Aware, Inc. Reports Second Quarter 2008 Financial Results

BEDFORD, Mass., July 24 /PRNewswire-FirstCall/ -- Aware, Inc. (NASDAQ: AWRE), a leading supplier of broadband technology and biometrics software, today reported financial results for its second quarter ended June 30, 2008.

Revenues for the second quarter of 2008 were $6.2 million, a decrease of 4% compared to $6.4 million in the same quarter last year. For the six months ended June 30, 2008, revenues decreased 2% to $12.0 million, compared to $12.2 million in the same period a year ago.

The Company reports its net income and basic and diluted net income per share in accordance with U.S. generally accepted accounting principles (GAAP), and additionally, on a non-GAAP basis. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation expense. The company uses the non-GAAP information internally to evaluate its operating performance and believes these non-GAAP measures are useful to investors as they provide additional insight into the underlying operating results. However, non-GAAP measures are not stated in accordance with, should not be considered in isolation from, and are not a substitute for, GAAP measures. A reconciliation of GAAP to non-GAAP results has been provided in the attached financial tables.

The GAAP net loss for the second quarter of 2008 was $1.3 million, or $0.05 per diluted share, which included $0.4 million of stock-based compensation charges in accordance with the provisions of FAS 123(R). This compared to a GAAP net loss of $1.0 million, or $0.04 per diluted share, for the same period a year ago. GAAP net loss for the six months ended June 30, 2008 was $2.5 million, or $0.11 per share, compared to a net loss of $1.1 million, or $0.05 per share, for the same period a year ago.

The Non-GAAP net loss for the second quarter of 2008, excluding the effect of stock-based compensation, was $0.9 million, or $0.04 per diluted share. For the six months ended June 30, 2008, the company had a non-GAAP net loss, excluding the effect of stock-based compensation, of $1.8 million, or $0.08 per share.

Michael Tzannes, Aware's chief executive officer, said, "Biometrics revenues were at a record high, driven by strong software sales and continued growth in professional services. Our presence as a software component provider for border control and secure credentialing applications has strengthened significantly over the past year. Our DSL test and diagnostics hardware and software products have now been designed-in across numerous handheld and testhead supplier platforms. In licensing, we are continuing with our plan to diversify into new opportunities, the most exciting of which is home networking in support of the ITU standard."

Note: Aware's conference call will be broadcast live over the Internet today, July 24, 2008 at 5:00 p.m. Eastern Time. To listen to the call, please go to The conference call may also be heard by calling (719) 325-4776 and referencing the confirmation number 3829447. A replay of the call will be archived on our website after the call.

About Aware

Aware is a leading technology supplier for the telecommunications industries. For more than ten years, Aware has pioneered innovations at telecommunications standards-setting organizations and continues to develop and market DSL silicon intellectual property and test and diagnostics products. Its StratiPHY(tm) IP product line supports DSL standards, including ADSL2+ and VDSL2, and has been broadly licensed to leading semiconductor companies. Telecom equipment vendors and phone companies use Aware's DSL test and diagnostics modules and Dr. DSL(R) software to help provision DSL circuits globally. Aware is also a veteran of the biometrics industry, providing biometric and imaging software components used in government systems worldwide since 1992. Aware's interoperable, standard-compliant, field-proven imaging products are used in a number of applications, from border management to criminal justice to medical imaging. Aware is a publicly held company (NASDAQ: AWRE) based in Bedford, Massachusetts.

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 and biometrics markets. Aware wishes to caution you that there are factors that could cause actual results to differ materially from the results indicated by such statements. The DSL factors include, but are not limited to: we have a unique business model, our quarterly results are difficult to predict, our DSL licensing and DSL test and diagnostic businesses depend upon a limited number of customers, 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, our business could be harmed if our test and diagnostic hardware and software products have quality problems, we depend on a single source contract manufacturer for the manufacture of our DSL hardware products, our manufacturing systems may not be adequate for our DSL test and diagnostics hardware products, we depend on single source suppliers for components in our DSL hardware products, and our business is subject to rapid technological change. The biometric factors include, but are not limited to: market acceptance of our biometric products, changes in contracting practices of government or law enforcement agencies, announcements or introductions of new products by our competitors, delays, failures or problems in our biometric products, problems in our biometrics services business, delays in the adoption of new industry biometric standards, and competitive pressures resulting in lower software product revenues. 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 annual report on Form 10-K for the fiscal year ended December 31, 2007 and other reports and filings made with the Securities and Exchange Commission.

