194,071	21,017,892

CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHNSIVE LOSS - USD ($) shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue:
Total revenue	$ 3,849,000	$ 6,381,000	$ 12,592,000	$ 13,870,000
Costs and expenses:
Cost of services and other revenue	270,000	410,000	817,000	1,033,000
Research and development	1,873,000	2,264,000	5,922,000	6,909,000
Selling and marketing	1,856,000	2,171,000	5,838,000	6,118,000
General and administrative	1,317,000	1,601,000	4,086,000	4,679,000
Fair value adjustment to contingent acquisition payment		(812,000)		(812,000)
Total costs and expenses	5,316,000	5,634,000	16,663,000	17,927,000
Operating (loss) income	(1,467,000)	747,000	(4,071,000)	(4,057,000)
Interest income	315,000	397,000	886,000	982,000
Loss before provision for income taxes	(1,152,000)	1,144,000	(3,185,000)	(3,075,000)
Provision for income taxes	15,000		54,000
Net (loss) income	$ (1,167,000)	$ 1,144,000	$ (3,239,000)	$ (3,075,000)
Net (loss) income per share - basic	$ (0.06)	$ 0.05	$ (0.15)	$ (0.15)
Net (loss) income per share - diluted	$ (0.06)	$ 0.05	$ (0.15)	$ (0.15)
Weighted-average shares – basic	21,186	21,049	21,123	21,017
Weighted-average shares – diluted	21,186	21,131	21,123	21,017
Other comprehensive (loss) income, net of tax:
Unrealized gain on available-for-sale securities	$ 250,000	$ 43,000	$ 373,000	$ 62,000
Comprehensive loss	(917,000)	1,187,000	(2,866,000)	(3,013,000)
Software licenses
Revenue:
Total revenue	1,175,000	4,391,000	5,137,000	7,535,000
Software maintenance
Revenue:
Total revenue	2,257,000	1,889,000	6,571,000	5,491,000
Services and other
Revenue:
Total revenue	$ 417,000	$ 101,000	$ 884,000	$ 844,000

Intangible Assets - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense on intangible assets	$ 0.1	$ 0.1	$ 0.3	$ 0.3

Equity and Stock-based Compensation - Share Purchases (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023	Mar. 01, 2022
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Repurchase of common stock		$ 126	$ 341
Share Purchases
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of common stock authorized for repurchase						$ 10,000
Repurchase of common stock				$ 1,800
Number of stock purchased	0	81,083		35	271,991

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

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+ Details

- Definition

Equity impact of the value of stock that has been repurchased during the period and has not been retired and is not held in treasury. Some state laws may mandate the circumstances under which an entity may acquire its own stock and prescribe the accounting treatment therefore. This element is used when state law does not recognize treasury stock.

+ References + Details

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Oct. 28, 2024
Cover [Abstract]
Entity Registrant Name	AWARE, INC.
Entity Central Index Key	0001015739
Trading Symbol	AWRE
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		21,203,919
Document Type	10-Q
Document Period End Date	Sep. 30, 2024
Amendment Flag	false
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, $0.01 par value per share
Security Exchange Name	NASDAQ
Entity File Number	000-21129
Entity Incorporation, State or Country Code	MA
Entity Tax Identification Number	04-2911026
Entity Address, Address Line One	76 Blanchard Road, Burlington
Entity Address, City or Town	Burlington
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01803
City Area Code	781
Local Phone Number	687-0300
Document Quarterly Report	true
Document Transition Report	false

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Intangible Assets and Estimated Useful Lives

Intangible assets and their estimated useful lives as of September 30, 2024 are as follows (dollars in thousands):


	Useful Life	Gross Amount		Accumulated Amortization			Net Book Value
Customer relationships	8 and 10 years	$	2,680	$	(933	)	$	1,747
Developed technology	5 and 7 years		710		(385	)		325
Trade name trademarks	3 and 7 years		30		(22	)		8
		$	3,420	$	(1,340	)	$	2,080

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

We expect to record amortization expense for the remainder of 2024 and each subsequent year and thereafter as follows (in thousands):


2024	$	103
2025		405
2026		356
2027		345
2028		338
Thereafter		533
	$	2,080

Subsequent Event

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

Subsequent Event

Note 8 – Subsequent Event

On October 30, 2024 we announced, Robert Eckel, our Chief Executive Officer and a member of our Board of Directors, will resign from these positions effective as of December 31, 2024. In anticipation of that transition we have engaged an executive strategic advisor to work with the Board and our management to evaluate our market position and sales strategy and provide strategic recommendations. In addition, we have engaged an executive search firm to assist in the identification of Mr. Eckel’s successor. We anticipate that we will recognize approximately $0.9 million of general and administrative expenses during the fourth quarter of 2024 related to this transition.

