Aware Inc 10-K for FY2022

Aware Inc (AWRE)

10-K 2023-03-15 For: 2022-12-31

Added on April 06, 2026

About this 10-K

Aware Inc filed this 10-K on March 15, 2023, covering the fiscal year ended December 31, 2022 (FY2022).

Headline figures

Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $16.01M; down 5.0% from $16.85M a year earlier
Net loss: $1.73M; compared with a net loss of $5.82M a year earlier
Diluted EPS: -$0.08; compared with -$0.27 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Massachusetts	04-2911026
(State or Other Jurisdiction ofc Incorporation or Organization)	(I.R.S. Employer Identification No.)


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share	AWRE	The Nasdaq Global Market


PART I

Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Reserved	16
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 8.	Financial Statements and Supplementary Data	25
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A.	Controls and Procedures	54
Item 9B.	Other Information	54
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	54

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	54
Item 11.	Executive Compensation	54
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	54
Item 13.	Certain Relationships and Related Transactions, and Director Independence	55
Item 14.	Principal Accountant Fees and Services	55

PART IV

Item 15.	Exhibits and Financial Statement Schedule	56

Signatures		58


Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		(d) Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
October 1 through 31, 2022		90,144	$	1.82		90,144		9,571,921
November 1 through 30, 2022		397,671	$	1.81		397,671		9,407,859
December 1 through 31, 2022		140,825	$	1.90		140,825	$	8,688,074
Total		628,640	$	1.83		628,640


	Year ended December 31,
Revenue:	2022			2021
Software licenses		46	%		47	%
Software maintenance		45			40
Services and other		9			13
Total revenue		100			100
Costs and expenses:
Cost of services and other		8			7
Research and development		58			55
Selling and marketing		43			38
General and administrative		40			37
Gain on sale of fixed assets		(35	)		-
Total costs and expenses		114			137
Operating loss		(14	)		(37	)
Interest and other income		3			-
Loss before provision for (benefit from) income taxes		(11	)		(37	)
Provision for (benefit from) income taxes	0				(2	)
Net loss		(11	%)		(35	%)


☒	Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


	Years ended December 31,
	2022		2021
Research and development expense	$	9,234	$	9,259
Cost of services and other		1,260		1,210
Total engineering costs	$	10,494	$	10,469


	December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	11,749		$	29,963
Marketable securities		17,229			—
Accounts receivable, net		3,317			3,763
Unbilled receivables, net		2,929			3,087
Tax receivable		1,362			1,411
Prepaid expenses and other current assets		693			591
Total current assets		37,279			38,815
Property and equipment, net		726			3,216
Intangible assets, net		2,806			3,222
Goodwill		3,120			3,120
Note receivable		2,601			—
Right of use asset		4,538			—
Other long-term assets		122			—
Total assets	$	51,192		$	48,373
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	639		$	283
Accrued expenses		1,282			1,909
Current portion of operating lease liabilities		470			—
Deferred revenue		3,411			3,549
Total current liabilities		5,802			5,741
Long-term deferred revenue		322			191
Long-term operating lease liabilities		4,047			-
Long-term contingent acquisition payments		812			919
Total long-term liabilities		5,181			1,110
Commitments and contingent liabilities (Note 11)
Stockholders’ equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized, none outstanding		-			-
Common stock, $.01 par value; shares authorized, 70,000,000 in 2022 and 2021; issued and outstanding of 21,093,447 as of December 31, 2022 and 21,613,982 as of December 31, 2021		211			216
Additional paid-in capital		98,306			97,778
Accumulated deficit		(58,198	)		(56,472	)
Accumulated other comprehensive loss		(110	)		—
Total stockholders’ equity		40,209			41,522
Total liabilities and stockholders’ equity	$	51,192		$	48,373


	Years ended December 31,
	2022			2021
Revenue:
Software licenses	$	7,386		$	7,973
Software maintenance		7,111			6,679
Services and other		1,511			2,202
Total revenue		16,008			16,854
Costs and expenses:
Cost of services and other		1,260			1,210
Research and development		9,234			9,259
Selling and marketing		6,962			6,324
General and administrative		6,441			6,158
Gain on sale of fixed assets		(5,672	)		—
Total costs and expenses		18,225			22,951
Operating loss		(2,217	)		(6,097	)
Interest and other income		540			4
Loss before provision for (benefit from) income taxes		(1,677	)		(6,093	)
Provision for (benefit from) income taxes		49			(269	)
Net loss	$	(1,726	)	$	(5,824	)
Net loss per share – basic	$	(0.08	)	$	(0.27	)
Net loss per share – diluted	$	(0.08	)	$	(0.27	)
Weighted-average shares - basic		21,604			21,525
Weighted-average shares - diluted		21,604			21,525
Other comprehensive loss, net of tax
Unrealized loss on available-for-sale securities		(110	)		—
Comprehensive loss	$	(1,836	)	$	(5,824	)