    Aware, StratiPHY, and Dr. DSL are trademarks or registered trademarks of
Aware, Inc.

                                 AWARE, INC.
                    (In thousands, except per share data)

                                    Three Months Ended      Six Months Ended
                                          June 30,               June 30,
                                      2008       2007        2008      2007
      Product sales                  $3,948     $3,771      $7,872    $7,236
      Contract revenue                1,776      1,575       3,298     3,409
      Royalties                         443      1,083         874          1,584
                    Total  revenue                              6,167            6,429            12,044        12,229

        Costs  and  expenses:
            Cost  of  product  sales  (1)                  624            1,690              1,448          2,186
            Cost  of  contract  revenue  (1)        1,129            1,410              2,148          2,762
            Research  and  development  (1)        3,511            2,650              7,039          5,206
            Selling  and  marketing  (1)              1,186                999              2,155          1,872
            General  and  administrative  (1)    1,285            1,144              2,478          2,260
                    Total  costs  and  expenses        7,735            7,893            15,268        14,286

        Loss  from  operations                          (1,568)        (1,464)          (3,224)      (2,057)
        Interest  income                                          315                503                  698          1,008

        Loss  before  provision  for
          income  taxes                                        (1,253)            (961)          (2,526)      (1,049)
        Provision  for  income  taxes                        4                    7                    13                17

        Net  loss                                                ($1,257)          ($968)        ($2,539)    ($1,066)

        Net  loss  per  share  -  basic              ($0.05)        ($0.04)          ($0.11)      ($0.05)
        Net  loss  per  share  -  diluted          ($0.05)        ($0.04)          ($0.11)      ($0.05)

        Weighted  average  shares  -
          basic                                                      23,869          23,715            23,875        23,687
        Weighted  average  shares  -
          diluted                                                  23,869          23,715            23,875        23,687

        (1)  Effective  January  1,  2006  the  Company  adopted  Statement  of  Financial
                Accounting  Standard  No.  123  (Revised),  "Share-Based  Payment"
                (FAS  123(R)).  The  amounts  in  the  tables  above  include  stock-based
                compensation  as  follows  (in  thousands):

                                                                                  Three  Months  Ended      Six  Months  Ended
                                                                                              June  30,                        June  30,
                                                                                        2008            2007            2008          2007

        Cost  of  product  sales                                      $    3            $    2            $    6          $    4
        Cost  of  contract  revenue                                    26                43                60              79
        Research  and  development                                  160                99              327            184
        Sales  and  marketing                                              50                25                81              46
        General  and  administrative                              154                83              244            174
        Total  stock-based  compensation  costs        $393            $252            $718          $487

                                                                  AWARE,  INC.
                                Non-GAAP  Financial  Measures  and  Reconciliation
                                        (In  thousands,  except  per  share  data)

                                                                  Three  Months  Ended                Six  Months  Ended
                                                                            June  30,                                  June  30,
                                                                      2008            2007                    2008                  2007

        GAAP  net  loss                              ($1,257)        ($968)            ($2,539)          ($1,066)
            Stock-based  compensation            393              252                      718                    487
        Non-GAAP  net  loss                          ($864)        ($716)            ($1,821)              ($579)

                                                                  Three  Months  Ended                Six  Months  Ended
                                                                            June  30,                                    June  30,
                                                                      2008            2007                    2008                  2007

        GAAP  net  loss  per  share            ($0.05)      ($0.04)              ($0.11)            ($0.05)
            Stock-based  compensation          0.01            0.01                    0.03                  0.03
        Non-GAAP  net  loss  per  share    ($0.04)      ($0.03)              ($0.08)            ($0.02)

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

                                                                                                      June  30,            December  31,
                                                                                                          2008                      2007
            Cash  and  investments                                                    $37,865              $38,549
            Accounts  receivable,  net                                                5,694                  7,661
            Inventories,  net                                                                2,070                  1,424
            Property  and  equipment,  net                                          7,723                  7,872
            Other  assets,  net                                                                  708                      877

            Total  assets                                                                    $54,060              $56,383


            Total  current  liabilities                                            $2,760                $2,817

            Long-term  deferred  revenue                                                330                      330

            Total  stockholders'  equity                                          50,970                53,236

            Total  liabilities  and  stockholders'  equity        $54,060              $56,383


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