Revenue Recognition - Revenue Generated Following Geographic Regions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenue	$ 3,849	$ 6,381	$ 12,592	$ 13,870
Operating Segments
Disaggregation of Revenue [Line Items]
Total revenue	3,849	6,381	12,592	13,870
Operating Segments \| United States
Disaggregation of Revenue [Line Items]
Total revenue	1,849	5,247	5,263	9,365
Operating Segments \| United Kingdom
Disaggregation of Revenue [Line Items]
Total revenue	762	323	3,255	934
Operating Segments \| Rest of World
Disaggregation of Revenue [Line Items]
Total revenue	$ 1,238	$ 811	$ 4,074	$ 3,571

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

+ References

+ Details

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (1,167)	$ (1,090)	$ (982)	$ 1,144	$ (2,651)	$ (1,568)	$ (3,239)	$ (3,075)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Equity and Stock-based Compensation - Stock Option Grants Restricted Stock Units and Unrestricted Stock Grants (Details)			1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Feb. 20, 2024 USD ($) Employee $ / shares shares	Jul. 01, 2023 shares	Aug. 31, 2024 shares	Sep. 30, 2024 shares	Sep. 30, 2023 shares	Sep. 30, 2024 shares	Sep. 30, 2023 shares	Dec. 31, 2023 shares
Stock options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock options granted				0	0	0	0
Number of stock options exercised				0	0	0	0
Unrestricted Stock \| 2023 Plan \| 2022 Grant
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares vested			15,000
Unrestricted Stock \| 2023 Plan \| 2023 Grant
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted (in shares)					0		134,211
Number of shares issued		67,104		0	0	67,107	61,462	67,107
Exchange Offer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of employees elected to exchange eligible options \| Employee	9
Number of shares purchased under option exchange program	2,180,000
Exchange offer, percentage of total shares outstanding	96.00%
New Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares purchased under option exchange program	933,073
Exchange offer, percentage of total shares outstanding	50.00%
Granted exercise price per share \| $ / shares	$ 2.21
Incremental expense \| $	$ 0
Restricted Stock Units \| 2023 Plan \| 2024 Grant
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted (in shares)				0		284,814
Number of shares vested						70,406
Restricted Stock Units \| 2023 Plan \| 2024 Grant \| October 2024, and April 2025, 2026 and 2027
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares vested						60,000
Number of shares issued in increments forfeited						15,000
Restricted Stock Units \| 2023 Plan \| 2024 Grant \| December 2024 and June 2025, 2026 and 2027
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares vested						24,000
Number of shares issued in increments forfeited						6,000
Restricted Stock Units \| 2023 Plan \| 2024 Grant \| July 2024 and January 2025, 2026 and 2027
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares issued						60,000
Number of shares issued in increments forfeited						15,000

Intangible Assets - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract]
2024	$ 103
2025	405
2026	356
2027	345
2028	338
Thereafter	533
Net Book Value	$ 2,080

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 11,223	$ 10,002
Marketable securities	16,167	20,913
Accounts receivable, net	4,038	2,454
Unbilled receivables, net	1,408	1,401
Prepaid expenses and other current assets	1,012	1,054
Total current assets	33,848	35,824
Property and equipment, net	515	579
Intangible assets, net	2,080	2,391
Goodwill	3,120	3,120
Right of use asset	4,040	4,260
Other long-term assets	122	122
Total assets	43,725	46,296
Current liabilities:
Accounts payable	816	280
Accrued expenses	1,303	1,706
Current portion of operating lease liabilities	651	637
Deferred revenue	5,062	4,926
Total current liabilities	7,832	7,549
Long-term deferred revenue	345	611
Long-term operating lease liabilities	3,657	3,838
Total long-term liabilities	4,002	4,449
Stockholders’ equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized, none outstanding
Common stock, $.01 par value; 70,000,000 shares authorized; issued and outstanding of 21,194,071 as of September 30, 2024 and 21,017,892 as of December 31, 2023	212	210
Additional paid-in capital	100,057	99,405
Accumulated deficit	(68,751)	(65,512)
Accumulated other comprehensive income	373	195
Total stockholders’ equity	31,891	34,298
Total liabilities and stockholders’ equity	$ 43,725	$ 46,296

Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2024
Income Tax Disclosure [Abstract]
Income tax provision	$ 15,000	$ 54,000

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

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-URI https://asc.fasb.org/1943274/2147483443/250-10-50-9

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Computation of Earnings per Share

9 Months Ended

Sep. 30, 2024

Earnings Per Share [Abstract]

Computation of Earnings per Share

Note 5 – Computation of Earnings per Share

Basic earnings per share is computed by dividing net income or loss by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net income or loss by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the purposes of this calculation, stock options are considered common stock equivalents in periods in which they have a dilutive effect. Stock options that are anti-dilutive are excluded from the calculation. Potential common stock equivalents

were not included in the per share calculation for diluted earnings per share where we had a net loss, and the effect of their inclusion would be anti-dilutive.

Revenue Recognition - Changes in Contract Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue from Contract with Customer [Abstract]
Unbilled receivables, Balance at Beginning of Period	$ 1,299	$ 2,820	$ 1,401	$ 2,929
Unbilled receivables, Revenue Recognized In Advance of Billings	634	924	2,770	2,601
Unbilled receivables, Billings	(525)	(1,972)	(2,763)	(3,758)
Unbilled receivables, Balance at End of Period	$ 1,408	$ 1,772	$ 1,408	$ 1,772

Subsequent Event - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Dec. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Subsequent Event [Line Items]
General and administrative expenses		$ 1,317	$ 1,601	$ 4,086	$ 4,679
Scenario Forecast
Subsequent Event [Line Items]
General and administrative expenses	$ 900

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Revenue Recognition - Schedule of Revenue by Contract Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Total revenue	$ 3,849	$ 6,381	$ 12,592	$ 13,870
License and Service Contracts
Disaggregation of Revenue [Line Items]
Total revenue	1,175	4,391	5,137	7,535
Operating Segments
Disaggregation of Revenue [Line Items]
Total revenue	3,849	6,381	12,592	13,870
Operating Segments \| License and Service Contracts
Disaggregation of Revenue [Line Items]
Total revenue	3,070	5,982	9,930	11,586
Operating Segments \| Subscription-based Contracts
Disaggregation of Revenue [Line Items]
Total revenue	$ 779	$ 399	$ 2,662	$ 2,284

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

+ References

+ Details

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities that are measured at fair value on a recurring basis included the following (in thousands):


	Fair Value Measurement at September 30, 2024 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	10,166	$	—	$	—	$	10,166
Marketable securities		16,167		—		—		16,167
Total assets	$	26,333	$	—	$	—	$	26,333


	Fair Value Measurement at December 31, 2023 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	7,848	$	—	$	—	$	7,848
Marketable securities		20,913		—		—		20,913
Note receivable		—		—		—		—
Total assets	$	28,761	$	—	$	—	$	28,761

Summary of Marketable Securities by Security Type

Marketable securities by security type consisted of the following (in thousands):


	September 30, 2024:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury notes and bonds	$	15,793	$	373	$	—	$	16,167
	$	15,793	$	373	$	—	$	16,167


	December 31, 2023:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury notes and bonds	$	15,332	$	176	$	(19	)	$	15,489
Corporate bonds		5,386		39		(1	)		5,424
	$	20,718	$	215	$	(20	)	$	20,913

Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Schedule of Available-for-sale Securities
Marketable securities	$ 16,167	$ 20,913
Fair Value, Measurements, Recurring [Member]
Schedule of Available-for-sale Securities
Note receivable		0
Total assets	26,333	28,761
Fair Value, Measurements, Recurring [Member] \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Schedule of Available-for-sale Securities
Note receivable		0
Total assets	26,333	28,761
Fair Value, Measurements, Recurring [Member] \| Significant Other Observable Inputs (Level 2)
Schedule of Available-for-sale Securities
Note receivable		0
Total assets	0	0
Fair Value, Measurements, Recurring [Member] \| Significant Unobservable Inputs (Level 3)
Schedule of Available-for-sale Securities
Note receivable		0
Total assets	0	0
Fair Value, Measurements, Recurring [Member] \| Money market funds (included in cash and cash equivalents)
Schedule of Available-for-sale Securities
Money market funds (included in cash and cash equivalents)	10,166	7,848
Fair Value, Measurements, Recurring [Member] \| Money market funds (included in cash and cash equivalents) \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Schedule of Available-for-sale Securities
Money market funds (included in cash and cash equivalents)	10,166	7,848
Fair Value, Measurements, Recurring [Member] \| Money market funds (included in cash and cash equivalents) \| Significant Other Observable Inputs (Level 2)
Schedule of Available-for-sale Securities
Money market funds (included in cash and cash equivalents)	0	0
Fair Value, Measurements, Recurring [Member] \| Money market funds (included in cash and cash equivalents) \| Significant Unobservable Inputs (Level 3)
Schedule of Available-for-sale Securities
Money market funds (included in cash and cash equivalents)	0	0
Fair Value, Measurements, Recurring [Member] \| Marketable securities
Schedule of Available-for-sale Securities
Marketable securities	16,167	20,913
Fair Value, Measurements, Recurring [Member] \| Marketable securities \| Quoted Prices in Active Markets for Identical Assets (Level 1)
Schedule of Available-for-sale Securities
Marketable securities	16,167	20,913
Fair Value, Measurements, Recurring [Member] \| Marketable securities \| Significant Other Observable Inputs (Level 2)
Schedule of Available-for-sale Securities
Marketable securities	0	0
Fair Value, Measurements, Recurring [Member] \| Marketable securities \| Significant Unobservable Inputs (Level 3)
Schedule of Available-for-sale Securities
Marketable securities	$ 0	$ 0

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities:
Net loss	$ (3,239)	$ (3,075)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	421	437
Stock-based compensation	627	1,097
Interest on note receivable		(93)
Allowance for credit losses	53
Non-cash lease expense	53	218
Change in fair value of contingent acquisition payment		(812)
Changes in assets and liabilities:
Accounts receivable	(1,637)	(3,432)
Unbilled receivables	(7)	1,387
Prepaid expenses and other current assets	(118)	(459)
Tax receivable		1,355
Accounts payable	750	(408)
Accrued expenses	(616)	363
Deferred revenue	(131)	2,180
Net cash used in operating activities	(3,844)	(1,242)
Cash flows from investing activities:
Purchases of property and equipment	(45)	(16)
Purchase of marketable securities	(5,139)	(9,128)
Sale of marketable securities	10,224	4,750
Net cash provided by (used in) investing activities	5,040	(4,394)
Cash flows from financing activities:
Proceeds from issuance of common stock	37	52
Payments made for taxes of employees who surrendered shares related to unrestricted stock	(12)	(15)
Repurchase of common stock		(467)
Net cash provided by (used in) financing activities	25	(430)
Increase (decrease) in cash and cash equivalents	1,221	(6,066)
Cash and cash equivalents, beginning of period	10,002	11,749
Cash and cash equivalents, end of period	11,223	5,683
Supplemental disclosure: Cash paid for income taxes	$ 98	$ 136

Revenue Recognition

9 Months Ended

Sep. 30, 2024

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Note 2 – Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, we apply the following five step model:

1. 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 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. 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. Other revenue includes hardware sales that may be included in a software license, is recognized at a point in time upon delivery provided all other revenue recognition criteria are met.

In addition to selling software licenses, software maintenance and software services on a standalone basis, a significant portion of our contracts include multiple performance obligations, which require an allocation

of the transaction price to each distinct performance obligation based on a relative standalone selling price (“SSP”) basis. The SSP is the price at which we would sell a promised good or service separately to a customer. The best estimate of SSP is the observable price of a good or service when we sell that good or service separately. A contractually stated price or a list price for a good or service may be the SSP of that good or service. We use a range of selling prices to estimate SSP when we sell each of the goods and services separately and need to determine whether there is a discount that needs to be allocated based on the relative SSP of the various goods and services within multiple performance obligation arrangements. In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we typically determine the SSP using an adjusted market assessment approach using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual goods and services due to the stratification of those goods and services by customer. In these instances, we may use information such as the nature of the customer and distribution channel in determining the SSP.

When software licenses and significant customization engineering services are sold together, they are accounted for as a combined performance obligation, as the software licenses are generally highly dependent on, and interrelated with, the associated customization services and therefore are not distinct performance obligations. Revenue for the combined performance obligation 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).

