10-Q

not

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

☐ 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

DIGIMARC CORPORATION

(Exact name of registrant as specified in its charter)

Oregon	26-2828185
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9405 SW Gemini Drive, Beaverton, Oregon 97008

(Address of principal executive offices) (Zip Code)

(503) 469-4800

(Registrant’s telephone number, including area code)

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.    Yes  ☒    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).    Yes  ☒    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).    Yes  ☐    No   ☒

As of April 23, 2021, there were 16,914,831 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	4
	Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2021 and 2020	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 4.	Controls and Procedures	31
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6.	Exhibits	33
SIGNATURES		34

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

DIGIMARC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(UNAUDITED)

	March 31,			December 31,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	4,705		$	19,696
Marketable securities		65,796			58,032
Trade accounts receivable, net		4,141			3,907
Other current assets		1,978			2,197
Total current assets		76,620			83,832
Marketable securities		159			—
Property and equipment, net		3,144			3,272
Intangibles, net		6,609			6,612
Goodwill		1,114			1,114
Other assets		2,502			2,198
Total assets	$	90,148		$	97,028
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	3,008		$	2,827
Note payable, current		4,799			3,947
Deferred revenue		2,943			3,002
Total current liabilities		10,750			9,776
Lease liability and other long-term liabilities		2,325			2,295
Note payable, long-term		280			1,118
Total liabilities		13,355			13,189
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at March 31, 2021 and December 31, 2020)		50			50
Common stock (par value $0.001 per share, 50,000 authorized, 16,850 and 16,735 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)		17			17
Additional paid-in capital		256,200			255,024
Accumulated deficit		(179,474	)		(171,252	)
Total shareholders’ equity		76,793			83,839
Total liabilities and shareholders’ equity	$	90,148		$	97,028

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

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DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(UNAUDITED)

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Revenue:
Service	$	3,784		$	3,738
Subscription		2,916			2,451
Total revenue		6,700			6,189
Cost of revenue:
Service		1,570			1,684
Subscription		791			514
Total cost of revenue		2,361			2,198
Gross profit		4,339			3,991
Operating expenses:
Sales and marketing		4,941			5,246
Research, development and engineering		4,131			4,433
General and administrative		3,493			3,367
Total operating expenses		12,565			13,046
Operating loss		(8,226	)		(9,055	)
Other income, net		10			142
Loss before income taxes		(8,216	)		(8,913	)
Benefit (provision) for income taxes		(6	)		5
Net loss	$	(8,222	)	$	(8,908	)
Earnings (loss) per common share:
Loss per common share — basic	$	(0.50	)	$	(0.74	)
Loss per common share — diluted	$	(0.50	)	$	(0.74	)
Weighted average common shares outstanding — basic		16,333			12,037
Weighted average common shares outstanding — diluted		16,333			12,037

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

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DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(UNAUDITED)

										Additional						Total
	Preferred Stock				Common Stock					Paid-in			Accumulated			Shareholders'
	Shares		Amount		Shares			Amount		Capital			Deficit			Equity
BALANCE AT DECEMBER 31, 2020		10	$	50		16,735		$	17	$	255,024		$	(171,252	)	$	83,839
Issuance of restricted common stock		—		—		154			—		—			—			—
Forfeiture of restricted common stock		—		—		(19	)		—		—			—			—
Purchase and retirement of common stock		—		—		(20	)		—		(870	)		—			(870	)
Stock-based compensation		—		—		—			—		2,046			—			2,046
Net loss		—		—		—			—		—			(8,222	)		(8,222	)
BALANCE AT MARCH 31, 2021		10	$	50		16,850		$	17	$	256,200		$	(179,474	)	$	76,793
BALANCE AT DECEMBER 31, 2019		10	$	50		12,446		$	12	$	188,103		$	(138,715	)	$	49,450
Issuance of common stock, net of issuance costs		—		—		28			1		573			—			574
Exercise of stock options		—		—		8			—		135			—			135
Issuance of restricted common stock		—		—		186			—		—			—			—
Purchase and retirement of common stock		—		—		(23	)		—		(738	)		—			(738	)
Stock-based compensation		—		—		—			—		2,230			—			2,230
Net loss		—		—		—			—		—			(8,908	)		(8,908	)
BALANCE AT MARCH 31, 2020		10	$	50		12,645		$	13	$	190,303		$	(147,623	)	$	42,743

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

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DIGIMARC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(UNAUDITED)

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(8,222	)	$	(8,908	)
Adjustments to reconcile net loss to net cash used in    operating activities:
Depreciation, amortization and write-off of property and equipment		363			374
Amortization and write-off of intangibles		177			201
Amortization of right of use assets under operating leases		118			117
Amortization of net premiums and (discounts) on marketable securities		(266	)		97
Stock-based compensation		2,010			2,195
Changes in operating assets and liabilities:
Trade accounts receivable		(612	)		62
Other current assets		219			338
Other assets		(44	)		19
Accounts payable and other accrued liabilities		501			61
Deferred revenue		(55	)		(146	)
Lease liability and other long-term liabilities		(177	)		(159	)
Net cash used in operating activities		(5,988	)		(5,749	)
Cash flows from investing activities:
Purchase of property and equipment		(317	)		(235	)
Capitalized patent costs		(159	)		(137	)
Maturity of marketable securities		17,494			11,594
Purchase of marketable securities		(25,151	)		(6,407	)
Net cash provided by (used in) investing activities		(8,133	)		4,815
Cash flows from financing activities:
Issuance of common stock, net of issuance costs		—			574
Exercise of stock options		—			135
Purchase of common stock		(870	)		(738	)
Net cash used in financing activities		(870	)		(29	)
Net decrease in cash and cash equivalents		(14,991	)		(963	)
Cash and cash equivalents at beginning of period		19,696			11,213
Cash and cash equivalents at end of period	$	4,705		$	10,250
Supplemental disclosure of cash flow information:
Cash received (paid) for income taxes, net	$	(17	)	$	16
Supplemental schedule of non-cash activities:
Property and equipment and patent costs in accounts payable	$	(103	)	$	16
Stock-based compensation capitalized to software and patent costs	$	36		$	35

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

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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 Corporation (“Digimarc” or the “Company”), an Oregon corporation, is a pioneer in the automatic identification of media, including packaging, other commercial print, digital images, audio and video. The Digimarc Platform takes industry beyond the barcode, providing innovative and comprehensive automatic identification software and services to simplify search and transform information discovery through unparalleled reliability, efficiency and security. The Digimarc Platform enables applications that benefit retailers and consumer brands, national and state government agencies, media and entertainment industries, and others.

The Digimarc Platform features three core capabilities for the identification, discovery and quality management of media.  Digimarc Barcode integrates the identification function, which is a novel data carrier encoded into media in ways that are generally imperceptible to people, permitting the carrier to be repeated many times over the surface of the enhanced media. Digimarc Discover represents the discovery function, which is software for computing devices and network interfaces that recognize and decode indicia of the identity of media. These include, but are not limited to, Digimarc Barcodes, Quick Response Codes, Universal Product Codes, certain other Global Standards One (“GS1”) approved one-dimensional codes and relevant contextual data. Digimarc Verify incorporates the quality management function, a suite of software tools used to inspect and verify that the identification and discovery of media are both accurate and effective. Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.

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, 2020.

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 accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021. 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.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, including the reclassification of revenue by major target market. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Accounting Pronouncements Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (ASC 740) Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles and also improves consistent application of and simplifies U.S. GAAP. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company adopted this new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations and disclosures.

Accounting Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments,” which amends the guidance on the impairment of financial instruments. The amendments in this update remove the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance removes all

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current recognition thresholds and introduces the new current expected credit loss (“CECL”) model which will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not expect the impact of the adoption of this standard to have a material impact on its financial condition, results of operations 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 held-to-maturity and are reported at amortized cost, which approximates fair value.

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

March 31, 2021	Level 1		Level 2		Level 3		Total
Money market securities	$	3,404	$	—	$	—	$	3,404
Commercial paper		—		39,177		—		39,177
Pre-refunded municipals		—		21,273		—		21,273
Corporate notes		—		5,505		—		5,505
Total	$	3,404	$	65,955	$	—	$	69,359

December 31, 2020	Level 1		Level 2		Level 3		Total
Money market securities	$	10,988	$	—	$	—	$	10,988
Commercial paper		—		36,478		—		36,478
Pre-refunded municipals		—		26,697		—		26,697
Corporate notes		—		2,437		—		2,437
Total	$	10,988	$	65,612	$	—	$	76,600

The fair value maturities of the Company’s cash equivalents and marketable securities as of March 31, 2021, are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5 - 10 years		More than 10 years
Cash equivalents and marketable securities	$	69,359	$	69,200	$	159	$	—	$	—

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 money market securities, commercial paper and pre-refunded municipals totaling $3,404 and $18,568 at March 31, 2021, and December 31, 2020, respectively. Cash equivalents are carried at either cost or amortized cost, depending on the type of security, which approximates fair value.

3. Revenue Recognition

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

• Service revenue consists primarily of revenue earned from the performance of software development services. The majority of service contracts are structured as time and materials consulting 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.

• Subscription revenue consists primarily of revenue earned from the sale of software products and to a lesser extent the licensing of intellectual property. 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.

Customer arrangements may contain multiple performance obligations such as software development services, software products, and maintenance and support fees. The Company accounts for individual products and services separately if they are distinct. To determine the transaction price, the Company considers the terms of the contract and the Company’s customary business practices. Some contracts may contain variable consideration. In those cases, the Company estimates the amount of variable

8

consideration based on the sum of probability-weighted amounts in a range of possible consideration amounts. As part of this assessment, the Company will evaluate whether any of the variable consideration is constrained and if it is the Company will not include it in the transaction price. The consideration is allocated between distinct products and services based on their stand-alone selling prices. For items that are not sold separately, the Company estimates the standalone selling price based on reasonably available information, including market conditions, specific factors affecting the Company, and information about the customer. For distinct products and services, the Company typically recognizes the revenue associated with these performance obligations as they are delivered to the customer.  Products and services that are not capable of being distinct are combined with other products or services until a distinct performance obligation is identified.

All revenue recognized in the Consolidated Statements of Operations 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		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Government
Service	$	3,585	$	3,652
Subscription		300		300
Total Government		3,885		3,952
Commercial
Service	$	199	$	86
Subscription		2,616		2,151
Total Commercial		2,815		2,237
Total	$	6,700	$	6,189

The Company has contract assets from contracts with customers that are classified as “trade accounts receivable.”  Financial information about trade accounts receivable is included in Note 8.  

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

The following table provides information about contract liabilities from contracts with customers:

	March 31,		December 31,
	2021		2020
Deferred revenue, current	$	2,943	$	3,002
Deferred revenue, long-term		34		30
Total	$	2,977	$	3,032

The Company recognized $1,351 of revenue during the three months ended March 31, 2021, that was included in the contract liability balance as of December 31, 2020.

The aggregate amount of the transaction prices from contractual obligations that are unsatisfied or partially unsatisfied was $17,504 and $17,921 as of March 31, 2021, and December 31, 2020, respectively.

4. Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: automatic identification solutions. Revenue is generated in this segment primarily through software development services and software subscriptions. The Company markets its products in the U.S. and in non-U.S. countries through its sales personnel and partners.

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Revenue by geographic area, based upon the “bill-to” location, was as follows:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Domestic	$	1,722	$	1,759
International (1)		4,978		4,430
Total	$	6,700	$	6,189

(1) 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.

Major Customers

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

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Central Banks		58	%		64	%
Walmart Inc.		11	%		12	%

Long-Lived Assets by Geographical Area

The Company’s long-lived assets are all domiciled in the U.S.

5. Stock-Based Compensation

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

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

Stock Options

The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option pricing model. The Company recognizes the fair value of stock option awards on a straight-line basis over the vesting period of the award.

The following inputs are used in the Black-Scholes option pricing model to estimate the fair value of stock options:

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

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules of the awards. Stock options granted generally vest over a service period of three years and have a contractual term of ten years.

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 expected life 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 expected life of the award.

Expected Dividend Yield. The expected dividend yield is derived by dividing the Company’s expected annual dividend rate over the expected term by the fair value of the Company’s common stock at the grant date.

 There were no stock options granted during the three months ended March 31, 2021 and 2020.

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Restricted Stock

The fair value of restricted stock awards 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 vesting period of the award. Restricted stock awards granted generally vest over a service period of three to four years for employee grants and one to three years for director grants.

Restricted Stock Units

The fair value of restricted stock unit (“RSU”) awards, which 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 years.

There were no RSUs granted during the three months ended March 31, 2021 and 2020.

Performance Restricted Stock Units

The fair value of performance restricted stock unit (“PRSU”) awards, which vest upon meeting a market condition, such as exceeding a target stock price in the future, and a service condition, 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.

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

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.

There were no PRSUs granted during the three months ended March 31, 2021 and 2020.

Stock-Based Compensation

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Stock-based compensation:
Cost of revenue	$	173	$	190
Sales and marketing		440		479
Research, development and engineering		396		399
General and administrative		1,001		1,127
Stock-based compensation expense		2,010		2,195
Capitalized to software and patent costs		36		35
Total stock-based compensation	$	2,046	$	2,230

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

	As of		As of
	March 31,		December 31,
	2021		2020
Total unrecognized compensation costs	$	18,699	$	14,416

Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.

The Company expects to recognize the total unrecognized compensation costs as of March 31, 2021, for stock option, restricted stock, RSU, and PRSU awards over weighted average periods through March 31, 2025, as follows:

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	Stock	Restricted
	Options	Stock	RSUs	PRSUs
Weighted average period	1.21 years	1.51 years	1.50 years	1.75 years

As of March 31, 2021, under the Company’s stock-based compensation plan, an additional 684 shares remained available for future grants. The Company issues new shares upon exercises of stock options, grants of restricted stock awards and vesting of RSU and PRSU awards.

Stock Option Activity

The following table reconciles the outstanding balance of stock option awards:

			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Grant Date		Intrinsic
Three months ended March 31, 2021:	Options		Price		Fair Value		Value
Outstanding at December 31, 2020		305	$	27.94	$	12.65
Granted		—		—		—
Exercised		—		—		—
Forfeited or expired		—		—		—
Outstanding at March 31, 2021		305	$	27.94	$	12.65	$	1,513
Exercisable at March 31, 2021		133	$	33.30			$	10
Unvested at March 31, 2021		172	$	23.78			$	1,503

The aggregate intrinsic value is based on the closing price of $29.66 per share of Digimarc common stock on March 31, 2021, which would have been received by the optionees had all of the options with exercise prices less than $29.66 per share been exercised on that date.

Restricted Stock Activity

The following table reconciles the unvested balance of restricted stock awards:

				Weighted
				Average
	Number of			Grant Date
Three months ended March 31, 2021:	Shares			Fair Value
Unvested balance, December 31, 2020		416		$	28.20
Granted		154		$	43.99
Vested		(50	)	$	28.13
Forfeited		(19	)	$	22.63
Unvested balance, March 31, 2021		501		$	33.25

The following table indicates the fair value of all restricted stock awards that vested:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Fair value of restricted stock awards vested	$	2,175	$	1,811

Restricted Stock Units Activity

The following table reconciles the unvested balance of restricted stock unit awards:

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			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		45	$	15.36
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		45	$	15.36

Performance Restricted Stock Units Activity

The following table reconciles the unvested balance of performance restricted stock unit awards:

			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		124	$	11.08
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		124	$	11.08

6. Shareholders’ Equity

In May 2019, the Company entered into an Equity Distribution Agreement, whereby the Company may sell from time to time through Wells Fargo Securities, LLC, as its sales agent, the Company’s common stock having an aggregate offering price of up to $30,000.

There were no shares sold for the three months ended March 31, 2021.

For the three months ended March 31, 2020, the Company sold 28 shares at an average price of $21.92 under this Equity Distribution Agreement totaling $611 of cash proceeds, less $14 of commissions and $23 of stock issuance costs, for net cash proceeds of $574.

As of March 31, 2021, there is $6,932 available for future issuance under the Equity Distribution Agreement.

7. Earnings Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260, “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing earnings to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing earnings to common shares by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of stock options, RSUs and PRSUs. The dilutive effect of stock options, RSUs and PRSUs is determined using the treasury stock method.

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The following table reconciles earnings (loss) per common share:

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Basic Earnings (Loss) per Common Share:
Loss to common shares — basic	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — basic		16,333			12,037
Basic earnings (loss) per common share	$	(0.50	)	$	(0.74	)
Diluted Earnings (Loss) per Common Share:
Net loss attributable to common shares — diluted	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — diluted		16,333			12,037
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.74	)

The following table indicates the common stock equivalents related to stock options, RSUs and PRSUs that were anti-dilutive and excluded from diluted earnings per common share calculations:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Anti-dilutive shares due to:
Exercise prices higher than the average market price		—		550
Net loss		162		—

8. Trade Accounts Receivable

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	March 31,			December 31,
	2021			2020
Trade accounts receivable	$	4,166		$	3,932
Allowance for doubtful accounts		(25	)		(25	)
Trade accounts receivable, net	$	4,141		$	3,907
Unpaid deferred revenue included in trade    accounts receivable	$	800		$	1,711

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts each reporting period. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

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.

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Major Customers

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

	March 31,			December 31,
	2021			2020
Central Banks		60	%		69	%

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.

	March 31,			December 31,
	2021			2020
Office furniture and fixtures	$	1,650		$	1,650
Software		5,149			5,004
Equipment		5,044			4,967
Leasehold improvements		1,658			1,658
Gross property and equipment		13,501			13,279
Less accumulated depreciation and amortization		(10,357	)		(10,007	)
Property and equipment, net	$	3,144		$	3,272

10. 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 months ended March 31, 2021 and 2020.

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, generally approximating seventeen years.

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

	Estimated Life	March 31,			December 31,
	(years)	2021			2020
Capitalized patent costs	17-20	$	9,827		$	9,708
Intangible assets acquired:
Purchased patents and intellectual property	3-10		250			250
Existing technology	5		1,560			1,560
Customer relationships	7		290			290
Gross intangible assets			11,927			11,808
Accumulated amortization			(5,318	)		(5,196	)
Intangibles, net		$	6,609		$	6,612

11. Leases

The Company accounts for leases in accordance with ASC 842, “Leases.” The Company leases its corporate office in Beaverton, Oregon. In July 2015, the Company entered into an amendment with the landlord of its corporate office to extend the lease term through March 2024, with remaining rent payments as of March 31, 2021, totaling $2,504, payable in monthly installments.

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

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	March 31,			December 31,
	2021			2020
Right of use assets	$	1,675		$	1,793
Lease liabilities, current	$	683		$	663
Lease liabilities, long-term	$	1,594		$	1,772
Weighted-average remaining life	3.0 years			3.2 years
Weighted-average discount rate		8.20	%		8.20	%

The carrying value of the right of use assets is included in “Other assets” and the current and long-term lease liabilities are included in “Accounts payable and other accrued liabilities” and “Lease liability and other long-term liabilities,” respectively, in the Consolidated Balance Sheets.

Operating lease expense is included in cost of revenue and operating expenses in the Consolidated Statements of Operations and in cash flows from operating activities in the Consolidated Statements of Cash Flows.  The operating leases include variable lease payments which are not material and are included in operating lease expense.  Additional details of the Company’s operating leases are presented in the following table:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Operating lease expense	$	257	$	263
Cash paid for operating leases	$	297	$	327

The table below reconciles the cash payment obligations for the first five years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheet as of March 31, 2021:

	Cash
	Payment
Year ending December 31:	Obligations
Remaining in 2021	$	631
2022		862
2023		867
2024		218
2025		—
Thereafter		—
Total lease payments		2,578
Imputed interest		(301	)
Total minimum lease payments	$	2,277

12. Note Payable

Promissory Note under the Paycheck Protection Program

On April 16, 2020, the Company entered into a Promissory Note with Stearns Bank, N.A. in an aggregate principal amount of $5,032 (the “Note”), pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Note matures two years from the disbursement date and bears interest at a rate of 1.000% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. The Note is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the PPP. The Company believes that it used all of the proceeds from the Note for Qualifying Expenses. However, no assurance is provided that the Company will obtain forgiveness of the Note in whole or in part.

On June 29, 2020, the Company was notified by Stearns Bank, N.A. that the Note was transferred to The Loan Source, Inc., (the “Lender”) who will be responsible for servicing the Note going forward, including administering loan forgiveness.

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On September 15, 2020, the Company filed its application for 100% forgiveness of the Note. The application was reviewed by the Lender and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020. The Company has not received any notification from the SBA on the status of their review. Principal and interest payments can be deferred until the forgiveness process is completed.

The following table provides information about the Note:

	March 31,		December 31,
	2021		2020
Note payable	$	5,032	$	5,032
Accrued interest		47		33
Total	$	5,079	$	5,065
Note payable, current	$	4,799	$	3,947
Note payable, long-term		280		1,118
Total	$	5,079	$	5,065

13. Income Taxes

The provision for income taxes for the three months ended March 31, 2021 and 2020 reflects current taxes, deferred taxes, and withholding taxes. The effective tax rate for each of the three months ended March 31, 2021 and 2020 was 0%. The valuation allowance against net deferred tax assets as of March 31, 2021, was $57,850, an increase of $2,211 from $55,639 as of December 31, 2020.

Excess tax benefits of $796 and $255 were recognized in the provision for income taxes for the three months ended March 31, 2021 and 2020, respectively, which were offset by $796 and $255 of valuation allowance, respectively.

14. Commitments and Contingencies

Certain of the Company’s contracts 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 450, “Contingencies.” To date, there have been no claims made under such indemnification provisions.

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business. At this time, the Company does not believe that the resolution of any such matters will have a material adverse effect on its financial position, results of operations, or cash flows.

15. Subsequent Event

On April 12, 2021, Bruce Davis notified the Company of his intention to retire as the Company’s President and Chief Executive Officer and as Chairman and a member of the Board of Directors effective April 12, 2021 (“Transition Date”). His decision to retire was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Riley McCormack, who has been a Director of Digimarc since October 2020, was appointed as the President and Chief Executive Officer of the Company, effective as of April 12, 2021. 

In connection with his retirement, the Company has entered into a Separation Agreement and General Release with Mr. Davis (the “Separation Agreement”), dated April 12, 2021. Pursuant to the Separation Agreement, Mr. Davis agreed to release certain claims he may have against the Company and other released parties, and Mr. Davis’s stock options, restricted stock and RSUs that vest solely based on continued service, and PRSUs that are earned and remain subject to time-based vesting, will immediately vest with respect to the number of shares that would have vested if Mr. Davis’s employment had continued for an additional twenty-four months from the Transition Date, and his right to exercise vested stock options will expire on the earliest of (i) twenty-eight months from the Transition Date, (ii) the latest date the particular stock option could have expired by its original terms under any circumstances, or (iii) the tenth anniversary of the original date of grant of the particular stock option. The Company will also be obligated to continue to pay Mr. Davis his annual salary of $785 for twenty-eight months from the Transition Date, which amount will be paid according to the Company’s standard bi-weekly payroll schedule. For a period of up to twenty-eight months following the Transition Date, the Company will also pay for healthcare insurance premiums or, in certain circumstances, the cash equivalent, for Mr. Davis and his dependents to the extent they elect and remain entitled to such coverage under the Company’s group health plans. In addition, the Company will make premium payments on Mr. Davis’s existing term life insurance policy through August 10, 2023.

The Separation Agreement resulted in the acceleration of vesting for Mr. Davis on 137 stock options, 30 RSUs, and 82 PRSUs. Mr. Davis will forfeit 35 stock options, 15 RSUs, and 41 PRSUs. The Company estimates that it will incur total expenses of

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approximately $6,200 for the three months ending June 30, 2021 associated with the Separation Agreement, which includes $2,200 of cash related expenses and $4,000 of stock-based compensation expenses.

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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 Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 26, 2021 (our “2020 Annual Report”), and other reports and filings we have made with the U.S. Securities and Exchange Commission (“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 are in thousands except per share amounts or unless otherwise noted. The percentages within the tables may not sum to 100% due to rounding.

Digimarc, Digimarc Barcode and Digimarc Discover are registered trademarks of Digimarc Corporation.

