Aware, Inc. Reports First Quarter 2008 Financial Results

BEDFORD, Mass., May 8 /PRNewswire-FirstCall/ -- Aware, Inc. (NASDAQ: AWRE), a leading supplier of broadband technology and biometrics software, today reported financial results for its first quarter ended March 31, 2008.

Revenues for the first quarter of 2008 were $5.9 million, an increase of 1% compared to $5.8 million in the same quarter last year.

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 first quarter of 2008 was $1.3 million, or $0.05 per diluted share, which included $0.3 million of stock-based compensation charges in accordance with the provisions of FAS 123(R). This compared to a GAAP net loss of $0.1 million, or $0.00 per diluted share, for the same period a year ago.

The Non-GAAP net loss for the first quarter of 2008, excluding the effect of stock-based compensation, was $1.0 million, or $0.04 per diluted share.

Note: Aware's conference call will be broadcast live over the Internet today, May 8, 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 617-213-4852 and referencing the confirmation number 86740432. 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, 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
                                                            March 31,
                                                      2008            2007
      Product sales                                 $3,924          $3,465
      Contract revenue                               1,521           1,834
      Royalties                                        431             501
        Total revenue                                5,876           5,800

    Costs and expenses:
      Cost of product sales (1)                        824             495
      Cost of contract revenue (1)                   1,018           1,352
      Research and development (1)                                3,528                      2,557
            Selling  and  marketing  (1)                                                969                          873
            General  and  administrative  (1)                                  1,193                      1,116
                Total  costs  and  expenses                                          7,532                      6,393

        Net  loss  from  operations                                                (1,656)                      (593)
        Interest  income                                                                        383                          505

        Net  loss  before  provision  for  income  taxes            (1,273)                        (88)
        Provision  for  income  taxes                                                    (9)                        (10)

        Net  loss                                                                              ($1,282)                      ($98)

        Net  loss  per  share  -  basic                                            ($0.05)                    $0.00
        Net  loss  per  share  -  diluted                                        ($0.05)                    $0.00

        Weighted  average  shares  -  basic                          23,880,358            23,656,931
        Weighted  average  shares  -  diluted                      23,880,358            23,656,931

        (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
                                                                                                        March  31,
                                                                                              2008                    2007
        Cost  of  product  sales                                              $3                        $2
        Cost  of  contract  revenue                                        34                        36
        Research  and  development                                      167                        85
        Sales  and  marketing                                                  31                        21
        General  and  administrative                                    90                        91
        Total  stock-based  compensation  costs            $325                    $235

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

                                                                                                        Three  Months  Ended
                                                                                                                  March  31,
                                                                                                            2008            2007
        GAAP  net  loss                                                                    ($1,282)          ($98)
            Stock-based  compensation                                                  325              235
        Non-GAAP  net  income  (loss)                                              ($957)          $137

                                                                                                        Three  Months  Ended
                                                                                                                  March  31,
                                                                                                            2008            2007
        GAAP  diluted  net  loss  per  share                                  ($0.05)      ($0.00)
            Stock-based  compensation  per  share                            0.01            0.01
        Non-GAAP  diluted  net  income  (loss)  per  share        ($0.04)        $0.01

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

                                                                                                      March  31,      December  31,
                                                                                                          2008                    2007
            Cash  and  investments                                                    $40,304              $38,549
            Accounts  receivable,  net                                                5,044                  7,661
            Inventories,  net                                                                1,513                  1,424
            Property  and  equipment,  net                                          7,879                  7,872
            Other  assets,  net                                                                  850                      877

            Total  assets                                                                    $55,590              $56,383


            Total  current  liabilities                                            $2,823                $2,817

            Long-term  deferred  revenue                                                330                      330

            Total  stockholders'  equity                                          52,437                53,236

            Total  liabilities  and  stockholders'  equity        $55,590              $56,383

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