Massachusetts
|
04-2911026 |
(State or
Other Jurisdiction of
Incorporation or
Organization)
|
(I.R.S.
Employer Identification No.)
|
Title of Each
Class
|
Name of Each Exchange on Which Registered |
Common Stock, par
value $.01 per share
|
The Nasdaq Global
Market
|
PART
I
|
|||
Item
1.
|
Business
|
3
|
|
Item
1A.
|
Risk
Factors
|
12
|
|
Item
1B.
|
Unresolved
Staff
Comments
|
20
|
|
Item
2.
|
Properties
|
21
|
|
Item
3.
|
Legal
Proceedings
|
21
|
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
21
|
|
PART
II
|
|||
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases
of
Equity Securities
|
22
|
|
Item
6.
|
Selected
Financial Data
|
25
|
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results
of
Operations
|
26
|
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
34
|
|
Item
8.
|
Consolidated
Financial Statements and Supplementary
Data
|
35
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial
Disclosure
|
54
|
|
Item
9A.
|
Controls
and
Procedures
|
54
|
|
Item
9B.
|
Other
Information
|
54
|
|
PART
III
|
|||
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
55
|
|
Item
11.
|
Executive
Compensation
|
55
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder
Matters
|
55
|
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
55
|
|
Item
14.
|
Principal
Accountant Fees and
Services
|
55
|
|
PART
IV
|
|||
Item
15.
|
Exhibits
and Financial Statement
Schedules
|
56
|
|
Signatures
|
58
|
·
|
Data
formatting and interchange software components that support NIST, ISO,
INCITS, ICAO, and FIPS 201 standards and enable
interoperability.
|
·
|
Image
compression software components for fingerprint and facial image
compression such as WSQ and
JPEG2000.
|
·
|
Biometric
ID cards. Our PIVSuite™ family of software development kits
(SDKs) support registration, identity proofing, ID card personalization
and issuance applications in compliance with FIPS
201. CaptureSuite™ is a family of SDKs for automatic capture
and processing of
fingerprints.
|
·
|
Image
processing for biometric quality analysis, capture and transaction
processing applications.
|
·
|
Networking
software for building and deploying multimodal biometric data workflow
solutions. Our Biometrics Services Platform (BioSP
TM
)
is a service-oriented platform for biometrics data processing and
integration applications. BioSP supports the collection of biometrics from
a distributed network, and subsequent aggregation, analysis, processing
and integration of this data into larger
systems.
|
|
·
|
market
acceptance of broadband technologies we supply by semiconductor or
equipment companies;
|
|
·
|
the
extent and timing of new transactions with
customers;
|
|
·
|
changes
in our and our customers’ development schedules and levels of expenditure
on research and development;
|
|
·
|
the
loss of a strategic relationship or termination of a project by a
customer;
|
|
·
|
equipment
companies' acceptance of integrated circuits produced by our
customers;
|
|
·
|
the
loss by a customer of a strategic relationship with an equipment company
customer;
|
|
·
|
announcements
or introductions of new technologies or products by us or our
competitors;
|
|
·
|
delays
or problems in the introduction or performance of enhancements or of
future generations of our
technology;
|
|
·
|
failures
or problems in our hardware or software
products;
|
|
·
|
price
pressure in the biometrics or test and diagnostics markets from our
competitors;
|
|
·
|
delays
in the adoption of new industry standards or changes in market perception
of the value of new or existing
standards;
|
|
·
|
competitive
pressures resulting in lower contract revenues or royalty
rates;
|
|
·
|
competitive
pressures resulting in lower software or hardware product
revenues;
|
|
·
|
personnel
changes, particularly those involving engineering, technical, sales and
marketing personnel;
|
|
·
|
costs
associated with protecting our intellectual
property;
|
|
·
|
the
potential that customers could fail to make payments under their current
contracts;
|
|
·
|
ADSL
or VDSL market-related issues, including lower ADSL or VDSL chipset unit
demand brought on by excess channel inventory and lower average selling
prices for ADSL or VDSL chipsets as a result of market
surpluses;
|
|
·
|
hardware
manufacturing issues, including yield problems in our hardware platforms,
and inventory buildup and
obsolescence;
|
|
·
|
product
gross margin may be affected by various factors including, but not limited
to, product mix, product life cycle, and provision for excess and obsolete
inventory;
|
|
·
|
significant
fluctuations in demand for our hardware
products;
|
|
·
|
new
laws, changes to existing laws, or regulatory developments;
and
|
|
·
|
general
economic trends and other factors.
