Aware, Inc. Reports 2005 Third Quarter Financial Results

BEDFORD, Mass., Oct. 27 /PRNewswire-FirstCall/ -- Aware, Inc. (NASDAQ: AWRE), a worldwide leader and innovator of broadband intellectual property, today reported financial results for its third quarter ended September 30, 2005.

Revenues for the third quarter of 2005 were $5.1 million compared to $4.6 million for the same period last year. Net income for the third quarter of 2005 was $0.6 million, or $0.02 per share, compared to net income of $0.2 million, or $0.01 per share, for the year-ago period.

For the nine months ended September 30, 2005, revenues were $12.0 million compared to $11.9 million in the same period last year. Net loss for the nine months ended September 30, 2005 was $1.3 million or $0.06 per share, compared to a net loss of $1.8 million, or $0.08 per share, for the year-ago period.

Michael Tzannes, Aware's chief executive officer commented, "Events in the industry and interactions with existing and prospective customers continue to build our confidence that our products and product developments are well positioned. The markets we are addressing are going through significant changes and we are optimistic that we can capitalize on these changes. Please join us on our conference call today where we will elaborate on the transitions that are underway in the DSL and biometrics industries and why they are positive for Aware."

Tzannes added, "From the conclusion of today's conference call until Friday, October 28 at 5:00 p.m., we invite interested parties to submit investor questions via email to Email Contact. We will post questions and answers next week on our website."

Note: Aware's conference call will be broadcast live over the Internet today, October 27, 2005 at 5:00 p.m. Eastern Time. To listen to the call, please go to http://www.aware.com, and click on "Investor Relations." The conference call may also be heard by calling (719) 457-2633 and referencing the confirmation number 1864272. A replay of the call will be archived on our website after the call.

About Aware

Aware, Inc. designs, develops, licenses and markets DSL technologies that enable broadband communications over existing telephone networks. Its solutions, including splitterless G.lite, full-rate ADSL, ADSL2, ADSL2+, VDSL2, Bonded ADSL2+, Dr. DSL(R), StratiPHY(TM), StratiPHY-Bonded(TM), StratiPHY2+(TM), StratiPHY3(TM) and G.SHDSL, address central office as well as customer premise requirements. Aware is also a leading provider of standards- based biometric transaction and image compression software toolkits. More information can be found at http://www.aware.com.

Safe Harbor Warning

Portions of this release contain forward-looking statements regarding future events and are subject to risks and uncertainties, such as estimates or projections of future revenue and earnings and the growth of the DSL market. Aware wishes to caution you that there are factors that could cause actual results to differ materially from the results indicated by such statements. These factors include, but are not limited to: we have a unique business model, our quarterly results are difficult to predict, we depend on a limited number of licensees, we derive a significant amount of revenue from a small number of customers, we depend on equipment companies to incorporate our technology into their products, we face intense competition from other DSL vendors, DSL technology competes with other technologies for broadband access, and our business is subject to rapid technological change. We refer you to the documents Aware files from time to time with the Securities and Exchange Commission, specifically the section titled Risk Factors in our quarterly report on Form 10-Q for the quarter ended June 30, 2005 and other reports and filings made with the Securities and Exchange Commission.

Dr. DSL, StratiPHY, StratiPHY2+, StratiPHY3, and StratiPHY-Bonded are trademarks or registered trademarks of Aware, Inc.


                                 AWARE, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

                                   Three Months Ended       Nine Months Ended
                                     September 30,            September 30,
                                   2005         2004        2005         2004

    Revenue:
      Product sales              $2,417         $977      $4,163       $3,228
      Contract revenue            1,920        2,556       5,061        5,625
      Royalties                     750        1,028       2,770        3,035
       Total revenue              5,087        4,561      11,994       11,888

    Costs and expenses:
      Cost of product sales         157          198         279          730
      Cost of contract revenue      826          676       2,384        1,996
      Research and development    2,487        2,511       7,400        7,685
      Selling and marketing         721          521       2,064        1,792
      General and administrative    644          634       1,940        1,857
      Total costs and expenses    4,835        4,540      14,067       14,060

    Income (loss) from operations   252           21      (2,073)      (2,172)
    Interest income                 309          143         798          381

    Income (loss) before
     provision for income taxes     561          164      (1,275)      (1,791)
     Provision  for  income  taxes                -                        -                      -                        -

        Net  income  (loss)                            $561                  $164          ($1,275)          ($1,791)


        Net  income  (loss)
          per  share  -  basic                        $0.02                $0.01            ($0.06)            ($0.08)
        Net  income  (loss)
          per  share  -  diluted                    $0.02                $0.01            ($0.06)            ($0.08)

        Weighted  average  shares
          -  basic                                          23,116              22,784            23,027              22,767
        Weighted  average  shares
          -  diluted                                      25,168              22,837            23,027              22,767



                                                                  AWARE,  INC.
                                        CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                                                (In  thousands)

                                                                                                    September  30,      December  31,
                                                                                                                  2005                      2004

        ASSETS
            Cash  and  investments                                                          $37,518                $38,266
            Accounts  receivable,  net                                                      3,606                    3,070
            Property  and  equipment,  net                                                8,063                    8,287
            Other  assets,  net                                                                    1,032                        560

            Total  assets                                                                          $50,219                $50,183



        LIABILITIES  AND  STOCKHOLDERS'  EQUITY

            Total  current  liabilities                                                  $1,896                  $1,427

            Total  stockholders'  equity                                                48,323                  48,756

            Total  liabilities  and  stockholders'  equity              $50,219                $50,183

        Contact:
          Rob  Weiskopf
          Aware,  Inc.
          781-276-4000
 


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