AWARE INC /MA/
For the period ended Sep 30, 2026. Filed Oct 30, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 30, 2026
AWRE$0.97+1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-07-31.
0001193125-26-328344
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-30.
0001193125-26-441621
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 59 previous paragraphs and 59 current paragraphs.
33 unchanged; 26 reworded; 0 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Reworded paragraphs (26)
Previous wording
Revenue and operating loss for the three months ended June 30, 2026 were $3.3 million and $2.7 million, respectively. These results compared to revenue of $3.9 million and operating loss of $2.0 million for the three months ended June 30, 2025. The decrease in revenue and increase in operating loss was primarily due to lower software license revenue.
Current wording
Revenue and operating loss for the three months ended September 30, 2026 were $4.4 million and $0.9 million, respectively. These results compared to revenue of $5.1 million and operating loss of $1.3 million for the three months ended September 30, 2025. The decrease in revenue was primarily due to lower software license revenue. The decrease in operating loss was primarily due to lower operating expenses and partially offset by lower software license revenue.
Previous wording
Revenue and operating loss for the six months ended June 30, 2026 were $6.6 million and $6.4 million, respectively. These results compared to revenue of $7.5 million and operating loss of $3.8 million for the six months ended June 30, 2025. The decrease in revenue was primarily due to lower software license revenue. The increase in operating loss was primarily due to lower revenue, one-time severance costs in the current period of $0.7 million and a $0.6 million increase in salary-related expenses resulting from additional headcount hired in 2025. These severance costs relate to workforce reduction actions taken during the period as part of our efforts to align our cost structure with current business conditions. We expect to realize incremental cost savings from these actions throughout the remainder of 2026.
Current wording
Revenue and operating loss for the nine months ended September 30, 2026 were $11.1 million and $7.3 million, respectively. These results compared to revenue of $12.6 million and operating loss of $5.1 million for the nine months ended September 30, 2025. The decrease in revenue was primarily due to lower software license revenue. The increase in operating loss was primarily due to lower revenue, one-time severance costs in the current period of $0.7 million and a $0.9 million increase in salary-related expenses resulting from additional headcount hired in 2025. These severance costs relate to workforce reduction actions taken during the period as part of our efforts to align our cost structure with current business conditions. We expect to realize incremental cost savings from these actions throughout the remainder of 2026.
Previous wording
Software license revenue decreased 33% from $1.4 million in the three months ended June 30, 2025 to $1.0 million for the three months ended June 30, 2026. As a percentage of total revenue, software license revenue decreased from 36% in the second quarter of 2025 to 29% in the current year quarter. The $0.4 million decrease in software license revenue was due primarily to a decrease in perpetual licenses sales due to a decrease in one-time license deals in the current quarter.
Current wording
Software license revenue decreased 23% from $2.5 million in the three months ended September 30, 2025 to $1.9 million for the three months ended September 30, 2026. As a percentage of total revenue, software license revenue decreased from 49% in the third quarter of 2025 to 44% in the current year quarter. The $0.6 million decrease in software license revenue was due primarily fewer one-time perpetual licenses sales due to a decrease in one-time license deals in the current quarter.
Previous wording
Software license revenue decreased 27% from $2.7 million in the six months ended June 30, 2025 to $2.0 million for the six months ended June 30, 2026. As a percentage of total revenue, software license revenue decreased from 36% in the first six months of 2025 to 30% in the current period. The $0.7 million decrease in software license revenue was due primarily to a decrease in perpetual licenses sales due to a decrease in one-time license deals in the current year period.
Current wording
Software license revenue decreased 25% from $5.3 million in the nine months ended September 30, 2025 to $3.9 million for the nine months ended September 30, 2026. As a percentage of total revenue, software license revenue decreased from 42% in the first nine months of 2025 to 36% in the current period. The $1.3 million decrease in software license revenue was due primarily to fewer one-time perpetual licenses sales in the current year period.
Previous wording
Software maintenance decreased 7% from $2.1 million in the three months ended June 30, 2025 to $2.0 million for the three months ended June 30, 2026. As a percentage of total revenue, software maintenance revenue increased from 55% in the second quarter of 2025 to 61% in the current year period.