Overview

Digimarc Corporation is a pioneer in the automatic identification of media, including packaging, other commercial print, digital images, audio and video. The Digimarc Platform takes industry beyond the barcode, providing innovative and comprehensive automatic identification software and services to simplify search and transform information discovery through unparalleled reliability, efficiency and security. The Digimarc Platform enables applications that benefit retailers and consumer brands, national and state government agencies, media and entertainment industries, and others.

The Digimarc Platform features three core capabilities for the identification, discovery and quality management of media. Digimarc Barcode integrates the identification function, which is a novel data carrier encoded into media in ways that are generally imperceptible to people, permitting the carrier to be repeated many times over the surface of the enhanced media. Digimarc Discover represents the discovery function, which is software for computing devices and network interfaces that recognize and decode indicia of the identity of media. These include, but are not limited to, Digimarc Barcodes, Quick Response Codes, Universal Product Codes, certain other GS1 approved one-dimensional codes and relevant contextual data.  Digimarc Verify incorporates the quality management function, a suite of software tools used to inspect and verify that the identification and discovery of media are both accurate and effective. Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.

The Digimarc Platform enables customers to create digital identities for media objects and provides many benefits for connected media, including:

• Security: An imperceptible and indestructible data carrier encoded in the object provides a unique identification, whether in a digital image, video or audio file, or in graphics printed, embossed or etched on paper, cardboard, plastic, metal, or other material. Among other things, this identification supports strong authentication.

• Brand Protection: A unique identifier (“ID”) enables fraud deterrence across many use cases, from preventing “barcode swapping” and counterfeiting of currency, media, and goods to detection of use or distribution of physical products and digital images and e-publications.

• Traceability: The ID can carry serial numbers for easier tracking of individual items or entire lots. This has many uses, from ensuring product legitimacy to preventing product pirating to quickly identifying products for recall based on source provenance and sales destination.

• Sustainability: The ID can contain information specific to packaging content as an aid to broader and more efficient recycling. For example, a microscopic pattern embossed in plastic packaging can identify the materials used and their composition to aid sorting and recapture. Similarly, enhanced labels for fresh foods can be used to dynamically adjust pricing and thus reduce food waste proactively.

• Engagement: Consumers can directly interact with enhanced objects by merely scanning the item with their enabled smartphones. Brands can share additional product information online including recipes, instructions for use and recycling, information about ingredients and sources, how-to videos, coupons, and more.

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• Efficiency: Connected items, reliably scanned by machines and mobile devices, can enhance supply chain efficiencies, from parts matching in manufacturing to faster and more accurate inventory scanning and faster and easier front-of-store checkout experiences.

Our inventions provide a powerful document security element, giving rise to a long-term relationship with a consortium of central banks (the “Central Banks”) and many leading companies in the information technology industry. We and our business partners have successfully propagated the use of our technology in music, movies, television broadcasts, digital images, e-publications and printed materials. Digimarc Barcode is used in these applications to improve media rights and asset management, reduce piracy and counterfeiting losses, improve marketing programs, permit more efficient and effective distribution of valuable media content, and enhance consumer entertainment and commercial experiences.

Digimarc Barcode can be used to enhance all forms of media and is generally imperceptible to human senses, but quickly detected by computers, networks, or other digital devices like smartphones and tablets. Unlike traditional barcodes and tags, our solution does not require content owners to give up valuable visual space on their media content, nor does it affect their media content’s overall layout or aesthetics. Digimarc Barcode is generally imperceptible in regular use and does all that visible barcodes do, but performs better. Our Digimarc Discover software delivers a range of rich media experiences to its readers on their smartphones or tablets across multiple media formats, including print, audio and video. Unique to Digimarc Discover is its seamless multi-modal use of various content identification technologies as needed, including Digimarc Barcode, when present.

Banknote counterfeit deterrence was the first commercially successful large-scale use of our technologies. Innovations based on our existing technology and experience have been leveraged to create new products to deter counterfeiting and tampering of driver licenses and other government-issued secure credentials. In parallel, our business partners, under patent or technology licenses from us, are delivering solutions to track and monitor the distribution of music, images, television and movies to consumers.

Our intellectual property contains many innovations in digital watermarking, object content recognition, digital rights management, 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 1,000 U.S. and foreign patents granted and applications pending as of March 31, 2021. The patents in our portfolio each have a life of approximately 20 years from the patent’s effective filing date.

The market for patent licensing has become more challenging in recent years. As a result, we have shifted our focus from direct monetization through enforcement and licensing to facilitating progress toward the realization of our vision to enrich everyday living via pervasive, intuitive computing by:

• encouraging large scale adoption of our technologies by industry leaders;

• increasing the scale and rate of growth of our products and services business; and

• laying a foundation for continuous innovation.

For a discussion of activities and costs related to our research and development, see “Results of Operations – Summary – Research, development and engineering.”

Forging a Sustainable Future

At Digimarc, the environment is an essential stakeholder in everything we do, and we are committed to harnessing our culture of innovation to mitigate the visible and increasingly damaging effects of rising greenhouse gas emissions. We support a sustainable future by improving plastic sortation at recycling facilities to keep plastic out of landfills and oceans. Our technologies play a meaningful role in reducing food waste and educating consumers on package recyclability.

The Digimarc Platform features automatic identification software and services that help reduce food waste, increase traceability, and promote a circular economy by educating consumers on recycling options and improving plastic sortation at waste facilities. Digimarc Barcode applied to plastic packaging, labels, corrugate and other materials, can significantly help to address pressing environmental issues, such as climate change and the proliferation of plastic in our environment.

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• Recycling: Digimarc works with leading consumer brands to optimize packaging for the circular economy. Digimarc Barcode enables better detection and sortation of plastics, improving the economics and efficiencies of the recycling value chain. And, as part of the AIM HolyGrail 2.0 project focused on pioneering the use of digital watermarks, Digimarc can better enable companies to reach their recycling and sustainability goals.

• Traceability: Product traceability across the global supply chain is increasingly essential for consumer brands and food manufacturers to promote consumer safety, mitigate risk, and gain real-time insight into product locations in warehouses and distribution centers. Using Digimarc technologies for packaging supports these business needs with batch-lot and item-level traceability by applying serialized or custom identifiers and additional data to product packaging.

Together with our customers and partners around the world, we drive positive impacts across global supply chains. Our efforts prioritize people and the planet by aiming to eliminate waste and helping our customers meet their sustainability goals. As consumption trends and behaviors evolve, we are listening to our partners, their customers and other critical stakeholders, all of whom expect us all to operate with future generations in mind. We partner with global brand leaders, retailers, packaging and print innovators, and other technology solution providers who share the same mission of building a sustainable future.

COVID-19 Pandemic

The COVID-19 pandemic poses significant risks to our business. The ongoing public health actions attempting to reduce the spread of COVID-19 created and may continue to create significant disruptions to consumer demand, customer and supplier relationships, sales and support processes, and general economic conditions. Accordingly, our management continuously evaluates our business operations, communicates with and monitors the actions of our customers and partners, and reviews our near-term financial performance as we manage the Company through the uncertainty related to the COVID-19 pandemic. Some of our projects with retail customers and partners have been delayed as a result of the COVID-19 pandemic. Delays in these projects have affected the timing of closing new business. To help ensure adequate liquidity during this period and in light of uncertainties posed by the COVID-19 pandemic, we received a loan on April 16, 2020 under the Paycheck Protection Program (“PPP”). On September 15, 2020, we filed our application for 100% forgiveness of the loan. Our application was reviewed by the lender and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020. We have not received any notification from the SBA on the status of their review.

Critical Accounting Policies and Estimates

Detailed information about our critical accounting policies and estimates is set forth in Part III, Item 15 of our 2020 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.

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Results of Operations

The following table presents 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 month period ended March 31, 2021, and all changes discussed with respect to such periods reflect changes compared to the three month period ended March 31, 2020.

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Percentages are percent of total revenue
Revenue:
Service		56	%		60	%
Subscription		44			40
Total revenue		100			100
Cost of revenue:
Service		23			27
Subscription		12			8
Total cost of revenue		35			36
Gross profit		65			64
Operating expenses:
Sales and marketing		74			85
Research, development and    engineering		62			72
General and administrative		52			54
Total operating expenses		188			211
Operating loss		(123	)		(146	)
Other income, net		0			2
Loss before income taxes		(123	)		(144	)
Benefit (provision) for income taxes		(0	)		0
Net loss		(123	%)		(144	%)

Summary

Total revenue for the three month period ended March 31, 2021, increased 8% to $6.7 million, compared to the corresponding three month period ended March 31, 2020, primarily as a result of higher subscription revenue from a new Commercial customer.

Total operating expenses for the three month period ended March 31, 2021, decreased 4% to $12.6 million, compared to the corresponding three month period ended March 31, 2020, primarily as a result of lower travel, compensation and marketing costs.

Revenue

	Three			Three
	Months			Months
	Ended			Ended			Dollar		Percent
	March 31,			March 31,			Increase		Increase
	2021			2020			(Decrease)		(Decrease)
Revenue:
Service	$	3,784		$	3,738		$	46		1	%
Subscription		2,916			2,451			465		19	%
Total	$	6,700		$	6,189		$	511		8	%
Revenue (as % of total revenue):
Service		56	%		60	%
Subscription		44	%		40	%
Total		100	%		100	%

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Service. Service revenue consists primarily of revenue earned from the performance of software development services. The majority of service 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 service revenue, has a contract term through December 31, 2024 with the option to extend the term for an additional five years by mutual agreement. 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 increase in service revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was due to growth in services to Commercial customers partially offset by a decrease in services to the Central Banks due to the timing of program work.

Subscription. Subscription revenue consists primarily of revenue earned from the sale of software products and, to a lesser extent, the licensing of intellectual property. 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 increase in subscription revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to entering into a contract with a new Commercial customer. Most of the minimum contract value was recognized as revenue upon delivery of the software, instead of recognized ratably over the two-year term of the contract, because we had no continuing performance obligations after delivery.

Revenue by geography

	Three			Three
	Months			Months
	Ended			Ended			Dollar			Percent
	March 31,			March 31,			Increase			Increase
	2021			2020			(Decrease)			(Decrease)
Revenue by geography:
Domestic	$	1,722		$	1,759		$	(37	)		(2	)%
International		4,978			4,430			548			12	%
Total	$	6,700		$	6,189		$	511			8	%
Revenue (as % of total revenue):
Domestic		26	%		28	%
International		74	%		72	%
Total		100	%		100	%

The decrease in domestic revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was insignificant.

The increase in international revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to entering into a contract with a new international Commercial customer. Most of the minimum contract value was recognized as revenue upon delivery of the software, instead of recognized ratably over the two-year term of the contract, because we had no continuing performance obligations after delivery.

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Revenue by market

	Three		Three
	Months		Months
	Ended		Ended		Dollar			Percent
	March 31,		March 31,		Increase			Increase
	2021		2020		(Decrease)			(Decrease)
Government:
Service	$	3,585	$	3,652	$	(67	)		(2	)%
Subscription		300		300		—			—	%
Total Government	$	3,885	$	3,952	$	(67	)		(2	)%
Commercial:
Service	$	199	$	86	$	113			131	%
Subscription		2,616		2,151		465			22	%
Total Commercial	$	2,815	$	2,237	$	578			26	%
Total	$	6,700	$	6,189	$	511			8	%

The decrease in Government revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was due to timing of program work with the Central Banks.

The increase in Commercial revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to entering into a contract with a new Commercial customer. Most of the minimum contract value was recognized as revenue upon delivery of the software, instead of recognized ratably over the two-year term of the contract, because we had no continuing performance obligations after delivery.

Cost of revenue

Service. Cost of service revenue primarily includes:

• compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of our software developers, quality assurance personnel, design professionals, product managers, business development managers 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 directly used by customers;

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

• travel costs that are billed to customers.

Subscription. Cost of subscription revenue primarily includes:

• cost of outside contractors that provide operational support for our subscription products;

• license fees paid to technology solution providers when we sell a combined solution;

• Internet service provider connectivity charges and image search data fees to support our subscription products; and

• amortization of capitalized patent costs and patent maintenance fees.

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Gross profit

	Three			Three
	Months			Months
	Ended			Ended			Dollar		Percent
	March 31,			March 31,			Increase		Increase
	2021			2020			(Decrease)		(Decrease)
Gross Profit:
Service	$	2,214		$	2,054		$	160		8	%
Subscription		2,125			1,937			188		10	%
Total	$	4,339		$	3,991		$	348		9	%
Gross Profit (as % of related revenue):
Service		59	%		55	%
Subscription		73	%		79	%
Total		65	%		64	%

The increase in total gross profit for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to growth in subscription revenue and lower service costs partially offset by higher subscription costs.

The increase in service gross profit as a percentage of service revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to a favorable mix of billable expenses, with higher labor expenses, which have a higher billable margin, and lower non-labor expenses, which have a lower billable margin.

The decrease in subscription gross profit as a percentage of subscription revenue for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to higher license fees to a technology solution provider partially offset by higher revenue.

Operating expenses

Sales and marketing

	Three			Three
	Months			Months
	Ended			Ended			Dollar			Percent
	March 31,			March 31,			Increase			Increase
	2021			2020			(Decrease)			(Decrease)
Sales and marketing	$	4,941		$	5,246		$	(305	)		(6	)%
Sales and marketing    (as % of total revenue)		74	%		85	%

Sales and marketing expenses consist primarily of:

• compensation, benefits, incentive compensation in the form of stock-based compensation and related costs of sales and marketing employees and product managers;

• 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 product and marketing initiatives; and

• charges for infrastructure and centralized costs of facilities and information technology.

The decrease in sales and marketing expenses for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to:

• decreased travel costs of $0.2 million due to travel restrictions related to the COVID-19 pandemic; and

• decreased marketing costs of $0.2 million; partially offset by

• increased recruiting costs of $0.1 million.

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Research, development and engineering

	Three			Three
	Months			Months
	Ended			Ended			Dollar			Percent
	March 31,			March 31,			Increase			Increase
	2021			2020			(Decrease)			(Decrease)
Research, development and    engineering	$	4,131		$	4,433		$	(302	)		(7	)%
Research, development and    engineering (as % of total revenue)		62	%		72	%

Research, development and engineering expenses consist primarily of:

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

• payments to outside contractors;

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

• charges for infrastructure and centralized costs of facilities and information technology.

The decrease in research, development and engineering expenses for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to decreased compensation costs of $0.2 million reflecting lower headcount.

General and administrative

	Three			Three
	Months			Months
	Ended			Ended			Dollar		Percent
	March 31,			March 31,			Increase		Increase
	2021			2020			(Decrease)		(Decrease)
General and administrative	$	3,493		$	3,367		$	126		4	%
General and administrative    (as % of total revenue)		52	%		54	%

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 and are allocated to this area as well as each of the areas in cost of revenue, sales and marketing and research, development and engineering.

General and administrative expenses consist primarily of:

• compensation, benefits and incentive compensation in the form of stock-based compensation and related costs of 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 fees for outside legal counsel and translation costs, related to the filing and maintenance of our intellectual property;

• charges to write off previously capitalized patent costs for patent assets we abandon; and

• charges for infrastructure and centralized costs of facilities and information technology.

The increase in general and administrative expenses for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to:

• increased legal and accounting costs of $0.1 million, and

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• increased compensation costs of $0.1 million; partially offset by

• decreased travel costs of $0.1 million due to travel restrictions related to the COVID-19 pandemic.

Stock-based compensation

	Three		Three
	Months		Months
	Ended		Ended		Dollar			Percent
	March 31,		March 31,		Increase			Increase
	2021		2020		(Decrease)			(Decrease)
Cost of revenue	$	173	$	190	$	(17	)		(9	)%
Sales and marketing		440		479		(39	)		(8	)%
Research, development and engineering		396		399		(3	)		(1	)%
General and administrative		1,001		1,127		(126	)		(11	)%
Total	$	2,010	$	2,195	$	(185	)		(8	)%

The decrease in stock-based compensation expense for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to a lower value of stock awards granted.

We anticipate incurring an additional $18,699 in stock-based compensation expense through March 31, 2025, for awards outstanding as of March 31, 2021.

Other income, net

	Three			Three
	Months			Months
	Ended			Ended			Dollar			Percent
	March 31,			March 31,			Increase			Increase
	2021			2020			(Decrease)			(Decrease)
Other income, net	$	10		$	142		$	(132	)		(93	)%
Other income, net (as % of    total revenue)		0	%		2	%

The decrease in other income, net for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, was primarily due to lower interest rates earned on investments, partially offset by higher average investment balances.

Income Taxes

The provision for income taxes reflects current taxes, deferred taxes, and withholding taxes. The effective tax rate for each of the three month periods ended March 31, 2021 and 2020 was 0% because we have a full valuation allowance recorded against our deferred tax assets.

The valuation allowance against deferred tax assets as of March 31, 2021, was $57,850, an increase of $2,211 from $55,639 as of December 31, 2020.

We continually assess the applicability of a valuation allowance against our deferred tax assets. Based upon the positive and negative evidence available as of March 31, 2021, 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 full 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. All future reversals of the valuation allowance would result in a tax benefit in the period recognized.

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Liquidity and Capital Resources

	March 31,		December 31,
	2021		2020
Working capital	$	65,870	$	74,056
Current ratio (1)	7.1:1		8.6:1
Cash, cash equivalents and short-term    marketable securities	$	70,501	$	77,728
Long-term marketable securities	$	159	$	—
Total cash, cash equivalents and    marketable securities	$	70,660	$	77,728

(1) The current (liquidity) ratio is calculated by dividing total current assets by total current liabilities.

The $7,068 decrease in cash, cash equivalents and marketable securities at March 31, 2021, from December 31, 2020, resulted primarily from:

• cash used in operations;

• purchases of common stock related to tax withholding in connection with the vesting of restricted stock; 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 primarily include commercial paper, pre-refunded municipals, and corporate notes. Our investment policy requires our portfolio to be invested to ensure that the greater of $3,000 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 $1,000, 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 $15,000, whichever is greater, to be invested in any one industry category (e.g., financial or energy industries) 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 below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. 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 in the three month periods ended March 31, 2021 and 2020.

Operating Cash Flow

The components of cash flows used in operating activities were:

	Three			Three
	Months			Months
	Ended			Ended			Dollar			Percent
	March 31,			March 31,			Increase			Increase
	2021			2020			(Decrease)			(Decrease)
Net loss	$	(8,222	)	$	(8,908	)	$	(686	)		(8	)%
Non-cash items		2,402			2,984			582			20	%
Changes in operating assets and liabilities		(168	)		175			343			196	%
Net cash used in operating activities	$	(5,988	)	$	(5,749	)	$	239			4	%

Cash flows used in operating activities for the three month period ended March 31, 2021, increased by $239, compared to the corresponding three month period ended March 31, 2020, primarily as a result of lower non-cash items and changes in operating assets and liabilities, partially offset by a lower net loss. The decrease in non-cash items was primarily due to higher amortization of net discounts on marketable securities and lower stock-based compensation. The changes in operating assets and liabilities was largely due to timing of receipts from customers and payments to vendors.

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Cash flows from investing activities for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, decreased by $12,948 from $4,815 provided to $8,133 used, primarily as a result of higher net purchases of marketable securities.

Cash flows used in financing activities for the three month period ended March 31, 2021, compared to the corresponding three month period ended March 31, 2020, increased by $841 from $29 to $870, primarily as a result of no issuances of common stock and no proceeds from stock option exercises during the three month period ended March 31, 2021, and higher purchases of our common stock due to a higher share price in satisfaction of required withholding tax liability in connection with the vesting of restricted shares.

Future Cash Expectations

We believe that our current cash, cash equivalents, and short-term marketable securities balances will satisfy our projected working capital and capital expenditure requirements for at least the next 12 months. We continuously review our liquidity and anticipated capital requirements in light of the uncertainty created by the COVID-19 pandemic.

TCM Strategic Partners Transaction

On September 29, 2020, we entered into a Subscription Agreement with TCM Strategic Partners L.P. in a private placement to issue and sell 2,542 shares of our common stock and 17 shares of our newly designated Series B Convertible Preferred Stock (which subsequently converted into 1,198 shares of our common stock) for an aggregate purchase price of $53,500. We paid a total of $272 in stock issuance costs.

Paycheck Protection Program Loan

On April 16, 2020, we entered into a Promissory Note with an aggregate principal amount of $5,032 (the “Note”) with Steans Bank, N.A. pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The proceeds gave us more time to observe financial market trends and assess the effects of the COVID-19 pandemic on the Company to determine the best course of action concerning financing the business. The Note matures two years from the disbursement date and bears interest at a rate of 1.000% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Subject to the terms and limitations of the PPP, the Note may be forgiven in whole or in part.

On June 29, 2020, we were notified by Stearns Bank, N.A. that the Note was transferred to The Loan Source Inc. (“the Lender”), who will be responsible for servicing the Note going forward, including administering loan forgiveness. We believe that we have used the entire amount of the Note to fund expenses eligible for forgiveness under the PPP, and on September 15, 2020, we filed our application for 100% forgiveness of the Note. Our application was reviewed by the Lender and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020. We have not received any notification from the SBA on the status of their review. Principal and interest payments can be deferred until the forgiveness process is completed as no payments would be required if the Note is forgiven.

Equity Distribution Agreement

On May 16, 2019, we entered into an Equity Distribution Agreement, whereby we may sell from time to time through Wells Fargo Securities, LLC, as our sales agent, our common stock having an aggregate offering price of up to $30,000. Wells Fargo Securities, LLC will receive from us a commission equal to 2.50% of the gross sales price per share of common stock for shares having an aggregate offering price of up to $10,000, and a commission of 2.25% of the gross sales price per share of common stock thereafter, for shares sold under the Equity Distribution Agreement. As of March 31, 2021, we had sold 498 shares at an average price of $46.36 under this Equity Distribution Agreement, totaling $23,067 of cash proceeds, less $544 of commissions and $645 of stock issuance costs. As of March 31, 2021, there is $6,932 available for future issuance under the Equity Distribution Agreement.

Shelf Registration

On June 5, 2020, we filed a new shelf registration statement on Form S-3, that included $49,265 of unsold securities from our prior shelf registration statement filed on May 26, 2017 that expired in June 2020. Under the new shelf registration statement, we may sell securities in one or more offerings up to $100,000. As of March 31, 2021, there is $97,892 available under the shelf registration. The new shelf registration statement will expire in July 2023.

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. The COVID-19 pandemic has created substantial uncertainty and volatility in the stock market, particularly in the small cap sector in which our stock is traded, and has negatively impacted our share price. These factors may inhibit our near-term ability to obtain financing.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

We are party to an operating lease for our facility in Beaverton, Oregon. As amended in July 2015, the term of this lease runs through March 2024, with remaining rent payments totaling $2,504, payable in monthly installments.

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 2020 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:

• our beliefs regarding the possible effects of the COVID-19 pandemic on general economic conditions, public health, and consumer demand, and the Company’s results of operations, liquidity, capital resources, and general performance in the future;

• the possible impact of COVID-19 on our ability to obtain financing through our Equity Distribution Agreement and the availability of any alternative sources of financing;

• the timing and potential for forgiveness of the Note under the terms of the PPP and the possible impact of any audit or review related to the Note;

• the potential impact of COVID-19 on projects with our Commercial customers and partners;

• the concentration of most of our revenue among few customers;

• and the trends and sources of future revenue;

• anticipated successful advocacy of our technology by our partners;

• our belief regarding the global deployment of our products;

• our beliefs regarding potential outcomes of participating in the AIM HolyGrail 2.0 initiative;

• our future level of investment in our business, including investment in research, development and engineering of products and technology, development of our intellectual property, sales growth initiatives and development of new market opportunities;

• anticipated expenses, costs, margins, provision for income taxes and investment activities in the foreseeable future;

• our assumptions and expectations related to stock awards;

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

• anticipated effect of our adoption of accounting pronouncements;

• our beliefs regarding our critical accounting policies;

• our expectations regarding the impact of accounting pronouncements issued but not yet adopted;

• anticipated revenue to be generated from current contracts, renewals, and as a result of new programs;

• our estimates, judgments and assumptions related to impairment testing;

• variability of contracted arrangements in response to changes in circumstances underlying the original contractual arrangements;

30

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

• the size and growth of our markets and our assumptions and beliefs related to those markets;

• the existence of international growth opportunities and our future investment in such opportunities;

• 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;

• the effect of computerized trading on our stock price;

• capital market conditions, our expectations regarding credit risk exposure, interest rate volatility and other limitations on the availability of capital, which could have an impact on our cost of capital and our ability to access the capital markets;

• 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;

• the strength of our competitive position and our ability to innovate and enhance our competitive differentiation;

• our beliefs related to our existing facilities;

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

• our beliefs related to our relationship with our employees and the effect of increasing diversity within our workforce;

• our beliefs regarding cybersecurity incidents;

• our beliefs related to certain provisions in our bylaws and articles of incorporation; 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 Part I, Item 1A. “Risk Factors” of our 2020 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 4. 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 month period ended March 31, 2021, 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. Legal Proceedings.

