# EDGAR Filing Document

**Accession Number:** 0001438231
**File Stem:** 0001437749-25-034816
**Filing Date:** 2025-11
**Character Count:** 238598
**Document Hash:** ba8200fbd84146f64d4ef84cb2d96bed
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-25-034816.hdr.sgml**: 20251113

**ACCESSION NUMBER**: 0001437749-25-034816

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 104

**CONFORMED PERIOD OF REPORT**: 20250930

**FILED AS OF DATE**: 20251113

**DATE AS OF CHANGE**: 20251113

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Digimarc CORP
- **CENTRAL INDEX KEY:** 0001438231
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373]
- **ORGANIZATION NAME:** 06 Technology
- **EIN:** 262828185
- **STATE OF INCORPORATION:** OR
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-34108
- **FILM NUMBER:** 251478435

**BUSINESS ADDRESS:**
- **STREET 1:** 8500 SW CREEKSIDE PLACE
- **CITY:** BEAVERTON
- **STATE:** OR
- **ZIP:** 97008
- **BUSINESS PHONE:** 503-469-4800

**MAIL ADDRESS:**
- **STREET 1:** 8500 SW CREEKSIDE PLACE
- **CITY:** BEAVERTON
- **STATE:** OR
- **ZIP:** 97008

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** DMRC CORP
- **DATE OF NAME CHANGE:** 20080620

?xml version='1.0' encoding='ASCII'? dmrc20250930_10q.htm

[**Table of Contents**](#toc)

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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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**(Mark One)**

**☒&nbsp;&nbsp;&nbsp;&nbsp; QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended September 30, 2025**

**OR**

**☐&nbsp;&nbsp;&nbsp;&nbsp; TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from to** 

**Commission File Number: 001-34108**

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## DIGIMARC CORPORATION
**(Exact name of registrant as specified in its charter)**

------

---

| | |
|:---|:---|
| **Oregon** | **26-2828185** |
| **(State or other jurisdiction of**<br> **incorporation or organization)** | **(I.R.S. Employer**<br> **Identification No.)** |

---

**8500 SW Creekside Place, Beaverton, Oregon 97008**

**(Address of principal executive offices) (Zip Code)**

**(503) 469-4800**

**(Registrant's telephone number, including area code)**

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**Securities registered pursuant to Section 12(b) of the Act:**

---

| | | |
|:---|:---|:---|
| **Title of Each Class** | **Trading Symbol** | **Name of Each Exchange on Which Registered** |
| **Common Stock, $0.001 Par Value Per Share** | **DMRC** | **The NASDAQ Stock Market LLC** |

---

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.&nbsp;&nbsp;&nbsp;&nbsp;Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).&nbsp;&nbsp;&nbsp;&nbsp;Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |  |  |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).&nbsp;&nbsp;&nbsp;&nbsp;Yes ☐&nbsp;&nbsp;&nbsp;&nbsp;No ☒

As of November 7, 2025, there were 21,756,987 shares of the registrant's common stock, par value $0.001 per share, outstanding.

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[**Table of Contents**](#toc)

**Table of Contents**

---

| | | |
|:---|:---|:---|
| [**PART I. FINANCIAL INFORMATION**](#part1) | [**PART I. FINANCIAL INFORMATION**](#part1) | [**PART I. FINANCIAL INFORMATION**](#part1) |
| Item 1. | [Financial Statements (Unaudited):](#fs) | [3](#fs) |
|  | [Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024](#bs) | [3](#bs) |
|  | [Consolidated Statements of Operations and Comprehensive Loss for the <u>three and nine months ended September 30, 2025 and 2024</u>](#income) | [4](#income) |
|  | [Consolidated Statements of Shareholders' Equity for the <u>three and nine months ended September 30, 2025 and 2024</u>](#equity) | [5](#equity) |
|  | [Consolidated Statements of Cash Flows for the nine <u>months ended September 30, 2025 and 2024</u>](#cashflow) | [6](#cashflow) |
|  | [Notes to Consolidated Financial Statements](#notes) | [7](#notes) |
| Item 2. | [Management's Discussion and Analysis of Financial Condition and Results of Operations](#mda) | [20](#mda) |
| Item 3.  | [Quantitative and Qualitative Disclosures About Market Risk](#Item3) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[32](#Item3) |
| Item 4. | [Controls and Procedures](#controls) | [32](#controls) |
| [**PART II. OTHER INFORMATION**](#partII) | [**PART II. OTHER INFORMATION**](#partII) |  |
| Item 1. | [Legal Proceedings](#legal) | [33](#legal) |
| Item 1A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  | [Risk Factors](#riskfactors) | [33](#riskfactors) |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#unregistered) | [34](#unregistered) |
| Item 5. | [Other Information](#item5) | [34](#item5) |
| Item 6. | [Exhibits](#exhibits) | [35](#exhibits) |
| [SIGNATURES](#signatures) | [SIGNATURES](#signatures) | [36](#signatures) |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2

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[**Table of Contents**](#toc)

**PART I. FINANCIAL INFORMATION**

**Item 1.**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Financial Statements.**

**DIGIMARC CORPORATION**

**CONSOLIDATED BALANCE SHEETS**

**(In thousands, except per share data)**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $9101 | $12365 |
| Marketable securities | 3461 | 16365 |
| Trade accounts receivable, net | 6321 | 6412 |
| Other current assets | 2873 | 4189 |
| Total current assets | 21756 | 39331 |
| Property and equipment, net | 1227 | 1040 |
| Intangibles, net | 18765 | 22191 |
| Goodwill | 9060 | 8532 |
| Lease right of use assets | 3350 | 3659 |
| Other assets | 1277 | 1013 |
| Total assets | $55435 | $75766 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| Current liabilities: |  |  |
| Accounts payable and other accrued liabilities | $5595 | $5118 |
| Deferred revenue | 3842 | 4020 |
| Total current liabilities | 9437 | 9138 |
| Long-term lease liabilities | 4549 | 5213 |
| Other long-term liabilities | 62 | 56 |
| Total liabilities | 14048 | 14407 |
| Commitments and contingencies (Note 17) |  |  |
| Shareholders' equity: |  |  |
| Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at September 30, 2025 and December 31, 2024) | 50 | 50 |
| Common stock (par value $0.001 per share, 50,000 authorized, 21,751 and 21,495 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively) | 22 | 21 |
| Additional paid-in capital | 421592 | 415049 |
| Accumulated deficit | (378880) | (350778) |
| Accumulated other comprehensive loss | (1397) | (2983) |
| Total shareholders' equity | 41387 | 61359 |
| Total liabilities and shareholders' equity | $55435 | $75766 |

---

The accompanying notes are an integral part of these consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3

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[**Table of Contents**](#toc)

**DIGIMARC CORPORATION**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**

**(In thousands, except per share data)**

**(UNAUDITED)**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenue: |  |  |  |  |
| Subscription | $4567 | $5252 | $14505 | $17394 |
| Service | 3060 | 4191 | 10500 | 12366 |
| Total revenue | 7627 | 9443 | 25005 | 29760 |
| Cost of revenue: |  |  |  |  |
| Subscription <sup>(1)</sup> | 642 | 735 | 2101 | 2205 |
| Service <sup>(1)</sup> | 1330 | 1638 | 4120 | 5138 |
| Amortization expense on acquired intangible assets | 1209 | 1173 | 3546 | 3445 |
| Total cost of revenue | 3181 | 3546 | 9767 | 10788 |
| Gross profit | 4446 | 5897 | 15238 | 18972 |
| Operating expenses: |  |  |  |  |
| Sales and marketing | 2852 | 5637 | 11161 | 16789 |
| Research, development and engineering | 4315 | 6488 | 16485 | 19873 |
| General and administrative | 5355 | 4861 | 15614 | 13695 |
| Amortization expense on acquired intangible assets | 288 | 280 | 847 | 823 |
| Total operating expenses | 12810 | 17266 | 44107 | 51180 |
| Operating loss | (8364) | (11369) | (28869) | (32208) |
| Other income, net | 217 | 617 | 796 | 1868 |
| Loss before income taxes | (8147) | (10752) | (28073) | (30340) |
| Provision for income taxes | (5) | (2) | (29) | (22) |
| Net loss | $(8152) | $(10754) | $(28102) | $(30362) |
| Loss per share: |  |  |  |  |
| Loss per share — basic | $(0.38) | $(0.50) | $(1.30) | $(1.43) |
| Loss per share — diluted | $(0.38) | $(0.50) | $(1.30) | $(1.43) |
| Weighted average shares outstanding — basic | 21709 | 21435 | 21614 | 21187 |
| Weighted average shares outstanding — diluted | 21709 | 21435 | 21614 | 21187 |
| Comprehensive loss: |  |  |  |  |
| Unrealized gain (loss) on marketable securities, net of tax of $0 | $6 | $6 | $9 | $(11) |
| Foreign currency translation adjustment, net of tax of $0 | (457) | 1591 | 1577 | 1314 |
| Other comprehensive income (loss) | $(451) | $1597 | $1586 | $1303 |
| Net loss | (8152) | (10754) | (28102) | (30362) |
| Comprehensive loss | $(8603) | $(9157) | $(26516) | $(29059) |

---

------

<sup>(1)</sup> Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets.

The accompanying notes are an integral part of these consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4

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[**Table of Contents**](#toc)

 **DIGIMARC CORPORATION**

**CONSOLIDATED STATEMENTS OF SHAREHOLDERS**' **EQUITY**

**(In thousands)**

**(UNAUDITED)**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  |  | ***Accumulated*** |  |
|  |  |  |  |  | ***Additional*** |  | ***Other*** | ***Total*** |
|  | ***Preferred Stock*** | ***Preferred Stock*** | ***Common Stock*** | ***Common Stock*** | ***Paid-in*** | ***Accumulated*** | ***Comprehensive*** | ***Shareholders'*** |
|  | ***Shares*** | ***Amount*** | ***Shares*** | ***Amount*** | ***Capital*** | ***Deficit*** | ***Loss*** | ***Equity*** |
| **Three Months Ended September 30, 2025** |  |  |  |  |  |  |  |  |
| Balance at June 30, 2025 | 10 | $50 | 21657 | $22 | $418085 | $(370728) | $(946) | $46483 |
| &nbsp;&nbsp;&nbsp; Issuance of restricted common stock |  |  | 22 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Vesting of restricted stock units |  |  | 120 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Purchase of common stock |  |  | (48) |  | (419) |  |  | (419) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation | *—* |  | *—* |  | 3926 |  |  | 3926 |
| Unrealized gain (loss) on marketable securities | *—* |  | *—* |  |  |  | 6 | 6 |
| &nbsp;&nbsp;&nbsp; Foreign currency translation adjustments | *—* |  | *—* |  |  |  | (457) | (457) |
| Net loss | *—* |  | *—* |  |  | (8152) |  | (8152) |
| Balance at September 30, 2025 | 10 | $50 | 21751 | $22 | $421592 | $(378880) | $(1397) | $41387 |
| **Three Months Ended September 30, 2024** |  |  |  |  |  |  |  |  |
| Balance at June 30, 2024 | 10 | $50 | 21420 | $21 | $411331 | $(331376) | $(2858) | $77168 |
| &nbsp;&nbsp;&nbsp; Vesting of restricted stock units |  |  | 52 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeiture of restricted common stock |  |  | (6) |  |  |  |  |  |
| Purchase of common stock |  |  | (22) |  | (558) |  |  | (558) |
| &nbsp;&nbsp;&nbsp; Stock-based compensation | *—* |  | *—* |  | 2707 |  |  | 2707 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized gain (loss) on marketable securities | *—* |  | *—* |  |  |  | 6 | 6 |
| &nbsp;&nbsp;&nbsp; Foreign currency translation adjustments | *—* |  | *—* |  |  |  | 1591 | 1591 |
| &nbsp;&nbsp;&nbsp; Net loss | *—* |  | *—* |  |  | (10754) |  | (10754) |
| &nbsp;&nbsp;&nbsp; Balance at September 30, 2024 | 10 | $50 | 21444 | $21 | $413480 | $(342130) | $(1261) | $70160 |
|  |  |  |  |  |  |  | ***Accumulated*** |  |
|  |  |  |  |  | ***Additional*** |  | ***Other*** | ***Total*** |
|  | ***Preferred Stock*** | ***Preferred Stock*** | ***Common Stock*** | ***Common Stock*** | ***Paid-in*** | ***Accumulated*** | ***Comprehensive*** | ***Shareholders'*** |
|  | ***Shares*** | ***Amount*** | ***Shares*** | ***Amount*** | ***Capital*** | ***Deficit*** | ***Loss*** | ***Equity*** |
| **Nine Months Ended September 30, 2025** |  |  |  |  |  |  |  |  |
| Balance at December 31, 2024 | 10 | $50 | 21495 | $21 | $415049 | $(350778) | $(2983) | $61359 |
| Issuance of restricted common stock |  |  | 69 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Vesting of restricted stock units |  |  | 267 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Vesting of performance restricted stock units |  |  | 49 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Purchase of common stock |  |  | (129) | 1 | (2468) |  |  | (2467) |
| Stock-based compensation | *—* |  | *—* |  | 9011 |  |  | 9011 |
| Unrealized gain (loss) on marketable securities | *—* |  | *—* |  |  |  | 9 | 9 |
| Foreign currency translation adjustments | *—* |  | *—* |  |  |  | 1577 | 1577 |
| Net loss | *—* |  | *—* |  |  | (28102) |  | (28102) |
| Balance at September 30, 2025 | 10 | $50 | 21751 | $22 | $421592 | $(378880) | $(1397) | $41387 |
| **Nine Months Ended September 30, 2024** |  |  |  |  |  |  |  |  |
| Balance at December 31, 2023 | 10 | $50 | 20379 | $20 | $376189 | $(311768) | $(2564) | $61927 |
| &nbsp;&nbsp;&nbsp; Issuance of common stock |  |  | 929 | 1 | 32217 |  |  | 32218 |
| &nbsp;&nbsp;&nbsp; Issuance of restricted common stock |  |  | 24 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Vesting of restricted stock units |  |  | 148 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Vesting of performance restricted stock units |  | *—* | 60 | *—* | *—* | *—* | *—* | *—* |
| &nbsp;&nbsp;&nbsp; Forfeiture of restricted common stock |  |  | (7) |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Purchase of common stock |  |  | (89) |  | (2890) |  |  | (2890) |
| &nbsp;&nbsp;&nbsp; Stock-based compensation | *—* |  | *—* |  | 7964 |  |  | 7964 |
| &nbsp;&nbsp;&nbsp; Unrealized gain (loss) on marketable securities | *—* |  | *—* |  |  |  | (11) | (11) |
| &nbsp;&nbsp;&nbsp; Foreign currency translation adjustments | *—* |  | *—* |  |  |  | 1314 | 1314 |
| Net loss | *—* |  | *—* |  |  | (30362) |  | (30362) |
| Balance at September 30, 2024 | 10 | $50 | 21444 | $21 | $413480 | $(342130) | $(1261) | $70160 |

---

The accompanying notes are an integral part of these consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5

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[**Table of Contents**](#toc)

**DIGIMARC CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands)**

**(UNAUDITED)**

---

| | | |
|:---|:---|:---|
|  | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** |
| Cash flows from operating activities: |  |  |
| Net loss | $(28102) | $(30362) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Depreciation and write-off of property and equipment | 430 | 570 |
| Amortization of acquired intangible assets | 4393 | 4268 |
| Amortization and write-off of other intangible assets | 989 | 651 |
| Amortization of lease right of use assets under operating leases | 309 | 263 |
| Stock-based compensation | 8896 | 7939 |
| Increase (decrease) in allowance for doubtful accounts | 681 | 96 |
| Changes in operating assets and liabilities: |  |  |
| Trade accounts receivable | (1207) | (1321) |
| Other current assets | 1139 | (9) |
| Other assets | (358) | (582) |
| Accounts payable and other accrued liabilities | 245 | (816) |
| Deferred revenue | 443 | (2448) |
| Lease liability and other long-term liabilities | (628) | (586) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by (used in) operating activities | (12770) | (22337) |
| Cash flows from investing activities: |  |  |
| Purchase of property and equipment | (474) | (199) |
| Capitalized patent costs | (465) | (313) |
| Proceeds from maturities of marketable securities | 15352 | 16978 |
| Purchases of marketable securities | (2448) | (19376) |
| Net cash provided by (used in) investing activities | 11965 | (2910) |
| Cash flows from financing activities: |  |  |
| Issuance of common stock, net of issuance costs |  | 32218 |
| Purchase of common stock | (2467) | (2890) |
| Repayment of loans | (31) | (35) |
| Net cash provided by (used in) financing activities | (2498) | 29293 |
| Effect of exchange rate on cash | 39 | 58 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net increase (decrease) in cash and cash equivalents | (3264) | 4104 |
| Cash and cash equivalents at beginning of period | 12365 | 21456 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents at end of period | $9101 | $25560 |
| Supplemental disclosure of cash flow information: |  |  |
| Cash received (paid) for income taxes, net | $(32) | $(49) |
| Supplemental schedule of non-cash activities: |  |  |
| Property and equipment and patent costs in accounts payable | $164 | $49 |
| Stock-based compensation capitalized to software and patent costs | $115 | $25 |

---

The accompanying notes are an integral part of these consolidated financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6

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[**Table of Contents**](#toc)

**DIGIMARC CORPORATION**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(In thousands, except per share data)**

**(UNAUDITED)**

***1.* Description of Business and Significant Accounting Policies**

***Description of Business***

Digimarc ("the Company"), an Oregon corporation, is a pioneer and global leader in digital watermarking technologies. For nearly *30* years, Digimarc innovations and intellectual property in digital watermarking have been deployed in solutions built upon *one* or both of the following *two* things: the identification and the authentication of physical and digital items, often at massive scale, and often where other methods of identification or authentication don't work well or don't work at all.