Current wording
Software maintenance decreased 4% from $2.2 million in the three months ended September 30, 2025 to $2.1 million for the three months ended September 30, 2026. As a percentage of total revenue, software maintenance revenue increased from 43% in the third quarter of 2025 to 48% in the current year period.
Previous wording
Software maintenance decreased 4% from $4.3 million in the six months ended June 30, 2025 to $4.1 million for the six months ended June 30, 2026. As a percentage of total revenue, software maintenance revenue increased from 57% in the six months ended June 30, 2025 to 61% in the current year period.
Current wording
Software maintenance decreased 4% from $6.5 million in the nine months ended September 30, 2025 to $6.2 million for the nine months ended September 30, 2026. As a percentage of total revenue, software maintenance revenue increased from 51% in the nine months ended September 30, 2025 to 56% in the current year period.
Previous wording
The slight decrease in software maintenance was primarily due to the non-renewal of maintenance contracts by certain customers.
Current wording
The decreases in software maintenance was primarily due to the non-renewal or reduced scope of maintenance contracts by certain long-standing customers, principally U.S. federal government agencies and contractors supporting legacy deployments. Software maintenance contracts are generally renewed annually, the continued non-renewal of contracts by long-standing customers could reduce software maintenance revenue in future periods. Sustaining software maintenance revenue depends on renewal rates within our installed base and on new license sales, which generate related maintenance.
Previous wording
Services and other revenue was $0.3 million in the three months ended June 30, 2025 and 2026. As a percentage of total revenue, services and other revenue increased from 8% in the three months ended June 30, 2025 to 9% in the current year period.
Current wording
Services and other revenue was $0.4 million in the three months ended September 30, 2025 and 2026. As a percentage of total revenue, services and other revenue was 8% in the three months ended September 30, 2025 and 2026.
Previous wording
Services and other revenue increased from $0.5 million in the six months ended June 30, 2025 to $0.6 million in the six months ended June 30, 2026. As a percentage of total revenue, services and other revenue increased from 7% in the six months ended June 30, 2025 to 9% in the current year period. The increase was primarily due to growth in SaaS revenue, which increased from $0.1 million in the six months ended June 30, 2025 to $0.3 million in the current year period and was partially offset by lower services revenue. The increase in SaaS revenue reflects expansion of subscription-based customer arrangements.
Current wording
Services and other revenue increased from $0.9 million in the nine months ended September 30, 2025 to $1.0 million in the nine months ended September 30, 2026. As a percentage of total revenue, services and other revenue increased from 7% in the nine months ended September 30, 2025 to 9% in the current year period. The increase was primarily due to growth in SaaS revenue, which increased from $0.3 million in the nine months ended September 30, 2025 to $0.4 million in the current year period and was partially offset by lower services revenue. The increase in SaaS revenue reflects expansion of subscription-based customer arrangements.
Previous wording
Cost of revenue increased 95% from $0.3 million in the three months ended June 30, 2025 to $0.5 million in the three months ended June 30, 2026. Cost of revenue as a percentage of total revenue increased from 7% in the second quarter of 2025 to 16% in the current year second quarter. The $0.2 million increase was the result of increased software license costs.
Current wording
Cost of revenue was $0.4 million in the three months ended September 30, 2025 and 2026. Cost of revenue as a percentage of total revenue increased from 8% in the third quarter of 2025 to 10% in the current year third quarter.
Previous wording
Cost of revenue increased 97% from $0.4 million in the six months ended June 30, 2025 to $0.9 million in the six months ended June 30, 2026. Cost of revenue as a percentage of total revenue increased from 6% in the six months ended June 30, 2025 to 13% in the current year period. The $0.5 million increase was the result of increased software license costs.
Current wording
Cost of revenue increased 51% from $0.9 million in the nine months ended September 30, 2025 to $1.3 million in the nine months ended September 30, 2026. Cost of revenue as a percentage of total revenue increased from 7% in the nine months ended September 30, 2025 to 12% in the current year period. The $0.4 million increase was the result of increased software license costs.