We are subject from time to time to legal proceedings and claims arising in the ordinary course of business. At this time, we do not believe that the resolution of any such matters will have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. 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 2020 Annual Report. The risks and uncertainties described in our 2020 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. As of March 31, 2021, there have been no material changes to the risk factors previously disclosed in our 2020 Annual Report.

Item 2. 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 tax liability in connection with the vesting of restricted shares.

The following table sets forth information regarding purchases of our equity securities during the three month period ended March 31, 2021:

							(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 (1)		share (1)		or programs		or programs
Month 1
January 1, 2021 to  January 31, 2021		—	$	—		—	$	—
Month 2
February 1, 2021 to February 28, 2021		19,644	$	44.36		—	$	—
Month 3
March 1, 2021 to March 31, 2021		—	$	—		—	$	—
Total		19,644	$	44.36		—	$	—

(1) Fully vested shares of common stock withheld (purchased) by us in satisfaction of required withholding tax liability upon vesting of restricted stock.

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Item 6. Exhibits.

Exhibit Number	Exhibit Description
10.1	Work Agreement, dated October 5, 2010, by and among Digimarc Corporation, Invention Law Group, P.C. and IV Digital Multimedia Inventions, LLC*
10.2	Separation Agreement and General Release, effective as of April 12, 2021, between Digimarc Corporation and Bruce Davis
10.3	Employment Agreement, effective as of April 12, 2021, between Digimarc Corporation and Riley McCormack
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
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
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Certain identified portions of this exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K.

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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: April 29, 2021	DIGIMARC CORPORATION
	By:	/s/ CHARLES BECK
		CHARLES BECK
		Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT HAS BEEN EXCLUDED AND REPLACED BY [**] BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.

AGREEMENT

This Agreement (“Agreement”)is entered into as of October 5, 2010 (the “Effective Date”) by and among Digimarc Corporation, an Oregon corporation, with an address at 9405 SW Gemini Drive, Beaverton, OR 97008 (“Digimarc”), Invention Law Group, P.C. (“ILG”) and IV Digital Multimedia Inventions, LLC (“DMI” and together with ILG, the “IV Entities”).

RECITALS

A.Digimarc is granting DMI an exclusive license (with a right to sublicense) to certain Digimarc patents and patent applications (the “Patents”) pursuant to a Patent License Agreement (the “PLA”), a Patent Rights Agreement (the “PRA”), a Common Interest Agreement (the “CIA”) and other Transaction Agreements, all of which are being entered into concurrently herewith.

B.As described more fully in the agreements referenced in Recital A above, the parties have a common financial interest concerning the Patent Matters.  Under this common interest, the parties have agreed to treat their communications and those of their Counsel concerning the Patent Matters as protected by the common interest privilege, subject to the limitations and exceptions in the CIA.  Advancing the Patent Matters requires the exchange of proprietary documents and information, the joint development of legal strategies and the exchange of attorney work product developed by the parties and their respective Counsel.  

C.The IV Entities and Digimarc now wish to enter into this Agreement to provide a framework whereby the IV Entities may engage Digimarc to provide certainwork of the nature described herein (and included in the definition of Patent Matters in the CIA), with particular engagements to be set forth in SOWs to be executed hereunder.  

NOW, THEREFORE, the parties hereby agree as follows:

1.DEFINITIONS  

Capitalized terms used but not defined in his Agreement will have the meaning assigned to them in the CIA, the PLA, the PRA or other Transaction Agreements.

“Confidential Information”means (a) any information, technical data, trade secrets or know-how, including, but not limited to, analyses, assessments, research and product plans, products, services, markets, developments, inventions, processes, formulas, technology, marketing, finances or other business information disclosed to or made available to Digimarc by the IV Entities or IV Affiliates in writing, orally, or otherwise, (b) any third parties’ confidential or proprietary information that is subject to a duty by the IV Entities or the IV Affiliates to maintain the confidentiality of such information, and (c) information related to the ownership or holding of any intellectual property rights, applications for such rights, or other assets reviewed as part of the Work, whether owned by the IV Entities or any of the IV Affiliates.

“Counsel” means duly licensed in-house or outside attorneys or patent agents as well as their paralegals and agents.

“Effective Date” means the date set forth as the Effective Date on the signature page of this Agreement.

“Invoices” means the statements that Digimarc submits to the IV Entities in accordance with subsection 5.1 below.

“IV Affiliates”means each entity in whatever country organized, that controls, is controlled by or is under common control with DMI, including without limitation the IV Entities.  The term “control” means possession,

direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise.

“SOW” means a written statement of work substantially in the form set forth on Exhibit A which (a) describes the work that Digimarc will perform, (b) includes the compensation to be paid to Digimarc in connection with such work, (c) is subject to the terms of this Agreement and (d) becomes effective upon execution by authorized representatives of each of the parties.  

“Term” shall have the meaning ascribed to such term in subsection 7.1.

“Work” means all work, whether involving the Patents or patents or patent applications owned by IV Affiliates other than the Patents, that is requested by an IV Entity and performed by Digimarc pursuant to a SOW.

“Work Material” means all notes, records, drawings, designs, inventions, improvements, developments, discoveries, copyrightable material, and trade secrets that are conceived, made or discovered by Digimarc in the course of Digimarc’s performance of the Work, solely or in collaboration with others, during the term of this Agreement.

2.WORK

2.1This Agreement establishes the basic framework for Digimarc to perform Work and for licensing of pre-existing licensees.  

2.2The Work is currently contemplated to include the following:

(a)Patent Prosecution Assistance.  Assistance in the prosecution of the Patents, including without limitation prosecution of pending applications; filing of non-provisional patent applications claiming priority over provisional patent applications; filing of continuations, continuations-in-part and divisional applications; filing of foreign applications and international and national phase PCT applications; certificates of correction and reissues; and assistance with respect to reexaminations and other matters (the “Prosecution Assistance”).  

ILG, not Digimarc, shall, at its sole and independent discretion, determine the effect of Digimarc’s Prosecution Assistance on ILG’s own actions concerning the Patents.  The IV Entities will be under no duty to accept or act upon any Prosecution Assistance provided by Digimarc.  All Prosecution Assistance shall be subject to the IV Entities’ own legal review of Digimarc’s activities, including the patentability of any invention conceived by Digimarc and the content of any document to be filed with the United States Patent and Trademark Office (“USPTO”).  The IV Entities shall serve as the representative before the USPTO concerning the prosecution of any of the Patents and the designated recipient of all correspondence from the USPTO concerning the Patents.

Digimarc shall bill the IV Entities for Group 1 Personnel Prosecution Assistance on an hourly basis according to the hourly rates set forth on Exhibit B (subject to modification pursuant to subsection 5.2), subject to the monthly fee cap provided in the SOW; provided, however, that the IV Entities may request flat-fee or alternative billing arrangements subject to agreement by Digimarc.

(b)Portfolio Monetization.  Certain work relating in general to monetization of the Patents, including without limitation technology consulting, portfolio mining, identification of evidence of use and assistance with preparation of claim charts, advice regarding industry and technological trends, valuation services, serving as expert witnesses and other matters.  The IV Entities may engage Digimarc for this and other portfolio monetization Work on a project basis from time-to-time.  Digimarc shall bill the IV Entities for portfolio monetization Work performed by the Group 1 Personnel on an hourly basis at the hourly rates set forth on Exhibit B (subject to modification pursuant to subsection 5.2); provided, however, that the IV Entities may request flat-fee or alternative billing arrangements subject to agreement by Digimarc.

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(c)Licensing Work.  Engagement of Digimarc as a licensing representative on behalf of one or more of the IV Entities or IV Affiliates.  The parties currently envision such Work will be in connection with the potential licensing of clients outside of the IV Entities’ target markets.  The terms of any such engagement will be determined at the time of such engagement and will be as set forth in the applicable SOW.

(d)Post-Closing Intake.  Digimarc hereby agrees to complete all action items enumerated on Schedule 2.2(d) of this Agreement.  Digimarc hereby agrees that it shall account for all time and expenses incurred for such work beginning with the date of this Agreement, and all such time and expenses shall be reflected on the Invoices for such work.  However, Digimarc agrees that [**] to the IV Entities under this Agreement, and Digimarc [**] for the cost of the [**] associated with the work under this subsection.

2.3  Digimarc Group 2 Personnel.  Upon request of the IV Entities in connection with the periodic work plan or various SOWs, Digimarc will dedicate Group 2 Personnel resources in a reasonable time, amount and manner in support of the common interest of the parties.   Such resources can be requested in support of the patent prosecution, portfolio monetization, licensing work or other activities under subsection 2.2.  Upon such request, Digimarc Group 2 Personnel, including such inventors of the Patents, engineers and technical experts as may reasonably be required, will be made available [**], subject to modifications pursuant to subsection 5.2.

2.4Licensing of Pre-Existing Licensees of the Patents.  

(a)The IV Entities hereby grant Digimarc exclusive authority [**] (the “Pre-Existing Customer Agreements”, and the other party to each such agreement, a “Pre-Existing Digimarc Customer”) upon the [**], or upon [**] such Pre-Existing Customer Agreement.  Digimarc hereby acknowledges and agrees that its authority [**].  

(b)The IV Entities authorize Digimarc to [**] of Pre-Existing Customer Agreements that [**], and [**] the IV Entities.   Digimarc shall not have any duty to [**] such other [**] with any of the IV Entities.  

(c)The IV Entities agree not to [**] in [**] with Digimarc’s authority under this subsection 2.4; provided that this shall not preclude the IV Entities or IV Affiliates from [**] that [**] with such Existing Customer Agreements.

(d)Each of Digimarc and the IV Entities agrees that, if either a Pre-Existing Digimarc Customer or a prospective licensing customer of the IV Entities requests [**], Digimarc and the IV Entities will negotiate and work together in good faith to consider such request; provided, however, that this provision shall not obligate either party to [**], at such party’s discretion.

3.PROCESS/STATEMENTS OF WORK

3.1ILG, on behalf of the IV Affiliates, may propose Work to be performed by means of one or more SOWs from time to time.  The terms of each SOW shall be subject to mutual agreement between the parties, provided that the billing terms for Work falling within one of the categories set forth in subsection 2.2 above shall be subject to the provisions of subsection 2.2 that apply to such category.  No SOW will be effective unless signed by both ILG and Digimarc.

3.2Work performed under this Agreement will be related to factual, technical and legal analyses conducted by attorneys of ILG on behalf of the IV Entities and/or IV Affiliates, and all direction on Work should be taken only from attorneys of ILG.  The Work undertaken by Digimarc shall be subject to attorney-client privilege on behalf of the applicable IV Affiliate, and additionally is part of and subject to ILG’s attorney work product immunity from production and disclosure.

3.3Except as otherwise agreed upon by the parties or specified in the SOW, Digimarc will perform the Work at Digimarc’s office, using Digimarc’s own equipment and supplies.  Nothing in this Agreement will in

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any way be construed to characterize Digimarc or its employees as employees, representatives or agents of any of the IV Entities or IV Affiliates, except as expressly set forth in an SOW in which Digimarc is engaged as a licensing representative on behalf of one or more of the IV Entities or IV Affiliates.  

Digimarc will indemnify and hold harmless the IV Entities, the IV Affiliates, and the directors, officers and employees of each of the IV Entities and IV Affiliates, from any losses, liabilities, damages, claims, payments, liens, judgments, demands, costs and expenses (including reasonable attorneys’ fees) arising out of (a) a determination by a court or agency that Digimarc or any of its employees or other agents are employees of any of the IV Entities or IV Affiliates; or (b) any breach of duty owed by Digimarc to a third party.

3.4Digimarc will use all reasonable efforts to avoid any legal or ethical conflict of interest in connection with its performance of the Work.  In the event that Digimarc becomes aware of any such conflict of interest, Digimarc will immediately disclose the conflict to the IV Entities and will use commercially reasonable efforts to resolve the conflict to the IV Entities’ satisfaction.

3.5Digimarc will, within ten (10) business days after receiving a request thereto from the IV Entities, provide a written progress report regarding Digimarc’s performance of the Work to the IV Entities.  Each such report shall be deemed to be Work Material.

3.6Within the first calendar quarter following the Effective Date, and at least twice each calendar year, representatives of the IV Entities and Digimarc shall meet to discuss potential new SOWs that may be entered into during such calendar year.  The IV Entities shall use commercially reasonable efforts to provide Digimarc with reasonable notice of any anticipated material changes in the Digimarc resources utilized to perform Work, and any cancellation of an SOW.  Notwithstanding the preceding sentence, however, the IV Entities may direct Digimarc to cease its performance of the Work under any particular SOW upon ten (10) business days’ prior written notice.  Unless prohibited by the IV Entities’ confidentiality obligations, such notice will specify the reasons for the direction to cease performance of the Work under the applicable SOW.

4.PERSONNEL

4.1The personnel furnished by Digimarc to perform Work under each SOW will continue to be employees of Digimarc, and will not for any purpose be considered employees of the IV Entities or of any IV Affiliates.  Digimarc will be solely responsible for the payment of the salaries of its employees and related matters (including the withholding or payment of all federal, state and local income and other payroll taxes), worker’s compensation, disability benefits and all additional legal requirements of like nature applicable to such personnel.

4.2Digimarc agrees to use commercially reasonable efforts to make available such employees that may be requested by the IV Entities with reasonable notice for any particular SOW; provided that, except as provided below and in subsection 4.3, Digimarc ultimately retains sole authority in the assignment of its personnel in the performance of Work.  Notwithstanding the preceding sentence, Digimarc may not remove key personnel identified as such for a particular SOW from performance of Work under such SOW after the parties have mutually agreed to such SOW without reasonable prior written notice to the IV Entities and the IV Entities’ prior written consent, except that the IV Entities’ prior written consent shall not be required if circumstances beyond Digimarc’s reasonable control (but excluding conflicting demands or priorities within Digimarc’s business) require that such key personnel be removed from performance of Work under such SOW.  In the event of any such removal of key personnel by Digimarc, the IV Entities may elect, in their sole discretion, to either terminate the SOW, or to request particular replacement personnel (which requests Digimarc will use reasonable efforts to accommodate).  

4.3Notwithstanding the first sentence of subsection 4.2, the IV Entities may require the removal of any Digimarc personnel from the performance of Work during the course of performing under any SOW, provided that (i) the IV Entities provide Digimarc with five (5) business days prior notice specifying the reasons for the IV Entities’ desire to remove such personnel, and (ii) Digimarc’s project manager for such SOW has been unable to resolve any specified problems to the IV Entities’ reasonable satisfaction.  

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4.4Digimarc agrees that it shall not subcontract the performance of any Work under this Agreement without the IV Entities’ prior written consent.

5.PaymenT, MINIMUM FEES, EXPENSES and TAXES

5.1The IV Entities will pay Digimarc the compensation and any expenses set forth in the applicable SOW, subject to any limits set forth in such SOW.  Except as otherwise set forth in the applicable SOW: (i) such compensation shall be billed at the hourly rates set forth on Exhibit B hereto (subject to modifications pursuant to subsection 5.2), and (ii) Digimarc will sign and submit Invoices to the representative of the IV Entities within thirty (30) calendar days after the end of each calendar month during the Term.  

Each such Invoice shall detail (a) the Work performed during such month, (b) the fees accrued (if any) pursuant to the SOW during such month, and (c) the expenses incurred (if any) by Digimarc in such month for which Digimarc is entitled to reimbursement pursuant to the SOW; provided, however, that the IV Entities shall not reimburse Digimarc for any expenses in excess of $2,500 in the aggregate under any particular SOW except as set forth in the SOW or otherwise pre-approved by the IV Entities’ representative in writing and documented to the IV Entities’ reasonable satisfaction.  Digimarc understands that Digimarc is otherwise expected to bear its own costs and expenses (including travel expenses) except as otherwise specified in the SOW or authorized in this paragraph.  

Except as otherwise specified in the applicable SOW, the IV Entities shall pay all undisputed Invoices within thirty (30) days after the representative of the IV Entities receives such Invoices.  In the event that the IV Entities fail to make payments more than sixty (60) days following receipt of an Invoice, upon the request of Digimarc, the IV Entities shall also pay interest on such overdue amount at a rate of 0.67% per month (or part thereof), or at such lower rate as may be the maximum rate allowed under applicable law.  All payments under this Agreement shall be in U.S. dollars.

5.2The hourly rates set forth in Exhibit B will remain valid throughout the remainder of 2010.  These hourly rates may be increased no more than once per calendar year, with any such increase to be effective on January 1 of such calendar year.  Any such increase shall not exceed the lesser of (i) the rate of increase determined mutually by Digimarc and the IV Entities based on the report customarily used by Digimarc for average rates of wage and benefits inflation or deflation for similar project work, and (ii) five percent (5%) above the prior year’s rates.  

5.3Digimarc shall be responsible for any tax obligations arising from any payment made to Digimarc under this Agreement. Digimarc is obligated to report as gross receipts and revenue all compensation received by Digimarc pursuant to this Agreement.

5.4 The IV Entities intend to engage Digimarc for a volume of Work, and Digimarc shall be available to perform such Work as specified pursuant to the periodic meetings between the parties held in accordance with subsection 3.6 and otherwise upon reasonable advance notice from the IV Entities, at a cost run rate of at least $800,000 per twelve-month period following the Effective Date of this Agreement during the Required Term (defined in subsection 7.1) based on the billing rates set forth on Exhibit B (subject to adjustment as provided in subsection 5.2).  

The IV Entities shall pay Digimarc for Work performed by Digimarc under each SOW as provided in subsection 5.1; provided, however, that the IV Entities shall pay Digimarc a minimum payment (net of any amounts paid under Invoices during such calendar quarter) of $100,000 per calendar quarter at least ten (10) business days prior to the end of each of the first three calendar quarters per twelve month period during the Required Term.  

In the event that the IV Entities have made payments under this Agreement of less than $800,000 during any twelve-month period during the Required Term, the IV Entities shall make a payment equal to $800,000, less the amount of all payments made under this Agreement during such twelve-month period (the “Year-End Payment”), to Digimarc at least ten (10) business days prior to the end of such twelve-month period.  

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In the event that the IV Entities are required to make a Year-End Payment, then the IV Entities shall receive a credit for the amount of the Year-End Payment that may be applied towards the cost of Work to be performed by Digimarc during the next twelve-month period (or, with respect to a Year-End Period made during the fifth year of the Required Term, for the twelve-month period following the expiration of the Required Term); provided, however, that such credit shall not exceed $100,000 for any given twelve-month period.  To the extent that the IV Entities make payments under this Agreement in excess of $800,000 during any twelve-month period during the Required Term (“Excess Payments”), the $800,000 payment obligation during the immediately subsequent twelve-month period shall be reduced by the amount of such Excess Payments.  All amounts paid by the IV Entities or by an IV Affiliate to Digimarc for any Work shall apply towards the minimum payment obligations provided for above.

In the event that Digimarc fails to comply with Section 6 with respect to Work provided hereunder, and Digimarc fails to remedy (in the IV Entities’ reasonable determination) the failure under this Agreement within the time period specified in Section 6, then the IV Entities will be entitled to a remedy as determined under subsection 12, where such remedy may include being relieved of all further obligations under this subsection 5.4.  

Unless terminated earlier under this subsection 5.4 or under Section 7, the IV Entities’ obligations under this subsection 5.4 will expire upon the earlier of (a) the date on which the cumulative total amount paid by the IV Entities and IV Affiliates to Digimarc pursuant to this Agreement exceeds Four Million Dollars ($4,000,000), or (b) the date that is five (5) years after the Effective Date (the “Required Term”), notwithstanding any extension of the term of this Agreement.  

6.DIGIMARC’S PERFORMANCE

Digimarc (as an Entity) warrants that the Work provided under this Agreement will substantially conform to the Work described, and the requirements and procedures set forth, in the applicable SOW, and will be performed in a timely and professionally diligent manner by qualified personnel as measured against the customary industry standards for such Work.  In the event the IV Entities are dissatisfied with any Work performed by Digimarc, the IV Entities may elect to provide written notice (which shall describe the nonconformity in reasonable detail) to Digimarc, in which case Digimarc shall have thirty (30) calendar days after receipt of such notice to correct the nonconformity and provide the revised Work Materials to the IV Entities.  

7.Term and Termination

7.1The term of this Agreement (the “Term”) will commence on the Effective Date and will remain in effect for the term of the PLA, unless otherwise terminated in accordance with this Section 7 or unless the term of this Agreement is extended by mutual written agreement of the parties.  In the event that the PLA is terminated, this Agreement shall automatically terminate concurrently with the termination of the PLA.  

7.2If either party breaches any of its material obligations under this Agreement (including without limitation Section 6) and fails to cure such breach within thirty (30) days after notice thereof from the non-breaching party, the non-breaching party will have the right to invoke arbitration under Section 12.2(a).  

7.3In the event of an Acquisition Transaction (as defined in the PLA) involving Digimarc, the IV Entities and Digimarc agree to negotiate in good faith regarding continuation of this Agreement, on the same or modified terms, following the completion of such Acquisition Transaction, provided that the continuation of this Agreement does not, in the reasonable determination of the IV Entities, present a business or legal conflict for the IV Entities.

7.4In the event that the Patent License Agreement is terminated as a result of a material breach by Digimarc of such agreement, the IV Entities shall be entitled to terminate this Agreement without further obligation under subsection 5.4.

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7.5Upon termination or expiration of this Agreement, all rights and duties of the parties hereunder will cease, except that:

(a) In the case of early termination under subsection 7.2 of the work under subsection 2.2, the IV Entities will be obligated to pay all undisputed Invoices, in accordance with Section 5 above, for Work performed prior to termination; provided, however, that the IV Entities shall have no obligation to pay such outstanding amounts if the IV Entities terminate this Agreement pursuant to subsection 7.2 above for Digimarc’s gross negligence or willful misconduct in the performance of the Work corresponding to the outstanding amounts.  

(b) In the case of such early termination for any other reason, the IV Entities shall not be obligated to pay any of the remaining unpaid Minimum Fees notwithstanding any other provision of this Agreement.

(c)  Sections 2.4, 8, 9, 10, 11 and 12 will survive any termination or expiration of this Agreement. Subsection 2.4 shall end on the termination or expiration of the Patent License Agreement.

8.Representations

8.1      Digimarc represents and warrants to the IV Entities as follows:

(i)Digimarc is an independent entity, and Digimarc’s personnel are not, and will not be deemed to be, employees or Counsel of any of the IV Entities or IV Affiliates.

(ii) Except as otherwise specified in a SOW, Digimarc has the right to perform the Work at any place or location and at such times as Digimarc may determine.  Digimarc is under no ethical or legal restrictions that would prohibit or restrict Digimarc’s right, power and authority to perform the Work.

(iii)Digimarc is responsible for paying all ordinary and necessary expenses of its staff, including, without limitation, insurance premiums.  Neither Digimarc nor Digimarc’s staff will require any training from the IV Entities in the professional skills necessary to perform the Work.

8.2  Each party represents and warrants that it was represented by independent counsel in the creation of this Agreement.

9.ATTORNEY-CLIENT RELATIONSHIP DISCLAIMER

Nothing in this Agreement, or in any other agreement or understanding between the parties, affects the separate and independent representation of each party by its respective Counsel or creates an attorney-client relationship between the Counsel for a party (or any of that party’s employees) and the other party to this Agreement.