						Additional								Total
	Common Stock					Paid-In			Accumulated			Accumulated Other		Stockholders’
	Shares			Amount		Capital			Deficit			Comprehensive Loss		Equity
Balance at December 31, 2020		21,379		$	214	$	96,104		$	(50,648	)	$	—	$	45,670

Issuance of unrestricted stock		189			2		(2	)		—			—		—
Shares surrendered by employees to pay taxes related to unrestricted stock		(16	)		—		(54	)		—			—		(54	)
Issuance of common stock under employee stock purchase plan		62			—		163			—			—		163
Stock-based compensation expense		—			—		1,567			—			—		1,567
Net loss										(5,824	)		—		(5,824	)

Balance at December 31, 2021		21,614			216		97,778			(56,472	)		—		41,522
															—
Issuance of unrestricted stock		118			1		1			—			—		2
Shares surrendered by employees to pay taxes related to unrestricted stock		(10	)		—		(26	)		—			—		(26	)
Issuance of common stock under employee stock purchase plan		76			1		151			—			—		152
Stock-based compensation expense		—			—		1,707								1,707


Repurchase of common stock	(705	)		(7	)		(1,305	)		—			—			(1,312	)
Other comprehensive loss													(110	)		(110	)
Net loss	—			—			—			(1,726	)		—			(1,726	)

Balance at December 31, 2022	21,093		$	211		$	98,306		$	(58,198	)	$	(110	)	$	40,209


	Fair Value Measurement at December 31, 2022 Using:
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds (included in cash and cash equivalents)	$	10,967	$	-	$	-	$	10,967
Marketable securities		17,229		-		-		17,229
Note receivable		-		-		2,601		2,601
Total assets	$	28,196	$	-	$	2,601	$	30,797

Liabilities:
Contingent acquisition payments	$	-	$	-	$	812	$	812
Total liabilities	$	-	$	-	$	812	$	812


	December 31, 2022:
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury notes and bonds	$	13,389	$	24	$	(100	)	$	13,313
Corporate bonds		3,950		—		(34	)		3,916
	$	17,339	$	24	$	(134	)	$	17,229


	Year Ended
	December 31, 2022

Balance as of December 31, 2021	$	—
Investment in Note Receivable		2,500
Accrued interest		101
Balance as of December 31, 2022	$	2,601


	Years ended December 31,
	2022			2021
Allowance for doubtful accounts balance - beginning of year	$	74		$	138
Additions to the allowance for doubtful accounts		156			-
Deductions against the allowance for doubtful accounts		(42	)		(64	)
Allowance for doubtful accounts balance - end of year	$	188		$	74


Leasehold improvements		10 years
Furniture and fixtures		5 years
Computer and office equipment		3 years
Purchased software		3 years


	2022			2021
Customer A		26	%		27	%
Customer B		11	%		5	%


	Year ended December 31,
	2022		2021
United States	$	7,613	$	9,624
Brazil		953		1,938
United Kingdom		1,717		1,726
Rest of world		5,725		3,566
	$	16,008	$	16,854


	Goodwill
Balance as of December 31, 2020	$	1,651
Goodwill arising from AFIX acquisition		1,469
Balance as of December 31, 2021 and 2022	$	3,120


	Balance at Beginning of period		Revenue Recognized In Advance of Billings		Billings			Balance at End of Period
Year ended December 31, 2022
Contract Assets:
Unbilled receivables	$	3,087	$	5,288	$	(5,446	)	$	2,929
Year ended December 31, 2021
Contract Assets:
Unbilled receivables	$	2,229	$	7,172	$	(6,314	)	$	3,087

	Balance at Beginning of period		Billings		Revenue Recognized			Balance at End of Period
Year ended December 31, 2022
Contract Liabilities:
Deferred revenue	$	3,740	$	7,104	$	(7,111	)	$	3,733
Year ended December 31, 2021
Contract Liabilities:
Deferred revenue	$	3,933	$	6,486	$	(6,679	)	$	3,740


