Digimarc Corp

8. Trade Accounts Receivable

Trade Accounts Receivable

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

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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. Accounts 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.

Major Customers

The following customers accounted for10% or more of trade accounts receivable, net:

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, generallytwo toten years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life or the lease term.

10. Goodwill

The Company performs its annual goodwill impairment test during thesecond quarter of each fiscal year or whenever events or changes in circumstances indicate that the carrying value* mayexceed 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 thesix* months ended* June 30, 2026and2025*.

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 thethree andsix months ended* June 30, 2026and2025*.

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 approximatesseventeen years.

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

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:

For intangible assets recorded at* June 30, 2026*, the estimated future aggregate amortization expense for the years ending* December 31,2026 through December 31,*2030 is as follows:

12. Leases

The Company accounts for leases in accordance with ASCNo. 842, "Leases."

In* February 2022,the Company entered into a sublease agreement and lease extension agreement for office space in Beaverton, Oregon 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 June 30, 2026*, totaling $5,818 plus operating expenses, payable in monthly installments. Thefirst 26 months of rent payments and operating expenses were abated to cover the remaining lease term on the Company’s former corporate headquarters.

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

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 thethree andsix months ended* June 30, 2026and2025*.

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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:

The table below reconciles the aggregate cash payment obligations for the nextfive years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheets as of* June 30, 2026*:

In* December 2025,the Company entered into a sub-sublease agreement for the Company's corporate headquarters in Beaverton, Oregon, whereby the Company agreed to sub-sublease 38 thousand of the 65 thousand square feet of the building to another tenant. The term of the sub-sublease began on March 1, 2026,and runs through September 2030.The Company has recognized net sublease income of $146 and $194 for thethree* andsix months ended* June 30, 2026*, respectively in the Consolidated Statements of Operations. The remaining rent payments owed to the Company under the sub-sublease are $2,751.

13. Accounts Payable and Accrued liabilities

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

14. Other Income

The following table provides activity in other income, net:

15. Income Taxes

The benefit (provision) for income taxes reflects current taxes and deferred taxes. The effective tax rate for each of thethree andsix months ended* June 30, 2026and2025* was 0%.

The valuation allowance against net deferred tax assets as of* June 30, 2026*, was $114,925, an increase of $2,179 from $112,746 as of* December 31, 2025*. The Company continues to maintain a full valuation allowance against its net deferred tax assets, as management has concluded that it is more likely thannot that such deferred tax assets willnot be realized. The Company willnot 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.

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Excess tax deficiencies of $185 and $748 were recognized in the benefit (provision) for income taxes for thethree months ended* June 30, 2026and2025*, respectively, which were offset by$185 and $748 of valuation allowance, respectively. Excess tax deficiencies of $3,153 and $879 were recognized in the benefit (provision) for income taxes for thesix months ended* June 30, 2026and2025*, respectively, which were offset by $3,153 and $879 of valuation allowance, respectively.

16. Commitments and Contingencies

Certain of the Company’s product and services agreements include an indemnification provision for claims fromthird parties relating to the Company’s intellectual property. Such indemnification provisions are accounted for in accordance with ASCNo. 450 "Contingencies." To date, there have beenno claims made under such indemnification provisions.

The Company is subject to certain legal proceedings, including ongoing securities and derivative matters, as previously disclosed in the Company's Annual Report on Form10-K for the Year Ended* December 31, 2025*. On* February 9, 2026,the Predecessor and the now former Chief Executive Officer and current Chief Financial Officer of the Company moved to dismiss the class action lawsuit captionedUllom v. Digimarc Corp., et al.,No. 3:25-cv-00779-JR (the "UllomAction"). On February 11, 2026,thetwo derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah,Johnson v. McCormack et al.,No. 25-cv-56998 (the "Johnson Action") andSperry v. McCormack et al.,No. 26-cv-00621 (the "Sperry Action"), were consolidated and remain stayed pending resolution of the defendants' motion to dismiss in theUllom* Action. On* June 23, 2026,the magistrate judge issued findings and a recommendation that the motion to dismiss filed by the Predecessor and the now former Chief Executive Officer and current Chief Financial Officer of the Company in theUllomAction be granted and that judgment be entered dismissing theUllomAction. The findings and recommendation are subject to review by the district judge and donot* constitute a final order or judgment. The consolidated federal derivative actions, which were filed nominally on behalf of the Predecessor, remain stayed pending resolution of theUllomAction. In addition, the derivative lawsuits filed in the Circuit Court of the State of Oregon for the County of Multnomah, theJohnsonand theSperryActions, which were also filed nominally on behalf of the Predecessor, remain consolidated and stayed. The defendants, including the Company, believe they have defenses to the claims and are responding accordingly.

17. Subsequent Events

CEO Transition

The Board of Directors of the Company appointed Paul Carreiro as President and Chief Executive Officer ("CEO") of the Company, effective* July 6, 2026.In connection therewith, the C&TM Committee approved an annualized base salary of $500, an initial performance bonus opportunity at a target of 100%, prorated and guaranteed at a minimum of 100% for2026,* and the grant of 1,060 LTIP Units to Mr. Carreiro consisting of 307 TVUs and 753 PVUs that will vest over time based on the satisfaction of applicable service and market conditions. Additionally, the C&TM Committee approved the entry into an Executive Retention Agreement, dated* July 6, 2026,*with Mr. Carreiro.

In connection with the appointment of Mr. Carreiro, Riley McCormack's service as President and CEO concluded effective* July 5, 2026.Pursuant to the terms of Mr. McCormack's existing employment and retention agreements, he received cash severance benefits of $677 comprising of 18-months of his current salary and 18 months of health-insurance premiums. Mr. McCormack also received $469 of cash in exchange for the forfeiture of 60 vested PRSU awards to facilitate payment of personal income tax obligations. Additionally, pursuant to the terms of his existing employment and retention agreements, the remaining 64 unvested PRSUs, the remaining 275 unvested TVUs, and 263 of the 683 unvested PVUs became100%* vested upon completion of his service as President and CEO on* July 5, 2026.Mr. McCormack's remaining 420 unvested PVUs are eligible to vest over the remaining performance period upon the satisfaction of applicable market conditions withno* remaining service conditions. The total cash payment to Mr. McCormack of $1,146 was accrued as of* June 30, 2026within "accrued liabilities" in the Consolidated Balance Sheets and was paid to Mr. McCormack in July 2026.Stock-based compensation expense associated with Mr. McCormack'sone*-time accelerated vesting of equity awards was expensed on an accelerated pro rata basis over Mr. McCormack's remaining service period through* July 5, 2026,including $5,372 during thethree* months ended* June 30, 2026*, and $544 that will be expensed during thethree months ending* September 30, 2026.*

Shelf Registration

On* July 7, 2026,the Company filed a new shelf registration statement on Form S-3. The new shelf registration statement became effective on July 13, 2026,and expires on July 13, 2029.Under the new shelf registration statement, the Company maysell securities inone* or more offerings up to $50,000.

On* July 13,*2026, upon the new shelf registration becoming effective, the Company's prior shelf registration statement expired with $67,196 unused.

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