The Digimarc Illuminate platform is a distinctive software as a service ("SaaS") cloud-based platform for digital connectivity that provides the tools for the application of advanced digital watermarks and dynamic Quick Response ("QR") codes, software (digital twins) that enables various systems and devices to interact with those data carriers, and a centralized platform for capturing insights about digital interactions and automating activities based on that information.

The Digimarc product suite is built on top of the Digimarc Illuminate platform to power a trusted and scalable ecosystem that can address specific business needs in areas like automation, authenticity, sustainability, and customer trust and connectivity. All of the Company's products are complementary to each other, providing exponential benefits when combined. By enabling customers to create and connect digital twins to physical and digital items, Digimarc's products provide many benefits including:

• **Digimarc Automate** improves product inspection by embedding imperceptible digital watermarks into products, labels, and packaging, which are detectable by standard vision systems. This significantly reduces mixing errors and mislabeling, ensuring higher accuracy and efficiency in production, fulfillment, and distribution facilities without additional costs for special inks or hardware. By enabling real-time data analysis and minimizing human error, Digimarc Automate enhances quality assurance, reduces waste, and lowers the risk of product recalls, giving brands a competitive edge.

• **Digimarc Engage** activates products and multimedia to create and leverage an interactive, fully owned communications channel directly with consumers. Digimarc delivers dynamic, *GS1* Digital Link-compliant QR codes and hyperlinks that provide contextual redirection capabilities for multiple consumer experiences (including personalized and automated loyalty and rewards programs) based on a variety of factors such as time and location or previous behavior. Connecting engagements across the physical and digital worlds in a singular view results in powerful new capabilities and insights for brands.

• **Digimarc Recycle** increases the quality and quantity of recycled materials by digitizing products and packaging with digital watermarking technology. Coupled with consumer engagement capabilities, brands can leverage a direct, digital communications channel. Plus, Digimarc Recycle creates a cloud-based record of never-before-seen post-consumption data to provide new insights that benefit stakeholders across the value chain, including brands, facility operators, and Producer Responsibility Organizations ("PROs").

• **Digimarc Retail Experience** delivers smarter, connected packaging that supports next-generation retail checkout systems, including checkout efficiency (faster scanning) and checkout effectiveness (reduced shrinkage, including gift card and price look-up fraud prevention), optimized operational processes, advanced consumer engagement experiences, compliance with upcoming industry standards, and the collection of powerful *first*-party data and consumer insights.

• **Digimarc Validate** supports authentication in the physical and digital worlds to help ensure online interactions can be trusted and that real products and digital assets are genuine and in the right place. Digimarc's technology protects digital images, audio, product packaging, gift cards, and other physical items by delivering exclusive, covert digital watermarks and/or dynamic QR codes and a cloud-based record of product authentication information. In addition, consumer engagement capabilities provide a direct, digital communications channel.

***Interim Consolidated Financial Statements***

Our significant accounting policies are detailed in "Note *1:* Description of Business and Summary of Significant Accounting Policies" of our Annual Report on Form *10*-K for the year ended *December 31, 2024*, which was filed with the U.S. Securities and Exchange Commission ("SEC") on *February 27, 2025* (the "*2024* Annual Report").

The accompanying interim consolidated financial statements have been prepared from the Company's records without audit and, in management's opinion, include all adjustments (consisting of only normal recurring adjustments) necessary to fairly reflect the financial condition and the results of operations for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP") have been condensed or omitted in accordance with the rules and regulations of the SEC.

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the *2024* Annual Report. The results of operations for the interim periods presented in these consolidated financial statements are *not* necessarily indicative of the results for the full year.

***Principles of Consolidation***

The consolidated financial statements include the accounts of Digimarc and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *7*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

***Accounting Pronouncements Issued But *Not* Yet Adopted***

In *December 2023,* the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") *No. 2023*-*09* "*Income Taxes (Topic *740*) - Improvements to Income Tax Disclosures*". The ASU requires greater disaggregation of income tax disclosures primarily on the income tax rate reconciliation and income taxes paid. This ASU will be effective for the Company for the fiscal year ending *December 31, 2025,* with early adoption permitted. The adoption of this ASU will lead to additional income tax disclosures in the Company's consolidated financial statements for *2025* and future periods.

In *November 2024,* the FASB issued ASU *No. 2024*-*03* "*Income Statement (Subtopic *220*-*40*) - Reporting Comprehensive Income - Expense Disaggregation Disclosures*". The ASU requires disaggregated disclosure of income statement expenses, primarily the disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This ASU will be effective for the Company starting in the fiscal year ending *December 31, 2027* for annual periods and in the *first* quarter of the fiscal year ending *December 31, 2028* for interim periods, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU on the Company's disclosures, but it is *not* expected to have a material impact.

In *September 2025,* the FASB issued ASU *No. 2025*-*06,* "*Intangibles - Goodwill and Other - Internal-Use Software (Subtopic *350*-*40*): Targeted Improvements to the Accounting for Internal-Use Software*", which includes amendments intended to modernize the accounting for software costs by removing references to software development stages and clarifying the capitalization threshold. The amendments are effective for annual periods beginning after *December 15, 2027,* and interim reporting periods within those annual reporting periods, with early adoption permitted. The amendments *may* be applied prospectively, retrospectively, or through a modified transition approach. The Company is currently evaluating the effect of adopting this ASU on the Company's consolidated financial statements and disclosures.

***2.* Fair Value of Financial Instruments**

The estimated fair values of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and other accrued liabilities, approximate their carrying values due to the short-term nature of these instruments. The Company's marketable securities are classified as available-for-sale and are reported at fair value. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in "accumulated other comprehensive loss" in the Consolidated Balance Sheets until realized. Realized gains and losses are included in "other income, net" in the Consolidated Statements of Operations and Comprehensive Loss and are derived using the specific identification method for determining the cost of marketable securities sold.

In accordance with Accounting Standards Codification ("ASC") *No. 820* "*Fair Value Measurements and Disclosures*", the Company defines its fair value hierarchy based on *three* levels of inputs, of which the *first two* are considered observable and the last unobservable, that *may* be used to measure fair value, in the following:

• Level *1* Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date.

• Level *2* Pricing inputs are quoted for similar investments, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level *2* includes investments valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

• Level *3* Pricing inputs are unobservable for the investment; that is, the inputs reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company's fair value hierarchy for its cash equivalents and marketable securities was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **September 30, 2025** | ***Level 1*** | ***Level 2*** | ***Level 3*** | ***Total*** |
| Money market securities | $1604 | $— | $– $| 1604 |
| Commercial paper |  | 4390 | – | 4390 |
| Federal agency notes |  | 3212 | – | 3212 |
| U.S. treasuries |  | 1996 | – | 1996 |
| Total | $1604 | $9598 | $– $| 11202 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2024** | ***Level 1*** | ***Level 2*** | ***Level 3*** | ***Total*** |
| Money market securities | $112 | $— | $– $| 112 |
| Commercial paper |  | 10633 | – | 10633 |
| U.S. treasuries |  | 9192 | – | 9192 |
| Federal agency notes |  | 5317 | – | 5317 |
| Total | $112 | $25142 | $– $| 25254 |

---

The fair value maturities of the Company's cash equivalents and marketable securities as of *September 30, 2025*, were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | ***Maturities by Period*** | ***Maturities by Period*** | ***Maturities by Period*** |
|  |  | ***Less than*** | ***More than*** |
|  | ***Total*** | ***1 year*** | ***10 years*** |
| Cash equivalents and marketable securities | $11202 | $11202 | $— |

---

The Company considers all highly liquid marketable securities with original maturities of *90* days or less at the date of acquisition to be cash equivalents. Cash equivalents include commercial paper, federal agency notes, U.S. treasuries, and money market securities totaling $7,741 and $8,889 at *September 30, 2025* and *December 31, 2024*, respectively. Cash equivalents are carried at either cost or fair value, depending on the type of security.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *8*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

***3.* Revenue Recognition**

The Company derives its revenue primarily from software subscriptions and software development services. Applicable revenue recognition criteria are considered separately for each performance obligation as follows:

• Subscription revenue consists primarily of revenue earned from subscription fees for access to the Company's SaaS platform and products and, to a lesser extent, licensing fees for software products. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years.

• Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided.

Customer arrangements *may* contain multiple deliverables such as software platform subscriptions, software product subscriptions, and professional services. Subscriptions and services offered are usually distinct performance obligations. When they are *not* capable of being distinct, they are combined with other subscriptions or services until a distinct performance obligation is identified. To determine the transaction price, management considers the terms of the contract and the Company's customary business practices. Some contracts *may* contain variable consideration. In those cases, management estimates the amount of variable consideration based on the sum of probability-weighted amounts in a range of possible consideration amounts. As part of this assessment, management evaluates whether any of the variable consideration is constrained and if it is, it is *not* included in the transaction price. The consideration is allocated between distinct performance obligations based on their stand-alone selling prices. When the standalone selling prices are *not* directly observable, management makes estimates based on reasonably available information, including market conditions, specific factors affecting the Company, and information about the customer. The Company recognizes the revenue associated with each performance obligation as the obligation is fulfilled, which for subscriptions is typically recognized ratably over time, and for services is typically recognized when they are performed.

All revenue recognized in the Consolidated Statements of Operations and Comprehensive Loss is considered to be revenue from contracts with customers.

The following table provides information about disaggregated revenue by major target market in the Company's single reporting segment:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Commercial: |  |  |  |  |
| Subscription | $4267 | $4952 | $13605 | $16494 |
| Service | 41 | 430 | 876 | 864 |
| Total Commercial | $4308 | $5382 | $14481 | $17358 |
| Government: |  |  |  |  |
| Subscription | $300 | $300 | $900 | $900 |
| Service | 3019 | 3761 | 9624 | 11502 |
| Total Government | 3319 | 4061 | 10524 | 12402 |
| Total | $7627 | $9443 | $25005 | $29760 |

---

The Company has contract assets from contracts with customers that are classified as "trade accounts receivable" in the Consolidated Balance Sheets. See Note *8* for more information about trade accounts receivable.

The Company has contract assets from capitalized contract acquisition costs that are classified as "other current assets" and "other assets" in the Consolidated Balance Sheets. These contract acquisition costs are recognized in proportion to the revenue recognized from the contract they are associated with.

The following table provides information about contract assets:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Contract acquisition costs, current | $124 | $38 |
| Contract acquisition costs, long-term | 199 |  |
| Total | $323 | $38 |

---

The Company has contract liabilities from contracts with customers that are classified as "deferred revenue" in the Consolidated Balance Sheets. Deferred revenue consists of billings in advance for subscriptions and services for which the performance obligation has *not* been satisfied.

The following table provides information about contract liabilities:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Deferred revenue, current | $3842 | $4020 |
| Deferred revenue, long-term | 16 | 2 |
| Total | $3858 | $4022 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *9*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

The Company recognized $3,598 of revenue during the *nine* months ended *September 30, 2025*, that was included in the contract liability balance as of *December 31, 2024*.

The aggregate amount of the transaction prices from contractual obligations that are unsatisfied or partially unsatisfied was $28,880 and $25,215 as of *September 30, 2025*, and *December 31, 2024*, respectively. As of *September 30, 2025*, the Company expects $22,672 of the $28,880 to be recognized as revenue during the next twelve months.

***4.* Segment Information**

*Significant Segment Expenses*

The Company derives its revenue from a single reporting segment: product digitization solutions. Revenue is generated in this segment primarily through software subscriptions and software development services. The Company manages its business activities on a consolidated basis. In addition, the Chief Executive Officer of the Company, as the chief operating decision-maker ("CODM"), reviews the Company's operating results and makes decisions to allocate resources based on consolidated financial information. As such, the Company has one single reportable segment. The CODM uses consolidated net income (loss) as a performance measure and total consolidated assets as an asset measure, to assess performance of the Company, to allocate working capital, and to monitor budget versus actual results.

The following table illustrates reported segment revenue, segment profit and loss, and significant segment expenses.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Revenue: |  |  |  |  |
| Subscription | $4567 | $5252 | $14505 | $17394 |
| Service | 3060 | 4191 | 10500 | 12366 |
| Total revenue | 7627 | 9443 | 25005 | 29760 |
| Cost of revenue: |  |  |  |  |
| Subscription <sup>(1)</sup> | 642 | 735 | 2101 | 2205 |
| Service <sup>(1)</sup> | 1330 | 1638 | 4120 | 5138 |
| Amortization expense on acquired intangible assets | 1209 | 1173 | 3546 | 3445 |
| Total cost of revenue | 3181 | 3546 | 9767 | 10788 |
| Operating expenses: |  |  |  |  |
| Cash compensation | 4875 | 10322 | 22281 | 30425 |
| Stock-based compensation | 3529 | 2548 | 8170 | 7376 |
| Professional services and consultants | 1969 | 2057 | 6811 | 5880 |
| Software and hardware | 608 | 871 | 2146 | 2759 |
| Depreciation and amortization | 563 | 536 | 1606 | 1636 |
| Other segment items <sup>(2)</sup> | 1266 | 932 | 3093 | 3104 |
| Total operating expenses | 12810 | 17266 | 44107 | 51180 |
| Operating loss | (8364) | (11369) | (28869) | (32208) |
| Other income, net | 217 | 617 | 796 | 1868 |
| Provision for income taxes | (5) | (2) | (29) | (22) |
| Net loss | $(8152) | $(10754) | $(28102) | $(30362) |

---

------

<sup>(*1*)</sup> Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets.

<sup>(*2*)</sup> Other segment items include training and travel expenses, recruiting expenses, rent and facility expenses, bad debt expenses and other miscellaneous costs.

*Geographic Information*

The Company markets its products in the U.S. and in non-U.S. countries through its sales personnel and partners. Revenue by geographic area, based upon the "bill-to" location, was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Domestic | $2308 | $2004 | $6781 | $8349 |
| International <sup>(1)</sup> | 5319 | 7439 | 18224 | 21411 |
| Total | $7627 | $9443 | $25005 | $29760 |

---

------

<sup>(*1*)</sup> Revenue from the Central Banks, consisting of a consortium of central banks around the world, is classified as international revenue. Reporting revenue by country for this customer is *not* practicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *10*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

*Major Customers*

The following customers accounted for *10%* or more of revenue:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Customer A | 43% | 43% | 42% | 41% |
| Customer B | *\** | 16% | 13% | 15% |
| Customer C | 11% | *\** | 10% | 15% |

---

------

\* Less than *10%*

*Long-Lived Assets by Geographical Area*

Long-lived assets by geographic area were as follows:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| United States | $1223 | $1026 |
| Europe | 4 | 14 |
| Total | $1227 | $1040 |

---

***5.* Stock-Based Compensation**

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include restricted stock awards, restricted stock units, and performance restricted stock units.

Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.

***Determining Fair Value***

*Restricted Stock Awards*

The fair value of restricted stock awards ("RSA") that vest upon meeting a service condition is based on the fair market value of the Company's common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants and one to three years for director grants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *11*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

*Restricted Stock Units*

The fair value of restricted stock unit ("RSU") awards that vest upon meeting a service condition is based on the fair market value of the Company's common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally three to four years for employee grants.

*Performance Restricted Stock Units*

The fair value of performance restricted stock unit ("PRSU") awards that vest upon meeting a service condition and a performance condition, such as the Company exceeding a future annual recurring revenue target, is determined based on the fair market value of the Company's common stock on the date of the grant (measurement date), adjusted for probability of achievement of the performance criteria as of each reporting date, and is recognized on a straight-line basis over the service period of the award, which is generally three years for employee grants. The probability of achievement is subject to judgment, and could change from period to period, impacting the amount of expense to be recognized.

The fair value of PRSU awards that vest upon meeting a service condition and a market condition, such as the Company exceeding shareholder returns as compared to an index of peer companies, is determined on the date of grant (measurement date) using the Monte Carlo valuation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally three years for employee grants.

The following inputs are used in the Monte Carlo valuation model to estimate the fair value:

*Stock Price.* The stock price represents the fair market value of the Company's common stock on the date of the grant.

*Expected Volatility.* The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the term of the award.

*Risk-Free Interest Rate.* The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the term of the award.

*Monte Carlo valuation inputs:*

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Stock price | $— | $— | $13.16 | $36.64 |
| Expected volatility |  |  | 70.9% | 66.3% |
| Risk-free interest rate |  |  | 3.8% | 4.3% |

---

***Stock-Based Compensation***

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Stock-based compensation: |  |  |  |  |
| Cost of revenue | $336 | $154 | $726 | $563 |
| Sales and marketing | 577 | 688 | 1727 | 2198 |
| Research, development and engineering | 1244 | 648 | 2872 | 1911 |
| General and administrative | 1708 | 1212 | 3571 | 3267 |
| Stock-based compensation expense | 3865 | 2702 | 8896 | 7939 |
| Capitalized to software and patent costs | 61 | 5 | 115 | 25 |
| Total stock-based compensation | $3926 | $2707 | $9011 | $7964 |

---

The following table sets forth total unrecognized compensation costs related to non-vested stock-based awards granted under the Company's stock incentive plan:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Total unrecognized compensation costs | $15491 | $16226 |

---

Total unrecognized compensation costs will be adjusted based on updates to the estimated future achievement of performance conditions on PRSU awards as well as for any future forfeitures if and when they occur.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *12*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

The Company expects to recognize the total unrecognized compensation costs as of *September 30, 2025*, for all non-vested stock-based awards over weighted average periods through *September 30, 2029*, as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | ***RSAs*** | ***RSAs*** | ***RSUs*** | ***RSUs*** | ***PRSUs*** | ***PRSUs*** |
| Weighted average period (in years) |  | 1.06 |  | 1.47 |  | 1.41 |

---

As of *September 30, 2025*, under the Company's stock incentive plan, an additional 2,347 shares remained available for future grants. The Company issues new shares upon the grants of RSAs and vesting of RSU and PRSU awards.

*Restricted Stock Awards Activity*

The following table presents the unvested RSA activity:

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Three Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at June 30, 2025 | 74 | $18.15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 22 | $12.27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested | (5) | $19.52 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited |  | $— |
| Unvested balance at September 30, 2025 | 91 | $16.59 |

---

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Nine Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at December 31, 2024 | 59 | $29.98 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 69 | $12.69 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested | (37) | $30.61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited |  | $— |
| Unvested balance at September 30, 2025 | 91 | $16.59 |

---

The fair value of RSAs vested is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Fair value of RSAs vested | $73 | $308 | $668 | $2069 |

---

*Restricted Stock Units Activity*

The following table presents the unvested RSU award activity:

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Three Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at June 30, 2025 | 679 | $16.25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 98 | $8.98 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested | (120) | $16.46 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited | (41) | $19.69 |
| Unvested balance at September 30, 2025 | 616 | $14.83 |

---

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Nine Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at December 31, 2024 | 406 | $28.27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 673 | $13.09 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested | (267) | $18.81 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited | (196) | $26.30 |
| Unvested balance at September 30, 2025 | 616 | $14.83 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *13*

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[**Table of Contents**](#toc)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

The fair value of RSU awards vested is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Fair value of RSU awards vested | $1082 | $1356 | $4119 | $4403 |

---

*Performance Restricted Stock Units Activity*

The following table presents the unvested PRSU award activity:

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Three Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at June 30, 2025 | 560 | $18.49 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in units based on performance expectations |  | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 3 | $8.81 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested |  | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited | (39) | $18.18 |
| Unvested balance at September 30, 2025 | 524 | $18.45 |

---

---

| | | |
|:---|:---|:---|
|  |  | ***Weighted*** |
|  |  | ***Average*** |
|  | ***Number of*** | ***Grant Date*** |
| **Nine Months Ended September 30, 2025:** | ***Shares*** | ***Fair Value*** |
| Unvested balance at December 31, 2024 | 215 | $32.08 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in units based on performance expectations | (5) | $42.43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Granted | 421 | $15.20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Vested | (49) | $42.43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Forfeited | (58) | $23.04 |
| Unvested balance at September 30, 2025 | 524 | $18.45 |

---

The fair value of PRSU awards vested is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Fair value of PRSU awards vested | $— | $— | $1707 | $2370 |

---

***6.* Shareholders' Equity**

*Registered Direct Offering*

On *February 24, 2024,* the Company entered into purchase agreements with certain investors providing for the issuance and sale by the Company of 929 shares of common stock in a registered direct stock offering. The common shares were offered at a price of $35.00 per share, and the gross cash proceeds to the Company were $32,500. We incurred $282 of legal costs related to the offering. The closing of the registered direct offering occurred on *February 27, 2024.*

*Employee Stock Purchase Plan*

On *February 25, 2025,* the Company's Board of Directors adopted the *2025* Employee Stock Purchase Plan ("ESPP"). The Company reserved a total of 250 thousand shares and as of *September 30, 2025*, there were 250 thousand shares authorized and available for future issuance under the ESPP. Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 15% of their salary for the purchase of the Company's common stock at a discounted price per share. The Company's current offering period began on *June 16, 2025,* with the *first* purchase period ending on *December 15, 2025.* The stock-based compensation expense and payroll withholding for the ESPP during the *three* and *nine* months ended *September 30, 2025* were *not* material.

*Incentive Plan Amendment*

On *May 7, 2025,* the Company's shareholders approved an amendment to the Digimarc Corporation *2018* Stock Incentive Plan (as amended, the *"2018* Plan") to, among other things, increase the number of shares authorized for issuance by 950 thousand shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *14*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

***7.* Earnings Per Share**

The Company calculates basic and diluted earnings per share in accordance with ASC *No. 260,* "*Earnings Per Share*," using the treasury stock method.

Basic earnings per share excludes dilution and is calculated by dividing earnings by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is calculated by dividing earnings by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of unvested RSUs and PRSUs. The dilutive effect of unvested RSUs and PRSUs is determined using the treasury stock method. RSAs are included in shares outstanding on the date of grant.

The following table reconciles earnings (loss) per share:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| **Basic Earnings (Loss) per Share:** |  |  |  |  |
| Net loss — basic | $(8152) | $(10754) | $(28102) | $(30362) |
| Weighted average shares outstanding — basic | 21709 | 21435 | 21614 | 21187 |
| Basic loss per share | $(0.38) | $(0.50) | $(1.30) | $(1.43) |
| **Diluted Earnings (Loss) per Share:** |  |  |  |  |
| Net loss — diluted | $(8152) | $(10754) | $(28102) | $(30362) |
| Weighted average shares outstanding — diluted | 21709 | 21435 | 21614 | 21187 |
| Diluted loss per share | $(0.38) | $(0.50) | $(1.30) | $(1.43) |

---

The following table indicates the stock equivalents related to unvested RSUs and PRSUs that were anti-dilutive and excluded from diluted earnings (loss) per share calculations:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Anti-dilutive shares due to net loss |  | 95 |  | 85 |

---

***8.* Trade Accounts Receivable**

*Trade Accounts Receivable*

Trade accounts receivables are recorded at the contractual or invoiced amount.

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Trade accounts receivable, current | $7760 | $6563 |
| Trade accounts receivable, long-term | 90 | 80 |
| Allowance for doubtful accounts | (1439) | (151) |
| Trade accounts receivable, net | $6411 | $6492 |
| Unpaid deferred revenue included in trade accounts receivable | $1503 | $2590 |

---

*Allowance for Doubtful Accounts*

The Company's accounts receivables are subject to concentrations of credit risk. The Company maintains an allowance for its doubtful accounts receivable to reflect any estimated credit losses. The allowance is established in accordance with the current expected credit loss model, which requires the estimation of expected credit losses over the contractual life of financial assets. The allowance is calculated using a forward-looking probability-weighted approach based on historical loss experience, current economic conditions, and reasonable and supportable forecasts. The Company records the allowance in "general and administrative" expense in the Consolidated Statements of Operations and Comprehensive Loss, up to the amount of revenue recognized to date for each account. Any incremental allowance is recorded as an offset to "deferred revenue" in the Consolidated Balance Sheets. Account receivables are written off and charged against the recorded allowance when the Company has exhausted collection efforts without success.

*Unpaid Deferred Revenue*

The unpaid deferred revenue that is included in trade accounts receivable is billed in accordance with the provisions of the contracts with the Company's customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *15*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

*Major Customers*

The following customers accounted for *10%* or more of trade accounts receivable, net:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Company A | 30% | 47% |
| Company B | 24% | *\** |
| Company C | *\** | 12% |

---

------

\* Less than *10%*

***9.* Property and Equipment**

Property and equipment are stated at cost. Repairs and maintenance are charged to expense when incurred.

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally two to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Office furniture and fixtures | $63 | $63 |
| Software | 6022 | 5476 |
| Equipment | 2616 | 2566 |
| Leasehold improvements | 227 | 203 |
| Gross property and equipment | 8928 | 8308 |
| Less accumulated depreciation | (7701) | (7268) |
| Property and equipment, net | $1227 | $1040 |

---

***10.* Goodwill**

The Company performs its annual goodwill impairment test during the *second* quarter of each fiscal year or whenever events or changes in circumstances indicate that the carrying value *may* exceed the fair value. If the carrying value exceeds the estimated fair value, an impairment is recorded. The Company operates as a single reporting unit. The Company estimates the fair value of its single reporting unit using a market approach, which takes into account the Company's market capitalization plus an estimated control premium. No impairment charges were recorded for the *three* and *nine* months ended *September 30, 2025* and *2024*.

---

| | |
|:---|:---|
| Balance at December 31, 2024 | $8532 |
| Currency translation adjustments | 528 |
| Balance at September 30, 2025 | $9060 |

---

***11.* Intangibles**

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset *may not* be recoverable. No impairment charges were recorded for the *three* and *nine* months ended *September 30, 2025* and *2024*.

Patent costs associated with the application and award of patents in the U.S. and various other countries are capitalized and amortized on a straight-line basis over the term of the patents as determined at the award date, which varies depending on the pendency period of the application, but generally approximates *seventeen* years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *16*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

Amortization of intangible assets acquired is calculated using the straight-line method over the estimated useful lives of the assets.

---

| | | | |
|:---|:---|:---|:---|
|  | ***Estimated Life*** | ***September 30,*** | ***December 31,*** |
|  | ***(years)*** | ***2025*** | ***2024*** |
| Capitalized patent costs | ~17 | $9243 | $9174 |
| Intangible assets acquired: |  |  |  |
| Purchased intellectual property | 10 | 250 | 250 |
| Developed technology | 5 | 24106 | 22504 |
| Customer relationships | 10 | 11519 | 10754 |
| Gross intangible assets |  | 45118 | 42682 |
| Accumulated amortization |  | (26353) | (20491) |
| Intangibles, net |  | $18765 | $22191 |

---

The amortization of capitalized patent costs, purchased intellectual property, and developed technology is recorded in "cost of revenue" and the amortization of customer relationships is recorded in "operating expenses" in the Consolidated Statements of Operations and Comprehensive Loss.

Amortization expense on intangible assets was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Amortization expense | $1627 | $1589 | $4789 | $4678 |

---

For intangible assets recorded at *September 30, 2025*, the estimated future aggregate amortization expense for the years ending *December 31, 2025* through *December 31, 2029* is as follows:

---

| | |
|:---|:---|
|  | ***Amortization*** |
| **As of September 30, 2025** | ***Expense*** |
| Remaining in 2025 | $1632 |
| 2026 | 6470 |
| 2027 | 1615 |
| 2028 | 1606 |
| 2029 | 1578 |

---

***12.* Leases**

The Company accounts for leases in accordance with ASC *No. 842,* "*Leases.*"

The Company entered into a sublease agreement and lease extension agreement for office space in Beaverton, Oregon in *February 2022* to move the Company's corporate headquarters. The term of the sublease and lease extension runs through *September 2030,* with remaining rent payments as of *September 30, 2025*, totaling $6,817 plus operating expenses, payable in monthly installments. The *first 26* months of rent payments and operating expenses were abated to cover the remaining lease term on the Company's former corporate headquarters.

&nbsp;&nbsp;&nbsp;&nbsp;

All of the Company's leases are operating leases. The following table provides additional details of leases presented in the Consolidated Balance Sheets:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Lease right of use assets | $3350 | $3659 |
| Lease liabilities, current | $869 | $781 |
| Lease liabilities, long-term | $4549 | $5213 |
| Weighted-average remaining life (in years) | 5.0 | 5.7 |
| Weighted-average discount rate | 9% | 9% |

---

The current lease liabilities are included in "accounts payable and other accrued liabilities" in the Consolidated Balance Sheets.

The carrying value of the lease right of use assets is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset *may not* be recoverable. No impairment charges were recorded for the *three* and *nine* months ended *September 30, 2025* and *2024*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *17*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DIGIMARC CORPORATION

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (In thousands, except per share data)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (UNAUDITED)

Operating lease expense is included in "operating expenses" in the Consolidated Statements of Operations and Comprehensive Loss and in "cash flows from operating activities" in the Consolidated Statements of Cash Flows. The operating leases include variable lease payments, which are included in operating lease expense. Additional details of the Company's operating leases are presented in the following table:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Operating lease expense | $356 | $363 | $1098 | $1110 |
| Cash paid for operating leases | $447 | $445 | $1365 | $1209 |

---

The table below reconciles the aggregate cash payment obligations for the next *five* years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheets as of *September 30, 2025*:

---

| | |
|:---|:---|
|  | ***Cash*** |
|  | ***Payment*** |
| **As of September 30, 2025** | ***Obligations*** |
| Remaining in 2025 | $332 |
| 2026 | 1356 |
| 2027 | 1397 |
| 2028 | 1296 |
| 2029 | 1389 |
| Thereafter | 1066 |
| Total lease payments | 6836 |
| Imputed interest | (1418) |
| Total minimum lease payments | $5418 |

---

***13.* Accounts Payable and Accrued liabilities**

The components of accounts payable and accrued liabilities are summarized below:

---

| | | |
|:---|:---|:---|
|  | ***September 30,*** | ***December 31,*** |
|  | ***2025*** | ***2024*** |
| Accounts payable | $2884 | $2378 |
| Accrued liabilities | 1842 | 1959 |
| Lease liabilities, current | 869 | 781 |
| Total accounts payable and other accrued liabilities | $5595 | $5118 |

---

***14.* Reorganization**

On *February 26, 2025,* the Company announced a reduction of its global workforce to streamline the Company's team structure to better align with its long-term growth initiatives and profitability objectives. All associated costs with the reorganization are recorded as "operating expenses" in the Consolidated Statements of Operations and Comprehensive Loss. Corresponding liabilities are recorded as "accrued liabilities" in the Consolidated Balance Sheets. During the *nine* months ended *September 30, 2025*, the Company incurred cash severance costs totaling $3,230, reported as "cash compensation" in Note *4* Segment Information, including $1,622 related to research, development and engineering, $980 related to sales and marketing, and $628 related to general and administration.