The IV Entities acknowledge that Digimarc’s in-house Counsel may not engage in the practice of law on behalf of an entity other than Digimarc and acknowledge that no activities under this Agreement, or under any other agreement or understanding between the parties, shall be deemed legal representation by Digimarc or Digimarc’s in-house Counsel for the IV Entities.  

Each party hereby grants the other party and its Counsel the right to communicate with persons represented by each party’s Counsel.  

10.Confidentiality

10.1In addition to the terms and conditions of the Reciprocal Non-Disclosure Agreement dated July 13, 2009, as amended (“NDA”), which shall continue to apply to the parties hereto, Digimarc will not, during or subsequent to the Term, use Confidential Information for any purpose whatsoever other than the performance of the Work, and will not disclose Confidential Information to any third party.  Confidential Information will remain the sole property of the IV Entities and/or the IV Affiliates, as applicable.  Digimarc will take reasonable precautions to

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prevent any unauthorized disclosure of Confidential Information. Digimarc will safeguard Confidential Information by not:  

(a)disclosing to any third party in any way the results of any analysis prepared under this Agreement;

(b)marketing to any third party services to analyze any invention disclosures, patents, or patent applications that are analyzed or reviewed as part of the Work;

(c)preparing for any third party a defensive analysis of the patents reviewed as part of the Work;

(d)using Confidential Information learned as part of the Work to guide Digimarc’s or a third party’s intellectual property development or enforcement strategies;

(e)disclosing to any standards setting organization any information learned as part of the Work;

(f) disclosing the IV Entities’ or IV Affiliates’ connections to any of the patents reviewed by Digimarc in connection with the Work or disclosed to Digimarc by the IV Entities or IV Affiliates; or

(g)disclosing or permitting disclosure of any Confidential Information to any of Digimarc’s employees other than those that have a need to know in order to enable Digimarc to meet its obligations under the applicable SOW.  

10.2Digimarc will not improperly use or disclose to the IV Entities and the IV Affiliates any proprietary information or trade secrets of any former or current employer or other person or entity if Digimarc has an agreement or duty to keep such information confidential, and Digimarc will not bring onto the premises of the IV Entities or IV Affiliates any unpublished document or proprietary information belonging to such employer, person or entity unless consented to in writing by such employer, person or entity.  Digimarc will indemnify and hold harmless the IV Entities and IV Affiliates, their employees, executives, officers, representatives, agents, assigns, and their affiliates from and against all claims, liabilities, damages and expenses, including reasonable attorneys’ fees and costs of suit, arising out of or in connection with any violation or claimed violation by Digimarc, the IV Entities or an IV Affiliate of such third party’s rights.

10.3Digimarc's confidentiality obligations under this Section 10 shall not apply to the extent that: (a) the representative for the IV Entities preapproves such disclosure in writing; (b) disclosures are made in confidence to Digimarc's legal counsel, accountants, banks and financing sources and their advisors solely in connection with complying with Digimarc’s obligations under this Agreement; or (c) the Confidential Information to be disclosed has become publicly known through no wrongful act of Digimarc.  

Notwithstanding the foregoing, in the event that Digimarc is required by law or a valid and effective subpoena or order issued by either a court of competent jurisdiction or a governmental body to disclose any of the Confidential Information, Digimarc shall promptly notify the IV Entities in writing of the existence, terms, and circumstances surrounding such required disclosure so that the IV Entities or IV Affiliates may seek a protective order or other appropriate relief from the proper authority.  Digimarc shall cooperate with the IV Entities and/or the IV Affiliate(s), as applicable, in seeking such order or other relief.  If Digimarc is nonetheless required to disclose the Confidential Information, Digimarc may furnish only that portion of the Confidential Information that is legally required and will exercise all reasonable efforts to obtain reliable assurances that such Confidential Information will be treated confidentially to the fullest extent possible.

10.4Upon the termination or expiration of this Agreement, or upon the IV Entities’ request, Digimarc will deliver to the IV Entities all of the IV Entities’ and/or IV Affiliates’ property relating to, and all tangible embodiments of, Confidential Information.

11.OWNERSHIP OF WORK MATERIAL/INTELLECTUAL PROPERTY RIGHTS

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11.1 Digimarc acknowledges and agrees that, except as otherwise explicitly set forth in the applicable SOW, all Work Material is the sole property of the IV Entities.  To the fullest extent permitted under law, all Work Material will be deemed “Work for Hire” under the Copyright Act.  To the extent any Work Material is not “Work for Hire,” Digimarc hereby does and will assign (or cause to be assigned) fully to the IV Entities all Work Material and any copyrights, patents, mask work rights or other intellectual property rights relating thereto.  

11.2Except as otherwise explicitly set forth in the applicable SOW, for Work Material created by Group 2 Personnel in the course of Digimarc’s performance of the Work, the IV Entities grant to Digimarc a fully paid-up, royalty-free, non-exclusive, irrevocable, nonsublicensable, nontransferable (except as set forth in subsection 12.8) right and license, without geographic limitation, to the Work Material in order (a) to make, have made, use, lease, sell (or license, in the case of software), offer to sell, import or export any Digimarc Product, (b) to conduct Digimarc’s own research and development activities, and (c) to provide Digimarc Services to third parties.  

11.3Digimarc will sign, execute and acknowledge without cost, but at the expense of the IV Entities, such documents, and will perform such acts, as may be reasonably requested by the IV Entities to perfect the assignments set forth in subsection 11.1 above, or to obtain, enforce or defend intellectual property rights in any and all countries with respect to Work Material.  Digimarc shall have no right to prosecute and maintain patent applications and patents worldwide with respect to the Work Material.

11.4Upon the termination or expiration of this Agreement, or upon the IV Entities’ request, Digimarc will deliver to the IV Entities all Work Material in Digimarc’s possession or control. For Work Material created by Group 2 Personnel in the course of Digimarc’s performance of the Work, Digimarc shall also retain duplicates of the same.

12.GENERAL

12.1Governing Law. This Agreement will be governed by the laws of the State of Washington as applied without reference to conflicts of laws principles to the contrary.

12.2Dispute Resolution.  

(a)Arbitration.  Digimarc and the IV Entities agree that any dispute or controversy arising out of, in relation to, or in connection with this Agreement, or the making, interpretation, construction, performance or breach thereof, will be finally settled by binding arbitration in Seattle, Washington under the then current rules of Judicial Dispute Resolution by three (3) arbitrators appointed in accordance with such rules.  Once the arbitrators issue written findings of fact and conclusions of law, the decision of the arbitrators will be final, conclusive and binding on the parties to the arbitration.  Judgment may be entered on the arbitrators’ decision in any court of competent jurisdiction (provided that the arbitrators issued written findings of fact and conclusions of law as provided above).  Any provision of applicable law notwithstanding, no party will request, and the arbitrators will have no authority to award, punitive or exemplary damages against any party.  The costs of the arbitration, including administrative and arbitrator’s fees, will be shared equally by the parties.  Each party will bear the cost of its own attorneys’ fees and expert witness fees.

(b)Injunctive Relief.  Notwithstanding subsection 12.2(a) above, in addition to any other remedies available (including without limitation under subsection 12.2(a)), in the event of a breach of Sections 10 or 11, the nonbreaching party (or any IV Affiliate affected by the breach) will be entitled to seek injunctive relief in any court of competent jurisdiction.  A breach of Sections 10 or 11 may cause the nonbreaching party and any IV Affiliate affected by the breach irreparable harm and they may have no adequate remedy at law.  Therefore, the breaching party agrees that, in such an event, the nonbreaching party (and any IV Affiliate affected by the breach) would be entitled (in addition to any and all other remedies) to seek injunctive relief, specific performance, and other equitable remedies without proof of monetary damages or the inadequacy of other remedies.

12.3Notices.  Any notice will be given in writing at the address of each party set forth in the first paragraph of this Agreement, or to such other address as either party may substitute by written notice to the other in

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accordance with this subsection 12.3, and will be deemed given when delivered or, if delivery is not accomplished by reason or some fault of the addressee, when tendered.

12.4Entire Agreement.  This Agreement with its Exhibits, together with the CIA, PLA and the PRA, represent the entire agreement concerning the performance of the Work between Digimarc and the IV Entities and merges and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions.  Neither of the parties will be bound by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as expressly provided herein and/or in the CIA, PLA or PRA.  No oral explanation or oral information by either party hereto will alter the meaning or interpretation of this Agreement.  The terms and conditions of this Agreement will prevail notwithstanding any different, conflicting or additional terms and conditions that may appear on any letter, email or other communication or other writing not expressly incorporated into this Agreement.  

12.5No Third Party Beneficiaries.  This Agreement is not intended to confer any right or benefit on any third party (including, but not limited to, any employee or beneficiary of any party), and no action may be commenced or prosecuted against a party by any third party claiming as a third-party beneficiary of this Agreement or any of the transactions contemplated by this Agreement.  

12.6Amendments and Waivers.  This Agreement may not be amended or modified except by an instrument in writing signed by authorized representatives of both parties.  Waiver of any term or condition of this Agreement will only be effective if and to the extent documented in a writing signed by the party making or granting such waiver and will not be construed as a waiver of any subsequent breach or waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement.  The failure of any party to enforce any provision hereof will not be construed to be a waiver of the right of such party thereafter to enforce such provisions.

12.7No Partnership. The parties hereto are independent contractors.  Nothing in this Agreement will be construed to create a partnership, joint venture, franchise, fiduciary, employment or agency relationship between the parties.  Digimarc has no right, power or authority (express or implied) to enter into contract or to create any duty or obligation binding upon the IV Entities or the IV Affiliates.

12.8Assignment. The payment obligation of IV under subsection 5.4 of this Agreement may not be assigned or transferred by Digimarc without the express written consent of the IV Entities, subject to the “good faith” obligation in subsection 7.3.  Digimarc may not assign the remaining terms of this Agreement or its rights hereunder, including by operation of law, without the prior written consent of the IV Entities except in conjunction with an assignment by Digimarc of the Patent License Agreement and/or its rights thereunder that is permitted by subsection 11.3 of such Patent License Agreement.

The IV Entities may assign this Agreement or any or all of its rights and obligations hereunder to any IV Affiliate or to an unaffiliated third party that is managed and controlled by representatives of the IV Entities; provided, that such assignment shall not release the IV Entities from their payment obligations under this Agreement.

12.9Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision, provided that no such severability will be effective if it materially changes the economic benefit of this Agreement to the IV Entities or Digimarc.

12.10Counterparts. This Agreement may be executed in counterpart, each of which will be deemed an original, but both of which together will constitute one and the same instrument.  Each party will execute and promptly deliver to the other parties a copy of this Agreement bearing an original signature.  Prior to such delivery, in order to expedite the process of entering into this Agreement, the parties acknowledge that a Transmitted Copy of this Agreement will be deemed an original document.  “Transmitted Copy” means a copy bearing a signature of a party that is reproduced or transmitted via email of a .pdf file, photocopy, facsimile, or other process of complete and accurate reproduction and transmission.

--

In witness whereof, intending to be legally bound, the parties have executed this Agreement as of the Effective Date.

DIGIMARC:

Digimarc Corporation

By:   /s/ Bruce Davis
Bruce Davis
Chairman and CEO

Date: October 5, 2010

THE IV ENTITIES:

Invention Law Group, P.C.

By:   /s/ John Bove

John Bove

President

Date: October 5, 2010

IV Digital Multimedia Inventions, LLC

By:   /s/ Vincent Pluvinage

Vincent Pluvinage

Authorized Person

Date: October 5, 2010

[Signature Page to Work Agreement]

EXHIBIT A

STATEMENT OF WORK

<<TBD>>

EXHIBIT B*

Hourly Rates for 2010

Group 1 Personnel

Vice President, Intellectual Property $[**]

Chief Patent Counsel $[**]

Senior Intellectual Property Counsel $[**]

Senior Director, Licensing $[**]

Intellectual Property Counsel $[**]

Attorney $[**]

Senior Intellectual Property Paralegal $[**]

Paralegal $[**]

Group 2 Personnel

Position	Cost	Rate
Vice President	$[**]	$[**]
Founder/Inventor	$[**]	$[**]
Director	$[**]	$[**]
Program Manager	$[**]	$[**]
Engineering Manager	$[**]	$[**]
Engineer – R&D	$[**]	$[**]
Engineer – Hardware	$[**]	$[**]
Engineer – Software	$[**]	$[**]
QA Manager	$[**]	$[**]
Engineer – QA	$[**]	$[**]
Technical Writer	$[**]	$[**]
Product/Other	$[**]	$[**]
Technical Operator	$[**]	$[**]

* Unless otherwise set forth in a written agreement signed by the parties, executive level assistance will [**] will be made reasonably available to assist for [**] in support of the Patent License Agreement.

152080669.1

EX-10.2

Exhibit 10.2

SEPARATION AGREEMENT AND GENERAL RELEASE

ThisSEPARATIONAGREEMENTANDGENERALRELEASE(this

“Agreement”) is entered into between Bruce Davis (the “Executive”) and Digimarc Corporation (“Digimarc,” or the “Company”), and is effective as of April 12, 2021. The Company and Executive shall each be referred to in this Agreement as a “Party,” and collectively as the “Parties.”

WHEREAS, Executive has been employed by the Company as Chief Executive Officer pursuant to that certain Employment Agreement effective as of August 10, 2020 (the “Employment Agreement”);

WHEREAS, Executive has communicated to the Board of Directors of the Company (the “Board”) his intention to resign his employment and the Board has determined to accept such resignation;

WHEREAS, Executive holds 171,668 unvested options to purchase shares of the Company’s common stock subject to the terms of the Company’s 2018 Incentive Plan (the “Options”), 45,000 unvested restricted share units subject to the terms of the Company’s 2018 Incentive Plan (the “RSUs”), and 123,669 unvested performance-based restricted stock units subject to the terms of the Company’s 2018 Incentive Plan (the “PRSUs”);

WHEREAS, the Company wishes to express its appreciation for Executive’s service and provide certain separation benefits in exchange for Executive’s promises and covenants set forth herein; and

WHEREAS, the Executive and the Company wish to resolve all matters related to Executive’s employment with the Company and the cessation thereof, on the terms and conditions expressed in this Agreement.

NOW THEREFORE, in consideration of the mutual promises contained herein, the Parties, intending to be legally bound, agree as follows:

1.Resignation; Consulting Services. Executive’s resignation of his employment with Digimarc shall be effective on April 12, 2021 (the “Separation Date”). Effective on the Separation Date, Executive shall be deemed to have resigned from all positions, roles, titles or offices held by Executive, including, without limitation, Executive’s position as a Director and Chairman of the Board, and Executive shall cooperate with any reasonable requests from the Company to effectuate or document the same. In consideration of payments and benefits provided for in this Agreement, from the time commencing upon SeparationDateandconcludingonAugust10,2023,Executiveagreesthatheshallprovide advisory and consulting services as the Company may request from time to time, without additional compensation, it being understood that such services shall generally not exceed ten (10) hours per month and that the consideration provided under this Agreement is adequate compensation for all such services (the “Consulting Services”). Executive may beprovidedwithconfidentialand/orproprietaryinformationoftheCompanyinthecourse

of providing the Consulting Services and agrees that, notwithstanding the termination of hisemployment,heshallbeboundtotreatanyconfidentialand/orproprietaryinformation of the Company that he may learn in the course of providing the Consulting Services as strictlyconfidentialinaccordancewiththetermssetforthinSection9oftheEmployment Agreement. In connection with the Consulting Services, Executive’s sole point of contact at the Company will be its Chief Executive Officer (or their designee). Subject to the exceptions set forth in Section 14, Executive will not discuss substantive business matters of Digimarc with anyone other than the Chief Executive Officer (or their designee) unless expresslyrequestedbytheChiefExecutiveOfficer(ortheirdesignee);provided,however, that the Parties recognize that Executive’s son is employed by the Company and it shall not be a breach of this obligation if Executive discusses his son’s career with his son or others. For the avoidance of doubt, the Company and Executive agree that Executiveshall not be required to perform the Consulting Services in a manner which would result in Executive not incurring a “separation from service” within the meaning of Section 409A of the Internal Revenue Code on the SeparationDate.

2.Unconditional Obligations. The Company and Executive acknowledge that, regardlessofwhetherheacceptsthisAgreement,Executiveshallbepaidhissalarythrough the Separation Date and he shall be entitled to reimbursement of any business expenses through the Separation Date, if any, that shall be submitted and paid in accordance with Digimarc business expense reimbursement policies. Executive acknowledges that he is not entitled to FTO payout under Digimarc’s applicable policies. Executive further acknowledges that he shall receive notice under separate cover concerning his right to continue his insurance coverage pursuant to COBRA and that he is solely responsible for electing or declining such coverage and paying the applicable premiums to secure such coverage.

3.Consideration to Executive. Provided that Executive accepts and executes this Agreement, complies with its terms, and executes and does not revoke the Supplemental ReleaseattachedheretoasExhibitA(the“SupplementalRelease”)withinthetimeperiods specified therein, the Company will provide Executive with the following payments and benefits:

a) a series of severance payments in the total gross amount of One Million Eight- Hundred Thirty-One Thousand Six-Hundred Sixty-Seven Dollars ($1,831,667.00), less required withholdings and deductions, payable in equal installmentsoverthecourseoftheperiodbeginningontheSeparationDateand concluding on August 10, 2023, on the Company’s regular payroll dates following the Separation Date; provided, however, that the first such payment shall be made on the first administratively practicable payroll date following the Effective Date of the Supplemental Release and shall include all amounts payableduringtheperiodaftertheSeparationDateandthroughthedateofsuch firstpayment;

b) provided that Executive timely and properly elects continuation coverage (for himself and his spouse) under the Company’s group health plan(s) pursuant to COBRA,theCompanyshallreimburseExecutiveforhispaymentofpremiums

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for such coverage for a period of twenty-four (24) months followingthe SeparationDateoruntilExecutiveisnolongerentitledtoCOBRAcontinuation coverage under Digimarc’s group health plan(s), whichever period is shorter; provided,however,thatExecutiveacknowledgesandagreesthattheelectionof COBRA continuation coverage and the payment of any premiums due with respect to such COBRA continuation coverage shall remain Executive’s sole responsibility,andtheCompanyshallassumenoobligationforpaymentofany such premiums relating to such COBRA continuation coverage, unless otherwise required under applicablelaw;

c) to the extent that Executive has secured COBRA coverage following the Separation Date but becomes ineligible to participate in COBRA continuation coverage prior to the second anniversary of the Separation Date, the Company shallmakeaseriesofmonthlypaymentstoExecutivefromthedateofcessation of such coverage through the second anniversary of the Separation Date, each of which shall be in the gross amount of the last monthly COBRA premium reimbursed by the Company, less applicable taxes and withholdings, without any requirement that Executive secure other insurancecoverage;

d) provided that Executive, no later than January 31 immediately following the end of the calendar year in which Executive pays the applicable premium, requests reimbursement and provides Digimarc with evidence reasonably satisfactory to Digimarc of the amount of the premium and the fact of his paymentofthesame,theCompanyshallreimburseExecutiveforpremiumsfor coverageunderhisexistingtermlifeinsurancepolicy(withadeathbenefitof

$3,000,000)or,ifsuchcoverageisunavailable,forothercoverageobtainedby Executive with equivalent premiums, through August 10, 2023, it being understood that any tax withholding obligations that may arise out of such reimbursementshallbedeductedfromExecutive’sseverancepaymentspayable under this Agreement;and

e) notwithstandinghisresignationofemployment,136,668oftheOptions,30,000 of the RSUs, and 82,446 of the PRSUs shall vest and become exercisable on the Effective Date of the Supplemental Release; for the avoidance of doubt, all other unvested Options, unvested RSUs, unvested PRSUs and any other unvested awards shall be forfeited in connection with Executive’s resignation; fortheavoidanceofdoubt,Executive’svestedOptions,vestedRSUsandvested PRSUs are unaffected by this Agreement, except as set forth in Section 3(f) below;and

f) Executive’s right to exercise vested stock options will expire on the earliestof

(i)August 10, 2023, (ii) the latest date the particular option could haveexpired by its original terms under any circumstances, and (iii) the tenth anniversaryof the original date of grant of the particularoption.

Executive acknowledges that all payments to him pursuant to this Agreement shall be subject to all applicable taxes and withholdings and reported on a Form W-2. With

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respect to required tax withholding for RSUs, PRSUs and options, the Company may withhold appropriate amounts from Executive’s severance payments under this Agreement, require Executive to pay to the Company such amounts, or withhold a number of shares with a value equal to the tax withholding amount, which value will (a) for purposes of RSUs and PRSUs be based on the closing price of the Company’s shares on the Effective Date of the Supplemental Release, and (b) for purposes of options, be based on the Fair Market Value (as defined in the Company’s 2018 Incentive Plan) of a share on the exercise date. For the avoidance of doubt, and without limiting any other remedy that may be available to the Company, Executive acknowledges that if he breaches any of his obligations set forth in Sections 1, 9, 10, 11, 12 or 13 of this Agreement, the Company’s obligation to provide the payments and benefits set forth above shall cease immediately and Executive shall not be entitled to receive any payments or benefits not already paid to him.

4.Exercise of Options. Executive agrees that his exercise of any vested options in the Company’s shares hereafter shall be effected on a net share settlement basis, such that the number of shares issued to Executive in connection with his exercise of the particular option will be reduced by the Company’s retention of a portion of such shares and Executive will receive a net number of shares that is equal to (x) the number of shares as to which the particular option is being exercised minus (y) the quotient (rounded down to the nearest whole number) of the aggregate exercise price of the shares being exercised divided by the Fair Market Value (as defined in the Company’s 2018 Incentive Plan) of one share on the exercise date. Further, the number of shares covered by clause (y) willbe retained by the Company and not delivered to Executive, no fractional shares will be created as a result of such exercise, and Executive must contemporaneously pay for any portion of the aggregate exercise price that is not covered by the shares retained by the Company under clause (y) and all applicable withholding taxes. For the avoidance of doubt,anyexerciseofoptionsshallremainsubjecttotheothertermsandconditionsofthe governing plan document, including those provisions addressing tax withholding obligations.

5.AffirmationbyEmployee.ExecutiveaffirmsthatasofthedateofthisAgreement, he has been paid and/or has received all leave (paid or unpaid); compensation, wages, bonuses, and/or commissions, including for all hours of work, including any and all overtimehoursworked;and/orbenefitstowhichhemaybeentitled,andthatnootherleave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to Executive, except as provided in this Agreement. Executive further affirms that he hasno known workplace injuries or occupational diseases and has been provided and/or has not beendeniedanyleavetowhichExecutivewasentitledundertheFamilyandMedicalLeave Act or related state or local laws. Executive further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by the Company or its officers, including any allegations of corporate fraud. Executive further affirms that he has not raised any claim the factual foundation for which involvesdiscrimination.

6.No Initiated Claims. Executive represents that he has not filed any claims or charges against Digimarc with any court or with the Equal Employment Opportunity Commission,theNationalLaborRelationsBoard,theOccupationalSafetyandHealth

4

 

Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). Executive further representshehasnotassignedtoanythirdpartytherighttobringaclaimorchargeagainst DigimarcwithanyGovernmentalAgenciesorcourt.Executivewaivesanyrighttorecover damages from any claims or litigation asserted by any third party as consideration for the Separation Pay and other benefits provided in this Agreement. This Agreement does not prohibit Executive from filing for unemployment benefits nor does it interfere with Executive’s rights under Sections 7 and 8 of the National Labor Relations Act. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge with or participating in any investigation or proceeding conducted by any Government Agencies, including providing documents or other information without notice to Digimarc. This Agreement does not limit Executive’s right to receive an award for information provided to any GovernmentAgencies.