	2022			2021
Land	$	—		$	1,056
Building and improvements		146			9,166
Computer and office equipment		859			1,310
Purchased software		78			155
Furniture and fixtures		573			778
Total		1,656			12,465
Less accumulated depreciation		(930	)		(9,249	)
Property and equipment, net	$	726		$	3,216


Customer relationships	$	1,740
Developed technology		430
Trade name / trademarks		10
Goodwill		1,469
Gross assets acquired		3,649
Net working capital		(11	)
Fair value of contingent consideration		(919	)
Net assets acquired	$	2,719


	Useful Life	Gross Amount		Accumulated Amortization		Net Book Value
Customer relationships	8 and 10 years	$	2,680	$	424	$	2,256
Developed technology	5 and 7 years		710		180		530
Trade name / trademarks	3 and 7 years		30		10		20
		$	3,420	$	614	$	2,806


	2022			2021
Depreciation	$	-		$	367
Stock-based compensation		554			405
Research and development credits		6,817			6,904
Capitalized research expense		1,557
Net operating loss		2,562			3,380
Other		335			254
Total deferred tax assts		11,825			11,310
Valuation allowance		(11,115	)		(10,730	)
Deferred tax liabilities
Depreciation		(193	)		—
Intangibles		(517	)		(580	)
Total deferred tax liabilities		(710	)		(580	)
Net deferred tax assets (liabilities)	$	-		$	-


	2022					2021
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		3,240,000		$	4.97		425,000		$	6.00
Granted		-			-		2,875,000			4.73
Exercised		-			-		-			-
Forfeited or cancelled		(680,000	)		5.00		(60,000	)		4.73
Outstanding at end of year		2,560,000		$	4.96		3,240,000		$	4.97
Exercisable at year end		250,000		$	6.00		218,748		$	6.00


	Options Outstanding						Options Exercisable
Exercise Price Range	Number		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Number		Weighted Average Exercise Price
$4 to $5		2,316,250	$	4.72		8.11		62,500	$	4.50
$5 to $6		81,250	$	5.50		6.86		62,500	$	5.50
$6 to $7		81,250	$	6.50		6.86		62,500	$	6.50
$7 to $8		81,250	$	7.50		6.86		62,500	$	7.50
		2,560,000	$	4.96		8.01		250,000	$	6.00


	For the Year Ended December 31,
	2022		2021
Operating lease costs	$	182	$	-


	As of December 31,
	2022			2021
Operating lease right-of-use assets	$	4,538		$	-

Current portion, operating lease liabilities		470			-
Operating lease liabilities, long term		4,047			-
Total operating lease liabilities	$	4,517		$	-

Weighted average remaining lease term (years)		10.3
Weighted average incremental borrowing rate		10.1	%


2023	$	497
2024		667
2025		687
2026		708
2027		729
Thereafter		4,202
Total lease payments		7,490
Less implied interest		(2,973	)
Total operating lease liabilities	$	4,517


	Page
(1) Report of Independent Registered Public Accounting Firm (PCAOB ID No. 49)	25
Consolidated Balance Sheets as of December 31, 2022 and 2021	28
Consolidated Statements of Operations and Comprehensive Loss for each of the two years in the period ended December 31, 2022	29
Consolidated Statements of Cash Flows for each of the two years in the period ended December 31, 2022	30
Consolidated Statements of Stockholders’ Equity for each of the two years in the period ended December 31, 2022	31
Notes to Consolidated Financial Statements	34


Exhibit No.		Description of Exhibit

3.1		Amended and Restated Articles of Organization, as amended (filed as Exhibit 3.1 to the Company’s Form 10-K for the year ended December 31, 2008 and incorporated herein by reference).

3.2		Amended and Restated By-Laws (filed as Exhibit 3.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on December 10, 2007 and incorporated herein by reference).

4.1†		Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (filed as Exhibit 4.1 to the Company’s Form 10-K for the year ended December 31, 2019 and incorporated herein by reference)

10.1*		2021 Employee Stock Purchase Plan, (filed as Annex A to the Company’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 9, 2021 and incorporated herein by reference).

10.2*		Form of Indemnification Agreement for Directors and Officers of Aware, Inc. (filed as Exhibit 10.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on February 22, 2011 and incorporated herein by reference).

10.3*		2001 Nonqualified Stock Plan (filed as Exhibit 99(d)(4) to the Company’s Schedule TO filed with the Securities and Exchange Commission on March 3, 2003 and incorporated herein by reference).