When subscription-based software is sold, the subscription-based software and software maintenance are generally considered distinct performance obligations. The transaction price is allocated to subscription-based software and the software maintenance based on the relative SSP of each performance obligation. We sell subscription-based software for a fixed fee and/or a usage-based royalty fee, sometimes subject to a minimum guarantee. When the amount is in the form of a fixed fee, including the guaranteed minimum in subscription-based royalties, revenue is allocated to the subscription-based software and recognized at a point in time upon delivery, provided all other revenue recognition criteria are met. Revenue allocated to the software maintenance is recognized over the contract term on a straight-line basis. Any subscription-based software fees earned not subject to the guaranteed minimum or earned in excess of the minimum amount are recognized as revenue when the subsequent usage occurs.

Our contracts can include variable fees, such as the option to purchase additional usage of a previously delivered software license. We may also provide pricing concessions to clients, a business practice that also gives rise to variable fees in contracts. We include variable fees in the determination of total transaction price if it is not probable that a future significant reversal of revenue will occur. We use the expected value or most likely value amount, whichever is more appropriate for specific circumstances, to estimate variable consideration, and the estimates are based on the level of historical price concessions offered to clients.

The amount of consideration is typically not adjusted for a significant financing component if the time between payment and the transfer of the related good or service is one year or less under the practical expedient in the guidance. Our revenue arrangements are typically accounted for under such expedient, as payment is typically due within 30 to 60 days. However, during the three and nine months ended September 30, 2024, we identified one contract that contains a significant financing component, due to the inclusion of extended payment terms exceeding one year.

For this contract, we have adjusted the transaction price to reflect the time value of money using an interest rate of 11%. The financing component resulted in the recognition of $2,000 in interest income during the periods. The total amount of revenue recognized in the three and nine months ended September 30, 2024 from this contract was $0.2 million, excluding the financing adjustment.

Also, as we expand our Software as a Service (SaaS) offerings, including AwareID, revenue from SaaS contracts will be recognized ratably over the subscription period. For the three and nine months ended September 30, 2024, we generated $0.1 million of revenue from SaaS contracts, which is included in maintenance revenue. For the three and nine months ended September 30, 2023, we generated a de minimis amount of revenue from SaaS contracts.

Disaggregation of Revenues

We organize ourselves into a single segment that reports to the Chief Executive Officer who is our CODM. We conduct our operations in the United States and sell our products and services to domestic and international customers. Revenue generated from the following geographic regions was (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
United States	$	1,849	$	5,247	$	5,263	$	9,365
United Kingdom		762		323		3,255		934
Rest of World		1,238		811		4,074		3,571
	$	3,849	$	6,381	$	12,592	$	13,870

Revenue by timing of transfer of goods or services was (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Goods or services transferred at a point in time	$	459	$	4,391	$	3,099	$	6,893
Goods or services transferred over time		3,390		1,990		9,493		6,977
	$	3,849	$	6,381	$	12,592	$	13,870

Revenue by contract type was (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
License and service contracts	$	3,070	$	5,982	$	9,930	$	11,586
Subscription-based contracts		779		399		2,662		2,284
	$	3,849	$	6,381	$	12,592	$	13,870

Revenue from subscription-based contracts include revenue that may be recognized at a point in time or over time and be part of a fixed fee and or minimum guarantee as well as fees earned and allocated to software maintenance.

Contract Balances

When the timing of our delivery of goods or services is different from the timing of payments made by customers, we recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Customers that prepay are represented by the deferred revenue below until the performance obligation is satisfied.

Our contract assets consist of unbilled receivables. Our contract liabilities consist of deferred (unearned) revenue, which is generally related to software maintenance contracts. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue.

The following tables present changes in our contract assets and liabilities during the three and nine months ended September 30, 2024 and 2023 (in thousands):


	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Three months ended September 30, 2024
Contract assets:
Unbilled receivables	$	1,299	$	634	$	(525	)	$	1,408

Three months ended September 30, 2023
Contract assets:
Unbilled receivables	$	2,820	$	924	$	(1,972	)	$	1,772

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Three months ended September 30, 2024
Contract liabilities:
Deferred revenue	$	4,444	$	3,220	$	(2,257	)	$	5,407

Three months ended September 30, 2023
Contract liabilities:
Deferred revenue	$	4,359	$	3,442	$	(1,889	)	$	5,912


	Balance at Beginning of Period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Nine months ended September 30, 2024
Contract assets:
Unbilled receivables	$	1,401	$	2,770	$	(2,763	)	$	1,408

Nine months ended September 30, 2023
Contract assets:
Unbilled receivables	$	2,929	$	2,601	$	(3,758	)	$	1,772