|
|
·
|
the
test and diagnostics, semiconductor, telecommunications or biometrics
markets decline;
|
|
·
|
new
and/or existing customers do not choose to use our software or hardware
products;
|
|
·
|
new
and/or existing customers do not choose to license and/or buy our patents;
or
|
|
·
|
new
and/or existing customers do not choose to license our silicon IP for new
chipset products or do not maintain or increase their revenues from sales
of chipsets with our technology.
|
|
·
|
we
must typically undergo a lengthy and expensive process of building a
relationship with a potential customer before there is any assurance of an
agreement with such party, and in some instances we must convince a
potential customer to enter the DSL
market.
|
|
·
|
we
must persuade semiconductor and equipment manufacturers with significant
resources to rely on us for critical technology on an ongoing basis rather
than trying to develop similar technology
internally;
|
|
·
|
we
must persuade potential customers to bear development costs associated
with our technology applications and to make the necessary investment to
successfully manufacture chipsets and products using our technology;
and
|
|
·
|
we
must successfully transfer technical know-how to
customers.
|
|
—
|
market
acceptance of our biometric technologies and
products;
|
|
—
|
changes
in contracting practices of government or law enforcement
agencies;
|
|
—
|
the
failure of the biometrics market to experience continued
growth;
|
|
—
|
announcements
or introductions of new technologies or products by our
competitors;
|
|
—
|
delays
or problems in the introduction or performance of enhancements or of
future generations of our
technology;
|
|
—
|
failures
or problems in our biometric software
products;
|
|
—
|
the
risk that current or potential customers might decide to develop their own
software rather than buy it from
us;
|
|
—
|
delays
in the adoption of new industry biometric standards or changes in market
perception of the value of new or existing
standards;
|
|
—
|
growth
of proprietary biometric systems which do not conform to industry
standards;
|
|
—
|
competitive
pressures resulting in lower software product
revenues;
|
|
—
|
personnel
changes, particularly those involving engineering, technical and sales and
marketing personnel;
|
|
—
|
costs
associated with protecting our intellectual
property;
|
|
—
|
litigation
by third parties for alleged infringement of their proprietary
rights;
|
|
—
|
the
potential that customers could fail to make payments under their current
contracts;
|
|
—
|
new
laws, changes to existing laws, or regulatory developments;
and
|
|
—
|
general
economic trends and other factors.
|
|
—
|
our
ability to structure and price technology contracts in a manner that is
consistent with our business model;
|
|
—
|
our
ability to deliver contract milestones: i) in a timely and cost efficient
manner, and ii) in a form and condition acceptable to
customers;
|
|
—
|
the
risk that customers could terminate
projects;
|
|
—
|
the
risk that we rely substantially on third party contractors and consultants
to deliver certain contract milestones;
and
|
|
—
|
the
potential that customers could fail to make payments under their
contracts.
|
|
·
|
reduced
demand for our products or our customers’ products that incorporate our
technology;
|
|
·
|
increased
risk of order cancellations or
delays;
|
|
·
|
increased
risk that customers may delay or terminate
projects;
|
|
·
|
increased
pressure on the prices for our products or our customers’ products that
incorporate our technology;
|
|
·
|
greater
difficulty in collecting accounts receivable;
and
|
|
·
|
risks
to our liquidity, including the possibility that we might not have access
to our cash when needed.
|
|
·
|
quarterly
fluctuations in our operating
results;
|
|
·
|
changes
in future financial guidance that we may provide to investors and public
market analysts;
|
|
·
|
changes
in our relationships with our
customers;
|
|
·
|
announcements
of technological innovations or new products by us, our customers or our
competitors;
|
|
·
|
changes
in DSL or biometrics market growth rates as well as investor perceptions
regarding the investment opportunity that companies participating in the
DSL or biometrics industry afford
them;
|
|
·
|
changes
in earnings estimates by public market
analysts;
|
|
·
|
key
personnel losses;
|
|
·
|
sales
of our common stock;
|
|
·
|
our
stock repurchase activities; and
|
|
·
|
developments
or announcements with respect to industry standards, patents or
proprietary rights.
