Aware, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report; the provided filing text does not give clear Q4-only results. Amounts below are in U.S. dollars unless noted.
Business context
Aware develops biometric identity software and services—including fingerprint, face, iris, and voice technologies—for government and commercial customers. It sells through systems integrators, OEMs, resellers, partners, and directly. The company reported one operating segment. No customer accounted for at least 10% of annual revenue in 2021 or 2020.
Key financial metrics
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Revenue | $16.854 million | $11.309 million | Up 49% |
| Software license revenue | $7.973 million | $5.038 million | Up 58% |
| Software maintenance revenue | $6.679 million | $5.429 million | Up 23% |
| Services and other revenue | $2.202 million | $0.842 million | Up 162% |
| Operating loss | $(6.097) million | $(9.424) million | Narrowed by $3.327 million |
| Net loss | $(5.824) million | $(7.614) million | Narrowed by $1.790 million |
| Net loss per diluted share | $(0.27) | $(0.35) | |
| Cash used in operating activities | $(6.234) million | $(5.274) million | Cash use increased |
| Cash and cash equivalents at year-end | $29.963 million | $38.565 million | Down $8.602 million |
- Margins: Operating loss was approximately 36% of revenue in 2021 versus 83% in 2020; net loss was approximately 35% versus 67%. Services and other gross margin improved to 45% from 4%.
- Liquidity and debt: Current assets were $38.815 million and current liabilities $5.741 million at year-end. The balance sheet lists no debt. Management said cash should fund operations for at least 12 months from the March 15, 2022 filing date and meet known long-term cash requirements.
- Cash flows: Investing activities used $2.477 million, mainly for the FortressID acquisition; financing activities provided $0.109 million. Cash declined by $8.602 million during the year.
Material changes versus 2020
- Revenue gains reflected higher subscription-based and fixed-fee license contracts, AFIX-related maintenance revenue, and additional services work.
- Total costs and expenses rose to $22.951 million from $20.733 million, but more slowly than revenue; operating loss consequently narrowed.
- Research and development expense was $9.259 million versus $9.093 million; selling and marketing was $6.324 million versus $5.411 million; general and administrative was $6.158 million versus $5.419 million.
- Cash fell from $38.565 million to $29.963 million. Operating cash use increased despite the smaller net loss, in part reflecting changes in receivables and other working-capital items.
Outlook, risks, and unusual items
- Outlook: Management expected R&D and G&A expenses to rise in absolute dollars but decline as a share of revenue, and planned to expand sales and marketing. The company expected SaaS to become a significant offering over time, but reported no SaaS revenue in 2021.
- Acquisitions: Aware acquired FortressID in December 2021 for $2.5 million in cash plus contingent consideration valued at $0.9 million. Earn-out payments can total up to $4.0 million if revenue targets are met in 2022 and 2023. AFIX was acquired in November 2020 for approximately $2.4 million.
- Subsequent events: Aware entered a 10-year, six-month Burlington lease in March 2022, with $8.2 million of aggregate rent over the lease term. It also purchased a $2.5 million Omlis convertible note bearing 5% interest and received a warrant for up to 8% of Omlis equity, subject to its terms.
- Property transaction: A buyer may purchase Aware’s Bedford property for $8.875 million, but is not obligated to close. The company anticipated a possible closing in Q2 or Q3 2022; proceeds were not reported as received in this filing.
- Principal risks: COVID-19 continued to restrict customer meetings and demonstrations. Other cited risks include government budget and contracting changes, reliance on channel partners, uncertain commercial biometrics adoption, intense competition, privacy and biometric-data regulation, cybersecurity, software defects, and difficulty recruiting and retaining staff.
- Taxes and contingencies: Aware recorded a full $10.7 million valuation allowance against deferred tax assets. It disclosed $0.802 million of uncertain tax positions. Management reported no material pending litigation; ordinary-course customer indemnities have no reasonably estimable maximum exposure.
- Audit and controls: The auditor issued an unqualified opinion and identified revenue recognition and the FortressID contingent acquisition payment as critical audit matters. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor was not engaged to audit internal controls.
Important facts for investors to verify
- Whether revenue growth—particularly subscription-based license growth—continues and converts into recurring SaaS revenue; no SaaS revenue was recognized in 2021.
- Whether operating cash use moderates, given $6.234 million used in operations and the decline in year-end cash.
- FortressID revenue performance against the 2022–2023 earn-out targets, and the resulting cash payments and valuation changes.
- Potential dilution from 2.875 million stock options granted in 2021, alongside the company’s other equity plans.
- Whether the Bedford property sale closes and how the Burlington lease and Omlis investment affect liquidity and future obligations.