7.Release of Claims. Executive waives any legal rights and releases and forever discharges Digimarc, and all affiliated and/or related entities of Digimarc, including, but not limited to, each of Digimarc’s shareholders, directors, officers, agents, trustees, employees, attorneys, successors, and assigns (“Digimarc Releasees”), from any and all liability, demands, claims, suits, actions, charges, damages, judgments, levies or executions, damages, whether known or unknown, liquidated, fixed, contingent, direct or indirect,whichhavebeen,couldhavebeenorcouldberaisedorbroughtbyExecutivethat related to any matter whatsoever at any time before, and including, the execution of this Agreement (“Claims”). This release includes, but is not limited to, any and all Claims arising out of or related to Executive’s employment with, or separation of employment from, Digimarc; all contractual rights and obligations, including, without limitation, any Claims under the Employment Agreement; all Claims arising under any state or federal law,including,withoutlimitation,anyClaimspertainingtodiscriminationinemployment, wageandhour,ORSChapter659and659A,TitleVIIoftheCivilRightsActof1964,the Americans with Disabilities Act of 1990, the Post Civil War Civil Rights Acts (42 USC Sections 1981-1988), the Rehabilitation Act of 1973, the Equal Pay Act of 1963, the Fair Labor Standards Act, ORS Chapters 652 and 653, Oregon Family Medical Leave Act, the federal Family  Medical  Leave  Act,  the  National  Labor  Relations  Act,  the  EmployeeRetirementIncomeSecurityAct,allasamended,andanyregulationsundersuch authorities; and any Claim arising under any tort or other common law theories, including Claims related to Digimarc’s negligence. Notwithstanding anything in this Agreement to the contrary, Executive does not waive any rights Executive may have (i) underCOBRA;

(i)to Executive’s own vested accrued employee benefits under the Company’s health, welfare,orretirementbenefitplansasofthelastdateofemployment;(iii)tobenefitsand/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (iv) to pursue claims which by law cannot be waived by signing this Agreement and/or which may arise after the execution of this Agreement; and/or (v) to enforce this Agreement or to enforce his rights related to his stock, options, RSUs, or PRSUs consistent with this Agreement. In signing this Agreement, Executive acknowledges and intends that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. Executive expressly consents that this Agreementshallbegivenfullforceandeffectaccordingtoeachandallofitsexpressterms andprovisions,includingthoserelatingtounknownandunsuspectedclaims

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(notwithstanding any state or local statute that expressly limits the effectiveness of an agreement of unknown, unsuspected and unanticipated claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied. Executive acknowledges that he may hereafter discover claims or facts in addition to or different than those which henowknowsorbelievestoexistwithrespecttothesubjectmatterofthereleasesetforth above and which, if known or suspected at the time of entering into this Agreement, may have materially affected this Agreement and his decision to enter into it. Executive acknowledges and agrees that this waiver is an essential and material term of this AgreementandthatwithoutsuchwaivertheCompanywouldnothaveagreedtotheterms of thisAgreement.

8.No Admissions; Continuation of D&O Coverage. This Agreement shall not be construed as an admission by Digimarc or any Digimarc Releasees that they acted wrongfully with respect to Executive or as an admission by Executive of any misconduct or impropriety. It simply reflects the Parties’ desire to end their employment relationship in a business-like fashion. The Company represents and warrants that the Board is not aware of any facts or circumstances that would give rise to any claims against Executive. Digimarc agrees to maintain Directors and Officers insurance for Executive, in substantially the same form provided for current directors and officers, for any and all claims that have arisen or may arise out of related in any way to Executive’semployment, termination of employment (including but not limited to this Separation Agreement and the Supplemental Release) or service as an officer or director ofDigimarc.

9.Return of Property. Executive agrees that, within three (3) business days of a written request from the Company’s Chief Executive Officer, he shall return all of the Company’s property in his possession, including, without limitation, electronically-stored information or data, reports, customer lists, files, memoranda, records, credit cards, keys, passwords, computers, software, telecommunication equipment, and other physical or personal property that Executive received, prepared, or helped prepare in connection with Executive’s employment. Executive agrees that, in the event that Executive subsequently discovers any Company property in Executive’s possession, Executive will promptly return such property to the Company (or its designee). Notwithstanding the foregoing, Executive shall be permitted to retain the computer monitors and computer docking equipment in his possession together with his cellular phone and its phone number (after complying with any reasonable procedures directed by the Company to remove company data), with any tax withholding obligation arising out of his retention of such property to bewithheldfromtheseverancepaymentspayabletohimunderthisAgreement;provided, however,fortheavoidanceofdoubt,thatExecutiveshallreturnhisCompanylaptoptothe Company within three (3) business days of a written request from the Company’s Chief Executive Officer, while preserving all Company informationtherein.

10.Cooperation. Executive agrees to make himself reasonably available to, and to cooperatewiththeCompanyin,anyinternalinvestigationoradministrative,regulatory,or judicialinquiry,investigation,proceedingorarbitration.Executiveunderstandsandagrees that his reasonable cooperation includes, but is not limited to, making himself available to the Company upon reasonable notice for interviews and factual investigations; appearing attheCompany’srequesttogivetestimonywithoutrequiringserviceofasubpoenaor

6

 

other legal process; volunteering to the Company pertinent information; and turning over allrelevantdocumentswhichareormaycomeintohispossession.Theterm“cooperation” does not mean that Executive must provide information that is favorable to the Company; it means only that Executive will provide truthful information within his knowledge and possessionuponrequestoftheCompany.Executiveunderstandsthat,iftheCompanyasks for his cooperation in accordance with this provision, or he is required to participate in an administrative or legal proceeding or arbitration related to matters within the scope of his employment at the Company, the Company will reimburse him for reasonable travel expenses provided that Executive submits to the Company appropriate documentation of such expenses within thirty (30) calendar days after such expenses are incurred (provided that such proceeding was not initiated by Executive and does not otherwise concern any claims by Executive against the Company or any DigimarcReleasees).

11.Reaffirmation of Confidentiality Obligations and Restrictive Covenants. Executive reaffirms his obligations under the Section 8 of the Employment Agreement, including his obligations of confidentiality and non-competition, represents and warrants that he has not breached the same, and understands that such obligations continue after terminationofemploymentandexecutionofthisAgreement.ThePartiesincorporatesuch obligations into this Agreement as if fully set forth herein and acknowledge that Executive’s breach of those obligations shall constitute a breach of thisAgreement.

12.Intellectual Property. Executive reaffirms his obligations under that certain Proprietary Information Agreement between Executive and the Company, and represents andwarrantsthathehasnotbreachedthesame.ConsistentwithExecutive’scommitments thereunder, Executive agrees to cooperate with the Company to execute documents or otherwise provide any reasonable assistance requested by the Company to perfect his assignment of any intellectual property rights in favor of theCompany.

13.Non-Disparagement. Subject to the exceptions set forth in Section 14 of this Agreement, Executive agrees that he will not make any statement to any third party thatis intended to or is reasonably likely to disparage, slander or otherwise damage the business reputation of the Company or any of the Digimarc Releasees. The Company agrees that it shall instruct its directors and officers not to make any statements concerning Executive that are intended to or are reasonably likely to disparage, slander or otherwise damage the business reputation of the Executive, other than statements to any Government Agencies. Nothing in this section shall prevent any person from testifying truthfully in response to a subpoena, in response to a request from a government agency, or as otherwise requiredby law.

14.Exceptions. Executive acknowledges and agrees that nothing in this Agreementor in any agreement between him and the Company prohibits or limits him (or his attorney) frominitiatingcommunicationsdirectlywith,respondingtoanyinquiryfrom,volunteering information to, or providing testimony before the Securities and Exchange Commission (SEC), the Department of Justice, any regulatory or self-regulatory organization, or any other governmental, law enforcement, or regulatory authority, regarding this Agreement and its underlying facts and circumstances, or any reporting of, investigation into, or proceedingregardingsuspectedviolationsoflaw,andthatheisnotrequiredtoadviseor

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seekpermissionfromtheCompanybeforeengaginginanysuchactivity.Executivefurther acknowledges that, in connection with any such activity, he must inform such authority of the confidential nature of any confidential information that he provides, and that he is not permitted to disclose any information that is protected by the attorney-client privilege or anyotherprivilegebelongingtotheCompany,astheCompanydoesnotwaiveandintends to preserve such privileges. Executive is hereby notified that, pursuant to federal law (the DefendTradeSecretsAct),anindividual,shallnotbeheldcriminallyorcivillyliableunder any federal or state trade secret law for the disclosure of a trade secret that is (i) made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law;or(ii)madeinacomplaintorotherdocumentfiledinalawsuitorotherproceedingif suchfilingismadeunderseal.Further,nothinginthisAgreementshallrestrictExecutive’s communications with his immediate family members, tax and financial advisors, and/or attorneys.

15.Voluntary Agreement. Executive acknowledges that Executive is signing voluntarilyafterhavingreadallthecontentsofthisAgreementandhashadtheopportunity to consult with and be represented by Executive’s attorney. Executive further acknowledges that Executive understands the terms and conditions of thisAgreement.

16.Governing Law. This Agreement is governed in all respects by the internal, substantive laws of the State of Oregon, without regard to choice of lawprinciples.

17.Arbitration/Waiver of Jury Trial. Digimarc and Executive agree that any disputesarisingoutoforrelatingtothisAgreementshallberesolvedsolelyandexclusively by final, binding and confidential arbitration in Washington County, Oregon, before a singlearbitratorpursuanttotherulesoftheAmericanArbitrationAssociationandthatsuch claims shall not be brought in court. Notwithstanding the foregoing, the following claims shall not be subject to this arbitration agreement: claims for workers’ compensation benefits, claims for unemployment insurance benefits, claims by the Company for temporary injunctive relief, and any claims that are not arbitrable pursuant to any statute, rule or regulation forbidding pre-dispute arbitration agreements with respect tosuch claims. The costs of arbitration shall be borne equally by each party to the dispute and each party shall be responsible for their own legal and professional fees and expenses incurred during such dispute; provided, however, that if the Company ceases or withholds payments under this Agreement claiming a breach of Executive’s non-disparagement obligations under Section 13 of this Agreement and, after Executive initiates a claim for such payments, the arbitrator determines, in a reasoned award, that Executive did not breachsuchobligationsandisotherwiseentitledtosuchpayments,thenthearbitratorshall award Executive his reasonable attorneys’ fees and costs incurred in recovering such payments. To the extent applicable, each party hereby consents to the jurisdiction of the statecourtsof,andthefederalcourtsencompassing,WashingtonCounty,Oregon,andeach partywaivestherighttoatrialbyjuryforanyaction,suitorproceedingbroughttoenforce this agreement or an arbitration award rendered pursuant to this arbitrationclause.

18.Section 409A. Digimarc makes no representations or warranties to Executivewith respect to any tax, economic or legal consequences of this Agreement or any paymentsor

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otherbenefitsprovidedhereunder,includingwithoutlimitationunderCodeSection409A, andnoprovisionoftheAgreementshallbeinterpretedorconstruedtotransferanyliability for failure to comply with Code Section 409A from Executive or any other individual to Digimarcoranyofitsaffiliates.Executive,byexecutingthisAgreement,shallbedeemed to have waived any claim against Digimarc and its affiliates with respect to any such tax, economic or legal consequences. However, the parties intend that this Agreement and the paymentsandotherbenefitsprovidedhereunderbeexemptfromtherequirementsofCode Section409Atothemaximumextentpossible,whetherpursuanttotheshort-termdeferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A- 1(b)(9)(iii),orotherwise.TotheextentCodeSection409AisapplicabletothisAgreement (and such payments and benefits), the parties intend that this Agreement (and such payments and benefits) comply with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. Notwithstanding any provision of this Agreementtothecontrary,thisAgreementshallbeinterpreted,operatedandadministered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any provision of this Agreement to the contrary, with respect to any payments and benefits under this Agreement to which Code Section 409A applies, all references in this Agreement to the termination of Executive's employmentare intended to mean Executive's "separation from service," within the meaning of Code Section 409A(a)(2)(A)(i). In addition, if Executive is a "specified employee," within the meaning of Code Section 409A(a)(2)(B)(i), at the time of his "separation from service," withinthemeaningofCodeSection409A(a)(2)(A)(i),thentotheextentnecessarytoavoid subjecting Executive to the imposition of any additional tax under Code Section 409A, amounts that would otherwise be payable under this Agreement during the six-month period immediately following Executive's "separation from service," shall not be paid to Executive during such period, but shall instead be accumulated and paid to Executive (or, in the event of Executive's death, Executive's estate) in a lump sum on the first business day  following  the  date  that  is  six  months  after  Executive's  separation  from   service.Moreover, the parties intend that this Agreement be deemed to be amended to the extent necessary to comply with the requirements of Code Section 409A and to avoid or mitigate the imposition of additional taxes under Code Section 409A, while preserving to the maximum extent possible the essential economics of Executive's rights under the Agreement. For purposes of Section 409A, the right to a series of installment payments underthisAgreementshallbetreatedasarighttoaseriesofseparateanddistinctpayments

19.Severability. If any portion of this Agreement is held to be invalid or unenforceableforanyreason,theremainingcovenantsshallremaininfullforceandeffect to the maximum extent permitted bylaw.

20.Complete Agreement. This Agreement represents and contains the entire understanding between the Parties in connection with its subject matter. Executive acknowledges that in signing this Agreement, Executive has not relied upon any representationorstatementnotsetforthinthisAgreementmadebyDigimarcoranyofits representatives. The Company makes no representations regarding its relationship with or obligations to Executive, or as to the tax consequences of Employee’s entering into this Agreement,andnoneitmayhavemadeinthepastsurvive,exceptasexpresslysetforthin

9

 

this Agreement. Employee expressly agrees that the Company shall have no liability to him for any tax or penalty imposed on him as a result of this Agreement. This Agreement supersedesanypriorwrittenororalagreementsorunderstandings,exceptthatExecutive’s obligations under Section 9 of the Employment Agreement survive and are incorporated herein, as described in Section 11 of thisAgreement.

21.Modification. This Agreement may not be modified or discharged, in whole or in part,andnoprovisionhereofmaybewaived,exceptinwriting.Nowaiverofanyprovision on a particular occasion will affect the enforceability of such provision on subsequent occasions, and no waiver of any particular provision will affect the enforceability of any other provision.

IN WITNESS WHEREOF, the parties have executed this Separation Agreement and General Release on this 12th day of April, 2021.

DIGIMARC CORPORATION

    /s/ Robert Chamness

By: Robert P. Chamness

Title: EVP, Chief Legal Officer and Secretary

BRUCE DAVIS

    /s/ Bruce Davis

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EXHIBIT A

SUPPLEMENTAL RELEASE

Byhissignaturebelow,BruceDavis(“Executive”)herebyreleasesandforeverdischarges asofthedatehereofDigimarcCorporationandtheDigimarcReleaseesassetforthherein. Capitalized undefined terms used in this Supplemental Release shall have the meaning ascribedtothemintheSeparationAgreementandGeneralReleasebetweenExecutiveand the Company (the “Separation Agreement”). The Digimarc Releasees are intended to be third-partybeneficiariesofthisSupplementalRelease,andthisSupplementalReleasemay be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Digimarc Releasees hereunder. Executive agrees asfollows:

1.Executive understands that the payments or benefits to be paid or granted to him under the Separation Agreement represent, in part, consideration for signing this Supplemental Release, and are not salary, wages or benefits to which he was already entitled. Executive understands and agrees that he will not be eligible to receive any payments specified in Section 3 of the Separation Agreement unless he executes this SupplementalReleaseaftertheSeparationDateandonorbeforeMay4,2021,anddoes not revoke this Supplemental Release (as describedherein).

2.By his signature below, Executive waives any legal rights and releases and forever discharges Digimarc and the Digimarc Releasees, from any and all liability, demands, claims, suits, actions, charges, damages, judgments, levies or executions, damages, whether known or unknown, liquidated, fixed, contingent, direct or indirect, which have been, could have been or could be raised or brought by Executive that related to any matter whatsoever at any time before, and including, the execution of this Supplemental Release (“Claims”). This release includes, but is not limited to, any and all Claims arising out of or related to Executive’s employment with, or separation of employment from, Digimarc; all contractual rights and obligations, including, without limitation, any Claims under the Employment Agreement; all Claims arising under any state or federal law, including, without limitation, any Claims pertaining to discrimination in employment, wage and hour, ORS Chapter 659 and 659A, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Post Civil War Civil Rights Acts(42USCSections1981-1988),theAgeDiscriminationinEmploymentAct,theOlder WorkersBenefitProtectionAct,theRehabilitationActof1973,theEqualPayActof1963, the Fair Labor Standards Act, ORS Chapters 652 and 653, Oregon Family Medical Leave Act, the federal Family Medical Leave Act, the National Labor Relations Act, the EmployeeRetirementIncomeSecurityAct,allasamended,andanyregulationsundersuch authorities; and any Claim arising under any tort or other common law theories, including Claims related to Digimarc’snegligence.

3.Notwithstanding anything in this Supplemental Release to the contrary, Executive does not waive any rights Executive may have (i) under COBRA; (ii) to Executive’s own vested accrued employee benefits under the Company’s health, welfare, or retirement benefit plans as of the last date of employment; (iii) to benefits and/or the right to seek benefits under applicable workers’ compensation and/orunemployment

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compensation statutes; (iv) to pursue claims which by law cannot be waived by signing thisSupplementalReleaseand/orwhichmayariseaftertheexecutionofthisSupplemental Release; (v) to enforce the Separation Agreement or to enforce his rights related to his stock, options, RSUs, or PRSUs consistent with the Separation Agreement; and/or (vi) to challenge the validity of this SupplementalRelease.

4.In accordance with the Age Discrimination in Employment Act (the “ADEA”), as amended by the Older Worker’s Benefit ProtectionAct:

(a) ExecutiveacknowledgesandagreesthattheSeparationAgreementandthis Supplemental Release is written in a manner that is understandable to him andthathehascarefullyreadandfullyunderstandstheprovisionsandterms of the Separation Agreement and this Supplemental Release and agrees to such provisions andterms;

(b) Executive has been advised and hereby is advised in writing thatExecutive should consult with an attorney prior to executing this Supplemental Release, and Executive has obtained independent legal advice from an attorney of his own choice with respect to this Supplemental Release, or Executive has knowingly and voluntarily chosen not to doso;

(c) Executive is not waiving rights or claims that may arise after the date that this Supplemental Release is executed byExecutive;

(d) Executive knowingly and voluntarily waives any and all rights and claims, including,butnotlimitedtorightsundertheADEAandthoselawslistedin Paragraph 2above;

(e) As consideration for executing this Supplemental Release, Executive will receive compensation of value to which Executive would not otherwise be entitled;and

(f) No promise or inducement has been offered to Executive, except as expresslysetforthintheAgreement,andExecutiveisnotrelyinguponany such promise or inducement in entering into this SupplementalRelease.

5.In signing this Supplemental Release, Executive acknowledges andintends thatitshallbeeffectiveasabartoeachandeveryoneoftheClaimshereinabovementioned or implied. Executive expressly consents that this Supplemental Release shall be given fullforceandeffectaccordingtoeachandallofitsexpresstermsandprovisions,including those relating to unknown and unsuspected claims (notwithstanding any state or local statute that expressly limits the effectiveness of an agreement of unknown, unsuspected andunanticipatedclaims),ifany,aswellasthoserelatingtoanyotherClaimshereinabove mentioned or implied. Executive acknowledges that he may hereafter discover claims or facts in addition to or different than those which he now knows or believes to exist with respecttothesubjectmatterofthereleasesetforthaboveandwhich,ifknownorsuspected at the time of entering into this Supplemental Release, may have materially affected this SupplementalReleaseandhisdecisiontoenterintoit.Executiveacknowledgesandagrees that this waiver is an essential and material term of this Supplemental Release and that withoutsuchwaivertheCompanywouldnothaveagreedtothetermsoftheSeparation

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Agreement. Nothing in this Supplemental Release waives or releases claims by Executive that arise after the date the Executive signs this Supplemental Release.

6.Executive acknowledges that this Supplemental Release, together with the SeparationAgreement,representsthesettlementofanyandallclaimsandpotentialclaims that Executive may have against the Digimarc Releasees through the date Executive signs this Supplemental Release. Executive accepts the Separation Agreement and this Supplemental Release as being in full and complete accord, satisfaction, compromise,and settlementofanyandallsuchclaimsorpotentialclaimsandexpresslyagreesthatheisnot entitled to and shall not receive any further payment or recovery of any kind from the Company,andthattheCompanyshallhavenofurthermonetaryorotherobligationofany kind to Executive, including any further obligation for any costs, expenses, and attorneys’ fees, except as provided in the SeparationAgreement.

7.Revocation Right. After Executive executes this Supplemental Release, Executive shall have a period of seven (7) days from the date immediately following the date of execution of this Agreement in which Executive may revoke this Supplemental Release at Executive’s sole election by notifying Digimarc in writing. Any revocation within this period must state “I do hereby revoke my agreement to the Supplemental Release.”Thewrittenrevocationmustbeeitherpersonallydeliveredorpostmarkedwithin seven(7)calendardaysofExecutive’sexecutionofthisAgreementtoCindyMarple,Vice PresidentofHumanResources,DigimarcCorporation,9405SWGeminiDrive,Beaverton, OR 97008-7192. In the event Executive does not exercise his right to revokethis Supplemental Release, this Supplemental Release shall become effective on the date immediately following the seven-day revocation period described above (the “Effective Date”).

BY SIGNING THIS SUPPLEMENTAL RELEASE, I REPRESENT AND AGREE THAT:

• I HAVE READ ITCAREFULLY;

• I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF 1990;AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

• I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

• I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE SO OR, AFTER CAREFUL READINGAND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWNVOLITION;

• I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS SUPPLEMENTAL RELEASE TO CONSIDERIT;

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• I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTIONOF THIS SUPPLEMENTAL RELEASE TO REVOKE IT AND THAT THIS SUPPLEMENTAL RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HASEXPIRED;

• I HAVE SIGNED THIS SUPPLEMENTAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINEDTO ADVISE ME WITH RESPECT TO IT; AND

• I AGREE THAT THE PROVISIONS OF THIS SUPPLEMENTAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZEDREPRESENTATIVE OF THE COMPANY AND BYME.

SIGNED: DATE: BRUCEDAVIS

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EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into effective as of April 12, 2021 (the “Effective Date”) at Beaverton, Oregon between DIGIMARC CORPORATION, an Oregon corporation (“Digimarc”) with offices at 9405 SW Gemini Drive, Beaverton, Oregon 97008, and Riley McCormack (“Executive”).

WITNESSETH:

WHEREAS, Executive is currently a member of the Board of Directors of Digimarc; WHEREAS, Digimarc has determined that Executive should succeed its ChiefExecutive

Officer, Bruce Davis, who is resigning from Digimarc, and wishes to employ Executive in the capacity of Chief Executive Officer;

WHEREAS, Digimarc and Executive wish to memorialize the terms of Executive’s employment in a written agreement; and

WHEREAS, this Agreement shall replace and supersede Executive’s remuneration arrangementspursuanttoDigimarc’sDirectorCompensationProgram,whichshallceaseasofthe Effective Date and as described further in thisAgreement.

NOW,THEREFORE,inconsiderationoftheforegoingandinconsiderationofthemutual promises and agreements contained herein, the parties hereto agree asfollows:

1. Definitions.

For purposes of this Agreement, the following terms shall have the following meanings:

(a)“Affiliate” shall mean any person or entity that directly or indirectly controls, is controlled by, or is under common control withDigimarc.

(b)“Code” shall mean the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgatedthereunder.

(c)“Section 280G” shall mean Code Section 280G and the Treasury regulations promulgated thereunder or any similar or successorprovision.

2. Period ofEmployment.

Digimarc agrees to employ Executive, and Executive agrees to be so employed, on the terms and conditions set forth herein for the period beginning on the Effective Date and ending upon the termination of Executive’s employment as set forth herein (“Term”).

3. Duties and Responsibilities.

(a)Position. Executive will serve as Chief Executive Officer of Digimarc in conformity with general management policies, guidelines and directions issued by the Board of Directors of Digimarc (the “Board”), and shall perform all services appropriate to that positionas

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designated from time to time by the Board. Executive will report directly to the Board, and will have general charge and supervision of those functions and such other responsibilities as are customary for his position. As long as Executive serves as Chief Executive Officer, it is the intention of Digimarc that he will continue to be nominated to serve on the Board; provided, however, that the foregoing statement of intent shall in no way derogate from the Board’s right and power to act as it deems appropriate in the future.