The following table provides the details of costs and liabilities associated with the reorganization announced on *February 26, 2025:*

---

| | |
|:---|:---|
| Balance at December 31, 2024 | $— |
| Costs incurred | 3230 |
| Cash paid | (3220) |
| Balance at September 30, 2025 | $10 |

---

&nbsp;&nbsp;&nbsp;&nbsp;

***15.* Other Income**

The following table provides activity in other income, net:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | ***Three Months Ended September 30,*** | ***Three Months Ended September 30,*** | ***Nine Months Ended September 30,*** | ***Nine Months Ended September 30,*** |
|  | ***2025*** | ***2024*** | ***2025*** | ***2024*** |
| Interest income | $135 | $486 | $567 | $1471 |
| Refundable tax credit | 61 | 152 | 148 | 402 |
| Foreign currency gains (losses) | 21 | (21) | 81 | (5) |
| Total other income, net | $217 | $617 | $796 | $1868 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *18*

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***16.* Income Taxes**

The provision for income taxes reflects current taxes and deferred taxes. The effective tax rate for each of the *nine* months ended *September 30, 2025* and *2024* was 0%.

The valuation allowance against net deferred tax assets as of *September 30, 2025*, was $112,750, an increase of $8,389 from $104,361 as of *December 31, 2024*. The Company continues to provide for a valuation allowance to offset its net deferred tax assets until such time it is more likely than *not* the tax assets or portions thereof will be realized.

Excess tax deficiencies of $948 and $102 were recognized in the provision for income taxes for the *three* months ended *September 30, 2025* and *2024*, respectively, which were offset by $948 and $102 of valuation allowance, respectively.

An excess tax deficiency of $1,827 and an excess tax benefit of $1,410 were recognized in the provision for income taxes for the *nine* months ended *September 30, 2025* and *2024*, respectively, which were offset by $1,827 and $1,410 of valuation allowance, respectively.

On *July 4, 2025,* the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions, was signed into law in the United States, which includes a new Internal Revenue Code ("IRC") Section *174A.* Under Section *174A,* commencing with tax years beginning after *December 31, 2024,* domestic research or experimental expenditures *may* be deducted in the current period rather than capitalized and amortized over multiple years, as previously required under IRC Section *174.* As a result of this legislation, the Company intends to deduct its domestic Section *174A* expenditures beginning in its *2025* taxable year. The Company does *not* expect the OBBBA to have a material impact on its effective tax rate, financial condition, or results of operations in *2025.*

***17.* Commitments and Contingencies**

Certain of the Company's product and services agreements include an indemnification provision for claims from *third* parties relating to the Company's intellectual property. Such indemnification provisions are accounted for in accordance with ASC *No. 450* "*Contingencies*." To date, there have been *no* claims made under such indemnification provisions.

On *May 8, 2025,* a class action lawsuit captioned Ullom v. Digimarc Corp., et al., *No: 3:25*-cv-*00779*-JR (the "Ullom Action") was filed against the Company in the United States District Court for the District of Oregon. The complaint purports to assert claims against the Company and its Chief Executive Officer and Chief Financial Officer pursuant to Sections *10*(b) and *20*(a) of the Securities Exchange Act of *1934,* as amended (the "Exchange Act"), and Rule *10b*-*5* promulgated thereunder, on behalf of a putative class of investors who purchased or otherwise acquired the Company's shares between *May 2, 2024* and *February 26, 2025 (*the "class period"). The Ullom Action seeks to recover damages allegedly caused by purported misstatements and omissions regarding the renewal status of a commercial contract, claiming that these alleged misstatements and omissions artificially inflated the price paid for our common stock during the class period.

Subsequently, *four* derivative lawsuits were filed nominally on the Company's behalf, including three in the United States District Court for the District of Oregon on *August 29, 2025 (*as amended *September 2, 2025) (*Franchi v. McCormack et al., *No. 3:25*-cv-*01543*-AN), *October 7, 2025 (*Chadwick v. McCormack et al., *No. 3:25*-cv-*01838*-JR), *October 14, 2025 (*Jensen v. McCormack et al., *No. 3:25*-cv-*01891*-SB), and one in the Circuit Court of the State of Oregon for the County of Multnomah on *October 23, 2025 (*Johnson v. McCormack et al., *No. 25*-cv-*56998*), which are based on the same alleged facts and circumstances as the above-referenced securities class action and are against the Company's Chief Executive Officer, Chief Financial Officer and directors. The derivative actions collectively assert claims pursuant to Sections *10*(b), *14*(a), and *20*(a) of the Exchange Act, as well as for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, and waste of corporate assets. Each of the *four* derivative lawsuits seeks to recover damages on the Company's behalf and alleges that a legally required pre-suit demand on the Board of Directors would be futile and should be excused.

On *November 4, 2025,* the Chadwick, Jensen and Franchi actions were consolidated and stayed pending resolution of the Company's anticipated motion to dismiss in the Ullom Action.

These cases are at an early stage. The Company believes it has defenses to the claims and is responding accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *19*

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**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**

*The following Management*'*s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements relating to future events or the future financial performance of Digimarc that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. See the discussion regarding forward-looking statements included in this Quarterly Report on Form 10-Q under the caption* "*Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.*"

*The following discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Readers are also urged to carefully review and consider the disclosures made in Part II, Item 1A (*"*Risk Factors*"*) of this Quarterly Report on Form 10-Q and in the audited consolidated financial statements and related notes included in our 2024 Annual Report, and other reports and filings we have made with the SEC.*

*Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to* "*Company,*" "*Digimarc,*" "*we,*" "*our,*" *and* "*us*" *refer to Digimarc Corporation.*

*All dollar amounts within the tables below are in thousands. The percentages within the tables may not sum to 100% due to rounding.*

*Digimarc, Digimarc Barcode, The Barcode of Everything, Barcode of Everything, and the circle-d logo are registered trademarks of Digimarc Corporation. EVRYTHNG and EVRYTHNG PRODUCT CLOUD are registered trademarks of EVRYTHNG Limited (*"*EVRYTHNG*"*), a wholly owned subsidiary of Digimarc.* 

**Overview**

Digimarc, an Oregon corporation, is a pioneer and global leader in digital watermarking technologies. For nearly 30 years, Digimarc innovations and intellectual property in digital watermarking have been deployed in solutions built upon one or both of the following two things: the identification and the authentication of physical and digital items, often at massive scale, and often where other methods of identification or authentication don't work well or don't work at all.

The Digimarc Illuminate platform is a distinctive software as a service ("SaaS") cloud-based platform for digital connectivity that provides the tools for the application of advanced digital watermarks and dynamic Quick Response ("QR") codes, software (digital twins) that enables various systems and devices to interact with those data carriers, and a centralized platform for capturing insights about digital interactions and automating activities based on that information.

The Digimarc product suite is built on top of the Digimarc Illuminate platform to power a trusted and scalable ecosystem that can address specific business needs in areas like automation, authenticity, sustainability, and customer trust and connectivity. All of the Company's products are complementary to each other, providing exponential benefits when combined. By enabling customers to create and connect digital twins to physical and digital items, Digimarc's products provide many benefits including:

• **Digimarc Automate** improves product inspection by embedding imperceptible digital watermarks into products, labels, and packaging, which are detectable by standard vision systems. This significantly reduces mixing errors and mislabeling, ensuring higher accuracy and efficiency in production, fulfillment, and distribution facilities without additional costs for special inks or hardware. By enabling real-time data analysis and minimizing human error, Digimarc Automate enhances quality assurance, reduces waste, and lowers the risk of product recalls, giving brands a competitive edge.

• **Digimarc Engage** activates products and multimedia to create and leverage an interactive, fully owned communications channel directly with consumers. Digimarc delivers dynamic, GS1 Digital Link-compliant QR codes and hyperlinks that provide contextual redirection capabilities for multiple consumer experiences (including personalized and automated loyalty and rewards programs) based on a variety of factors such as time and location or previous behavior. Connecting engagements across the physical and digital worlds in a singular view results in powerful new capabilities and insights for brands.

• **Digimarc Recycle** increases the quality and quantity of recycled materials by digitizing products and packaging with digital watermarking technology. Coupled with consumer engagement capabilities, brands can leverage a direct, digital communications channel. Plus, Digimarc Recycle creates a cloud-based record of never-before-seen post-consumption data to provide new insights that benefit stakeholders across the value chain, including brands, facility operators, and Producer Responsibility Organizations ("PROs").

• **Digimarc Retail Experience** delivers smarter, connected packaging that supports next-generation retail checkout systems, including checkout efficiency (faster scanning) and checkout effectiveness (reduced shrinkage, including gift card and price look-up fraud prevention), optimized operational processes, advanced consumer engagement experiences, compliance with upcoming industry standards, and the collection of powerful first-party data and consumer insights.

• **Digimarc Validate** supports authentication in the physical and digital worlds to help ensure online interactions can be trusted and that real products and digital assets are genuine and in the right place. Digimarc's technology protects digital images, audio, product packaging, gift cards, and other physical items by delivering exclusive, covert digital watermarks and/or dynamic QR codes and a cloud-based record of product authentication information. In addition, consumer engagement capabilities provide a direct, digital communications channel.

Digimarc has maintained a relationship with a consortium of central banks for nearly 30 years, providing trusted technology to help deter digital counterfeiting of currency. The relationship was the first commercially successful large-scale use of our technologies and protects billions of banknotes in circulation globally.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 20

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Our intellectual property contains many innovations in digital watermarking, content and object recognition, product authentication, and related fields. To protect our inventions, we have implemented an extensive intellectual property protection program that relies on a combination of patent, copyright, trademark and trade secret laws, and nondisclosure agreements and other contracts. As a result, we believe we have one of the world's most extensive patent portfolios in digital watermarking and related fields, with approximately 750 U.S. and foreign patents granted and applications pending as of September 30, 2025. The patents in our portfolio each have a life of approximately 20 years from the patent's effective filing date.

**Critical Accounting Policies and Estimates**

Detailed information about our critical accounting policies and estimates is set forth in Part III, Item 15 of our 2024 Annual Report ("Exhibits and Financial Statement Schedules"), in "Note 1: Description of Business and Summary of Significant Accounting Policies," which is incorporated by reference into this Quarterly Report on Form 10-Q.

&nbsp;&nbsp;&nbsp;&nbsp;

**Results of Operations**

The following table presents Consolidated Statements of Operations data for the periods indicated as a percentage of total revenue. Unless stated otherwise, all references in this Management's Discussion and Analysis of Financial Condition and Results of Operations relate to the three and nine months ended September 30, 2025, and all changes discussed with respect to such period reflect changes compared to the three and nine months ended September 30, 2024.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| **Percentages are percent of total revenue** |  |  |  |  |
| Revenue: |  |  |  |  |
| Subscription | 60% | 56% | 58% | 58% |
| Service | 40% | 44% | 42% | 42% |
| Total revenue | 100% | 100% | 100% | 100% |
| Cost of revenue: |  |  |  |  |
| Subscription <sup>(1)</sup> | 8% | 8% | 8% | 7% |
| Service <sup>(1)</sup> | 17% | 17% | 16% | 17% |
| Amortization expense on acquired intangible assets | 16% | 12% | 14% | 12% |
| Total cost of revenue | 42% | 38% | 39% | 36% |
| Gross profit | 58% | 62% | 61% | 64% |
| Operating expenses: |  |  |  |  |
| Sales and marketing | 37% | 60% | 45% | 56% |
| Research, development and engineering | 57% | 69% | 66% | 67% |
| General and administrative | 70% | 51% | 62% | 46% |
| Amortization expense on acquired intangible assets | 4% | 3% | 3% | 3% |
| Total operating expenses | 168% | 183% | 176% | 172% |
| Operating loss | (110)% | (120)% | (115)% | (108)% |
| Other income, net | 3% | 7% | 3% | 6% |
| Loss before income taxes | (107)% | (114)% | (112)% | (102)% |
| Provision for income taxes | (—)% | (—)% | (—)% | (—)% |
| Net loss | (107)% | (114)% | (112)% | (102)% |

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<sup>(1)</sup> Cost of revenue for Subscription and Service excludes amortization expense on acquired intangible assets.

***Summary***

Our commercial subscription revenue in fiscal 2025 has been negatively impacted by the expiration of a commercial contract that ended in April 2025 with an international customer. The contract contributed $0.8 million and $2.5 million of subscription revenue during the three and nine months ended September 30, 2024, compared to $0.0 million and $1.1 million of subscription revenue during the three and nine months ended September 30, 2025. Our commercial subscription revenue in fiscal 2025 has also been negatively impacted by the expiration of a commercial contract that ended in June 2024 with a domestic customer. The contract contributed $0.0 million and $2.1 million of subscription revenue during the three and nine months ended September 30, 2024, compared to $0.0 million of subscription revenue for both the three and nine months ended September 30, 2025. Our commercial subscription revenue in the fourth quarter of fiscal 2025 will also be impacted by the conclusion of a contract renegotiation with a domestic customer that will negatively impact future revenue by $3.1 million on an annualized basis.

Our government service revenue in fiscal 2025 has been negatively impacted by a smaller approved budget by the Central Banks for program work in 2025. We expect government service revenue in fiscal 2025 to be $1.7 million to $1.8 million lower than in fiscal 2024.

Total revenue for the three months ended September 30, 2025, decreased $1.8 million, to $7.6 million, compared to $9.4 million for the corresponding three months ended September 30, 2024. Subscription revenue decreased $0.7 million, primarily reflecting a decrease of $0.8 million from the expiration of the commercial contract in April 2025 referenced above. Service revenue decreased $1.1 million, primarily reflecting $0.7 million of lower government service revenue from the Central Banks and $0.4 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.

Total revenue for the nine months ended September 30, 2025, decreased $4.8 million, to $25.0 million, compared to $29.8 million for the corresponding nine months ended September 30, 2024. Subscription revenue decreased $2.9 million, primarily reflecting a decrease of $3.5 million from the expiration of the commercial contracts in June 2024 and April 2025 referenced above, partially offset by higher commercial subscription revenue from new and existing commercial contracts. Service revenue decreased $1.9 million, reflecting lower government service revenue from the Central Banks.

We expect our expenses in fiscal 2025 to be significantly lower than fiscal 2024 due to the reorganization we announced on February 26, 2025, which reduced our cash expenses by approximately $16.5 million on an annualized basis. We also identified a total of approximately $5.5 million of other annualized cash cost savings that have now been implemented but not yet fully realized in the interim operating results for the period ended September 30, 2025.

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Total operating expenses for the three months ended September 30, 2025, decreased $4.5 million, to $12.8 million, compared to $17.3 million for the corresponding three months ended September 30, 2024. The decrease in operating expenses primarily reflects $5.4 million of lower cash compensation costs largely due to lower headcount and $0.3 million of lower software and hardware costs, partially offset by $1.0 million of higher stock compensation costs, $0.3 million of higher other costs, and a $0.3 million lower allocation out of operating expenses primarily due to lower billable service hours.

Total operating expenses for the nine months ended September 30, 2025, decreased $7.1 million, to $44.1 million, compared to $51.2 million for the corresponding nine months ended September 30, 2024. The decrease in operating expenses primarily reflects $8.1 million of lower cash compensation costs and $0.6 million of lower software and hardware costs, partially offset by higher professional service costs of $0.9 million and higher stock compensation expense of $0.8 million. The $8.1 million of lower cash compensation costs primarily reflects $12.1 million of lower compensation costs largely due to lower headcount, partially offset by $3.2 million of higher cash severance costs incurred as a result of the reorganization and a $0.8 million lower allocation out of operating expenses primarily due to lower billable service hours.