Previous wording
Total engineering costs increased 28% from $2.1 million in the three months ended June 30, 2025 to $2.6 million in the three months ended June 30, 2026. As a percentage of total revenue, total engineering costs increased from 53% in the three months ended June 30, 2025 to 81% in the same current year quarter. The spending increase for the three months ended June 30, 2026 compared to the same prior year period was primarily due to salary related costs in relation to additional headcount hired in 2025.
Current wording
Total engineering costs increased 7% from $2.2 million in the three months ended September 30, 2025 to $2.4 million in the three months ended September 30, 2026. As a percentage of total revenue, total engineering costs increased from 43% in the three months ended September 30, 2025 to 54% in the same current year quarter. The spending increase for the three months ended September 30, 2026 compared to the same prior year period was primarily due to salary related costs in relation to additional headcount hired in 2025.
Previous wording
Total engineering costs increased 45% from $4.0 million in the six months ended June 30, 2025 to $5.9 million in the six months ended June 30, 2026. As a percentage of total revenue, total engineering costs increased from 54% in the six months ended June 30, 2025 to 89% in the same current year period. The spending increase for the six months ended June 30, 2026 compared to the same prior year period was primarily due to one-time severance costs of $0.6 million including the termination of our chief technology officer and a $1.3 million increase in salary related costs in relation to additional headcount hired in 2025. We anticipate engineering expenses to decrease during the remainder of 2026 as we focus on strategic product development initiatives.
Current wording
Total engineering costs increased 32% from $6.3 million in the nine months ended September 30, 2025 to $8.3 million in the nine months ended September 30, 2026. As a percentage of total revenue, total engineering costs increased from 50% in the nine months ended September 30, 2025 to 75% in the same current year period. The spending increase for the nine months ended September 30, 2026 compared to the same prior year period was primarily due to one-time severance costs of $0.7 million including the termination of our chief technology officer and a $1.3 million increase in salary related costs in relation to additional headcount hired in 2025.
Previous wording
Selling and marketing expense decreased 29% from $2.0 million in the three months ended June 30, 2025 to $1.4 million in the same three month period of 2026. As a percentage of total revenue, selling and marketing expense decreased from 50% in the second quarter of 2025 to 42% in the corresponding period in 2026.
Current wording
Selling and marketing expense decreased 45% from $2.1 million in the three months ended September 30, 2025 to $1.1 million in the same three month period of 2026. As a percentage of total revenue, selling and marketing expense decreased from 41% in the third quarter of 2025 to 26% in the corresponding period in 2026.
Previous wording
Selling and marketing expense decreased 11% from $3.6 million in the six months ended June 30, 2025 to $3.2 million in the same six month period of 2026. As a percentage of total revenue, selling and marketing expense was 48% in the six months ended June 30, 2025 and 2026.
Current wording
Selling and marketing expense decreased 24% from $5.7 million in the nine months ended September 30, 2025 to $4.4 million in the same nine month period of 2026. As a percentage of total revenue, selling and marketing expense decreased from 45% in the nine months ended September 30, 2025 to 39% in the corresponding period in 2026.
Previous wording
The decrease in selling and marketing expense for the three and six months ended June 30, 2026, compared to the same periods in the prior year, was primarily due to lower personnel-related costs resulting from the cost saving plan implemented in March 2026 to better align the Company's cost structure with current business needs.
Current wording
The decrease in selling and marketing expense for the three and nine months ended September 30, 2026, compared to the same periods in the prior year, was primarily due to lower personnel-related costs resulting from the cost saving plan implemented in March 2026 to better align the Company's cost structure with current business needs.
Previous wording
General and administrative expense decreased 7% from $1.7 million in the three months ended June 30, 2025 to $1.6 million in the three months ended June 30, 2026. As a percentage of total revenue, general and administrative expense increased from 43% in the three months ended June 30, 2025 to 47% in the corresponding period of 2026.
Current wording
General and administrative expense decreased 17% from $1.8 million in the three months ended September 30, 2025 to $1.5 million in the three months ended September 30, 2026. As a percentage of total revenue, general and administrative expense decreased from 35% in the three months ended September 30, 2025 to 33% in the corresponding period in 2026.
