Company: AWRE
Filing Date: 2025-03-13
Form Type: 10-K
Source: 0000950170-25-038714
Chunk: 60

Company: AWARE INC /MA/
Filing Date: 2025-03-13
Form: 10-K
Item: Item 5
Chunk 60
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 service to a customer.

37

We categorize revenue as software licenses, software maintenance, or services and other. Specific revenue recognition policies apply to each category of revenue.Software licensesSoftware licenses consist of revenue from the sale of software licenses for biometrics and imaging applications. Our software licenses are functional intellectual property and typically provide customers with the right to use our software on a term or perpetual basis as it exists when made available to the customer. We recognize revenue from perpetual software licenses at a point in time upon delivery, provided all other revenue recognition criteria are met.We also offer certain products pursuant to a subscription-based software model which includes a term software license to use the software for a fixed term.  We recognize revenue for fixed fees associated with subscription-based software licenses at a point in time upon delivery, provided all other revenue recognition criteria are met.  Fees subject to the usage-based royalty exception are recognized when the subsequent usage occurs.Also, with the adaption of our current products to be delivered in a hosted environment with AwareID, we recognize revenue from our SaaS offerings ratably over the subscription period.  For the year ended December 31, 2024, we generated $0.1 million of revenue from SaaS contracts, which is included in license revenue.  In 2023, we generated a de minimis amount of revenue from SaaS contracts.Software maintenanceSoftware maintenance consists of revenue from the sale of software maintenance contracts for biometrics and imaging software. Software maintenance contracts entitle customers to receive software support and software updates, if and when they become available, during the term of the maintenance contract. Software support and software updates are considered distinct services. However, these distinct services are considered a single performance obligation consisting of a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. We recognize software maintenance revenue over time on a straight-line basis over the contract period.Services and otherService revenue consists of fees from biometrics customers for software engineering services. We recognize services revenue 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.  The use of the over-time revenue recognition method requires judgment in developing budgeted labor hours.  Changes in budgeted hours may occur and the resulting impact on revenue recognition is accounted for in the period of the change in estimate.  Other revenue, which includes hardware sales that may be purchased with the software license, is recognized at a point