(b)Duties. Executive will work exclusively for Digimarc on a full-time basis, devoting all of his time and attention during normal business hours to Digimarc’s business. Executive will perform his duties and responsibilities hereunder diligently, faithfully and loyally in order to facilitate the proper, efficient and successful operation of Digimarc’sbusiness.

(c)Other Activity. Except upon the prior approval of the Board, Executive (during the Term) shall not (i) accept any other employment; or (ii) engage, directly or indirectly, in any other business, commercial, or professional activity (whether or not pursued for pecuniary advantage) that is or may be competitive with Digimarc, that might create a conflict of interest with Digimarc, or that otherwise might interfere with the business of Digimarc or any Affiliate or theperformanceofExecutive’sdutiesandobligationstoDigimarc.SothatDigimarcmaybeaware of the extent of any other demands upon Executive’s time and attention, Executive shall disclose in confidence to Digimarc the nature and scope of any other business activity in which he is or becomes engaged during the Term. Consistent with the foregoing, the Company acknowledges that,basedoncurrentcircumstances,theBoardhasapprovedExecutivetoengageinthefollowing outside business activities: managing TCM|Strategic and its affiliates. Executive agrees to promptlydisclosetotheBoardanychangeincircumstancesthatmightcreateaconflictofinterest between the Company and Executive regarding such outside businessactivities.

4. Compensation andBenefits.

As compensation for Executive’s services, Executive will receive a cash salary of $1.00 and participate in the Company’s stock-based compensation plan, subject to the terms and conditions set forth in this Agreement. During the Term, Executive shall cease to receive any compensationundertheCompany’snonemployeedirectorcompensationpolicybutshallcontinue to vest in any awards previously granted to him as a Director, in accordance with and subject to the applicable award agreement(s) and plandocuments.

(a) Salary.DuringtheTerm,Executivewillbepaidanannualbasesalaryof

$1.00 per year. All compensation and comparable payments to be paid to Executive under this Agreement shall be less withholdings required by law.

(b)Equity Compensation. The Company shall cause to be granted to Executive restricted shares of the Company’s stock having a fair value of $250,000 on the date of grant, vesting in four quarterly tranches over the one-year period following the date of grant and subjecttosuchothertermsandconditionsassetforthintheDigimarcCorporation2018Incentive Plan, including the provisions on tax withholdingtherein.

(c)FlexibleTimeOff.Executivewillbeentitledtoflexibletimeoffconsistent with that generally provided to other executives ofDigimarc.

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(d)Reimbursement of Expenses. The Company will reimburse Executive in accordance with the policies and procedures of the Company, for all reasonable travelling, entertaining and other similar out of pocket expenses which Executive may incur wholly and necessarily in the performance of his duties, provided that Executive submits adequate documentationofsuchexpensesastheCompanymayrequire;andfurther,provided,however,for the avoidance of doubt, that Executive shall not be entitled to reimbursement of commuting costs or local housing costs associated with his performance of his duties. Reimbursement of expenses may be reportable to any appropriate tax authority and, in that event, it will be Executive’s responsibility to claim any tax relief and supply additional information that may be required.Any expense reimbursements shall be made within 60 days after submission of proper documentation by Executive (but in no event later than December 31 of the year following the year in which Executive incurs the related expense). Any reimbursement in one calendar year shall not affect the amount that may be reimbursed in any other calendar year and a reimbursement (or right thereto) may not be exchanged or liquidated for another benefit orpayment.

(e)Other Benefits. Except as specifically provided elsewhere in this Agreement, Digimarc will provide Executive with the same health, disability, retirement, death and other fringe benefits as are generally provided to other executives of Digimarc. The amount andextentofbenefitstowhichExecutiveisentitledshallbegovernedbythespecificbenefitplan, as it may be amended from time to time. Digimarc reserves the ability, in its sole discretion, to adjust Executive’s benefits under this Agreement provided that such adjustments generally apply to all executiveofficers.

5. Termination.

(a)Digimarc may terminate Executive’s employment under this Agreement at any time, with or without cause, upon written notice toExecutive.

(b)ExecutivemayterminatehisemploymentunderthisAgreementatanytime upon thirty (30) days’ prior written notice toDigimarc.

6. Effects ofTermination.

(a)If Executive’s employment ends for any reason, all Digimarc obligations underthisAgreementwillendexceptforreimbursementofproperlyauthorizedbusinessexpenses incurred by Executive prior to termination and the Company’s obligation to grant stock pursuant to Section 4(b) for the calendar quarter in which Executive’s employmentends.

7. ExciseTaxes.

(a)Notwithstanding any other provision of this Agreement, in the event that Executive becomes entitled to receive or receives any payments, options, awards or benefits (including, without limitation, the monetary value of any non-cash benefits and the accelerated vestingofstockoptions)underthisAgreementorunderanyotherplan,agreementorarrangement with Digimarc, any person whose actions result in any change described in Code Section 280G(b)(2)(A)(i) or any person affiliated with Digimarc or such person (collectively, the “Payments”), that may separately or in the aggregate constitute “parachute payments” within the meaningofSection280GandDigimarcreceivesconfirmationfromanindependentaccounting

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firm or independent tax counsel appointed by Digimarc (the “Tax Advisor”) that, but for this Section 7, any of the Payments will be subject to any excise tax pursuant to Code Section 4999or any similar or successor provision (the “Excise Tax”), then the Company shall pay to Executive either (i) the full amount of the Payments or (ii) an amount equal to the Payments, reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excess parachute payment” (within the meaning of Section 280G) (the “Capped Payments”), whichever of the foregoing amounts results in the receipt by Executive, on an after-tax basis, of the greatest amount of Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. For purposes of determining the after-tax value of the Payments, (i) there shallbe taken into account any Excise Tax and all applicable federal, state and local taxes required to be paid by Executive in respect of the receipt of the Payments and (ii) Executive shall be deemed to payincometaxesatthehighestrateof federalincometaxandthehighestrateorratesofstateand local income taxes in the state and locality of Executive’s domicile for income tax purposes for the taxable year in which the Payments will be made, provided that the state and local income tax rate shall be determined assuming that such taxes are fully deductible for federal income tax purposes, and provided further that any phase-out of itemized deductions or other items shall be ignored.

(b)All calculations and determinations under this Section 7, including application and interpretation of the Code and related regulatory, administrative and judicial authorities, shall be made by the Tax Advisor. All determinations made bythe Tax Advisor under thisSection7shallbeconclusiveandbindingonbothDigimarcandExecutive,andDigimarcshall cause the Tax Advisor to provide its determinations and any supporting calculations with respect toExecutivetoDigimarcandExecutive.Digimarcshallbearallfeesandexpenseschargedbythe Tax Advisor in connection with its services. For purposes of making the calculations and determinations under this Section 7, after taking into account the information provided by Digimarc and Executive, the Tax Advisor may make reasonable, good faith assumptions and approximations concerning the application of Code Sections 280G and 4999. Digimarc and ExecutiveshallfurnishtheTaxAdvisorwithsuchinformationanddocumentsastheTaxAdvisor mayreasonablyrequesttoassisttheTaxAdvisorinmakingcalculationsanddeterminationsunder this Section7.

(c)In the event that Section 7(a) above applies and a reduction is required to be applied to the Payments thereunder, the Payments shall be reduced by the Company in its reasonablediscretioninthefollowingorder:(i)reductionofanyPaymentsthataresubjecttoCode Section 409A on a pro-rata basis or such other manner that complies with Code Section 409A, as determined by the Company, and (ii) reduction of any Payments that are exempt from Code Section409A.

8. Termination Obligations.

(a)Executive agrees that all property, including, without limitation, all equipment, tangible Proprietary Information (as defined below), documents, books, records, reports, notes, contracts, lists, computer disks (and other computer-generated files and data), and copies thereof, created on any medium and furnished to, obtained by, or prepared by Executivein the course of or incident to his employment, belongs to Digimarc and shall be returned promptly to Digimarc at the end of theTerm.

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(b)All benefits to which Executive is otherwise entitled shall cease upon Executive’s termination, unless explicitly continued either under this Agreement or under any specific written policy or benefit plan ofDigimarc.

(c)EffectiveattheendoftheTerm,Executiveshallbedeemedtohaveresigned from all offices and directorships then held with Digimarc or any Affiliate; provided, however, that Executive may, at his election, continue to serve as a Director of theBoard.

(d)The representations and warranties contained in this Agreement and Executive’s obligations under this Section 8 on Termination Obligations and Section 9 of this Agreement on Proprietary Information shall survive the termination of thisAgreement.

(e)Following any termination of this Agreement, Executive shall fully cooperate with Digimarc in all matters relating to the winding up of pending work on behalf of Digimarc and the orderly transfer of work to other executives of Digimarc. Executive shall also cooperate in the defense of any action brought by any third party against Digimarc that relates in any way to Executive’s acts or omissions while employed byDigimarc.

(f)Prior to beginning any employment within two (2) years following the end of the Term, Executive shall first provide Digimarc with the name and address of his prospective employer so that Digimarc may provide the new employer with a copy of thisAgreement.

9. Proprietary Information and Covenant Not toCompete.

(a)Defined. “Proprietary Information” is all information and any idea in whatever form, tangible or intangible, pertaining in any manner to the business of Digimarc, or anyAffiliate,oritsemployees,clients,consultants,orbusinessassociates,whichwasproducedby any employee of Digimarc in the course of his or her employment or otherwise produced or acquiredbyoronbehalf ofDigimarc.AllProprietaryInformationnotgenerallyknownoutsideof Digimarc’sorganization,andallProprietaryInformationsoknownonlythroughimpropermeans, shallbedeemed“ConfidentialInformation.”Withoutlimitingtheforegoingdefinition,Proprietary and Confidential Information shall include, but not be limited to: (i) formulas, teaching and development techniques, processes, trade secrets, computer programs, electroniccodes, inventions, improvements, and research projects; (ii) information about costs, profits, markets, sales,andlistsofcustomersorclients;(iii)business,marketing,andstrategicplans;and

(iv) employee personnel files and compensation information. Executive should consult any Digimarc procedures instituted to identify and protect certain types of Confidential Information, which are considered by Digimarc to be safeguards in addition to the protection provided by this Agreement. Nothing contained in those procedures or in this Agreement is intended to limit the effect of the other.

(b)General Restrictions on Use. During the Term, Executive shall use Proprietary Information, and shall disclose Confidential Information, only for the benefit of Digimarc and as is necessary to carry out his responsibilities under this Agreement. Following termination, Executive shall neither, directly or indirectly, use any Proprietary Information nor disclose any Confidential Information, except as expressly and specifically authorized in writing by Digimarc. The publication of any Proprietary Information through literature or speechesmust

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beapprovedinadvanceinwritingbyDigimarc.NothinginthisAgreementshallhavethepurpose or effect of preventing Executive from disclosing or discussing conduct that constitutes discrimination prohibited by Oregon Revised Statutes 659A.030, including conduct that constitutessexualassault,orthatisprohibitedbyOregonRevisedStatutes659A.082or659A.112

(c)Location and Reproduction. Executive shall maintain at his work station and/or any other place under his control only such Confidential Information as he has a current “needtoknow.”Executiveshallreturntotheappropriatepersonorlocationorotherwiseproperly dispose of Confidential Information once that need to know no longer exists. Executive shall not make copies of or otherwise reproduce Confidential Information unless there is a legitimate business need forreproduction.

(d)Prior Actions and Knowledge. Executive represents and warrants that from the time of his first contact with Digimarc, he has held in strict confidence all Confidential Information and has not disclosed any Confidential Information, directly or indirectly, to anyone outside of Digimarc, or used, copied, published, or summarized any Confidential Information, except to the extent otherwise permitted in thisAgreement.

(e)Third-Party Information. Executive acknowledges that Digimarc has received and in the future will receive from third parties their confidential information subject to a duty on Digimarc’s part to maintain the confidentiality of this information and to use it only for certain limited purposes. Executive agrees that he owes Digimarc and these third parties, during theTermandthereafter,adutytoholdallsuchconfidentialinformationinthestrictestconfidence and not to disclose or use it, except as necessary to perform his obligations hereunder and as is consistent with Digimarc’s agreement with thirdparties.

(f)No Competition. In the interest of preventing the use or disclosure of Confidential Information in breach of the preceding subsections, Executive shall not, during the Term and for a period one (1) year thereafter, perform work for any of Digimarc’s business competitors whether as an employee or as a consultant, and shall not serve as a director, partner, agent or shareholder of such competitor (except that Executive may hold less than 5% of the outstanding stock of any public company for investmentpurposes).

(g)Misuse of Confidential Information. Executive agrees that, during the Termandforaperiodone(1)yearthereafter,heshallnot,directlyorindirectly,(i)divertorattempt to divert from Digimarc (or any Affiliate) any business of any kind in which it is engaged; or (ii) employ or recommend for employment any person employed by Digimarc (or any Affiliate), unless Executive can prove that any action taken in contravention of this subsection was done without the use in any way of ConfidentialInformation.

(h)Interference with Business. In order to avoid disruption of Digimarc’s business, Executive agrees that during the Term and for a period one (1) year thereafter, he shall not, directly or indirectly, (i) solicit any customer of Digimarc (or any Affiliate) known to Executive during the Term to have been a customer to do business with anyone other than Digimarc; or (ii) solicit for employment any person employed by Digimarc (or anyAffiliate).

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(i)Parallel Obligations. Executive’s obligations in this Section 9 are not exclusive and the Parties acknowledge that Executive is simultaneously executing a Non- Disclosure, Non-Competition, and Invention Assignment Agreement of even date herewith (the “NDA”).ThisAgreementandtheNDAshouldbeconstruedtogether,butintheeventofaconflict, the terms of this Agreement shallcontrol.

10. Section409A.

Digimarc makes no representations or warranties to Executive with respect to any tax, economic or legal consequences of this Agreement or any payments or other benefits provided hereunder, including without limitation under Code Section 409A, and no provision of the Agreement shall be interpreted or construed to transfer any liability for failure to comply with Code Section 409A from Executive or any other individual to Digimarc or any of its

affiliates. Executive, by executing this Agreement, shall be deemed to have waived any claim against Digimarc and its affiliates with respect to any such tax, economic or legal consequences. However, the parties intend that this Agreement and the payments and other benefits provided hereunder be exempt from the requirements of Code Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or otherwise. To the extent Code Section 409A is applicable to this Agreement (and such payments and benefits), the parties intend that this Agreement (and such payments and benefits) comply with the deferral, payout and other limitations and restrictions imposed under Code Section 409A. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any provision of this Agreement to the contrary, with respect to any payments and benefits under this Agreement to which Code Section 409A applies,all

references in this Agreement to the termination of Executive's employment are intended tomean Executive's "separation from service," within the meaning of Code Section 409A(a)(2)(A)(i). In addition, if Executive is a "specified employee," within the meaning ofCode

Section 409A(a)(2)(B)(i), at the time of his "separation from service," within the meaning of Code Section 409A(a)(2)(A)(i), then to the extent necessary to avoid subjecting Executive to the imposition of any additional tax under Code Section 409A, amounts that would otherwise be payable under this Agreement during the six-month period immediately following Executive's "separation from service," shall not be paid to Executive during such period, but shall instead be accumulated and paid to Executive (or, in the event of Executive's death, Executive's estate) in a lump sum on the first business day following the date that is six months after Executive's separation from service. Moreover, the parties intend that this Agreement be deemed to be amended to the extent necessary to comply with the requirements of Code Section 409A and to avoid or mitigate the imposition of additional taxes under Code Section 409A, while preserving to the maximum extent possible the essential economics of Executive's rights under the Agreement.

11. Notices.

Any notice to be given hereunder by Digimarc to Executive will be deemed to be given if delivered to Executive in person, or if mailed to Executive, by certified mail, postage prepaid,

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return receipt requested, at his address last shown on the records of Digimarc. Any notice to be given by Executive to Digimarc will be deemed to be given if delivered in person or by mail, postage prepaid, return receipt requested to the Chief Financial Officer at Digimarc’s principal executive office, unless Executive or Digimarc will have duly notified the other party in writing ofachangeofaddress. Ifmailed,noticewillbedeemedtohavebeengivenwhendeposited inthe mail as set forthabove.

12. Amendments.

This Agreement will not be modified or discharged, in whole or in part, except by an agreement in writing signed by an executive officer of Digimarc other than Executive on the one hand, and Executive on the other hand.

13. EntireAgreement.

This Agreement, together with any and all other written agreement(s) made contemporaneously herewith and applicable incentive and benefits plans of Digimarc, constitute the entire agreement between the parties with respect to Executive’s employment by Digimarc from and after the Effective Date. The parties are not relying on any other representation or understanding with respect thereto, express or implied, oral or written. As of the Effective Date, this Agreement, as supplemented by such contemporaneous agreement(s), supersedes any prior agreement,writtenororal,ofDigimarcwithrespecttoExecutive’semployment;fortheavoidance of doubt, Executive’s obligations of confidentiality as a Director and his rights toindemnification as a Director are unaffected by thisAgreement.

14. Captions.

ThecaptionscontainedinthisAgreementareforconvenienceofreferenceonlyanddonot affect the meaning of any terms or provisions of thisAgreement.

15. BindingEffect.

The rights and obligations of Digimarc hereunder will inure to the benefit of, and will be binding upon, Digimarc and its respective successors and assigns, and the rights and obligations of Executive hereunder will inure to the benefit of, and will be binding upon, Executive and his heirs, personal representatives and estate. All references in this Agreement to “Digimarc” will be deemed to include its successors and assigns.

16. SeverableProvisions.

IfanyprovisionofthisAgreement,oritsapplicationtoanyperson,place,orcircumstance, is held by an arbitrator or a court of competent jurisdiction to be invalid, unenforceable, or void, such provision shall be enforced to the greatest extent permitted by law, and the remainder ofthis Agreementandsuchprovisionasappliedtootherpersons,places,andcircumstancesshallremain in full force and effect.

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17. GoverningLaw.

This Agreement will be interpreted, construed, and enforced in all respects in accordance with the laws of the State of Florida.

18. Interpretation.

This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. By way of example and not in limitation, this Agreement shall not be construed in favor of the party receiving a benefit nor against the party responsible for any particular language in this Agreement. Captions are used for reference purposes only and should be ignored in the interpretation of the Agreement.

19. EmployeeAcknowledgement.

Executive acknowledges that he has had the opportunity to consult legal counsel inregard to this Agreement, that he has read and understands this Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily and based on his own judgment and not on any representations or promises other than those contained in thisAgreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of April 12, 2021.

DIGIMARCCORPORATIONEXECUTIVE

/s/ Robert Chamness/s/ Riley McCormack

By: Robert P. Chamness    Riley McCormack

Its: EVP, Chief Legal Officer & Secretary

EX-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: April 29, 2021

By:	/S/ RILEY MCCORMACK
	RILEY MCCORMACK Chief Executive Officer

EX-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: April 29, 2021

By:	/S/ CHARLES BECK
	CHARLES BECK Chief Financial Officer

EX-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 March 31, 2021 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: April 29, 2021

By:	/S/ RILEY MCCORMACK
	RILEY MCCORMACK Chief Executive Officer

EX-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 March 31, 2021 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: April 29, 2021

By:	/S/ CHARLES BECK
	CHARLES BECK Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	Apr. 23, 2021
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Trading Symbol	DMRC
Entity Registrant Name	Digimarc CORP
Entity Central Index Key	0001438231
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity File Number	001-34108
Entity Tax Identification Number	26-2828185
Entity Address, Address Line One	9405 SW Gemini Drive
Entity Address, City or Town	Beaverton
Entity Address, State or Province	OR
Entity Address, Postal Zip Code	97008
City Area Code	503
Local Phone Number	469-4800
Entity Common Stock, Shares Outstanding		16,914,831
Title of 12(b) Security	Common Stock, $0.001 Par Value Per Share
Security Exchange Name	NASDAQ
Entity Incorporation, State or Country Code	OR
Document Transition Report	false
Document Quarterly Report	true
Entity Interactive Data Current	Yes

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 4,705	$ 19,696
Marketable securities	65,796	58,032
Trade accounts receivable, net	4,141	3,907
Other current assets	1,978	2,197
Total current assets	76,620	83,832
Marketable securities	159	0
Property and equipment, net	3,144	3,272
Intangibles, net	6,609	6,612
Goodwill	1,114	1,114
Other assets	2,502	2,198
Total assets	90,148	97,028
Current liabilities:
Accounts payable and other accrued liabilities	3,008	2,827
Note payable, current	4,799	3,947
Deferred revenue	2,943	3,002
Total current liabilities	10,750	9,776
Lease liability and other long-term liabilities	2,325	2,295
Note payable, long-term	280	1,118
Total liabilities	13,355	13,189
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock (par value $0.001 per share, 2,500 authorized, 10 shares issued and outstanding at March 31, 2021 and December 31, 2020)	50	50
Common stock (par value $0.001 per share, 50,000 authorized, 16,850 and 16,735 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)	17	17
Additional paid-in capital	256,200	255,024
Accumulated deficit	(179,474)	(171,252)
Total shareholders’ equity	76,793	83,839
Total liabilities and shareholders’ equity	$ 90,148	$ 97,028

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares shares in Thousands	Mar. 31, 2021	Dec. 31, 2020
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,500	2,500
Preferred stock, shares issued	10	10
Preferred stock, shares outstanding	10	10
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	16,850	16,735
Common stock, shares outstanding	16,850	16,735

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue:
Total revenue	$ 6,700	$ 6,189
Cost of revenue:
Total cost of revenue	2,361	2,198
Gross profit	4,339	3,991
Operating expenses:
Sales and marketing	4,941	5,246
Research, development and engineering	4,131	4,433
General and administrative	3,493	3,367
Total operating expenses	12,565	13,046
Operating loss	(8,226)	(9,055)
Other income, net	10	142
Loss before income taxes	(8,216)	(8,913)
Benefit (provision) for income taxes	(6)	5
Net loss	$ (8,222)	$ (8,908)
Earnings (loss) per common share:
Loss per common share — basic	$ (0.50)	$ (0.74)
Loss per common share — diluted	$ (0.50)	$ (0.74)
Weighted average common shares outstanding — basic	16,333	12,037
Weighted average common shares outstanding — diluted	16,333	12,037
Service [Member]
Revenue:
Total revenue	$ 3,784	$ 3,738
Cost of revenue:
Total cost of revenue	1,570	1,684
Subscription [Member]
Revenue:
Total revenue	2,916	2,451
Cost of revenue:
Total cost of revenue	$ 791	$ 514

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2019	$ 49,450	$ 50	$ 12	$ 188,103	$ (138,715)
Balance, shares at Dec. 31, 2019		10,000	12,446,000
Issuance of common stock, net of issuance costs	574	$ 0	$ 1	573	0
Issuance of common stock, net of issuance costs, shares		0	28,000
Exercise of stock options	135	$ 0	$ 0	135	0
Exercise of stock options, shares		0	8,000
Issuance of restricted common stock	0	$ 0	$ 0	0	0
Issuance of restricted common stock, shares		0	186,000
Purchase and retirement of common stock	(738)	$ 0	$ 0	(738)	0
Purchase and retirement of common stock, shares		0	(23,000)
Stock-based compensation	2,230	$ 0	$ 0	2,230	0
Net loss	(8,908)	0	0	0	(8,908)
Balance at Mar. 31, 2020	42,743	$ 50	$ 13	190,303	(147,623)
Balance, shares at Mar. 31, 2020		10,000	12,645,000
Balance at Dec. 31, 2020	$ 83,839	$ 50	$ 17	255,024	(171,252)
Balance, shares at Dec. 31, 2020		10,000	16,735,000
Issuance of common stock, net of issuance costs, shares			0
Exercise of stock options, shares	0
Issuance of restricted common stock	$ 0	$ 0	$ 0	0	0
Issuance of restricted common stock, shares		0	154,000
Forfeiture of restricted common stock	0	$ 0	$ 0	0	0
Forfeiture of restricted common stock, shares		0	(19,000)
Purchase and retirement of common stock	(870)	$ 0	$ 0	(870)	0
Purchase and retirement of common stock, shares		0	(20,000)
Stock-based compensation	2,046	$ 0	$ 0	2,046	0
Net loss	(8,222)	0	0	0	(8,222)
Balance at Mar. 31, 2021	$ 76,793	$ 50	$ 17	$ 256,200	$ (179,474)
Balance, shares at Mar. 31, 2021		10,000	16,850,000

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities:
Net loss	$ (8,222)	$ (8,908)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and write-off of property and equipment	363	374
Amortization and write-off of intangibles	177	201
Amortization of right of use assets under operating leases	118	117
Amortization of net premiums and (discounts) on marketable securities	(266)	97
Stock-based compensation	2,010	2,195
Changes in operating assets and liabilities:
Trade accounts receivable	(612)	62
Other current assets	219	338
Other assets	(44)	19
Accounts payable and other accrued liabilities	501	61
Deferred revenue	(55)	(146)
Lease liability and other long-term liabilities	(177)	(159)
Net cash used in operating activities	(5,988)	(5,749)
Cash flows from investing activities:
Purchase of property and equipment	(317)	(235)
Capitalized patent costs	(159)	(137)
Maturity of marketable securities	17,494	11,594
Purchase of marketable securities	(25,151)	(6,407)
Net cash provided by (used in) investing activities	(8,133)	4,815
Cash flows from financing activities:
Issuance of common stock, net of issuance costs	0	574
Exercise of stock options	0	135
Purchase of common stock	(870)	(738)
Net cash used in financing activities	(870)	(29)
Net decrease in cash and cash equivalents	(14,991)	(963)
Cash and cash equivalents at beginning of period	19,696	11,213
Cash and cash equivalents at end of period	4,705	10,250
Supplemental disclosure of cash flow information:
Cash received (paid) for income taxes, net	(17)	16
Supplemental schedule of non-cash activities:
Property and equipment and patent costs in accounts payable	(103)	16
Stock-based compensation capitalized to software and patent costs	$ 36	$ 35

XML

Description of Business and Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business and Significant Accounting Policies

1. Description of Business and Significant Accounting Policies

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, is a pioneer in the automatic identification of media, including packaging, other commercial print, digital images, audio and video. The Digimarc Platform takes industry beyond the barcode, providing innovative and comprehensive automatic identification software and services to simplify search and transform information discovery through unparalleled reliability, efficiency and security. The Digimarc Platform enables applications that benefit retailers and consumer brands, national and state government agencies, media and entertainment industries, and others.