|
1.
|
72,000
square feet of office space in Bedford, Massachusetts, which serves as our
headquarters. This site is used for our research and
development, sales and marketing, and administrative
activities. We own this
facility.
|
2.
|
411
square feet of research and development space in Orinda,
California. This facility is currently leased for a 3-year
term, which expires on August 31,
2010.
|
First
|
Second
|
Third
|
Fourth
|
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|
2008
|
||||
High
|
$4.30
|
$3.96
|
$3.39
|
$2.96
|
Low
|
3.65
|
2.85
|
2.43
|
1.58
|
2007
|
||||
High
|
$6.25
|
$6.50
|
$6.74
|
$5.48
|
Low
|
4.95
|
4.98
|
3.67
|
4.01
|
Value of Investment
($)
|
||||||||||||||||||||||||
12/31/03
|
12/31/04
|
12/31/05
|
12/31/06
|
12/31/07
|
12/31/08
|
|||||||||||||||||||
Aware,
Inc.
|
$ | 100.00 | $ | 166.90 | $ | 153.13 | $ | 183.41 | $ | 144.53 | $ | 64.35 | ||||||||||||
Nasdaq Composite
Index
|
100.00 | 110.08 | 112.88 | 126.51 | 138.13 | 80.47 | ||||||||||||||||||
RDG Technology
Composite
|
100.00 | 104.00 | 106.32 | 115.97 | 132.44 | 75.00 |
Period
|
(a)
Total Number
of
Shares
Purchased
|
(b)
Average Price
Paid per
Share
|
(c)
Total Number of Shares Purchased
as Part of Publicly Announced Plans or Programs(1)
|
(d)
Maximum Number
(or Approximate Dollar Value) of
Shares that May Yet Be Purchased
Under the
Plans
or Programs
|
||||||
October 1, 2008 to October 31,
2008
|
10,100
|
$2.46
|
702,331
|
$7,646,321
|
||||||
November 1, 2008 to November 30,
2008
|
18,800
|
$2.26
|
721,131
|
$7,603,874
|
||||||
December 1, 2008 to December 31,
2008
|
-
|
-
|
721,131
|
$7,603,874
|
(1)
|
On
August 28, 2007, we issued a press release announcing that our board of
directors had approved the repurchase from time to time through December
31, 2008 of up to $5,000,000 of our common stock. On October 29, 2008, we
announced that our board of directors had approved an amendment to the
program that increased the total amount of common stock that may be
repurchased from $5,000,000 to $10,000,000. The amendment also
extended the period of time that shares may be repurchased from December
31, 2008 to December 31, 2009.
|
Year
ended December 31,
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||||||
Statements of Operations
Data
|
||||||||||||||||||||
Revenue
|
$ | 30,517 | $ | 26,437 | $ | 24,056 | $ | 15,667 | $ | 16,485 | ||||||||||
Income
(loss) from operations
|
629 | (1,830 | ) | (399 | ) | ( 3,618 | ) | (1,925 | ) | |||||||||||
Net
income (loss)
|
1,776 | 160 | 1,034 | (2,468 | ) | (1,367 | ) | |||||||||||||
Net
income (loss) per share – basic
|
$ | 0.08 | $ | 0.01 | $ | 0.04 | $ | (0.11 | ) | $ | (0.06 | ) | ||||||||
Net
income (loss) per share – diluted
|
$ | 0.07 | $ | 0.01 | $ | 0.04 | $ | (0.11 | ) | $ | (0.06 | ) | ||||||||
Balance Sheet Data
|
||||||||||||||||||||
Cash
and short-term investments
|
$ | 45,516 | $ | 38,055 | $ | 37,834 | $ | 36,763 | $ | 34,965 | ||||||||||
Working
capital
|
47,288 | 45,031 | 41,372 | 39,124 | 37,168 | |||||||||||||||
Total
assets
|
57,546 | 56,383 | 54,586 | 49,741 | 50,183 | |||||||||||||||
Total
liabilities
|
3,023 | 3,147 | 3,216 | 2,238 | 1,427 | |||||||||||||||
Total
stockholders’ equity
|
54,523 | 53,236 | 51,370 | 47,503 | 48,756 | |||||||||||||||
Year
ended December 31,
|
||||||||||||