*Revenue*

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Revenue: |  |  |  |  |  |  |  |  |
| Subscription | $4567 | $5252 | $(685) | (13)% | $14505 | $17394 | $(2889) | (17)% |
| Service | 3060 | 4191 | (1131) | (27)% | 10500 | 12366 | (1866) | (15)% |
| Total | $7627 | $9443 | $(1816) | (19)% | $25005 | $29760 | $(4755) | (16)% |
| Revenue (as % of total revenue): |  |  |  |  |  |  |  |  |
| Subscription | 60% | 56% |  |  | 58% | 58% |  |  |
| Service | 40% | 44% |  |  | 42% | 42% |  |  |
| Total | 100% | 100% |  |  | 100% | 100% |  |  |

---

*Subscription*

Subscription revenue consists primarily of revenue earned from subscription fees for access to our SaaS platform and products and, to a lesser extent, licensing fees for our software products. The majority of subscription contracts are recurring, paid in advance and recognized over the term of the subscription, which is typically one to three years.

The $0.7 million decrease in subscription revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects a decrease of $0.8 million from the expiration of a commercial contract in April 2025.

The $2.9 million decrease in subscription revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects a decrease of $3.5 million from the expiration of commercial contracts in June 2024 and April 2025, partially offset by higher commercial subscription revenue from new and existing commercial contracts.

*Service*

Service revenue consists primarily of revenue earned from the performance of software development services and, to a lesser extent, professional services. The majority of software development contracts are structured as time and materials agreements. Revenue for services is generally recognized as the services are performed. Billing for services rendered generally occurs within one month after the services are provided. Service contracts can range from days to several years in length. Our contract with the Central Banks, which accounts for the majority of our service revenue, has a contract term through December 31, 2029. The contract is subject to work plans that are reviewed and agreed upon quarterly. The contract provides for predetermined billing rates, which are adjusted annually to account for cost of living variables, and provides for the reimbursement of third party costs incurred to support the work plans.

The $1.1 million decrease in service revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects $0.7 million of lower government service revenue from the Central Banks and $0.4 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.

The $1.9 million decrease in service revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects $1.9 million of lower government service revenue from the Central Banks.

*Revenue by geography*

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Revenue by geography: |  |  |  |  |  |  |  |  |
| Domestic | $2308 | $2004 | $304 | 15% | $6781 | $8349 | $(1568) | (19)% |
| International | 5319 | 7439 | (2120) | (28)% | 18224 | 21411 | (3187) | (15)% |
| Total | $7627 | $9443 | $(1816) | (19)% | $25005 | $29760 | $(4755) | (16)% |
| Revenue (as % of total revenue): |  |  |  |  |  |  |  |  |
| Domestic | 30% | 21% |  |  | 27% | 28% |  |  |
| International | 70% | 79% |  |  | 73% | 72% |  |  |
| Total | 100% | 100% |  |  | 100% | 100% |  |  |

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*Domestic*

The $0.3 million increase in domestic revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects higher commercial subscription revenue from new and existing commercial contracts with domestic customers.

The $1.6 million decrease in domestic revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects a decrease of $2.1 million from the expiration of a commercial subscription contract in June 2024 with a domestic customer, partially offset by higher subscription revenue from new and existing commercial contracts with domestic customers.

*International*

The $2.1 million decrease in international revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects a decrease of $0.8 million from the expiration of a commercial subscription contract in April 2025 with an international customer, $0.7 million of lower government service revenue from the Central Banks and $0.4 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.

The $3.2 million decrease in international revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects $1.9 million of lower government service revenue from the Central Banks and a decrease of $1.4 million from the expiration of a commercial subscription contract in April 2025 with an international customer.

*Revenue by market*

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Commercial: |  |  |  |  |  |  |  |  |
| Subscription | $4267 | $4952 | $(685) | (14)% | $13605 | $16494 | $(2889) | (18)% |
| Service | 41 | 430 | (389) | (90)% | 876 | 864 | 12 | 1% |
| Total Commercial | $4308 | $5382 | $(1074) | (20)% | $14481 | $17358 | $(2877) | (17)% |
| Government: |  |  |  |  |  |  |  |  |
| Subscription | $300 | $300 | $— | —% | $900 | $900 | $— | —% |
| Service | 3019 | 3761 | (742) | (20)% | 9624 | 11502 | (1878) | (16)% |
| Total Government | $3319 | $4061 | $(742) | (18)% | $10524 | $12402 | $(1878) | (15)% |
| Total | $7627 | $9443 | $(1816) | (19)% | $25005 | $29760 | $(4755) | (16)% |
| Revenue (as % of total revenue): |  |  |  |  |  |  |  |  |
| Commercial | 56% | 57% |  |  | 58% | 58% |  |  |
| Government | 44% | 43% |  |  | 42% | 42% |  |  |
| Total | 100% | 100% |  |  | 100% | 100% |  |  |

---

*Commercial*

The $1.1 million decrease in commercial revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects a decrease of $0.8 million from the expiration of a commercial subscription contract in April 2025 and $0.4 million of lower commercial service revenue from HolyGrail 2.0 recycling projects.

The $2.9 million decrease in commercial revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects a decrease of $3.5 million from the expiration of commercial subscription contracts in June 2024 and April 2025, partially offset by higher commercial subscription revenue from new and existing commercial contracts.

*Government*

The $0.7 million decrease in government revenue for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, reflects $0.7 million of lower government service revenue from the Central Banks.

The $1.9 million decrease in government revenue for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, reflects $1.9 million of lower government service revenue from the Central Banks.

*Annual Recurring Revenue (*"*ARR*"*)*

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of** | **As of** | **Dollar** | **Percent** |
|  | **September 30,** | **September 30,** | **Increase** | **Increase** |
|  | **2025** | **2024** | **(Decrease)** | **(Decrease)** |
| ARR | $15813 | $18674 | $(2861) | (15)% |

---

ARR decreased $2.9 million from September 30, 2024 to September 30, 2025, reflecting the expiration of a commercial contract in April 2025 that accounted for $3.5 million of ARR, partially offset by increases to ARR from new and existing commercial contracts. ARR will be negatively impacted by $3.1 million in the fourth quarter of fiscal 2025, reflecting the conclusion of a contract renegotiation with a domestic customer.

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We provide an ARR performance metric to help investors better understand and assess the performance of our business because our mix of revenue generated from recurring sources has increased in recent years. ARR is calculated as the aggregation of annualized subscription fees from all of our commercial contracts as of the measurement date. ARR does not have any standardized meaning and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with, or to replace, either of those items. ARR is not a forecast and the contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

*Cost of revenue*

*Subscription*. Cost of subscription revenue primarily includes:

• internet cloud hosting costs and image search data fees to support our subscription products; and

• amortization of capitalized patent costs and patent maintenance fees.

*Service.* Cost of service revenue primarily includes:

• compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our software developers, quality assurance personnel, professional services team and other personnel where we bill our customers for time and materials costs;

• payments to outside contractors that are billed to customers;

• charges for equipment and software directly used by customers;

• depreciation for equipment and software directly used by customers; and 

• travel costs that are billed to customers.

*Amortization expense on acquired intangible assets* includes:

• amortization expense recognized on the developed technology intangible asset acquired in the EVRYTHNG acquisition.

*Gross profit*

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Gross Profit: |  |  |  |  |  |  |  |  |
| Subscription <sup>(1)</sup> | $3925 | $4517 | $(592) | (13)% | $12404 | $15189 | $(2785) | (18)% |
| Service <sup>(1)</sup> | 1730 | 2553 | (823) | (32)% | 6380 | 7228 | (848) | (12)% |
| Amortization expense on acquired intangible assets | (1209) | (1173) | (36) | (3)% | (3546) | (3445) | (101) | (3)% |
| Total | $4446 | $5897 | $(1451) | (25)% | $15238 | $18972 | $(3734) | (20)% |
| Gross Profit Margin: |  |  |  |  |  |  |  |  |
| Subscription <sup>(1)</sup> | 86% | 86% |  |  | 86% | 87% |  |  |
| Service <sup>(1)</sup> | 57% | 61% |  |  | 61% | 58% |  |  |
| Total | 58% | 62% |  |  | 61% | 64% |  |  |

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<sup>(1)</sup> Gross Profit and Gross Profit Margin for Subscription and Service excludes amortization expense on acquired intangible assets.

The $1.5 million decrease in total gross profit for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects $1.8 million of lower revenue, partially offset by $0.3 million of lower cost of service revenue.

The $3.7 million decrease in total gross profit for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects $4.8 million of lower revenue, partially offset by $1.0 million of lower cost of service revenue.

Subscription gross profit margin, excluding amortization expense on acquired intangible assets, for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, was the same.

The decrease in subscription gross profit margin, excluding amortization expense on acquired intangible assets, for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects lower subscription revenue, partially offset by lower cost of subscription revenue.

The decrease in service gross profit margin, excluding amortization expense on acquired intangible assets, for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects a less favorable mix of service revenue.

The increase in service gross profit margin, excluding amortization expense on acquired intangible assets, for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects a more favorable mix of service revenue.

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*Operating expenses*

*Sales and marketing*

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Sales and marketing | $2852 | $5637 | $(2785) | (49)% | $11161 | $16789 | $(5628) | (34)% |
| Sales and marketing (as % of total revenue) | 37% | 60% |  |  | 45% | 56% |  |  |

---

Sales and marketing expenses consist primarily of:

• compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our sales, marketing, product, professional services and customer support personnel;

• travel and market research costs, and costs associated with marketing programs, such as trade shows, public relations and new product launches;

• professional services and outside contractor costs for sales and marketing and product initiatives; and

• the allocation of facilities and information technology costs.

The $2.8 million decrease in sales and marketing expenses for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects:

• lower cash compensation costs of $2.5 million largely due to lower headcount; and

• lower stock compensation costs of $0.1 million.

The $5.6 million decrease in sales and marketing expenses for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects:

• lower cash compensation costs of $5.4 million largely due to lower headcount; 

• lower stock compensation costs of $0.5 million;

• lower other costs of $0.3 million;

• lower allocation in for facilities and information technology costs of $0.3 million primarily due to lower allocable costs; and

• lower professional services costs of $0.2 million; partially offset by

• higher cash severance costs of $0.9 million incurred as a result of the reorganization.

*Research, development and engineering*

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Research, development and engineering | $4315 | $6488 | $(2173) | (33)% | $16485 | $19873 | $(3388) | (17)% |
| Research, development and engineering (as % of total revenue) | 57% | 69% |  |  | 66% | 67% |  |  |

---

Research, development and engineering expenses consist primarily of:

• compensation, benefits, incentive compensation in the form of cash and stock-based compensation and related costs of our software and hardware developers and quality assurance personnel;

• payments to outside contractors for software development services;

• the purchase of materials and services for platform and product development; and

• the allocation of facilities and information technology costs.

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The $2.2 million decrease in research, development and engineering expenses for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects:

• lower cash compensation costs of $2.6 million largely due to lower headcount; and

• lower professional services costs of $0.2 million; partially offset by

• higher stock compensation costs of $0.6 million; and

• lower allocation out of operating expenses of $0.2 million primarily due to lower billable service hours.

The $3.4 million decrease in research, development and engineering expenses for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects:

• lower cash compensation costs of $5.3 million largely due to lower headcount;

• lower professional service costs of $0.6 million; and

• lower allocation in for facilities and information technology costs of $0.3 million primarily due to lower allocable costs; partially offset by

• higher cash severance costs of $1.6 million incurred as a result of the reorganization;

• higher stock compensation costs of $1.0 million; and

• lower allocation out of operating expenses of $0.5 million primarily due to lower billable service hours.

*General and administrative*

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| General and administrative | $5355 | $4861 | $494 | 10% | $15614 | $13695 | $1919 | 14% |
| General and administrative (as % of total revenue) | 70% | 51% |  |  | 62% | 46% |  |  |

---

We incur general and administrative costs in the functional areas of finance, legal, human resources, intellectual property, executive and board of directors. Costs for facilities and information technology are also managed as part of the general and administrative processes. These costs are allocated to sales and marketing, research, development and engineering, and general and administrative based on relative headcount.

General and administrative expenses consist primarily of:

• compensation, benefits and incentive compensation in the form of cash and stock-based compensation and related costs of our general and administrative personnel;

• third party and professional fees associated with legal, accounting and human resources functions;

• costs associated with being a public company;

• third party costs, including filing and governmental regulatory fees and outside legal fees and translation costs, related to the filing and maintenance of our intellectual property; and

• the allocation of facilities and information technology costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The $0.5 million increase in general and administrative expenses for the three months ended September 30, 2025 , compared to the corresponding three months ended September 30, 2024, primarily reflects:

• higher stock compensation costs of $0.5 million;

• higher other costs of $0.3 million; and

• lower allocation out for facilities and information technology costs of $0.3 million primarily due to lower allocable costs; partially offset by

• lower cash compensation costs of $0.7 million largely due to lower headcount.

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The $1.9 million increase in general and administrative expenses for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects:

• higher professional services costs of $1.7 million;

• higher cash severance costs of $0.7 million incurred as a result of the reorganization;

• lower allocation out for facilities and information technology costs of $0.6 million primarily due to lower allocable costs;

• higher other costs of $0.4 million; and

• higher stock compensation costs of $0.3 million; partially offset by

• lower cash compensation costs of $1.4 million largely due to lower headcount; and 

• lower software and hardware costs of $0.4 million.

*Amortization expense on acquired intangible assets*

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** |
| Amortization expense on acquired intangible assets | $288 | $280 | $8 | 3% | $847 | $823 | $24 |
| Amortization expense on acquired intangible assets (as % of total revenue) | 4% | 3% |  |  | 3% | 3% |  |

---

Amortization expense on acquired intangible assets relates to amortization expense recognized on the customer relationships intangible asset acquired in the EVRYTHNG acquisition.

The insignificant changes in amortization expense on acquired intangible assets reflect the impact of changes in foreign currency exchange rates.

*Stock-based compensation*

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Cost of revenue | $336 | $154 | $182 | 118% | $726 | $563 | $163 | 29% |
| Sales and marketing | 577 | 688 | (111) | (16)% | 1727 | 2198 | (471) | (21)% |
| Research, development and engineering | 1244 | 648 | 596 | 92% | 2872 | 1911 | 961 | 50% |
| General and administrative | 1708 | 1212 | 496 | 41% | 3571 | 3267 | 304 | 9% |
| Total | $3865 | $2702 | $1163 | 43% | $8896 | $7939 | $957 | 12% |

---

The $1.2 million increase in stock-based compensation expense for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects a larger number of employee stock grants and a higher estimate of future achievement of performance conditions on performance restricted stock unit awards.

The $1.0 million increase in stock-based compensation expense for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects a larger number of employee stock grants and a higher estimate of future achievement of performance conditions on performance restricted stock unit awards.

We anticipate incurring an additional $15.5 million in stock-based compensation expense through September 30, 2029, for stock awards outstanding as of September 30, 2025.

*Other income, net*

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Dollar** | **Percent** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Other income, net | $217 | $617 | (400) | (65)% | $796 | $1868 | (1072) | (57)% |
| Other income, net (as % of total revenue) | 3% | 7% |  |  | 3% | 6% |  |  |

---

The $0.4 million decrease in other income, net for the three months ended September 30, 2025, compared to the corresponding three months ended September 30, 2024, primarily reflects lower interest income due to lower marketable securities balances and interest rates.

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The $1.1 million decrease in other income, net for the nine months ended September 30, 2025, compared to the corresponding nine months ended September 30, 2024, primarily reflects lower interest income due to lower marketable securities balances and interest rates and a lower refundable tax credit.