10.4*		Form of Nonqualified Stock Option Agreement under the 2001 Nonqualified Stock Plan for options granted to executive officers and directors prior to May 21, 2008 (filed as Exhibit 10.6 to Company’s Form 10-K for the year ended December 31, 2006 and incorporated herein by reference).

10.5*		Form of Nonqualified Stock Option Agreement under the 2001 Nonqualified Stock Plan for options granted to executive officers and directors from and after May 21, 2008 (filed as Exhibit 10.8 to Company’s Form 8-K on May 22, 2008 and incorporated herein by reference)

10.6*		Form of Unrestricted Stock Award for outside directors of Aware under the 2001 Nonqualified Stock Plan (filed as Exhibit 10.1 to Company's Form 8-K filed with the Securities and Exchange Commission on July 28, 2010 and incorporated herein by reference).

10.7*		Form of Unrestricted Stock Award for officers of Aware under the 2001 Nonqualified Stock Plan (filed as Exhibit 10.2 to Company's Form 8-K filed with the Securities and Exchange Commission on July 28, 2010 and incorporated herein by reference).


10.8*		Form of Unrestricted Stock Award for executive officers and directors of Aware, Inc. under the 2001 Nonqualified Plan (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 4, 2013 and incorporated herein by reference).

10.9*		Employment Agreement between Aware, Inc. and Robert A. Eckel (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 19, 2019 and incorporated herein by reference).

10.10*		Performance Share Award Agreement between Aware, Inc. and Robert A. Eckel (filed as Exhibit 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 19, 2019 and incorporated herein by reference).

10.11*		Employment Agreement between Aware, Inc. and Robert M. Mungovan (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on October 1, 2019 and incorporated herein by reference).

10.12*		Amendment to Employment Agreement dated as of July 15, 2022, by and between Aware, Inc. and Robert Mungovan (filed as Exhibit 10.1 to the Company's Form 8-K filed with the Securities and Exchange Commission on July 20, 2022 and incorporated herein by reference).

10.13*		Employment Agreement between Aware, Inc. and Mohamed Lazzouni (filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 19, 2019 and incorporated herein by reference).

10.14*		Employment Agreement between Aware, Inc. and David B. Barcelo dated May 4, 2020 (filed as Exhibit 10.1 to Aware, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on May 4, 2020 and incorporated herein by reference).

10.15*		Aware, Inc. 20220 Executive Bonus Plan (incorporated by reference to Item 5.02 of the Aware, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2022 and incorporated herein by reference).

10.16*		Amendment to Employment Agreement between Aware, Inc. and Robert Eckel dated March 27, 2020 (filed as Exhibit 10.2 to Aware Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on March 30, 2020 and incorporate herein by reference).

10.17*		Lease dated as of March 1, 2022 by and between 76/80 Burlington Group, LLC and Aware, Inc. (filed as Exhibit 10.20 to Aware Inc. Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission and incorporated herein by reference).

10.18*		Employment Agreement between Aware, Inc. and Craig Herman dated August 9, 2022.

21.1		Subsidiaries of Registrant.

23.1		Consent of Independent Registered Public Accounting Firm.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial statements from Aware, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in inline XBRL (eXtensible Business Reporting Language), as follows: (i) Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021; (ii) Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and December 31, 2021; (iii) Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and December 31, 2021; (iv) Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and December 31, 2021 and (v) Notes to Consolidated Financial Statements.
104		Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101


AWARE, INC.

By:		/s/ Robert A. Eckel
		Robert A. Eckel
		Chief Executive Officer & President


By:		/s/ David Barcelo
		David Barcelo
		Chief Financial Officer (Principal Financial and Accounting Officer)
		Date: March 15, 2023


Signature		Title

/s/ Robert A. Eckel		Chief Executive Officer, President & Director
Robert A. Eckel		(Principal Executive Officer)

/s/ David Barcelo		Chief Financial Officer
David Barcelo		(Principal Financial and Accounting Officer)


/s/ Brent P. Johnstone		Chairman of the Board & Director
Brent P. Johnstone

/s/ John S. Stafford, III		Director
John S. Stafford, III


/s/ Brian D. Connolly		Director
Brian D. Connolly
/s/ Gary Evee		Director
Gary Evee /s/ Peter Faubert		Director
Peter Faubert


Name of Organization		Jurisdiction
Aware Security Corporation		Massachusetts
Fort3ss, Inc.		Delaware


Date:	March 15, 2023	/s/ Robert A. Eckel
		Robert A. Eckel
		Chief Executive Officer & President