Revenue:
|
2008
|
2007
|
2006
|
|||||||||
Product
sales
|
46 | % | 66 | % | 32 | % | ||||||
Contract
revenue
|
48 | 24 | 52 | |||||||||
Royalties
|
6 | 10 | 16 | |||||||||
Total
revenue
|
100 | 100 | 100 | |||||||||
Costs
and expenses:
|
||||||||||||
Cost
of product
sales
|
8 | 15 | 4 | |||||||||
Cost
of contract
revenue
|
14 | 21 | 22 | |||||||||
Research
and
development
|
43 | 41 | 44 | |||||||||
Selling
and
marketing
|
16 | 14 | 14 | |||||||||
General
and
administrative
|
17 | 16 | 18 | |||||||||
Total
costs and
expenses
|
98 | 107 | 102 | |||||||||
Income
(loss) from
operations
|
2 | (7 | ) | (2 | ) | |||||||
Interest
income
|
4 | 8 | 8 | |||||||||
Income
before provision for income taxes
|
6 | 1 | 6 | |||||||||
Provision
for income
taxes
|
- | - | 2 | |||||||||
Net
income
|
6 | % | 1 | % | 4 | % |
Payments
Due By Period
|
|||||||||||||||||||||
Contractual Obligations
|
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
||||||||||||||||
Operating
leases
|
$ | 22 | $ | 13 | $ | 9 | $ | - | $ | - | |||||||||||
Purchase
orders
|
442 | 442 | - | - | - | ||||||||||||||||
Total
|
$ | 464 | $ | 455 | $ | 9 | $ | - | $ | - |
|
·
|
Cash
and cash equivalents, which consist of financial instruments with original
maturities of three months or less;
|
|
·
|
Short-term
investments, which consist of financial instruments with remaining
maturities of twelve months or less, and auction rate securities that
typically have interest reset dates of twenty-eight days;
and
|
|
·
|
Investments,
which consist of financial instruments that mature in three years or
less.
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Years
ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Revenue:
|
||||||||||||
Product
sales
|
$ | 14,022 | $ | 17,491 | $ | 7,610 | ||||||
Contract
revenue
|
14,658 | 6,337 | 12,569 | |||||||||
Royalties
|
1,837 | 2,609 | 3,877 | |||||||||
Total
revenue
|
30,517 | 26,437 | 24,056 | |||||||||
Costs
and expenses:
|
||||||||||||
Cost
of product
sales
|
2,589 | 3,998 | 918 | |||||||||
Cost
of contract
revenue
|
4,180 | 5,425 | 5,182 | |||||||||
Research
and
development
|
13,171 | 10,869 | 10,591 | |||||||||
Selling
and
marketing
|
4,739 | 3,738 | 3,359 | |||||||||
General
and
administrative
|
5,209 | 4,237 | 4,405 | |||||||||
Total
costs and
expenses
|
29,888 | 28,267 | 24,455 | |||||||||
Income
(loss) from
operations
|
629 | (1,830 | ) | (399 | ) | |||||||
Interest
income
|
1,163 | 2,016 | 1,840 | |||||||||
Income
before provision for income taxes
|
1,792 | 186 | 1,441 | |||||||||
Provision
for income
taxes
|
16 | 26 | 407 | |||||||||
Net
income
|
$ | 1,776 | $ | 160 | $ | 1,034 | ||||||
Net
income per share –
basic
|
$ | 0.08 | $ | 0.01 | $ | 0.04 | ||||||
Net
income per share –
diluted
|
$ | 0.07 | $ | 0.01 | $ | 0.04 | ||||||
Weighted
average shares –
basic
|
23,638 | 23,738 | 23,474 | |||||||||
Weighted
average shares –
diluted
|
23,697 | 25,084 | 24,965 |
Years
ended December 31,
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 1,776 | $ | 160 | $ | 1,034 | ||||||
Adjustments
to reconcile net income to net cash
provided
by (used in) operating activities:
|
||||||||||||
Depreciation
and
amortization
|
921 | 878 | 686 | |||||||||
Provision
for doubtful accounts
|
(25 | ) | (20 | ) | - | |||||||
Stock-based
compensation