*Income Taxes* 

The provision for income taxes reflects current taxes and deferred taxes. The effective tax rate for each of the nine months ended September 30, 2025 and 2024 was 0%. Our effective tax rate is significantly lower than our statutory tax rate because we have a valuation allowance recorded against our deferred tax assets.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions, was signed into law in the United States, which includes a new Internal Revenue Code ("IRC") Section 174A. Under Section 174A, commencing with tax years beginning after December 31, 2024, domestic research or experimental expenditures may be deducted in the current period rather than capitalized and amortized over multiple years, as previously required under IRC Section 174. As a result of this legislation, we intend to deduct our domestic Section 174A expenditures beginning in our 2025 taxable year. We do not expect the OBBBA to have a material impact on our effective tax rate, financial condition, or results of operations in 2025.

The valuation allowance against deferred tax assets as of September 30, 2025, was $112.8 million, an increase of $8.4 million from $104.4 million as of December 31, 2024.

We continually assess the applicability of a valuation allowance against our deferred tax assets. Based upon the positive and negative evidence available as of September 30, 2025, and largely due to the cumulative loss incurred by us over the last several years, which is considered a significant piece of negative evidence when assessing the realizability of deferred tax assets, a valuation allowance is recorded against our deferred tax assets. We will not record tax benefits on any future losses until it is determined that those tax benefits will be realized. Future reversals of the valuation allowance would result in a tax benefit in the period recognized.

*Non-GAAP Financial Measures*

The following discussion and analysis include both financial measures in accordance with U.S. GAAP ("GAAP") as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that excludes amounts that are not normally excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to, GAAP financial measures. Non-GAAP financial measures may not be indicative of the historical operating results of the Company nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP. Our management uses and relies on Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP loss per share (diluted), which are all non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods.

Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

We define Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP loss per share (diluted) excluding the adjustments in the table below. These non-GAAP financial measures are an important measure of our operating performance because they allow management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing non-cash and non-recurring activities that can affect comparability.

We have included a reconciliation of our financial measures calculated in accordance with GAAP to the most comparable non-GAAP financial measures. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between us and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definitions being used and to the reconciliation between such measures and the corresponding GAAP measures provided by each company under applicable SEC rules.

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The following table presents a reconciliation of Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP operating expenses, Non-GAAP net loss, and Non-GAAP loss per share (diluted) for the three and nine months ended September 30, 2025 and 2024:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended September 30,** | **Three Months Ended September 30,** | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| <u>GAAP gross profit</u> | $4446 | $5897 | $15238 | $18972 |
| Amortization of acquired intangible assets | 1209 | 1173 | 3546 | 3445 |
| Amortization and write-off of other intangible assets <sup>(1)</sup> | 222 | 213 | 660 | 634 |
| Stock-based compensation | 336 | 154 | 726 | 563 |
| Non-GAAP gross profit | $6213 | $7437 | $20170 | $23614 |
| Non-GAAP gross profit margin | 81% | 79% | 81% | 79% |
| <u>GAAP operating expenses</u> | $12810 | $17266 | $44107 | $51180 |
| Depreciation and write-off of property and equipment | (146) | (179) | (430) | (570) |
| Amortization of acquired intangible assets | (288) | (280) | (847) | (823) |
| Amortization and write-off of other intangible assets | (128) | (77) | (329) | (164) |
| Amortization of lease right of use assets under operating leases | (108) | (90) | (309) | (263) |
| Stock-based compensation | (3529) | (2548) | (8170) | (7376) |
| Non-GAAP operating expenses | $8611 | $14092 | $34022 | $41984 |
| <u>GAAP net loss</u> | $(8152) | $(10754) | $(28102) | $(30362) |
| Total adjustments to gross profit | 1767 | 1540 | 4932 | 4642 |
| Total adjustments to operating expenses | 4199 | 3174 | 10085 | 9196 |
| Non-GAAP net loss | $(2186) | $(6040) | $(13085) | $(16524) |
| <u>GAAP loss per share (diluted)</u> | $(0.38) | $(0.50) | $(1.30) | $(1.43) |
| Non-GAAP net loss | $(2186) | $(6040) | $(13085) | $(16524) |
| Non-GAAP loss per share (diluted) | $(0.10) | $(0.28) | $(0.61) | $(0.78) |

---

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(1) In the second quarter of fiscal 2025, management updated its definition of Non-GAAP gross profit to adjust for the amortization of patent maintenance costs. The related amortization expense for the three and nine months ended September 30, 2025 and 2024 is now reflected in "amortization and write-off of other intangible assets" above to calculate Non-GAAP gross profit, Non-GAAP gross profit margin, Non-GAAP net loss and Non-GAAP loss per share (diluted).

Non-GAAP gross profit for the three months ended September 30, 2025, decreased by $1.2 million compared to the three months ended September 30, 2024. The decrease primarily reflects lower revenue, partially offset by lower cost of service revenue.

Non-GAAP gross profit for the nine months ended September 30, 2025, decreased by $3.4 million compared to the nine months ended September 30, 2024. The decrease primarily reflects lower revenue, partially offset by lower cost of service revenue.

Non-GAAP gross profit margin for the three months ended September 30, 2025, increased to 81% compared to 79% for the three months ended September 30, 2024. The increase primarily reflects a more favorable mix of service revenue when excluding non-cash costs and lower cost of subscription revenue, partially offset by lower subscription revenue.

Non-GAAP gross profit margin for the nine months ended September 30, 2025, increased to 81% compared to 79% for the nine months ended September 30, 2024. The increase primarily reflects a more favorable mix of service revenue when excluding non-cash costs and lower cost of subscription revenue, partially offset by lower subscription revenue.

Non-GAAP operating expenses for the three months ended September 30, 2025, decreased $5.5 million compared to the three months ended September 30, 2024. The decrease primarily reflects $5.4 million of lower cash compensation costs largely due to lower headcount and $0.3 million of lower software and hardware costs, partially offset by higher other costs of $0.3 million and a $0.3 million lower allocation out of operating expenses primarily due to lower billable service hours.

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Non-GAAP operating expenses for the nine months ended September 30, 2025, decreased $8.0 million compared to the nine months ended September 30, 2024. The decrease primarily reflects $8.1 million of lower cash compensation costs and $0.6 million of lower software and hardware costs, partially offset by higher professional service costs of $0.9 million. The $8.1 million of lower cash compensation costs primarily reflects $12.1 million of lower compensation costs largely due to lower headcount, partially offset by $3.2 million of higher cash severance costs incurred as a result of the reorganization and a $0.8 million lower allocation out of operating expenses primarily due to lower billable service hours.

**Liquidity and Capital Resources**

---

| | | |
|:---|:---|:---|
|  | **September 30,** | **December 31,** |
|  | **2025** | **2024** |
| Working capital | $12319 | $30193 |
| Current ratio <sup>(1)</sup> | 2.3:1 | 4.3:1 |
| Cash, cash equivalents and short-term marketable securities | $12562 | $28730 |

---

------

<sup>(1)</sup> The current ratio is calculated by dividing total current assets by total current liabilities.

The $16.2 million decrease in cash, cash equivalents and marketable securities at September 30, 2025, from December 31, 2024, resulted primarily from:

• cash used in operations;

• purchases of common stock related to tax withholding in connection with the vesting of restricted stock, restricted stock units, and performance restricted stock units; and

• purchases of property and equipment and capitalized patent costs.

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and trade accounts receivable. We place our cash and cash equivalents with major banks and financial institutions and at times deposits may exceed insured limits. Marketable securities include commercial paper, federal agency notes, and U.S. treasuries. Our investment policy requires our portfolio to be invested to ensure that the greater of $3.0 million or 7% of the invested funds will be available within 30 days' notice.

Other than cash used for operating needs, which may include short-term marketable securities, our investment policy limits our credit exposure to any one financial institution or type of financial instrument by limiting the maximum of 5% of our cash and cash equivalents and marketable securities or $1.0 million, whichever is greater, to be invested in any one issuer except for the U.S. government, U.S. federal agencies and U.S.-backed securities, which have no limits, at the time of purchase. Our investment policy also limits our credit exposure by limiting to a maximum of 40% of our cash and cash equivalents and marketable securities, or $15.0 million, whichever is lesser, to be invested in any one industry category (e.g., financial, energy, etc.) at the time of purchase. As a result, we believe our credit risk associated with cash and investments to be minimal.

A decline in the market value of any security that is deemed to be other-than-temporary is charged to earnings. To determine whether an impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until a market price recovery and evidence indicating that the cost of the investment is recoverable outweighs evidence to the contrary. There have been no other-than-temporary impairments identified or recorded by us for the three and nine months ended September 30, 2025 and 2024.

*Cash flows from operating activities*

The components of cash flows used in operating activities were:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Nine Months Ended September 30,** | **Nine Months Ended September 30,** | **Dollar** | **Percent** |
|  | **2025** | **2024** | **Increase/(Decrease)** | **Increase/(Decrease)** |
| Net loss | $(28102) | $(30362) | $(2260) | (7)% |
| Non-cash items included in net loss | 15698 | 13787 | (1911) | (14)% |
| Changes in operating assets and liabilities | (366) | (5762) | (5396) | (94)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in operating activities | $(12770) | $(22337) | $(9567) | (43)% |

---

Cash used in operating activities for the nine months ended September 30, 2025, decreased by $9.6 million, compared to the corresponding nine months ended September 30, 2024, reflecting a $5.4 million improvement due to the favorable timing of changes in operating assets and liabilities, a $2.3 million lower net loss and $1.9 million of higher non-cash items included in net loss. The favorable timing primarily reflects the timing of customer receipts and vendor payments, lower incentive compensation paid in 2025 for fiscal 2024 than paid in 2024 for fiscal 2023, and the timing and amount of refundable tax credits. The increase in non-cash items included in net loss primarily reflects $1.0 million of higher stock compensation expense and $0.6 million of higher adjustments to our allowance for doubtful accounts.

We incurred cash severance costs of $3.2 million as a result of the reorganization we announced on February 26, 2025, of which $3.2 million was paid during the nine months ended September 30, 2025.

 *Cash flows from investing activities*

Cash flows from investing activities for the nine months ended September 30, 2025, increased by $14.9 million, compared to the corresponding nine months ended September 30, 2024, primarily reflecting $16.9 million of lower purchases of marketable securities, partially offset by $1.6 million of lower proceeds from maturities of marketable securities and $0.3 million of higher purchases of property and equipment.

*Cash flows from financing activities*

Cash flows from financing activities for the nine months ended September 30, 2025, decreased by $31.8 million, compared to the corresponding nine months ended September 30, 2024, primarily reflecting the $32.2 million of net cash proceeds raised from our registered direct stock offering in February 2024, partially offset by $0.4 million of lower purchases of common stock.

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***Future Cash Expectations***

We believe that our current cash, cash equivalents, and marketable securities balances will satisfy our projected working capital and capital expenditure requirements for at least the next 12 months.

Our commercial subscription revenue in fiscal 2025 has been negatively impacted by the expiration of a commercial contract that ended in April 2025 with an international customer. The contract contributed $0.8 million and $2.5 million of subscription revenue during the three and nine months ended September 30, 2024, compared to $0.0 million and $1.1 million of subscription revenue during the three and nine months ended September 30, 2025. Our commercial subscription revenue in fiscal 2025 has also been negatively impacted by the expiration of a commercial contract that ended in June 2024 with a domestic customer. The contract contributed $0.0 million and $2.1 million of subscription revenue during the three and nine months ended September 30, 2024, compared to $0.0 million of subscription revenue for both the three and nine months ended September 30, 2025. Our commercial subscription revenue in the fourth quarter of fiscal 2025 will also be impacted by the conclusion of a contract renegotiation with a domestic customer that will negatively impact future revenue by $3.1 million on an annualized basis.

Our government service revenue in fiscal 2025 has been negatively impacted by a smaller approved budget by the Central Banks for program work in 2025. We expect government service revenue in fiscal 2025 to be $1.7 million to $1.8 million lower than in fiscal 2024.

Our expenses in fiscal 2025 will be significantly lower than fiscal 2024 due to the reorganization we announced on February 26, 2025, which reduced our cash expenses by approximately $16.5 million on an annualized basis. We have also identified approximately $5.5 million of other annualized cash cost savings that have now been implemented but not yet fully realized in the interim operating results for the period ended September 30, 2025.

*Registered Direct Offering*

On February 24, 2024, we entered into purchase agreements with certain investors providing for the issuance and sale by us of 929 thousand shares of our common stock in a registered direct stock offering. The common shares were offered at a price of $35.00 per share, and the gross cash proceeds to us were $32.5 million. We incurred $0.3 million of legal costs related to the offering. The closing of the registered direct offering occurred on February 27, 2024.

Employee Stock Purchase Plan

On February 25, 2025, the Company's Board of Directors adopted the 2025 Employee Stock Purchase Plan ("ESPP"), which was approved by the Company's shareholders at its annual meeting of shareholders on May 7, 2025. The Company reserved a total of 250 thousand shares and as of September 30, 2025, there were 250 thousand shares authorized and available for future issuance under the ESPP. Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 15% of their salary for the purchase of the Company's common stock at a discounted price per share. The Company's current offering period began on June 16, 2025, with the first purchase period ending on December 15, 2025. The stock-based compensation expense and payroll withholding for the ESPP during the three and nine months ended September 30, 2025 were not material.

*Incentive Plan Amendment*

On May 7, 2025, the Company's shareholders approved an amendment to the Digimarc Corporation 2018 Stock Incentive Plan (as amended, the "2018 Plan") to, among other things, increase the number of shares authorized for issuance by 950 thousand shares.

*Shelf Registration*

On June 23, 2023, we filed a new shelf registration statement on Form S-3 that included $34.6 million of unsold securities from our prior shelf registration statement filed on June 5, 2020. The new shelf registration statement became effective on July 19, 2023, and expires on July 19, 2026. Under the new shelf registration statement, we may sell securities in one or more offerings up to $100.0 million. As of September 30, 2025, $67.5 million remained available under the new shelf registration statement.

We may sell shares under the shelf registration and/or use similar or other financing means to raise working capital in the future, if necessary, to support continued investment in our growth initiatives. We may also raise capital in the future to fund acquisitions and/or investments in complementary businesses, technologies or product lines. If it becomes necessary to obtain additional financing, we may not be able to do so, or if these funds are available, they may not be available on satisfactory terms. These factors may inhibit our near-term ability to obtain financing.

**Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995**

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Section 27A of the Securities Act of 1933. Words such as "may," "might," "plan," "should," "could," "expect," "anticipate," "intend," "believe," "project," "forecast," "estimate," "continue," and variations of such terms or similar expressions are intended to identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements, and investors are cautioned not to place undue reliance on such statements. We believe that the following factors, among others (including those described in Item 1A. "Risk Factors" of our 2024 Annual Report), could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us. Forward-looking statements include but are not limited to statements relating to:

• trends and sources of future revenue;

• anticipated revenue to be generated from current contracts;

• anticipated expenses, costs, margins, provision for income taxes and investment activities;

• our expectations regarding expense reductions resulting from our recent reorganization and implementation of other annualized cash cost savings;

• our assumptions and expectations related to stock awards, including future stock-based compensation expense;

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• our belief that we have one of the world's most extensive patent portfolios in digital watermarking and related fields;

• our beliefs regarding our critical accounting policies;

• business opportunities that could require that we seek additional financing and our ability to do so;

• our expected short-term and long-term liquidity positions;

• our capital expenditure and working capital requirements and our ability to fund our capital expenditure and working capital needs through cash flow from operations or financing;

• our expectations regarding our ability to meet future financial obligations as they become due within the coming fiscal year;

• our use of cash, cash equivalents and marketable securities in upcoming quarters and the possibility that our deposits of cash and cash equivalents with major banks and financial institutions may exceed insured limits;

• protection, development and monetization of our intellectual property portfolio;

• our expectations regarding the impact of the OBBBA on our tax rate; and

• our beliefs related to legal proceedings and claims arising in the ordinary course of business.

We believe that the risk factors specified above and the risk factors contained in 2024 Part I, Item 1A. "Risk Factors" of our 2024 Annual Report, among others, could affect our future performance and the liquidity and value of our securities and cause our actual results to differ materially from those expressed or implied by forward-looking statements made by us or on our behalf. Investors should understand that it is not possible to predict or identify all risk factors and that there may be other factors that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements made by us or by persons acting on our behalf apply only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of the filing of this Quarterly Report on Form 10-Q.