	Balance at Beginning of Period		Billings		Revenue Recognized			Balance at End of Period
Nine months ended September 30, 2024
Contract liabilities:
Deferred revenue	$	5,537	$	6,441	$	(6,571	)	$	5,407

Nine months ended September 30, 2023
Contract liabilities:
Deferred revenue	$	3,733	$	7,670	$	(5,491	)	$	5,912

Remaining Performance Obligations

Remaining performance obligations represent the transaction prices from contracts for which work has not been performed or goods and services have not been delivered. We expect to recognize revenue on approximately 97% of the remaining deferred revenue over the next 12 months, with the remainder recognized thereafter. As of September 30, 2024, the aggregate amount of the transaction prices allocated to remaining performance obligations for contracts with a duration greater than one year was $0.3 million.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
-Paragraph 10
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-URI https://asc.fasb.org/1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Name Accounting Standards Codification
-Section 50
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-URI https://asc.fasb.org/1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-Subparagraph (a)
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-URI https://asc.fasb.org/1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Paragraph 12
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-Publisher FASB
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
-Paragraph 12
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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-Section 50
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org/606/tableOfContent

+ Details

Description of the Company and Basis of Presentation (Policies)	9 Months Ended
	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and notes necessary for a complete presentation of our financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. We filed audited financial statements which included all information and notes necessary for such presentation for the two years ended December 31, 2023 in conjunction with our 2023 Annual Report on Form 10-K. This Form 10-Q should be read in conjunction with that Form 10-K. The accompanying unaudited consolidated balance sheets, statements of operations and comprehensive loss, statements of cash flows, and statements of stockholders’ equity reflect all adjustments (consisting only of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of financial position at September 30, 2024, and of operations and cash flows for the interim periods ended September 30, 2024 and 2023. The results of operations for the interim periods ended September 30, 2024 are not necessarily indicative of the results to be expected for the year.
Principles of Consolidation	Principles of Consolidation The consolidated financial statements include the accounts of Aware, Inc. and its subsidiaries, Aware Security Corporation and Fortr3ss, Inc. Intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates	Use of Estimates The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The most significant estimates included in the financial statements pertain to revenue recognition, reserves for credit losses, valuation of the contingent acquisition payment, valuation of the investment in the note receivable, goodwill and long-lived asset impairment and valuation allowance for deferred income tax assets. Actual results could differ from those estimates.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”). This ASU will be effective for our fiscal year ending on December 31, 2024 and interim periods beginning in fiscal 2025, with early adoption permitted. We are assessing the impact of the standard on our consolidated financial statements. 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. This ASU will be effective for our fiscal year ending on December 31, 2025, with early adoption permitted. We are assessing the impact of the standard on our consolidated financial statements.

Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 3 – Fair Value Measurements

The FASB Codification defines fair value and establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy under the FASB Codification are: Level 1 – valuations that are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date; Level 2 – valuations that are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly; and Level 3 – valuations that require inputs that are both significant to the fair value measurement and unobservable.

Cash and cash equivalents, which primarily include money market mutual funds were $11.2 million and $10.0 million as of September 30, 2024 and December 31, 2023, respectively. Marketable securities, which primarily consists of U.S. Treasuries and previously included corporate bonds, were $16.2 million and $20.9 million as of September 30, 2024 and December 31, 2023, respectively. Our assets and liabilities that are measured at fair value on a recurring basis included the following (in thousands):


	Fair Value Measurement at September 30, 2024 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	10,166	$	—	$	—	$	10,166
Marketable securities		16,167		—		—		16,167
Total assets	$	26,333	$	—	$	—	$	26,333


	Fair Value Measurement at December 31, 2023 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	7,848	$	—	$	—	$	7,848
Marketable securities		20,913		—		—		20,913
Note receivable		—		—		—		—
Total assets	$	28,761	$	—	$	—	$	28,761

Our investments in marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss in stockholders' equity.

Marketable securities by security type consisted of the following (in thousands):


	September 30, 2024:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury notes and bonds	$	15,793	$	373	$	—	$	16,167
	$	15,793	$	373	$	—	$	16,167


	December 31, 2023:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury notes and bonds	$	15,332	$	176	$	(19	)	$	15,489
Corporate bonds		5,386		39		(1	)		5,424
	$	20,718	$	215	$	(20	)	$	20,913

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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+ Details