|
1,505 | 1,138 | 1,937 | |||||||||
Increase
(decrease) from changes in assets and liabilities:
|
||||||||||||
Accounts
receivable
|
5,475 | (2,903 | ) | (989 | ) | |||||||
Inventories
|
(232 | ) | (605 | ) | (733 | ) | ||||||
Prepaid expenses and other
current assets
|
110 | 160 | (103 | ) | ||||||||
Accounts
payable
|
(473 | ) | 247 | 85 | ||||||||
Accrued
expenses
|
423 | 69 | 301 | |||||||||
Deferred
revenue
|
(74 | ) | (386 | ) | 592 | |||||||
Net
cash provided by (used in) operating activities
|
9,406 | (1,262 | ) | 2,810 | ||||||||
Cash
flows from investing activities:
|
||||||||||||
Purchases
of property and
equipment
|
(445 | ) | (559 | ) | (666 | ) | ||||||
Sales
of
investments
|
38,743 | 24,497 | 15,984 | |||||||||
Purchases
of
investments
|
(2,000 | ) | (30,009 | ) | (23,521 | ) | ||||||
Net
cash provided by (used in) investing activities
|
36,298 | (6,071 | ) | (8,203 | ) | |||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuance of common
stock
|
363 | 647 | 896 | |||||||||
Shares
surrendered by employees to pay taxes related to
unrestricted
stock
|
- | (41 | ) | - | ||||||||
Repurchase
of common
stock
|
(2,357 | ) | (38 | ) | - | |||||||
Net
cash provided by (used in) financing activities
|
(1,994 | ) | 568 | 896 | ||||||||
Increase
(decrease) in cash and cash equivalents
|
43,710 | (6,765 | ) | (4,497 | ) | |||||||
Cash
and cash equivalents, beginning of year
|
1,806 | 8,571 | 13,068 | |||||||||
Cash
and cash equivalents, end of
year
|
$ | 45,516 | $ | 1,806 | $ | 8,571 |
Additional
|
Total
|
|||||||||||||||||||
Common
Stock
|
Paid-In
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance
at December 31, 2005
|
23,282 | $ | 233 | $ | 79,093 | $ | (31,823 | ) | $ | 47,503 | ||||||||||
Exercise
of common stock options
|
293 | 3 | 881 | 884 | ||||||||||||||||
Issuance
of unrestricted stock
|
66 | - | 367 | 367 | ||||||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
2 | - | 12 | 12 | ||||||||||||||||
Stock-based
compensation expense
|
- | - | 1,570 | 1,570 | ||||||||||||||||
Net
income
|
1,034 | 1,034 | ||||||||||||||||||
Balance
at December 31, 2006
|
23,643 | 236 | 81,923 | (30,789 | ) | 51,370 | ||||||||||||||
Exercise
of common stock options
|
198 | 3 | 632 | 635 | ||||||||||||||||
Repurchase
of common stock
|
(9 | ) | - | (38 | ) | (38 | ) | |||||||||||||
Issuance
of unrestricted stock
|
29 | - | 153 | 153 | ||||||||||||||||
Shares
surrendered by employees to
pay
taxes related to unrestricted stock
|
(8 | ) | - | (41 | ) | (41 | ) | |||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
2 | - | 12 | 12 | ||||||||||||||||
Stock-based
compensation expense
|
- | - | 985 | 985 | ||||||||||||||||
Net
income
|
160 | 160 | ||||||||||||||||||
Balance
at December 31, 2007
|
23,855 | 239 | 83,626 | (30,629 | ) | 53,236 | ||||||||||||||
Exercise
of common stock options
|
136 | 1 | 358 | 359 | ||||||||||||||||
Repurchase
of common stock
|
(712 | ) | (7 | ) | (2,350 | ) | (2,357 | ) | ||||||||||||
Issuance
of common stock under
employee
stock purchase plan
|
2 | - | 4 | 4 | ||||||||||||||||
Stock-based
compensation expense
|
- | - | 1,505 | 1,505 | ||||||||||||||||
Net
income
|
1,776 | 1,776 | ||||||||||||||||||
Balance
at December 31, 2008
|
23,281 | $ | 233 | $ | 83,143 | $ | (28,853 | ) | $ | 54,523 |
1.