**Item 3. Quantitative and Qualitative Disclosures About Market Risk**

Not applicable.

**Item 4.**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Exchange Act), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. These disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.

**Changes in Controls**

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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**PART II. OTHER INFORMATION.**

**Item 1.**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Legal Proceedings.**

On May 8, 2025, a class action lawsuit captioned Ullom v. Digimarc Corp., et al., No: 3:25-cv-00779-JR (the "Ullom Action") was filed against the Company in the United States District Court for the District of Oregon. The complaint purports to assert claims against the Company and its Chief Executive Officer and Chief Financial Officer pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder, on behalf of a putative class of investors who purchased or otherwise acquired the Company's shares between May 2, 2024 and February 26, 2025 (the "class period"). The Ullom Action seeks to recover damages allegedly caused by purported misstatements and omissions regarding the renewal status of a commercial contract, claiming that these alleged misstatements and omissions artificially inflated the price paid for our common stock during the class period.

Subsequently, four derivative lawsuits were filed nominally on the Company's behalf, including three in the United States District Court for the District of Oregon on August 29, 2025 (as amended September 2, 2025) (Franchi v. McCormack et al., No. 3:25-cv-01543-AN), October 7, 2025 (Chadwick v. McCormack et al., No. 3:25-cv-01838-JR), October 14, 2025 (Jensen v. McCormack et al., No. 3:25-cv-01891-SB), and one in the Circuit Court of the State of Oregon for the County of Multnomah on October 23, 2025 (Johnson v. McCormack et al., No. 25-cv-56998), which are based on the same alleged facts and circumstances as the above-referenced securities class action and are against the Company's Chief Executive Officer, Chief Financial Officer and directors. The derivative actions collectively assert claims pursuant to Sections 10(b), 14(a), and 20(a) of the Exchange Act, as well as for breaches of fiduciary duties, aiding and abetting breaches of fiduciary duties, unjust enrichment, and waste of corporate assets. Each of the four derivative lawsuits seeks to recover damages on the Company's behalf and alleges that a legally required pre-suit demand on the Board of Directors would be futile and should be excused.

On November 4, 2025, the Chadwick, Jensen and Franchi actions were consolidated and stayed pending resolution of the Company's anticipated motion to dismiss in the Ullom Action.

These cases are at an early stage. The Company believes it has defenses to the claims and is responding accordingly. See Note 17 – Commitments and Contingencies to the consolidated financial statements of this Form 10-Q for information on our legal proceedings.

**Item 1A.**&nbsp;&nbsp;&nbsp;&nbsp; **Risk Factors**

Our business, financial condition, results of operations and cash flows may be affected by a number of factors. Detailed information about risk factors that may affect Digimarc's actual results are set forth in Part I, Item 1A: "Risk Factors" of our 2024 Annual Report. The risks and uncertainties described in our 2024 Annual Report are those risks of which we are aware and that we consider to be material to our business. If any of those risks and uncertainties develop into actual events, our business, financial condition, results of operations or cash flows could be materially adversely affected. In that case, the trading price of our common stock could decline. In addition to the other information set forth in this Quarterly Report on Form 10-Q and in Part I, Item 1A: "Risk Factors" of our 2024 Annual Report, you should carefully consider the additional risk factor below.

<u>***Actions of activist shareholders and securities litigation can be costly and time-consuming, divert management's attention and resources, and continue to have an adverse effect on our business.***</u>

While we value open dialogue and input from our shareholders, activist shareholders have in the past and could in the future take actions that could be costly and time-consuming for us, disrupt our operations, and divert the attention of our board of directors, management, and employees. Such actions include public proposals and requests for potential nominations of candidates for election to our board of directors, requests to pursue a strategic combination or other transaction, or other special requests. As a result, we have retained, and may in the future retain, additional services of various professionals to advise us in these matters, including legal, financial and communications advisers, the costs of which have negatively impacted our quarterly financial results, and may negatively impact our financial results in the future. In addition, perceived uncertainties as to our future direction, strategy, or leadership created as a consequence of activist shareholder initiatives can result in the loss of potential business opportunities, harm our ability to attract new or retain existing investors, customers, directors, employees or other partners, and cause our stock price to experience periods of volatility or otherwise be adversely affected. We are the subject of securities litigation, and volatility in our stock price may in the future cause us to become the target of additional securities litigation, which could result in substantial costs and divert management's attention and the attention and resources of our board of directors from our business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 33

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**Item 2.**&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Unregistered Sales of Equity Securities and Use of Proceeds.**

**(c) Purchases of Equity Securities by the Issuer and Affiliated Purchases**

We repurchase shares of common stock in satisfaction of required withholding of income tax liability in connection with the vesting of restricted stock, restricted stock units and performance restricted stock units.

The following table sets forth information regarding purchases of our equity securities during the three months ended September 30, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |  |  |  | **(d)** |
|  |  |  | **(c)** | **Approximate** |
|  |  |  | **Total number** | **dollar value** |
|  |  |  | **of shares** | **of shares that** |
|  | **(a)** | **(b)** | **purchased as** | **may yet be** |
|  | **Total number** | **Average price** | **part of publicly** | **purchased** |
|  | **of shares** | **paid per** | **announced plans** | **under the plans** |
| **Period** | **purchased <sup>(1)</sup>** | **share <sup>(1)</sup>** | **or programs** | **or programs** |
| Month 1 |  |  |  |  |
| July 1, 2025 to July 31, 2025 |  | $— |  | $— |
| Month 2 |  |  |  |  |
| August 1, 2025 to August 31, 2025 | 47548 | $8.81 |  | $— |
| Month 3 |  |  |  |  |
| September 1, 2025 to September 30, 2025 |  | $— |  | $— |
| Total | 47548 | $8.81 |  | $— |

---

------

<sup>(1)</sup> Shares of common stock withheld (purchased) by us in satisfaction of required withholding of income tax liability upon vesting of restricted stock, restricted stock units and performance restricted stock units.

**Item *5.* Other Information**

None of our officers or directors adopted, modified, or terminated a "Rule *10b5*-*1* trading arrangement" or a "non-Rule *10b5*-*1* trading arrangement," as defined in Item *408* of Regulation S-K, during the *three* months ended *September 30, 2025*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 34

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**Item 6. Exhibits.**

---

| | |
|:---|:---|
| **Exhibit**<br> **<u>Number</u>**  | **<u>Exhibit Description</u>** |
| 10.1 | [Digimarc Corporation 2018 Incentive Plan, as amended](ex_856245.htm) |
| 31.1 | [Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer](ex_856247.htm) |
| 31.2 | [Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer](ex_856248.htm) |
| 32.1 | [Section 1350 Certification of Chief Executive Officer](ex_856249.htm) |
| 32.2 | [Section 1350 Certification of Chief Financial Officer](ex_856250.htm) |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| &nbsp;&nbsp;&nbsp;&nbsp;104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 35

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| Date: November 13, 2025 | DIGIMARC CORPORATION | DIGIMARC CORPORATION |
|  | By:  | /s/ CHARLES BECK |
|  |  | CHARLES BECK |
|  |  | *Chief Financial Officer* |
|  |  | *(Duly Authorized Officer and Principal Financial and Accounting Officer)* |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 36

## Exhibit 10.1

**Exhibit 10.1**

**DIGIMARC CORPORATION**<br> **2018 INCENTIVE PLAN**

**SECTION 1 PURPOSE**

The purpose of the Digimarc Corporation 2018 Incentive Plan (the "Plan") is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company's shareholders.

**SECTION 2 DEFINITIONS**

Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.

**SECTION 3 ADMINISTRATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.1** **Administration of the Plan** 

The Plan shall be administered by the Board or the Compensation Committee, which shall be composed of two or more directors, each of whom is a "non-employee director" within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission, an "outside director" within the meaning of Section 162(m) of the Code, or any successor provision thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.2** **Delegation** 

Notwithstanding the foregoing, the Board or the Compensation Committee may delegate responsibility for administering the Plan, including with respect to designated classes of Eligible Persons, to different committees consisting of one or more members of the Board, subject to such limitations as the Board deems appropriate, except with respect to Awards to Participants who are subject to Section 16 of the Exchange Act or Awards granted pursuant to Section 16 of the Plan. Members of any committee shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board or the Compensation Committee may authorize one or more officers of the Company to grant Awards to designated classes of Eligible Persons, within limits specifically prescribed by the Board or the Compensation Committee; provided, however, that no such officer shall have or obtain authority to grant Awards to himself or herself or to any person subject to Section 16 of the Exchange Act. All references in the Plan to the "Committee" shall be, as applicable, to the Compensation Committee or any other committee or any officer to whom the Board or the Compensation Committee has delegated authority to administer the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.3** **Administration and Interpretation by Committee** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of Common Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant, subject to Section 409A of the Code and in accordance with Section 6.3 of the Plan; (viii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company's employees as it so determines; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In no event, however, shall the Committee have the right, without shareholder approval, to (i) cancel or amend outstanding Options or SARs for the purpose of repricing, replacing or regranting such Options or SARs with Options or SARs that have a purchase or grant price that is less than the purchase or grant price for the original Options or SARs except in connection with adjustments provided in Section 15, or (ii) issue an Option or SAR or amend an outstanding Option or SAR to provide for the grant or issuance of a new Option or SAR on exercise of the original Option or SAR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's working less than full-time shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Compensation Committee, whose determination shall be final.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Decisions of the Committee shall be final, conclusive and binding on all persons, including the Company, any Participant, any shareholder and any Eligible Person. A majority of the members of the Committee may determine its actions.

**SECTION 4 SHARES SUBJECT TO THE PLAN**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.1** **Authorized Number of Shares** 

Subject to adjustment from time to time as provided in Section 15.1, the number of shares of Common Stock available for issuance under the Plan shall be:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) 3,150,000 shares; plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (i) any authorized shares available for issuance, and not issued or subject to outstanding awards, under the Company's 2008 Incentive Plan (the "Prior Plan") on the Effective Date shall cease to be set aside or reserved for issuance pursuant to the Prior Plan, effective on the Effective Date, and shall instead be set aside and reserved for issuance pursuant to the Plan and (ii) any shares subject to outstanding awards under the Prior Plan on the Effective Date that cease to be subject to such awards following the Effective Date (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares), shall cease to be set aside or reserved for issuance pursuant to the Prior Plan, effective on the date upon which they cease to be so subject to such awards, and shall instead be set aside and reserved for issuance pursuant to the Plan, up to an aggregate maximum of 785,000 shares pursuant to clauses (i) and (ii) of this paragraph, subject to adjustment from time to time as provided in Section 15.1. Shares issued under the Plan shall be drawn from authorized and unissued shares.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.2** **Share Usage** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock tendered by a Participant or retained by the Company as full or partial payment to the Company for the exercise price of an Option shall not be available for Awards under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company to satisfy tax withholding obligations in connection with an Award (other than an Option or SAR), or (ii) covered by an Award (other than an Option or SAR) that is settled in cash, or in a manner such that some or all of the shares of Common Stock covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything in the Plan to the contrary, the Committee may grant Substitute Awards under the Plan. Substitute Awards shall not reduce the number of shares authorized for issuance under the Plan. In the event that an Acquired Entity has shares available for awards or grants under one or more preexisting plans not adopted in contemplation of such acquisition or combination, then, to the extent determined by the Board or the Compensation Committee, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of common stock of the entities that are parties to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding the other provisions in this Section 4.2, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 15.1.

**SECTION 5 ELIGIBILITY**

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.

**SECTION 6 AWARDS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.1** **Form, Grant and Settlement of Awards** 

The Committee shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Committee shall determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.2** **Evidence of Awards** 

Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Committee shall deem advisable and that are not inconsistent with the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.3** **Deferrals** 

The Committee may permit or require a Participant to defer receipt of the payment of any Award if and to the extent set forth in the instrument evidencing the Award at the time of grant. If any such deferral election is permitted or required, the Committee, in its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits to deferred stock unit equivalents; provided, however, that the terms of any deferrals under this Section 6.3 shall comply with all applicable law, rules and regulations, including, without limitation, Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.4** **Dividends and Distributions** 

Participants may, if and to the extent the Committee so determines and sets forth in the instrument evidencing the Award at the time of grant, be credited with dividends paid with respect to shares of Common Stock underlying an Award in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or Stock Appreciation Right may not be contingent, directly or indirectly, on the exercise of the Option or a Stock Appreciation Right, and an Award providing a right to dividends or dividend equivalents declared and paid on the number of shares underlying an Option or a Stock Appreciation Right, the payment of which is not contingent upon, or otherwise payable on, the exercise of the Option or a Stock Appreciation Right, must comply with or qualify for an exemption under Section 409A of the Code. Also notwithstanding the foregoing, any dividends or dividend equivalents credited to an Award shall accrue and be paid only to the extent the Award becomes vested or payable.

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**SECTION 7 OPTIONS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.1** **Grant of Options** 

The Committee may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.2** **Option Exercise Price** 

The exercise price for shares purchased under an Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date (and shall not be less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.3** **Term of Options** 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.4** **Exercise of Options** 

The Committee shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Committee at any time.

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Committee, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Committee, accompanied by payment in full as described in Sections 7.5 and 13. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.5** **Payment of Exercise Price** 

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Committee for that purchase, which forms may include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) cash;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) check or wire transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board (i.e., a "cashless" exercise); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) such other consideration as the Committee may permit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.6** **Effect of Termination of Service** 

The Committee shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Committee at any time; provided, however, that any such waiver or modification shall satisfy the requirements for exemption under Section 409A of the Code.

If the exercise of the Option following a Participant's Termination of Service, but while the Option is otherwise exercisable, would be prohibited solely because the issuance of Common Stock would violate either the registration requirements under the Securities Act or the Company's insider trading policy, then the Option shall remain exercisable until the earlier of the Option Expiration Date and the expiration of a period of three months (or such other period of time as determined by the Committee in its sole discretion) after the Participant's Termination of Service during which the exercise of the Option would not be in violation of the Securities Act or the Company's insider trading policy requirements.

**SECTION 8 INCENTIVE STOCK OPTION LIMITATIONS**

Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code, or any successor provision, and any applicable regulations thereunder.

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**SECTION 9 STOCK APPRECIATION RIGHTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.1** **Grant of Stock Appreciation Rights** 

The Committee may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Committee shall determine in its sole discretion. A SAR may be granted in tandem with an Option or alone ("***freestanding***"). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. A SAR may be exercised upon such terms and conditions and for the term as the Committee determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.2** **Payment of SAR Amount** 

Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Committee as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Committee in its sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.3** **Post-Termination Exercise** 

The Committee shall establish and set forth in each instrument that evidences a freestanding SAR whether the SAR shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Committee at any time; provided, that any such waiver or modification shall satisfy the requirements under Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.4** **Waiver of Restrictions** 

Subject to Section 18.5, the Committee, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate; provided, that any such waiver shall satisfy the requirements under Section 409A of the Code.

**SECTION 10 STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1** **Grant of Stock Awards, Restricted Stock and Stock Units** 

The Committee may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Committee shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2** **Vesting of Restricted Stock and Stock Units** 

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Committee, and subject to the provisions of Section 13, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3** **Waiver of Restrictions** 

Subject to Section 18.5, the Committee, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.

**SECTION 11 PERFORMANCE AWARDS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.1** **Performance Shares** 

The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Common Stock, the value of which may be paid to the Participant by delivery of shares of Common Stock or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Subject to Section 18.5, the amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.2** **Performance Units** 

The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than shares of Common Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. Subject to Section 18.5, the amount to be paid under an Award of Performance Units may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.

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**SECTION 12 OTHER STOCK OR CASH-BASED AWARDS**

Subject to the terms of the Plan and such other terms and conditions as the Committee deems appropriate, the Committee may grant other incentives payable in cash or in shares of Common Stock under the Plan.

