Aware, Inc. Reports 2006 Second Quarter Financial Results

BEDFORD, Mass. - August 3, 2006 – Aware, Inc. (NASDAQ: AWRE), a worldwide leader and innovator of broadband intellectual property, today reported financial results for its second quarter ended June 30, 2006.

Revenues for the second quarter of 2006 increased 79% to $4.8 million, from $2.7 million in the same quarter last year. For the six months ended June 30, 2006, revenues increased 58% to $10.9 million, compared to $6.9 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.

GAAP net loss for the second quarter of 2006 was $1.2 million, or $0.05 per share, which included $0.7 million of stock-based compensation charges, as this was the Company’s second quarter subject to the provisions of FAS 123(R). This compared to a GAAP net loss of $1.5 million, or $0.07 per share, for the same period a year ago. GAAP net loss for the six months ended June 30, 2006 was $0.7 million or $0.03 per share, compared to a net loss of $1.8 million, or $0.08 per share, for the same period a year ago. GAAP results prior to 2006 do not include a charge for stock-based compensation.

Non-GAAP net loss for the second quarter of 2006, excluding the effect of stock-based compensation, was $0.5 million, or $0.02 per share. For the six months ended June 30, 2006, the company had a non-GAAP net income, excluding the effect of stock-based compensation, of $0.6 million, or $0.02 per share.

Michael Tzannes, Chief Executive Officer, said: “Our DSL licensing revenues and biometrics software revenues are on track for solid growth this year. In DSL, this growth is coming from the transition to higher speed ADSL2+ and VDSL2 networks, which is well underway around the world. IPTV and triple-play services have emerged as important DSL industry drivers. In biometrics, we are benefiting from our broad-based exposure to the use of AFIS and related client systems and to new biometric opportunities in border control and secure credential applications. Our DSL test and diagnostics products are well poised to capitalize on the transition to higher speed technologies for the delivery of new services. Our technology and products have positioned us for growth in the ADSL2+/VDSL2 and biometrics markets and we are confident that we will grow revenues going forward.”

Note: Aware’s conference call will be broadcast live over the Internet today, August 3, 2006 at 5:00 p.m. Eastern Time. To listen to the call, please go to www.aware.com, and click on “Investor Relations.” The conference call may also be heard by calling (719) 457-2637 and referencing the confirmation number 6366485. 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®, StratiPHY™, StratiPHY-Bonded™, StratiPHY2+™, StratiPHY3™ 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.