Notice of Exempt Solicitation (Form PX14A6G)

Name of the Registrant:

Name of Person Relying on Exemption:

Address of Person Relying on Exemption:

Written Materials. The following written materials are attached:

Vote "WITHHOLD" on Riley McCormack, who as CEO is responsible for the Company's poor performance and destruction of shareholder value

"VOTE NO" on the Company's say-on-pay (Proposal No. 3 on your proxy card); this incentive plan has created misalignment between management versus shareholders in that executives were well compensated while shareholders lost significant value

Vote "WITHHOLD" on Kathleen Kool, who, as the previous Chair of the Compensation Committee, put in place the misaligned incentives, and as Chair of the Board has failed to address the Company's poor performance

Nasdaq Composite

DMRC stock price

DMRC if performance = Nasdaq

Digimarc's stock price is down 60% in the four years since Mr. McCormack was named CEO

If Digimarc had matched the Nasdaq Composite Index, the Company's stock price would be $34.06 (3.0x its present level)

The equity market has unequivocally rebuked Mr. McCormack's performance

Since Ocho published our public letter on 3/20/25, numerous shareholders have reached out to share their frustration with the Company's poor operating and financial performance under his leadership, as well as his inadequate communication with investors

Quarterly revenue

Share count

Quarterly revenue/share

For the past four years, quarterly revenue has been flat at ~$0.40 per share

Modest growth in revenue has been offset by ongoing dilution from capital raises and acquisitions

The Guidelines can be found here.

Mr. McCormack has no prior sales or go-to-market experience; unfortunately, he has been unable to overcome the lack of this skill set, and the result has been a dearth of revenue growth

Actual results

Needham est (as of 6/24)

Digimarc began reporting annual recurring revenue (ARR) in 3q23, and it has become the most important metric in determining the Company's intrinsic value

The Company announced two large commercial contracts in the past four years; they will both no longer generate ARR by the end of the current quarter

Since Digimarc first reported this metric, Net ARR has declined by 17% (-14% CAGR)

This is in stark contrast to the 63% increase (48% CAGR) that was projected by a prominent sell side analyst

The actual Net ARR result for 12/31/24 was 49% below the sell side's forecast from only 6 months earlier

Cash ($ in millions)

Number of employees:

Sales, marketing, ops

R&D, engineering

Finance, admin, IT

Total Employees

In the four years Mr. McCormack has been CEO, Digimarc's poor financial performance has resulted in over $120M in losses and a depleted cash balance

This poor performance has depressed Digimarc's stock price; at this level, it would be extremely dilutive to raise new capital

The cumulative losses and declining cash balance recently caused the Company to reduce its workforce by 42%, including a 73% decrease in R&D and engineering employees

These cuts threaten the viability of some of the Company's most promising markets, especially those that have not yet achieved product-market fit

Digimarc shareholders should not be forced to continue relying on a CEO whose poor performance has required the Company to terminate 42% of its employees

For over four months, Mr. McCormack failed to disclose to shareholders the loss of Digimarc's largest commercial customer

The contract expired in June 2024

Nonetheless, it was still included in the ARR calculation as of 6/30/24, which was reported to investors on the Company's earnings call in August 2024 (even though Digimarc had not received revenue from this contract for the prior five weeks)

Legally, because Mr. McCormack discussed the future opportunities he envisioned with this customer on that same August 2024 call, he was required to disclose the loss of this contract at the same time

However, he did not disclose the termination of the contract until the following earnings call (November 2024)

As a result, Mr. McCormack's credibility has been destroyed, and investors' distrust will strand the stock price "in the penalty box" until the Company hires a new CEO

Digimarc shareholders deserve a CEO who communicates with clarity and transparency rather than one who withholds critical information

This misalignment was caused by a significant change in the Company's incentive plan for 2024

Previously, Digimarc used total annual recurring revenue (ARR) as the largest weighting (65%) in its incentive compensation, which was aligned with shareholder interests, as total ARR was inclusive of both new customer wins and contract losses

Beginning in 2024, Digimarc changed the largest weighting (still 65%) in its incentive compensation calculation to "Gross New ARR Growth", which is based on only the additions to Ending ARR (but ignores any customer losses)

In other words, even if the Company were to lose all of its existing customers, there would be no impact on management's compensation in what is by far the largest weighting of their Annual Incentive Plan

Digimarc reported a 10% decline in total ARR in 2024 (due to the loss of its largest commercial contract, among others)

However, the Company reported 23% Gross New ARR Growth in 2024 (which exceeded its 22.5% target for this deficient metric)

Under the 2023 compensation system, this performance would have resulted in executives receiving 0% of the 65% payout (based on total ARR)

However, under the 2024 compensation system, the same performance resulted in executives receiving a 71% payout on this metric (109% of the target of a 65% payout for Gross New ARR Growth)