The Digimarc Platform features three core capabilities for the identification, discovery and quality management of media.  Digimarc Barcode integrates the identification function, which is a novel data carrier encoded into media in ways that are generally imperceptible to people, permitting the carrier to be repeated many times over the surface of the enhanced media. Digimarc Discover represents the discovery function, which is software for computing devices and network interfaces that recognize and decode indicia of the identity of media. These include, but are not limited to, Digimarc Barcodes, Quick Response Codes, Universal Product Codes, certain other Global Standards One (“GS1”) approved one-dimensional codes and relevant contextual data. Digimarc Verify incorporates the quality management function, a suite of software tools used to inspect and verify that the identification and discovery of media are both accurate and effective. Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.

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, 2020.

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 accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021. 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.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, including the reclassification of revenue by major target market. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Accounting Pronouncements Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (ASC 740) Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles and also improves consistent application of and simplifies U.S. GAAP. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company adopted this new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations and disclosures.

Accounting Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments,” which amends the guidance on the impairment of financial instruments. The amendments in this update remove the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance removes all

current recognition thresholds and introduces the new current expected credit loss (“CECL”) model which will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not expect the impact of the adoption of this standard to have a material impact on its financial condition, results of operations and disclosures.

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

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 held-to-maturity and are reported at amortized cost, which approximates fair value.

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

March 31, 2021	Level 1		Level 2		Level 3		Total
Money market securities	$	3,404	$	—	$	—	$	3,404
Commercial paper		—		39,177		—		39,177
Pre-refunded municipals		—		21,273		—		21,273
Corporate notes		—		5,505		—		5,505
Total	$	3,404	$	65,955	$	—	$	69,359

December 31, 2020	Level 1		Level 2		Level 3		Total
Money market securities	$	10,988	$	—	$	—	$	10,988
Commercial paper		—		36,478		—		36,478
Pre-refunded municipals		—		26,697		—		26,697
Corporate notes		—		2,437		—		2,437
Total	$	10,988	$	65,612	$	—	$	76,600

The fair value maturities of the Company’s cash equivalents and marketable securities as of March 31, 2021, are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5 - 10 years		More than 10 years
Cash equivalents and marketable securities	$	69,359	$	69,200	$	159	$	—	$	—

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 money market securities, commercial paper and pre-refunded municipals totaling $3,404 and $18,568 at March 31, 2021, and December 31, 2020, respectively. Cash equivalents are carried at either cost or amortized cost, depending on the type of security, which approximates fair value.

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Revenue Recognition

3 Months Ended

Mar. 31, 2021

Revenue Recognition [Abstract]

Revenue Recognition

3. Revenue Recognition

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

• Service revenue consists primarily of revenue earned from the performance of software development services. The majority of service contracts are structured as time and materials consulting 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.

• Subscription revenue consists primarily of revenue earned from the sale of software products and to a lesser extent the licensing of intellectual property. 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.

Customer arrangements may contain multiple performance obligations such as software development services, software products, and maintenance and support fees. The Company accounts for individual products and services separately if they are distinct. To determine the transaction price, the Company considers the terms of the contract and the Company’s customary business practices. Some contracts may contain variable consideration. In those cases, the Company 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, the Company will evaluate whether any of the variable consideration is constrained and if it is the Company will not include it in the transaction price. The consideration is allocated between distinct products and services based on their stand-alone selling prices. For items that are not sold separately, the Company estimates the standalone selling price based on reasonably available information, including market conditions, specific factors affecting the Company, and information about the customer. For distinct products and services, the Company typically recognizes the revenue associated with these performance obligations as they are delivered to the customer.  Products and services that are not capable of being distinct are combined with other products or services until a distinct performance obligation is identified.

All revenue recognized in the Consolidated Statements of Operations 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		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Government
Service	$	3,585	$	3,652
Subscription		300		300
Total Government		3,885		3,952
Commercial
Service	$	199	$	86
Subscription		2,616		2,151
Total Commercial		2,815		2,237
Total	$	6,700	$	6,189

The Company has contract assets from contracts with customers that are classified as “trade accounts receivable.”  Financial information about trade accounts receivable is included in Note 8.  

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

The following table provides information about contract liabilities from contracts with customers:

	March 31,		December 31,
	2021		2020
Deferred revenue, current	$	2,943	$	3,002
Deferred revenue, long-term		34		30
Total	$	2,977	$	3,032

The Company recognized $1,351 of revenue during the three months ended March 31, 2021, that was included in the contract liability balance as of December 31, 2020.

The aggregate amount of the transaction prices from contractual obligations that are unsatisfied or partially unsatisfied was $17,504 and $17,921 as of March 31, 2021, and December 31, 2020, respectively.

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Segment Information

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segment Information

4. Segment Information

Geographic Information

The Company derives its revenue from a single reporting segment: automatic identification solutions. Revenue is generated in this segment primarily through software development services and software subscriptions. 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		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Domestic	$	1,722	$	1,759
International (1)		4,978		4,430
Total	$	6,700	$	6,189

(1) 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.

Major Customers

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

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Central Banks		58	%		64	%
Walmart Inc.		11	%		12	%

Long-Lived Assets by Geographical Area

The Company’s long-lived assets are all domiciled in the U.S.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

5. Stock-Based Compensation

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

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

Stock Options

The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option pricing model. The Company recognizes the fair value of stock option awards on a straight-line basis over the vesting period of the award.

The following inputs are used in the Black-Scholes option pricing model to estimate the fair value of stock options:

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

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules of the awards. Stock options granted generally vest over a service period of three years and have a contractual term of ten years.

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 expected life 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 expected life of the award.

Expected Dividend Yield. The expected dividend yield is derived by dividing the Company’s expected annual dividend rate over the expected term by the fair value of the Company’s common stock at the grant date.

 There were no stock options granted during the three months ended March 31, 2021 and 2020.

Restricted Stock

The fair value of restricted stock awards 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 vesting period of the award. Restricted stock awards granted generally vest over a service period of three to four years for employee grants and one to three years for director grants.

Restricted Stock Units

The fair value of restricted stock unit (“RSU”) awards, which 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 years.

There were no RSUs granted during the three months ended March 31, 2021 and 2020.

Performance Restricted Stock Units

The fair value of performance restricted stock unit (“PRSU”) awards, which vest upon meeting a market condition, such as exceeding a target stock price in the future, and a service condition, 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.

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

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.

There were no PRSUs granted during the three months ended March 31, 2021 and 2020.

Stock-Based Compensation

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Stock-based compensation:
Cost of revenue	$	173	$	190
Sales and marketing		440		479
Research, development and engineering		396		399
General and administrative		1,001		1,127
Stock-based compensation expense		2,010		2,195
Capitalized to software and patent costs		36		35
Total stock-based compensation	$	2,046	$	2,230

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

	As of		As of
	March 31,		December 31,
	2021		2020
Total unrecognized compensation costs	$	18,699	$	14,416

Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.

The Company expects to recognize the total unrecognized compensation costs as of March 31, 2021, for stock option, restricted stock, RSU, and PRSU awards over weighted average periods through March 31, 2025, as follows:

	Stock	Restricted
	Options	Stock	RSUs	PRSUs
Weighted average period	1.21 years	1.51 years	1.50 years	1.75 years

As of March 31, 2021, under the Company’s stock-based compensation plan, an additional 684 shares remained available for future grants. The Company issues new shares upon exercises of stock options, grants of restricted stock awards and vesting of RSU and PRSU awards.

Stock Option Activity

The following table reconciles the outstanding balance of stock option awards:

			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Grant Date		Intrinsic
Three months ended March 31, 2021:	Options		Price		Fair Value		Value
Outstanding at December 31, 2020		305	$	27.94	$	12.65
Granted		—		—		—
Exercised		—		—		—
Forfeited or expired		—		—		—
Outstanding at March 31, 2021		305	$	27.94	$	12.65	$	1,513
Exercisable at March 31, 2021		133	$	33.30			$	10
Unvested at March 31, 2021		172	$	23.78			$	1,503

The aggregate intrinsic value is based on the closing price of $29.66 per share of Digimarc common stock on March 31, 2021, which would have been received by the optionees had all of the options with exercise prices less than $29.66 per share been exercised on that date.

Restricted Stock Activity

The following table reconciles the unvested balance of restricted stock awards:

				Weighted
				Average
	Number of			Grant Date
Three months ended March 31, 2021:	Shares			Fair Value
Unvested balance, December 31, 2020		416		$	28.20
Granted		154		$	43.99
Vested		(50	)	$	28.13
Forfeited		(19	)	$	22.63
Unvested balance, March 31, 2021		501		$	33.25

The following table indicates the fair value of all restricted stock awards that vested:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Fair value of restricted stock awards vested	$	2,175	$	1,811

Restricted Stock Units Activity

The following table reconciles the unvested balance of restricted stock unit awards:

			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		45	$	15.36
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		45	$	15.36

Performance Restricted Stock Units Activity

The following table reconciles the unvested balance of performance restricted stock unit awards:

			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		124	$	11.08
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		124	$	11.08

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Shareholders' Equity

3 Months Ended

Mar. 31, 2021

Equity [Abstract]

Shareholders' Equity

6. Shareholders’ Equity

In May 2019, the Company entered into an Equity Distribution Agreement, whereby the Company may sell from time to time through Wells Fargo Securities, LLC, as its sales agent, the Company’s common stock having an aggregate offering price of up to $30,000.

There were no shares sold for the three months ended March 31, 2021.

For the three months ended March 31, 2020, the Company sold 28 shares at an average price of $21.92 under this Equity Distribution Agreement totaling $611 of cash proceeds, less $14 of commissions and $23 of stock issuance costs, for net cash proceeds of $574.

As of March 31, 2021, there is $6,932 available for future issuance under the Equity Distribution Agreement.

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Earnings Per Common Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Earnings Per Common Share

7. Earnings Per Common Share

The Company calculates basic and diluted earnings per common share in accordance with ASC 260, “Earnings Per Share,” using the two-class method because the Company’s unvested restricted stock is a participating security since these awards contain non-forfeitable rights to receive dividends. Under the two-class method, earnings are allocated to each class of common stock and participating security as if all of the earnings for the period had been distributed.

Basic earnings per common share excludes dilution and is calculated by dividing earnings to common shares by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing earnings to common shares by the weighted-average number of common shares, as adjusted for the potentially dilutive effect of stock options, RSUs and PRSUs. The dilutive effect of stock options, RSUs and PRSUs is determined using the treasury stock method.

The following table reconciles earnings (loss) per common share:

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Basic Earnings (Loss) per Common Share:
Loss to common shares — basic	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — basic		16,333			12,037
Basic earnings (loss) per common share	$	(0.50	)	$	(0.74	)
Diluted Earnings (Loss) per Common Share:
Net loss attributable to common shares — diluted	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — diluted		16,333			12,037
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.74	)

The following table indicates the common stock equivalents related to stock options, RSUs and PRSUs that were anti-dilutive and excluded from diluted earnings per common share calculations:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Anti-dilutive shares due to:
Exercise prices higher than the average market price		—		550
Net loss		162		—

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Trade Accounts Receivable

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Trade Accounts Receivable

8. Trade Accounts Receivable

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	March 31,			December 31,
	2021			2020
Trade accounts receivable	$	4,166		$	3,932
Allowance for doubtful accounts		(25	)		(25	)
Trade accounts receivable, net	$	4,141		$	3,907
Unpaid deferred revenue included in trade    accounts receivable	$	800		$	1,711

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing trade accounts receivable. The Company determines the allowance based on historical write-off experience and current information. The Company reviews its allowance for doubtful accounts each reporting period. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

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 for 10% or more of trade accounts receivable, net:

	March 31,			December 31,
	2021			2020
Central Banks		60	%		69	%

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Property and Equipment

3 Months Ended

Mar. 31, 2021

Property Plant And Equipment [Abstract]

Property and Equipment

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.

	March 31,			December 31,
	2021			2020
Office furniture and fixtures	$	1,650		$	1,650
Software		5,149			5,004
Equipment		5,044			4,967
Leasehold improvements		1,658			1,658
Gross property and equipment		13,501			13,279
Less accumulated depreciation and amortization		(10,357	)		(10,007	)
Property and equipment, net	$	3,144		$	3,272

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Intangibles

3 Months Ended

Mar. 31, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Intangibles

10. 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 months ended March 31, 2021 and 2020.

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, generally approximating seventeen years.

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

	Estimated Life	March 31,			December 31,
	(years)	2021			2020
Capitalized patent costs	17-20	$	9,827		$	9,708
Intangible assets acquired:
Purchased patents and intellectual property	3-10		250			250
Existing technology	5		1,560			1,560
Customer relationships	7		290			290
Gross intangible assets			11,927			11,808
Accumulated amortization			(5,318	)		(5,196	)
Intangibles, net		$	6,609		$	6,612

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Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

11. Leases

The Company accounts for leases in accordance with ASC 842, “Leases.” The Company leases its corporate office in Beaverton, Oregon. In July 2015, the Company entered into an amendment with the landlord of its corporate office to extend the lease term through March 2024, with remaining rent payments as of March 31, 2021, totaling $2,504, payable in monthly installments.

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

	March 31,			December 31,
	2021			2020
Right of use assets	$	1,675		$	1,793
Lease liabilities, current	$	683		$	663
Lease liabilities, long-term	$	1,594		$	1,772
Weighted-average remaining life	3.0 years			3.2 years
Weighted-average discount rate		8.20	%		8.20	%

The carrying value of the right of use assets is included in “Other assets” and the current and long-term lease liabilities are included in “Accounts payable and other accrued liabilities” and “Lease liability and other long-term liabilities,” respectively, in the Consolidated Balance Sheets.

Operating lease expense is included in cost of revenue and operating expenses in the Consolidated Statements of Operations and in cash flows from operating activities in the Consolidated Statements of Cash Flows.  The operating leases include variable lease payments which are not material and are included in operating lease expense.  Additional details of the Company’s operating leases are presented in the following table:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Operating lease expense	$	257	$	263
Cash paid for operating leases	$	297	$	327

The table below reconciles the cash payment obligations for the first five years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheet as of March 31, 2021:

	Cash
	Payment
Year ending December 31:	Obligations
Remaining in 2021	$	631
2022		862
2023		867
2024		218
2025		—
Thereafter		—
Total lease payments		2,578
Imputed interest		(301	)
Total minimum lease payments	$	2,277

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Note Payable

3 Months Ended

Mar. 31, 2021

Notes Payable [Abstract]

Note Payable

12. Note Payable

Promissory Note under the Paycheck Protection Program

On April 16, 2020, the Company entered into a Promissory Note with Stearns Bank, N.A. in an aggregate principal amount of $5,032 (the “Note”), pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Note matures two years from the disbursement date and bears interest at a rate of 1.000% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. The Note is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (collectively, “Qualifying Expenses”), pursuant to the terms and limitations of the PPP. The Company believes that it used all of the proceeds from the Note for Qualifying Expenses. However, no assurance is provided that the Company will obtain forgiveness of the Note in whole or in part.

On June 29, 2020, the Company was notified by Stearns Bank, N.A. that the Note was transferred to The Loan Source, Inc., (the “Lender”) who will be responsible for servicing the Note going forward, including administering loan forgiveness.

On September 15, 2020, the Company filed its application for 100% forgiveness of the Note. The application was reviewed by the Lender and submitted to the Small Business Administration (“SBA”) for approval on December 17, 2020. The Company has not received any notification from the SBA on the status of their review. Principal and interest payments can be deferred until the forgiveness process is completed.

The following table provides information about the Note:

	March 31,		December 31,
	2021		2020
Note payable	$	5,032	$	5,032
Accrued interest		47		33
Total	$	5,079	$	5,065
Note payable, current	$	4,799	$	3,947
Note payable, long-term		280		1,118
Total	$	5,079	$	5,065

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The provision for income taxes for the three months ended March 31, 2021 and 2020 reflects current taxes, deferred taxes, and withholding taxes. The effective tax rate for each of the three months ended March 31, 2021 and 2020 was 0%. The valuation allowance against net deferred tax assets as of March 31, 2021, was $57,850, an increase of $2,211 from $55,639 as of December 31, 2020.

Excess tax benefits of $796 and $255 were recognized in the provision for income taxes for the three months ended March 31, 2021 and 2020, respectively, which were offset by $796 and $255 of valuation allowance, respectively.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

14. Commitments and Contingencies

Certain of the Company’s contracts 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 450, “Contingencies.” To date, there have been no claims made under such indemnification provisions.

The Company is subject from time to time to other legal proceedings and claims arising in the ordinary course of business. At this time, the Company does not believe that the resolution of any such matters will have a material adverse effect on its financial position, results of operations, or cash flows.

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Subsequent Event

3 Months Ended

Mar. 31, 2021

Subsequent Events [Abstract]

Subsequent Event

15. Subsequent Event

On April 12, 2021, Bruce Davis notified the Company of his intention to retire as the Company’s President and Chief Executive Officer and as Chairman and a member of the Board of Directors effective April 12, 2021 (“Transition Date”). His decision to retire was not due to any disagreement with the Company on any matter relating to the Company’s operations, policies or practices. Riley McCormack, who has been a Director of Digimarc since October 2020, was appointed as the President and Chief Executive Officer of the Company, effective as of April 12, 2021. 

In connection with his retirement, the Company has entered into a Separation Agreement and General Release with Mr. Davis (the “Separation Agreement”), dated April 12, 2021. Pursuant to the Separation Agreement, Mr. Davis agreed to release certain claims he may have against the Company and other released parties, and Mr. Davis’s stock options, restricted stock and RSUs that vest solely based on continued service, and PRSUs that are earned and remain subject to time-based vesting, will immediately vest with respect to the number of shares that would have vested if Mr. Davis’s employment had continued for an additional twenty-four months from the Transition Date, and his right to exercise vested stock options will expire on the earliest of (i) twenty-eight months from the Transition Date, (ii) the latest date the particular stock option could have expired by its original terms under any circumstances, or (iii) the tenth anniversary of the original date of grant of the particular stock option. The Company will also be obligated to continue to pay Mr. Davis his annual salary of $785 for twenty-eight months from the Transition Date, which amount will be paid according to the Company’s standard bi-weekly payroll schedule. For a period of up to twenty-eight months following the Transition Date, the Company will also pay for healthcare insurance premiums or, in certain circumstances, the cash equivalent, for Mr. Davis and his dependents to the extent they elect and remain entitled to such coverage under the Company’s group health plans. In addition, the Company will make premium payments on Mr. Davis’s existing term life insurance policy through August 10, 2023.

The Separation Agreement resulted in the acceleration of vesting for Mr. Davis on 137 stock options, 30 RSUs, and 82 PRSUs. Mr. Davis will forfeit 35 stock options, 15 RSUs, and 41 PRSUs. The Company estimates that it will incur total expenses of

approximately $6,200 for the three months ending June 30, 2021 associated with the Separation Agreement, which includes $2,200 of cash related expenses and $4,000 of stock-based compensation expenses.

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Description of Business and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business

Description of Business

Digimarc Corporation (“Digimarc” or the “Company”), an Oregon corporation, is a pioneer in the automatic identification of media, including packaging, other commercial print, digital images, audio and video. The Digimarc Platform takes industry beyond the barcode, providing innovative and comprehensive automatic identification software and services to simplify search and transform information discovery through unparalleled reliability, efficiency and security. The Digimarc Platform enables applications that benefit retailers and consumer brands, national and state government agencies, media and entertainment industries, and others.

The Digimarc Platform features three core capabilities for the identification, discovery and quality management of media.  Digimarc Barcode integrates the identification function, which is a novel data carrier encoded into media in ways that are generally imperceptible to people, permitting the carrier to be repeated many times over the surface of the enhanced media. Digimarc Discover represents the discovery function, which is software for computing devices and network interfaces that recognize and decode indicia of the identity of media. These include, but are not limited to, Digimarc Barcodes, Quick Response Codes, Universal Product Codes, certain other Global Standards One (“GS1”) approved one-dimensional codes and relevant contextual data. Digimarc Verify incorporates the quality management function, a suite of software tools used to inspect and verify that the identification and discovery of media are both accurate and effective. Together, these core capabilities enable organizations, application developers, and other solution providers to build new and improve existing automatic identification solutions.

Interim Consolidated Financial Statements

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, 2020.

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 accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021. 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.

Reclassifications

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, including the reclassification of revenue by major target market. These reclassifications had no material effect on the results of operations or financial position for any period presented.

Accounting Pronouncements

Accounting Pronouncements Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (ASC 740) Simplifying the Accounting for Income Taxes,” that removes certain exceptions to the general principles and also improves consistent application of and simplifies U.S. GAAP. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company adopted this new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s financial condition, results of operations and disclosures.

Accounting Pronouncements Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments,” which amends the guidance on the impairment of financial instruments. The amendments in this update remove the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance removes all

current recognition thresholds and introduces the new current expected credit loss (“CECL”) model which will require entities to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Company does not expect the impact of the adoption of this standard to have a material impact on its financial condition, results of operations and disclosures.