Previous wording
General and administrative expense decreased 5% from $3.4 million in the six months ended June 30, 2025 to $3.2 million in the same six month period of 2026. As a percentage of total revenue, general and administrative expense increased from 45% in six months ended June 30, 2025 to 48% in the corresponding period of 2026.
Current wording
General and administrative expense decreased 9% from $5.1 million in the nine months ended September 30, 2025 to $4.7 million in the same nine month period of 2026. As a percentage of total revenue, general and administrative expense increased from 41% in the nine months ended September 30, 2025 to 42% in the corresponding period of 2026.
Previous wording
The decrease in general and administrative expense for the three and six months ended June 30, 2026, compared to the same periods in the prior year, was primarily due to lower personnel-related costs resulting from the cost saving plan implemented in March 2026 to better align the Company's cost structure with current business needs.
Current wording
The decrease in general and administrative expense for the three and nine months ended September 30, 2026, compared to the same periods in the prior year, was primarily due to lower personnel-related costs resulting from the cost-saving plan implemented in March 2026 to better align the Company's cost structure with current business needs.
Previous wording
Interest income was $0.4 million and $0.5 million in the six months ended June 30, 2026 and 2025, respectively. The decrease in interest income in the six months ended June 30, 2026 was primarily the result of lower average cash balances during the current year period.
Current wording
Interest income was $0.5 million and $0.7 million in the nine months ended September 30, 2026 and 2025, respectively. The decrease in interest income in the nine months ended September 30, 2026 was primarily the result of lower average cash balances during the current year period.
Previous wording
Income taxes. Total income tax expense was $1 thousand and $26 thousand for the three months ended June 30, 2026 and 2025, respectively. The income tax expense relates to state income taxes.
Current wording
Income taxes. Total income tax expense was $6 thousand and income tax expense was $5 thousand for the three months ended September 30, 2026 and 2025, respectively. The income tax expense relates to state income taxes.
Previous wording
Total income tax expense was $9 thousand and $34 thousand for the six months ended June 30, 2026 and 2025, respectively. The income tax expense relates to state income taxes.
Current wording
Total income tax expense was $15 thousand and income tax expense was $39 thousand for the nine months ended September 30, 2026 and 2025, respectively. The income tax expense relates to state income taxes.
Previous wording
At June 30, 2026, we had cash, cash equivalents and marketable securities of $16.8 million, which represented a decrease of $5.5 million from December 31, 2025. The decrease in cash, cash equivalents and marketable securities was primarily due to the impact of $5.4 million of cash used in operating activities.
Current wording
At September 30, 2026, we had cash, cash equivalents and marketable securities of $15.4 million, which represented a decrease of $6.9 million from December 31, 2025. The decrease in cash, cash equivalents and marketable securities was primarily due to the impact of $6.9 million of cash used in operating activities.
Previous wording
Cash provided by investing activities was $1.0 million in the first six months of 2026, which primarily consisted of net sales of marketable securities.
Current wording
Cash provided by investing activities was $2.0 million in the first nine months of 2026, which primarily consisted of net sales of marketable securities.
Previous wording
Cash provided by financing activities was $47 thousand in the first six months of 2026, which primarily consisted of proceeds from issuances of common stock.
Current wording
Cash provided by financing activities was $47 thousand in the first nine months of 2026, which primarily consisted of proceeds from issuances of common stock.
Previous wording
While we cannot assure you that we will not require additional financing, or that such financing will be available to us, we believe that our cash and cash equivalents will be sufficient to fund our operations for at least the next twelve months from the date of this filing and to meet our known long-term cash requirements. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our future growth, operating results, and the investments needed to support our operations. If we require additional capital resources, we may utilize available funds or seek external financing, which may not be available on terms we find attractive or at all.
Current wording
While we cannot assure you that we will not require additional financing, or that such financing will be available to us, we believe that our cash and cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months from the date of this filing and to meet our known long-term cash requirements. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our future growth, operating results, and the investments needed to support our operations. If we require additional capital resources, we may utilize available funds or seek external financing, which may not be available on terms we find attractive or at all.