Under the prior (more sensible) plan, this 71% payout would have been 0%, which would have reduced the executives' Annual Incentive Plan payout from 96% of target to 25% (i.e., the 2024 incentive payments were nearly 4x the level they would have been under the previous system)

Importantly, shareholders care far more about the prior metric (total ARR) than the new measure (Gross New ARR Growth)

In fact, from the day after Digimarc reported its 12/31/23 ARR to the day after reporting its 12/31/24 results, the stock price plummeted 56% (compared to a 14% increase in the Nasdaq Composite Index during the same time period)

In other words, in 2024, the Company's executives received a 109% payout on this metric (and a 96% payout on its target incentive plan overall), despite the shareholders having suffered 70% stock price underperformance

The timing of this peculiar change in the incentive compensation framework was particularly detrimental as it was implemented just months before the known, upcoming expiration of Digimarc's largest commercial contract

This two-year contract started in July 2022 and was scheduled to expire in June 2024

The non-renewal of this contract was devastating for the Company's shareholders but, because the incentive plan was changed to ignore the loss of existing customers, the executives' bonus payouts were not impacted

As Chair of the Compensation Committee, she oversaw the redesign and implementation of the disastrous compensation plan outlined above

This allowed Digimarc's executives to be well compensated in 2024, despite failing to renew the Company's largest commercial contract and destroying significant shareholder value

This was a dereliction of fiduciary duty, as this change to executive compensation clearly benefited management at the expense of Digimarc shareholders

Ms. Kool, as Chair of the Board, appears to have taken no action to address the Company's dramatic loss of value and the CEO's poor performance

"As the Chair of the Board, Ms. Kool works ... to engage with and represent the shareholder community." - Digimarc's proxy statement, 3/25/25

Despite that claim, Ms. Kool's actions in this role have been counterproductive for both the Company and its shareholders:

When Ocho requested a private meeting shortly before crossing the 5% ownership threshold, Ms. Kool promptly agreed

However, she inexplicably canceled the meeting one business day later

She then refused to reschedule the meeting, claiming she was "not able to have the conversation"

This forced Ocho to publish a public letter (the first its principal has written in over 30 years of public equity investing)

Large shareholders should not be required to communicate publicly in order to have their voices heard by the person claiming to serve as the Company's representative of the shareholder community

While Digimarc is in crisis, as Chair of the Board, Ms. Kool was unable to schedule a meeting with Ocho for 25 days after our public letter and has taken no other discernable action on behalf of the Company's shareholders

In March 2023, April 2024, and March 2025, Digimarc released proxy statements that included paragraphs about the opportunity for non-employee directors to receive 0%, 50%, or 100% of their annual retainers in common stock

In March 2023 and April 2024, that paragraph ended with similar language: "Following our annual meeting, all our non-employee directors chose to take at least half of their annual cash retainer in equity"

In March 2025, that sentence no longer appeared; also, footnote 1 to the 2024 Non-Employee Director Compensation Table makes clear that Ms. Kool elected to receive all of her 2024 director compensation in cash

The Form 4 filings in April 2025 reveal that Ms. Kool still chooses to be the lone director not to receive any of her retainer in common stock (i.e., she continues to opt for cash only)

It is also concerning that Ms. Kool was named Chair of Digimarc in July 2024, just a few months after choosing to become the only director to receive none of her retainer fees in stock

Digimarc shareholders deserve a Chair who believes in the Company enough to "put her money where her mouth is" by receiving her retainer in stock

WITHHOLD on Mr. McCormack because his four-year tenure has been marked by a 60% decline in the stock price, no growth in revenue per share and declining net ARR, continued operating losses and the need to curtail investments in employees and the business, and lost credibility with investors due to a lack of transparent communication.

VOTE NO on say-on-pay because Digimarc's incentive plan misaligns the interests of management versus shareholders. The change of a key compensation metric, from total ARR to "Gross New ARR Growth", occurred just months before the expiration (and eventual loss) of the Company's largest commercial contract. This curious revision meant, even in the event Digimarc had lost all of its existing customers, there would be no effect on the largest weighting (65%) of management's cash bonuses. As a result, Digimarc's executives were paid nearly four times as much on their Annual Incentive Plan for 2024 (96% payout) than they would have under the prior (more sensible) plan (25% payout).

WITHHOLD on Ms. Kool because she was Chair of the Compensation Committee when the aforementioned changes to the incentive plan occurred to the detriment of shareholders, she appears to have taken no action to address the Company's dramatic loss in shareholder value and CEO's poor performance, she has not been willing to meet with large shareholders unless they communicate publicly, and she has cast a vote of "no confidence" as the lone director to choose to receive none of her annual retainer in stock (opting for cash only).