**SECTION 13 WITHHOLDING**

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award ("tax withholding obligations") and (b) any amounts due from the Participant to the Company or to any Related Company ("other obligations") to the extent such amounts are not "deferred compensation" within the meaning of Section 409A. The Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

The Committee may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. To the extent required to avoid adverse financial accounting consequences to the Company, the value of the shares so withheld or tendered may not exceed the employer's minimum required tax withholding rate.

**SECTION 14 ASSIGNABILITY**

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent permitted by the Company, the Participant may designate one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Committee, in its sole discretion, may permit a Participant to assign or transfer an Award subject to such terms and conditions as the Committee shall specify.

**SECTION 15 ADJUSTMENTS**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.1** **Adjustment of Shares** 

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Committee shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2; (iii) the maximum number and kind of securities set forth in Section 4.3; (iv) the maximum numbers and kind of securities set forth in Section 16.3; and (v) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Committee, as to the terms of any of the foregoing adjustments shall be conclusive and binding.

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 15.1 but shall be governed by Sections 15.2 and 15.3, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.2** **Dissolution or Liquidation** 

To the extent not previously exercised or settled, and unless otherwise determined by the Committee in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Committee, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.3** **Change in Control** 

Notwithstanding any other provision of the Plan to the contrary, unless the Committee shall determine otherwise in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Change in Control:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All outstanding Awards, other than Performance Shares and Performance Units, shall become fully and immediately vested and exercisable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Change in Control and shall terminate at the effective time of the Change in Control, and any such Awards constituting "deferred compensation" within the meaning of Section 409A of the Code shall be paid within 60 days following the effective date of the Change in Control; provided, however, that with respect to a Change in Control that is a Company Transaction, such Awards, other than Awards constituting "deferred compensation" within the meaning of Section 409A of the Code, shall become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, only if and to the extent such Awards are not converted, assumed or replaced by the Successor Company.

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For the purposes of this Section 15.3(a), an Award shall be considered converted, assumed or replaced by the Successor Company if following the Company Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Committee may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The target payout opportunities attainable under all outstanding Stock Awards and Stock Units with restrictions based on performance criteria, Performance Shares, and Performance Units shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change in Control, and such Awards shall be paid within 60 days following the effective date of the Change in Control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding the foregoing, the Committee, in its sole discretion, may instead provide in the event of a Change in Control that is a Company Transaction that a Participant's outstanding Awards shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by holders of Common Stock in the Company Transaction, or, in the event the Company Transaction is one of the transactions listed under subsection (c) in the definition of Company Transaction or otherwise does not result in direct receipt of consideration by holders of Common Stock, the value of the deemed per share consideration received, in each case as determined by the Committee in its sole discretion, multiplied by the number of shares of Common Stock subject to such outstanding Awards (to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Committee in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.4** **Further Adjustment of Awards** 

Subject to Sections 15.2 and 15.3, the Committee shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Committee, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Committee may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Committee may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.5** **No Limitations** 

The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.6** **Fractional Shares** 

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.7** **Section 409A of the Code** 

Notwithstanding anything in this Plan to the contrary, (a) any adjustments made pursuant to this Section 15 to Awards that are considered "deferred compensation" within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code and (b) any adjustments made pursuant to this Section 15 to Awards that are not considered "deferred compensation" subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code.

**SECTION 16 PERFORMANCE GOALS AND LIMITATIONS ON AWARDS**

The Compensation Committee may, at the time of grant of an Award, determine that the vesting and/or payment pursuant to the Award shall be conditioned on the attainment for the specified Performance Period of specified performance targets related to designated performance goals for such period selected by the Compensation Committee from among the Performance Criteria specified in Section 16.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.1** **Performance Criteria** 

If the Compensation Committee determines that an Award shall be subject to this Section 16, then the lapsing of restrictions thereon and the distribution of cash, shares of Common Stock or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Compensation Committee, which shall be based on the attainment of specified levels of one of or any combination of the following "performance criteria" for the Company as a whole or any business unit of the Company, as reported or calculated by the Company: net earnings or net income (before or after taxes); earnings per share (basic or fully diluted); net sales growth or bookings growth; revenues; operating profit or income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); return measures (including, but not limited to, return on assets, capital, net capital utilized, equity or sales); working capital; cash flow (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); earnings before or after taxes, interest, depreciation and/or amortization; gross or operating profit; cost control; strategic initiatives; market share; improvements in capital structure; productivity ratios; share price (including, but not limited to, growth measures and total shareholder return); expense targets; margins; operating efficiency or margins; capital efficiency; strategic targets; economic profit; employee or customer satisfaction, services performance, subscriber, cash management or asset management metrics; working capital targets; cash value added; or market or economic value added (together, the "Performance Criteria"). Such performance goals also may be based on the achievement of specified levels of Company performance (or performance of an applicable affiliate or business unit of the Company) under one or more of the Performance Criteria described above relative to the performance of other corporations.

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The Compensation Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company's annual report to shareholders for the applicable year, (vi) acquisitions or divestitures, (vii) foreign exchange gains and losses, and (viii) gains and losses on asset sales.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.2** **Compensation Committee Certification and Authority** 

After the completion of each Performance Period, the Compensation Committee shall certify the extent to which any Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any Award subject to this Section 16.

The Compensation Committee shall have the power to impose such other restrictions on Awards subject to this Section 16 as it may deem necessary or appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.3** **Limitations** 

Subject to adjustment from time to time as provided in Section 15.1, no Participant may be granted Awards other than Performance Units subject to this Section 16 in any calendar year period with respect to more than 750,000 shares of Common Stock for such Awards, except that the Company may make additional one time grants of such Awards for up to 1,000,000 shares to newly hired or newly promoted individuals, and the maximum dollar value payable with respect to Performance Units or other awards payable in cash subject to this Section 16 in any one calendar year is $2,500,000.

The Compensation Committee shall have the power to impose such other restrictions on Awards subject to this Section 16 as it may deem necessary or appropriate.

**SECTION 17 AMENDMENT AND TERMINATION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.1** **Amendment, Suspension or Termination** 

The Board or the Compensation Committee may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, shareholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires shareholder approval may be made only by the Board. Subject to Section 17.3, the Compensation Committee may amend the terms of any outstanding Award, prospectively or retroactively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.2** **Term of the Plan** 

The Plan shall have no fixed expiration date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten years after the later of (a) the Effective Date and (b) the date of approval by the shareholders of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.3** **Consent of Participant** 

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 15 shall not be subject to these restrictions.

Subject to Section 18.5, the Board shall have broad authority to amend the Plan or any outstanding Award without the consent of a Participant to the extent the Board deems necessary or advisable to (i) comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules and other applicable law, rules and regulations or (ii) to ensure that an Award is not subject to additional taxes, interest or penalties under Section 409A of the Code.

**SECTION 18 GENERAL**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.1** **No Individual Rights** 

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.2** **Issuance of Shares** 

Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

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As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Committee may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.3** **Indemnification** 

Each person who is or shall have been a member of the Board, or a committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 3 of the Plan, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf, unless such loss, cost, liability or expense is a result of such person's own willful misconduct or except as expressly provided by statute.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.4** **No Rights as a Shareholder** 

Unless otherwise provided by the Committee or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.5** **Compliance with Laws and Regulations** 

In interpreting and applying the provisions of the Plan, any Options granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code, although the Company makes no representations that Options granted as Incentive Stock will maintain such qualification.

Notwithstanding anything contained in the Plan to the contrary, the Company intends that any and all Awards and compensation payable under the Plan shall satisfy the requirements for exemption from, or compliance with, Section 409A of the Code and that all terms and provisions shall be interpreted to satisfy such requirements. If the Committee determines that an Award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to Section 409A of the Code, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from, or compliance with, Section 409A of the Code.

Furthermore, any payment or distribution that is to be made under the Plan (or pursuant to an Award under the Plan) to a Participant who is a "specified employee" of the Company within the meaning of that term under Section 409A and as determined by the Committee, on account of a "separation from service" within the meaning of that term under Section 409A of the Code, may not be made before the date which is six months after the date of such "separation from service," unless the payment or distribution is exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise.

Notwithstanding any other provision in the Plan, the Committee makes no representations that Awards granted under the Plan shall be exempt from, or comply with, Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan.

Awards not deferred under Section 6.3 and not otherwise exempt from the requirements of Section 409A of the Code are intended to qualify for the short-term deferral exemption to Section 409A of the Code, and payment shall be made as soon as administratively feasible after the Award became vested, but in no event shall such payment be made later than 2 1/2 months after the end of the calendar year in which the Award becomes vested unless otherwise permitted under the exemption provisions of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.6** **Participants in Other Countries or Jurisdictions** 

Without amending the Plan, the Committee may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt, amend or rescind such modifications, procedures or subplans under the Plan as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or where Participants may reside to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.7** **No Trust or Fund** 

The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.8** **Successors** 

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.9** **Severability** 

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Committee's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.10** **Choice of Law and Venue** 

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Oregon.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.11** **Legal Requirements** 

The granting of Awards and the issuance of shares of Common Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.

**SECTION 19 EFFECTIVE DATE**

The effective date (the "Effective Date") is the date on which the Plan is approved by the shareholders of the Company. If the shareholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options.

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**APPENDIX A**<br> **DEFINITIONS**

As used in the Plan,

**"Acquired Entity**" means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.

**"Award**" means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Common Stock as may be designated by the Committee from time to time.

**"Board**" means the Board of Directors of the Company.

**"Cause**," unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding.

**"Change in Control**," unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the occurrence of any of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) an acquisition by any Entity of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (1) the then outstanding shares of common stock of the Company (the "**Outstanding Company Common Stock**") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "**Outstanding Company Voting Securities**"), provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege where the security being so converted was not acquired directly from the Company by the party exercising the conversion privilege, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Company, (iv) an acquisition by any Entity pursuant to a transaction that meets the conditions of clauses (i), (ii) and (iii) set forth in the definition of Company Transaction, or (v) any acquisition approved by the Board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a change in the composition of the Board during any two-year period such that the individuals who, as of the beginning of such two-year period, constitute the Board (the "**Incumbent Board**") cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the beginning of the two-year period, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Entity other than the Board shall not be considered a member of the Incumbent Board; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) consummation of a Company Transaction.

**"Code**" means the Internal Revenue Code of 1986, as amended from time to time.

**"Committee**" has the meaning set forth in Section 3.2.

**"Common Stock**" means the common stock, par value $0.001 per share, of the Company.

**"Company**" means Digimarc Corporation, an Oregon corporation.

**"Company Transaction**," unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a merger or consolidation of the Company with or into any other company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a sale in one transaction or a series of transactions undertaken with a common purpose of at least 50% of the Company's outstanding voting securities; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company's assets, excluding, however, in each case, a transaction pursuant to which

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Entities who are the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction will beneficially own, directly or indirectly, at least 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Successor Company in substantially the same proportions as their ownership, immediately prior to such Company Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) no Entity (other than the Company, any employee benefit plan (or related trust) of the Company, a Related Company or a Successor Company) will beneficially own, directly or indirectly, 40% or more of, respectively, the outstanding shares of common stock of the Successor Company or the combined voting power of the outstanding voting securities of the Successor Company entitled to vote generally in the election of directors unless such ownership resulted solely from ownership of securities of the Company prior to the Company Transaction; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) individuals who were members of the Incumbent Board will immediately after the consummation of the Company Transaction constitute at least a majority of the members of the board of directors of the Successor Company.

Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.

**"Compensation Committee**" means the Compensation Committee of the Board.

**"Disability**," unless otherwise defined by the Committee for purposes of the Plan in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding. Notwithstanding the foregoing, with respect to Incentive Stock Options, "Disability" shall have the meaning attributed to that term for purposes of Section 422 of the Code.

**"Effective Date**" has the meaning set forth in Section 19.

**"Eligible Person**" means any person eligible to receive an Award as set forth in Section 5.

**"Entity**" means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).

**"Exchange Act**" means the Securities Exchange Act of 1934, as amended from time to time.

**"Fair Market Value**" means the closing price for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Committee using such methods or procedures as it may establish.

**"Grant Date**" means the later of (a) the date on which the Committee completes the corporate action authorizing the grant of an Award or such later date specified by the Committee and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

**"Incentive Stock Option**" means an Option granted with the intention that it qualify as an "incentive stock option" as that term is defined for purposes of Section 422 of the Code or any successor provision.

**"Nonqualified Stock Option**" means an Option other than an Incentive Stock Option.

**"Option**" means a right to purchase Common Stock granted under Section 7.

**"Option Expiration Date**" means the last day of the maximum term of an Option.

**"Outstanding Company Common Stock**" has the meaning set forth in the definition of "Change in Control."

**"Outstanding Company Voting Securities**" has the meaning set forth in the definition of "Change in Control."

**"Parent Company**" means a company or other entity which as a result of a Company Transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries.

**"Participant**" means any Eligible Person to whom an Award is granted.

**"Performance Award**" means an Award of Performance Shares or Performance Units granted under Section 11.

**"Performance Criteria**" has the meaning set forth in Section 16.1.

**"Performance Period**" means the period of time during which the Performance Criteria must be met in order to determine the degree of payout and/or vesting with respect to an Award. The Compensation Committee may establish different Performance Periods for different Participants, and the Compensation Committee may establish concurrent or overlapping Performance Periods.

**"Performance Share**" means an Award of units denominated in shares of Common Stock granted under Section 11.1.

**"Performance Unit**" means an Award of units denominated in cash or property other than shares of Common Stock granted under Section 11.2.

**"Plan**" means the Digimarc Corporation 2018 Incentive Plan.

**"Prior Plan**" has the definition set forth in Section 4.1.

**"Related Company**" means any entity that is directly or indirectly controlled by, in control of or under common control with the Company.

**"Restricted Stock**" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Committee.

------

**"Retirement**," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means "Retirement" as defined for purposes of the Plan by the Committee or the Company's chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches "normal retirement age," as that term is defined in Section 411(a)(8) of the Code.

**"Securities Act**" means the Securities Act of 1933, as amended from time to time.

**"Stock Appreciation Right**" or "**SAR**" means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.

**"Stock Award**" means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Committee.

**"Stock Unit**" means an Award denominated in units of Common Stock granted under Section 10.

**"Substitute Awards**" means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.

**"Successor Company**" means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.

**"Termination of Service**" means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Compensation Committee, whose determination shall be conclusive and binding. Transfer of a Participant's employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Compensation Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant's employment or service relationship is with an entity that has ceased to be a Related Company. A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor, or independent contractor of the Company or a Related Company or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.

**"Vesting Commencement Date**" means the Grant Date or such other date selected by the Committee as the date from which an Award begins to vest.

## Exhibit 31.1

**Exhibit 31.1**

**DIGIMARC CORPORATION**

**CERTIFICATION**

I, Riley McCormack, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digimarc Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2025

---

| | |
|:---|:---|
| By: | /S/ RILEY MCCORMACK |
|  | RILEY MCCORMACK<br> *Chief Executive Officer* |

---

## Exhibit 31.2

**Exhibit 31.2**

**DIGIMARC CORPORATION**

**CERTIFICATION**

I, Charles Beck, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Digimarc Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 13, 2025

---

| | |
|:---|:---|
| By: | /S/ CHARLES BECK |
|  | CHARLES BECK<br> *Chief Financial Officer* |

---

## Exhibit 32.1

**Exhibit 32.1**

**DIGIMARC CORPORATION**

**CERTIFICATION**

In connection with the periodic report of Digimarc Corporation (the "Company") on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission (the "Report"), I, Riley McCormack, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: November 13, 2025

---

| | |
|:---|:---|
| By: | /S/ RILEY MCCORMACK  |
|  | RILEY MCCORMACK<br> *Chief Executive Officer* |

---

## Exhibit 32.2

**Exhibit 32.2**

**DIGIMARC CORPORATION**

**CERTIFICATION**

In connection with the periodic report of Digimarc Corporation (the "Company") on Form 10-Q for the period ended September 30, 2025 as filed with the Securities and Exchange Commission (the "Report"), I, Charles Beck, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the U.S. Code, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: November 13, 2025

---

| | |
|:---|:---|
| By: | /S/ CHARLES BECK  |
|  | CHARLES BECK<br> *Chief Financial Officer* |

---