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Summary of Fair Value Hierarchy for Financial Assets

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

March 31, 2021	Level 1		Level 2		Level 3		Total
Money market securities	$	3,404	$	—	$	—	$	3,404
Commercial paper		—		39,177		—		39,177
Pre-refunded municipals		—		21,273		—		21,273
Corporate notes		—		5,505		—		5,505
Total	$	3,404	$	65,955	$	—	$	69,359

December 31, 2020	Level 1		Level 2		Level 3		Total
Money market securities	$	10,988	$	—	$	—	$	10,988
Commercial paper		—		36,478		—		36,478
Pre-refunded municipals		—		26,697		—		26,697
Corporate notes		—		2,437		—		2,437
Total	$	10,988	$	65,612	$	—	$	76,600

Summary of Fair Value Maturities for Financial Asset

The fair value maturities of the Company’s cash equivalents and marketable securities as of March 31, 2021, are as follows:

	Maturities by Period
	Total		Less than 1 year		1-5 years		5 - 10 years		More than 10 years
Cash equivalents and marketable securities	$	69,359	$	69,200	$	159	$	—	$	—

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2021

Revenue Recognition [Abstract]

Schedule of Disaggregated Revenue By Major Product Line in Single Reporting Segment

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

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Government
Service	$	3,585	$	3,652
Subscription		300		300
Total Government		3,885		3,952
Commercial
Service	$	199	$	86
Subscription		2,616		2,151
Total Commercial		2,815		2,237
Total	$	6,700	$	6,189

Schedule of Contract Liabilities from Contracts with Customers

The following table provides information about contract liabilities from contracts with customers:

	March 31,		December 31,
	2021		2020
Deferred revenue, current	$	2,943	$	3,002
Deferred revenue, long-term		34		30
Total	$	2,977	$	3,032

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Geographical Segment Revenue

Revenue by geographic area, based upon the “bill-to” location, was as follows:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Domestic	$	1,722	$	1,759
International (1)		4,978		4,430
Total	$	6,700	$	6,189

(1) 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.

Customers Accounted for 10% or More of Revenue

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

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Central Banks		58	%		64	%
Walmart Inc.		11	%		12	%

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Allocation of Stock-Based Compensation

Stock-Based Compensation

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Stock-based compensation:
Cost of revenue	$	173	$	190
Sales and marketing		440		479
Research, development and engineering		396		399
General and administrative		1,001		1,127
Stock-based compensation expense		2,010		2,195
Capitalized to software and patent costs		36		35
Total stock-based compensation	$	2,046	$	2,230

Unrecognized Compensation Cost Related to Non-Vested Stock-Based Awards Granted

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

	As of		As of
	March 31,		December 31,
	2021		2020
Total unrecognized compensation costs	$	18,699	$	14,416

Weighted Average Period for Recognition of Unrecognized Compensation Cost for Stock Options and Restricted Stock

The Company expects to recognize the total unrecognized compensation costs as of March 31, 2021, for stock option, restricted stock, RSU, and PRSU awards over weighted average periods through March 31, 2025, as follows:

	Stock	Restricted
	Options	Stock	RSUs	PRSUs
Weighted average period	1.21 years	1.51 years	1.50 years	1.75 years

Reconciliation of Outstanding Balance of Stock Options

The following table reconciles the outstanding balance of stock option awards:

			Weighted		Weighted
			Average		Average		Aggregate
	Number of		Exercise		Grant Date		Intrinsic
Three months ended March 31, 2021:	Options		Price		Fair Value		Value
Outstanding at December 31, 2020		305	$	27.94	$	12.65
Granted		—		—		—
Exercised		—		—		—
Forfeited or expired		—		—		—
Outstanding at March 31, 2021		305	$	27.94	$	12.65	$	1,513
Exercisable at March 31, 2021		133	$	33.30			$	10
Unvested at March 31, 2021		172	$	23.78			$	1,503

Reconciliation of Unvested Balance of Restricted Stock

The following table reconciles the unvested balance of restricted stock awards:

				Weighted
				Average
	Number of			Grant Date
Three months ended March 31, 2021:	Shares			Fair Value
Unvested balance, December 31, 2020		416		$	28.20
Granted		154		$	43.99
Vested		(50	)	$	28.13
Forfeited		(19	)	$	22.63
Unvested balance, March 31, 2021		501		$	33.25

Fair Value of Restricted Stock Awards Vested

The following table indicates the fair value of all restricted stock awards that vested:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Fair value of restricted stock awards vested	$	2,175	$	1,811

Restricted Stock Units [Member]

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Reconciliation of Unvested Balance of Restricted Stock Unit

The following table reconciles the unvested balance of restricted stock unit awards:

			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		45	$	15.36
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		45	$	15.36

Performance Restricted Stock Units [Member]

Share Based Compensation Arrangement By Share Based Payment Award [Line Items]

Reconciliation of Unvested Balance of Performance Restricted Stock Unit

The following table reconciles the unvested balance of performance restricted stock unit awards:

			Weighted
			Average
	Number of		Grant Date
	Units		Fair Value
Unvested balance, December 31, 2020		124	$	11.08
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Unvested balance, March 31, 2021		124	$	11.08

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Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Summary of Reconciliation of Earnings (Loss) Per Common Share

The following table reconciles earnings (loss) per common share:

	Three			Three
	Months			Months
	Ended			Ended
	March 31,			March 31,
	2021			2020
Basic Earnings (Loss) per Common Share:
Loss to common shares — basic	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — basic		16,333			12,037
Basic earnings (loss) per common share	$	(0.50	)	$	(0.74	)
Diluted Earnings (Loss) per Common Share:
Net loss attributable to common shares — diluted	$	(8,222	)	$	(8,908	)
Weighted average common shares outstanding — diluted		16,333			12,037
Diluted earnings (loss) per common share	$	(0.50	)	$	(0.74	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following table indicates the common stock equivalents related to stock options, RSUs and PRSUs that were anti-dilutive and excluded from diluted earnings per common share calculations:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Anti-dilutive shares due to:
Exercise prices higher than the average market price		—		550
Net loss		162		—

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Trade Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2021

Receivables [Abstract]

Summary of Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount.

	March 31,			December 31,
	2021			2020
Trade accounts receivable	$	4,166		$	3,932
Allowance for doubtful accounts		(25	)		(25	)
Trade accounts receivable, net	$	4,141		$	3,907
Unpaid deferred revenue included in trade    accounts receivable	$	800		$	1,711

Customers Accounted for 10% or More of Trade Accounts Receivable, Net

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

	March 31,			December 31,
	2021			2020
Central Banks		60	%		69	%

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2021

Property Plant And Equipment [Abstract]

Depreciation and Amortization on Property and Equipment Using the Straight-Line Method

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.

	March 31,			December 31,
	2021			2020
Office furniture and fixtures	$	1,650		$	1,650
Software		5,149			5,004
Equipment		5,044			4,967
Leasehold improvements		1,658			1,658
Gross property and equipment		13,501			13,279
Less accumulated depreciation and amortization		(10,357	)		(10,007	)
Property and equipment, net	$	3,144		$	3,272

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Intangibles (Tables)

3 Months Ended

Mar. 31, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Amortization of Intangible Assets Acquired

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

	Estimated Life	March 31,			December 31,
	(years)	2021			2020
Capitalized patent costs	17-20	$	9,827		$	9,708
Intangible assets acquired:
Purchased patents and intellectual property	3-10		250			250
Existing technology	5		1,560			1,560
Customer relationships	7		290			290
Gross intangible assets			11,927			11,808
Accumulated amortization			(5,318	)		(5,196	)
Intangibles, net		$	6,609		$	6,612

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Additional Details of Leases Presented in Balance Sheets

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

	March 31,			December 31,
	2021			2020
Right of use assets	$	1,675		$	1,793
Lease liabilities, current	$	683		$	663
Lease liabilities, long-term	$	1,594		$	1,772
Weighted-average remaining life	3.0 years			3.2 years
Weighted-average discount rate		8.20	%		8.20	%

Additional Details of Operating Lease Expense

Operating lease expense is included in cost of revenue and operating expenses in the Consolidated Statements of Operations and in cash flows from operating activities in the Consolidated Statements of Cash Flows.  The operating leases include variable lease payments which are not material and are included in operating lease expense.  Additional details of the Company’s operating leases are presented in the following table:

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2021		2020
Operating lease expense	$	257	$	263
Cash paid for operating leases	$	297	$	327

Reconciliation of Undiscounted Cash Payment Obligations of Operating Lease Liability

The table below reconciles the cash payment obligations for the first five years and total of the remaining years for the operating lease liability recorded in the Consolidated Balance Sheet as of March 31, 2021:

	Cash
	Payment
Year ending December 31:	Obligations
Remaining in 2021	$	631
2022		862
2023		867
2024		218
2025		—
Thereafter		—
Total lease payments		2,578
Imputed interest		(301	)
Total minimum lease payments	$	2,277

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Note Payable (Tables)

3 Months Ended

Mar. 31, 2021

Notes Payable [Abstract]

Schedule of Note Payable

The following table provides information about the Note:

	March 31,		December 31,
	2021		2020
Note payable	$	5,032	$	5,032
Accrued interest		47		33
Total	$	5,079	$	5,065
Note payable, current	$	4,799	$	3,947
Note payable, long-term		280		1,118
Total	$	5,079	$	5,065

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Fair Value of Financial Instruments - Summary of Fair Value Hierarchy for Financial Assets (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 69,359
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	69,359	$ 76,600
Fair Value, Measurements, Recurring [Member] | Money Market Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	3,404	10,988
Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	39,177	36,478
Fair Value, Measurements, Recurring [Member] | Pre-refunded Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	21,273	26,697
Fair Value, Measurements, Recurring [Member] | Corporate Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	5,505	2,437
Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	3,404	10,988
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Money Market Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	3,404	10,988
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Pre-refunded Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	65,955	65,612
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Money Market Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	39,177	36,478
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Pre-refunded Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	21,273	26,697
Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	5,505	2,437
Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Money Market Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Pre-refunded Municipals [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	0	0
Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total	$ 0	$ 0

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Fair Value of Financial Instruments - Summary of Fair Value Maturities for Financial Asset (Detail) $ in Thousands	Mar. 31, 2021 USD ($)
Fair Value Disclosures [Abstract]
Cash equivalents and marketable securities, Maturities by Period, Total	$ 69,359
Cash equivalents and marketable securities, Maturities by Period, Less than 1 year	69,200
Cash equivalents and marketable securities, Maturities by Period, 1-5 years	159
Cash equivalents and marketable securities, Maturities by Period, 5-10 years	0
Cash equivalents and marketable securities, Maturities by Period, More than 10 years	$ 0

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Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Fair Value Disclosures [Abstract]
Highly liquid marketable securities with original maturities	90 days or less
Cash equivalents include commercial paper and money market funds	$ 3,404	$ 18,568

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Revenue Recognition - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Revenue Recognition [Abstract]
Period of revenue from services	1 month
Subscription revenue term, minimum	1 year
Subscription revenue term, maximum	3 years
Deferred revenue, revenue recognized	$ 1,351
Aggregate amount of transaction price from contractual obligations	$ 17,504	$ 17,921

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Revenue Recognition - Schedule of Disaggregated Revenue By Major Product Line in Single Reporting Segment (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Disaggregation Of Revenue [Line Items]
Total	$ 6,700	$ 6,189
Service [Member]
Disaggregation Of Revenue [Line Items]
Total	3,784	3,738
Subscription [Member]
Disaggregation Of Revenue [Line Items]
Total	2,916	2,451
Government [Member]
Disaggregation Of Revenue [Line Items]
Total	3,885	3,952
Government [Member] | Service [Member]
Disaggregation Of Revenue [Line Items]
Total	3,585	3,652
Government [Member] | Subscription [Member]
Disaggregation Of Revenue [Line Items]
Total	300	300
Commercial [Member]
Disaggregation Of Revenue [Line Items]
Total	2,815	2,237
Commercial [Member] | Service [Member]
Disaggregation Of Revenue [Line Items]
Total	199	86
Commercial [Member] | Subscription [Member]
Disaggregation Of Revenue [Line Items]
Total	$ 2,616	$ 2,151

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Revenue Recognition - Schedule of Contract Liabilities from Contracts with Customers (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Revenue Recognition [Abstract]
Deferred revenue, current	$ 2,943	$ 3,002
Deferred revenue, long-term	34	30
Total	$ 2,977	$ 3,032

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Segment Information - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2021 Segment
Revenue, Major Customer [Line Items]
Number of reporting segment	1
Customer Concentration Risk [Member] | Minimum [Member] | Sales [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue from major customers	10.00%

XML

Segment Information - Geographical Segment Revenue (Detail) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue		$ 6,700	$ 6,189
Domestic [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue		1,722	1,759
International [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Total revenue	[1]	$ 4,978	$ 4,430

[1] 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.

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Segment Information - Customers Accounted for 10% or More of Revenue (Detail) - Customer Concentration Risk [Member] - Sales [Member]	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Central Banks [Member]
Revenue, Major Customer [Line Items]
Entity wide revenue major customers percentage	58.00%	64.00%
Walmart Inc. [Member]
Revenue, Major Customer [Line Items]
Entity wide revenue major customers percentage	11.00%	12.00%

XML

Stock-Based Compensation - Additional Information (Detail) - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted	0
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	3 years
Contractual terms	10 years
Stock options granted	0	0
Stock-based compensation plans, number of additional shares authorized for future grants	684
Stock price	$ 29.66
Restricted Stock [Member] | Minimum [Member] | Employee [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	3 years
Restricted Stock [Member] | Minimum [Member] | Director [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	1 year
Restricted Stock [Member] | Maximum [Member] | Employee [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	4 years
Restricted Stock [Member] | Maximum [Member] | Director [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	3 years
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	3 years
Stock options granted	0	0
Performance Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting period for stock options and restricted stock	3 years
Stock options granted	0	0

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Stock-Based Compensation - Allocation of Stock-Based Compensation (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 2,010	$ 2,195
Capitalized to software and patent costs	36	35
Total stock-based compensation	2,046	2,230
Cost of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	173	190
Sales and Marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	440	479
Research, Development and Engineering [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	396	399
General and Administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 1,001	$ 1,127

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Stock-Based Compensation - Unrecognized Compensation Cost Related to Non-Vested Stock-Based Awards Granted (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Total unrecognized compensation costs	$ 18,699	$ 14,416

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Stock-Based Compensation - Weighted Average Period for Recognition of Unrecognized Compensation Cost for Stock Options and Restricted Stock (Detail)	3 Months Ended
	Mar. 31, 2021
Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average period	1 year 2 months 15 days
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average period	1 year 6 months 3 days
Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average period	1 year 6 months
Performance Restricted Stock Units [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average period	1 year 9 months

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Stock-Based Compensation - Reconciliation of Outstanding Balance of Stock Options (Detail) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) $ / shares shares
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Options, Outstanding at beginning | shares	305
Options, Granted | shares	0
Options, Exercised | shares	0
Options, Forfeited or expired | shares	0
Options, Outstanding at ending | shares	305
Options, Exercisable at ending | shares	133
Options, Unvested at ending | shares	172
Weighted Average Exercise Price, Outstanding at beginning	$ 27.94
Weighted Average Exercise Price, Granted	0
Weighted Average Exercise Price, Exercised	0
Weighted Average Exercise Price, Forfeited or expired	0
Weighted Average Exercise Price, Outstanding at ending	27.94
Weighted Average Exercise Price, Exercisable at ending	33.30
Weighted Average Exercise Price, Unvested at ending	23.78
Weighted Average Grant Date Fair Value, Outstanding at beginning	12.65
Weighted Average Grant Date Fair Value, Granted	0
Weighted Average Grant Date Fair Value, Exercised	0
Weighted Average Grant Date Fair Value, Forfeited or expired	0
Weighted Average Grant Date Fair Value, Outstanding at ending	$ 12.65
Aggregate Intrinsic Value, Outstanding | $	$ 1,513
Aggregate Intrinsic Value, Exercisable | $	10
Aggregate Intrinsic Value, Unvested | $	$ 1,503

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Stock-Based Compensation - Reconciliation of Unvested Balance of Restricted Stock (Detail) - Restricted Stock [Member] shares in Thousands	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Number of Shares
Unvested, beginning balance | shares	416
Granted | shares	154
Vested | shares	(50)
Forfeited | shares	(19)
Unvested, ending balance | shares	501
Weighted Average Grant Date Fair Value
Unvested, beginning balance | $ / shares	$ 28.20
Granted | $ / shares	43.99
Vested | $ / shares	28.13
Forfeited | $ / shares	22.63
Unvested, ending balance | $ / shares	$ 33.25

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Stock-Based Compensation - Fair Value of Restricted Stock Awards Vested (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Restricted Stock [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Fair value of restricted stock awards vested	$ 2,175	$ 1,811

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Stock-Based Compensation - Reconciliation of Unvested Balance of Restricted Stock Unit (Detail) - Restricted Stock Units [Member] shares in Thousands	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested, beginning balance | shares	45
Granted | shares	0
Vested | shares	0
Forfeited | shares	0
Unvested, ending balance | shares	45
Unvested, beginning balance | $ / shares	$ 15.36
Granted | $ / shares	0
Vested | $ / shares	0
Forfeited | $ / shares	0
Unvested, ending balance | $ / shares	$ 15.36

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Stock-Based Compensation - Reconciliation of Unvested Balance of Performance Restricted Stock Unit (Detail) - Performance Restricted Stock Units [Member] shares in Thousands	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Number of Shares
Unvested, beginning balance | shares	124
Granted | shares	0
Vested | shares	0
Forfeited | shares	0
Unvested, ending balance | shares	124
Weighted Average Grant Date Fair Value
Unvested, beginning balance | $ / shares	$ 11.08
Granted | $ / shares	0
Vested | $ / shares	0
Forfeited | $ / shares	0
Unvested, ending balance | $ / shares	$ 11.08

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Shareholders' Equity - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	May 31, 2019
Equity Distribution Agreement
Common Stock Capital Value Reserved For Future Issuance	$ 6,932,000
Common Stock [Member]
Issuance of common stock	0	28,000
Cash proceeds from sale of common stock		$ 574,000
Sale of common stock, sales agent commissions		14,000
Stock issuance costs		$ 23,000
Common Stock [Member] | Equity Distribution Agreement With Average Price Of Twenty One Point Nine Two
Issuance of common stock		28,000
Common stock price per share		$ 21.92
Cash proceeds from sale of common stock		$ 611,000
Common Stock [Member] | Maximum [Member]
Aggregate offering price of common stock			$ 30,000,000

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Earnings Per Common Share - Summary of Reconciliation of Earnings (Loss) Per Common Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Basic Earnings (Loss) per Common Share:
Loss to common shares — basic	$ (8,222)	$ (8,908)
Weighted average common shares outstanding — basic	16,333	12,037
Basic earnings (loss) per common share	$ (0.50)	$ (0.74)
Diluted Earnings (Loss) per Common Share:
Net loss attributable to common shares — diluted	$ (8,222)	$ (8,908)
Weighted average common shares outstanding — diluted	16,333	12,037
Diluted earnings (loss) per common share	$ (0.50)	$ (0.74)

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Earnings Per Common Share - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share	162	0
Higher Than Average Market Price [Member]
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Common stock equivalents related to stock options that were anti-dilutive and excluded from diluted net income per share	0	550

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Trade Accounts Receivable - Summary of Trade Accounts Receivable (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Accounts Receivable Net Current [Abstract]
Trade accounts receivable	$ 4,166	$ 3,932
Allowance for doubtful accounts	(25)	(25)
Trade accounts receivable, net	4,141	3,907
Unpaid deferred revenue included in trade accounts receivable	$ 800	$ 1,711

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Trade Accounts Receivable - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2021
Accounts Receivable [Member] | Minimum [Member] | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Percentage of trade accounts receivable of major customers	10.00%

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Trade Accounts Receivable - Customers Accounted for 10% or More of Trade Accounts Receivable, Net (Detail)	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Accounts Receivable [Member] | Credit Concentration Risk [Member] | Central Banks [Member]
Concentration Risk [Line Items]
Percentage of trade accounts receivable of major customers	60.00%	69.00%

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Property and Equipment - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2021
Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	2 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	10 years

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Property and Equipment - Depreciation and Amortization on Property and Equipment Using the Straight-Line Method (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Property Plant And Equipment [Abstract]
Office furniture and fixtures	$ 1,650	$ 1,650
Software	5,149	5,004
Equipment	5,044	4,967
Leasehold improvements	1,658	1,658
Gross property and equipment	13,501	13,279
Less accumulated depreciation and amortization	(10,357)	(10,007)
Property and equipment, net	$ 3,144	$ 3,272

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Intangibles - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Impairment charges on intangible	$ 0	$ 0
Capitalized Patent Costs [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	17 years

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Intangibles - Amortization of Intangible Assets Acquired (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Capitalized patent costs	$ 9,827	$ 9,708
Intangible assets acquired:
Gross intangible assets	11,927	11,808
Accumulated amortization	(5,318)	(5,196)
Intangibles, net	$ 6,609	6,612
Capitalized Patent Costs [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	17 years
Capitalized Patent Costs [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	20 years
Purchased Patents and Intellectual Property [Member]
Intangible assets acquired:
Intangible assets amount	$ 250	250
Purchased Patents and Intellectual Property [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	3 years
Purchased Patents and Intellectual Property [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years
Existing Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	5 years
Intangible assets acquired:
Intangible assets amount	$ 1,560	1,560
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	7 years
Intangible assets acquired:
Intangible assets amount	$ 290	$ 290

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Leases - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jul. 31, 2015	Mar. 31, 2021
Lessee Operating Lease [Line Items]
Remaining rent payments		$ 2,578
Beaverton, Oregon [Member]
Lessee Operating Lease [Line Items]
Existence of option to extend		0
Option to extend operating lease		0
Option to extend operating lease, month and year	2024-03
Remaining rent payments		$ 2,504

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Leases - Additional Details of Leases Presented in Balance Sheets (Detail) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Right of use assets	$ 1,675	$ 1,793
Lease liabilities, current	683	663
Lease liabilities, long-term	$ 1,594	$ 1,772
Weighted-average remaining life	3 years	3 years 2 months 12 days
Weighted-average discount rate	8.20%	8.20%

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Leases - Additional Details of Operating Lease Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Operating lease expense	$ 257	$ 263
Cash paid for operating leases	$ 297	$ 327

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Leases - Reconciliation of Undiscounted Cash Payment Obligations of Operating Lease Liability (Detail) $ in Thousands	Mar. 31, 2021 USD ($)
Leases [Abstract]
Remaining in 2021	$ 631
2022	862
2023	867
2024	218
2025	0
Thereafter	0
Total lease payments	2,578
Imputed interest	(301)
Total minimum lease payments	$ 2,277

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Note Payables - Additional Information (Details) - USD ($) $ in Thousands		1 Months Ended
	Sep. 15, 2020	Apr. 16, 2020	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Aggregate principal loan amount			$ 5,032	$ 5,032
Application of loan percentage to be applied to forgiveness of the note	100.00%
PPP [Member]
Debt Instrument [Line Items]
Aggregate principal loan amount		$ 5,032
Term of loan		2 years
Interest rate on loan per annum		1.00%
Loan, payment terms		Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

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Note Payables - Schedule of Note Payables (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Notes Payable [Abstract]
Note payable	$ 5,032	$ 5,032
Accrued interest	47	33
Total	5,079	5,065
Note payable, current	4,799	3,947
Note payable, long-term	280	1,118
Total	$ 5,079	$ 5,065

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Income Tax Disclosure [Line Items]
Deferred tax assets, valuation allowance	$ 57,850		$ 55,639
Effective tax rate	0.00%	0.00%
Change in valuation allowance	$ 2,211
ASU No. 2016-09 [Member]
Income Tax Disclosure [Line Items]
Excess tax benefits recognized in the provision for income taxes offset by valuation allowance	$ 796	$ 255

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Subsequent Event - Additional Information (Detail) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
	Apr. 12, 2021	Jun. 30, 2021	Mar. 31, 2021	Mar. 31, 2020
Subsequent Event [Line Items]
Stock-based compensation			$ 2,010	$ 2,195
Separation Agreement [Member] | Scenario Forecast [Member]
Subsequent Event [Line Items]
Estimated total expense		$ 6,200
Cas related expenses		2,200
Stock-based compensation		$ 4,000
Subsequent Event [Member] | President, CFO and chairman [Member] | Separation Agreement [Member]
Subsequent Event [Line Items]
Officers' compensation	$ 785
Compensation period	28 months
Subsequent Event [Member] | President, CFO and chairman [Member] | Separation Agreement [Member] | Restricted Stock Units [Member]
Subsequent Event [Line Items]
Number of shares vested	30
Number of shares forfeited	15
Subsequent Event [Member] | President, CFO and chairman [Member] | Separation Agreement [Member] | Performance Restricted Stock Units [Member]
Subsequent Event [Line Items]
Number of shares vested	82
Number of shares forfeited	41
Subsequent Event [Member] | President, CFO and chairman [Member] | Separation Agreement [Member] | Stock Option [Member]
Subsequent Event [Line Items]
Number of shares vested	137
Number of shares forfeited	35