|
NATURE
OF BUSINESS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Short-term investments
|
2007
|
||||
Auction
variable rate notes
|
$ | 17,955 | |||
Corporate
debt securities
|
2,033 | ||||
U.S.
agency securities
|
16,261 | ||||
Total
|
$ | 36,249 |
Investments
|
2007
|
||||
Corporate
debt securities
|
$ | 494 | |||
Total
|
$ | 494 |
Building
and improvements
|
30
years
|
|
Building
improvements
|
5
to 20 years
|
|
Furniture
and fixtures
|
5
years
|
|
Computer,
office & manufacturing equipment
|
3
years
|
|
Purchased
software
|
3
years
|
|
·
|
Hardware
products, including UDMT modem modules and DSL test and development
systems, are standalone products that are sold independently of our
silicon intellectual property products. The terms of sales
generally do not contain provisions that obligate us to provide additional
products or services after shipment. Additionally, we do not
grant return rights other than normal warranty rights of
return. We recognize revenue: (i) upon shipment when products
are shipped FOB shipping point, and (ii) upon delivery at the customer’s
location when products are shipped FOB
destination.
|
|
·
|
Software
products consist of software that is generally sold to OEM customers for
integration into their products. The terms of sale generally do
not contain provisions that obligate us to provide additional products or
services after shipment, other than technical telephone support for a
brief period of time post sale. The cost of providing technical support is
inconsequential because of the limited scope of the
support. Additionally, we do not grant return rights other than
normal warranty rights of return, and we generally do not customize
software for customers. We also sell maintenance
contracts that entitle customers to product updates, which we classify as
product revenue.
|
3.
|
INVENTORIES
|
2008
|
2007
|
||||||||
Raw
materials
|
$ | 1,650 | $ | 1,424 | |||||
Finished
goods
|
6 | - | |||||||
Total
|
$ | 1,656 | $ | 1,424 |
4.
|
PROPERTY
AND EQUIPMENT
|
2008
|
2007
|
||||||||
Land
|
$ | 1,080 | $ | 1,080 | |||||
Building
and improvements
|
8,869 | 8,854 | |||||||
Computer
equipment
|
2,065 | 7,168 | |||||||
Purchased
software
|
1,241 | 3,129 | |||||||
Furniture
and fixtures
|
817 | 944 | |||||||
Office
equipment
|
203 | 364 | |||||||
Manufacturing
equipment
|
76 | 292 | |||||||
Total
|
14,351 | 21,831 | |||||||
Less
accumulated depreciation and amortization
|
(6,888 | ) | (13,959 | ) | |||||
Property
and equipment, net
|
$ | 7,463 | $ | 7,872 |
5.
|
INCOME
TAXES
|
2008
|
2007
|
||||||||
Federal
net operating loss carryforwards
|
$ | 15,679 | $ | 15,662 | |||||
Research
and development and other tax credit carryforwards
|
17,208 | 16,744 | |||||||
State
net operating loss carryforwards
|
660 | 704 | |||||||
Capitalized
research and development costs
|
6,245 | 8,186 | |||||||
Other
|
2,689 | 1,529 | |||||||
Total
|
42,481 | 42,825 | |||||||
Less
valuation allowance
|
(42,481 | ) | (42,825 | ) | |||||
Deferred
tax assets, net
|
$ | - | $ | - |
|
A
reconciliation of the U.S. federal statutory rate to the effective tax
rate is as follows:
|
Year
ended December 31,
|
|||||||||||||
2008
|
2007
|
2006
|
|||||||||||
Federal
statutory rate
|
34 | % | 34 | % | 34 | % | |||||||
State
rate, net of federal benefit
|
4 | (16 | ) | 4 | |||||||||
Foreign
tax expense
|
- | - | 27 | ||||||||||
Tax
credits
|
(52 | ) | (545 | ) | (97 | ) | |||||||
Change
in valuation allowance
|
12 | 504 | 43 | ||||||||||
Nondeductible
compensation expense
|
3 | 31 | 16 | ||||||||||
Other
|
0 | 6 | 1 | ||||||||||
Effective
tax rate
|
1 | % | 14 | % | 28 | % |
6.
|
EQUITY
AND STOCK COMPENSATION PLANS
|
2008
|
2007
|
2006
|
|||||||||||
Cost of product
sales
|
$ | 11 | $ | 13 | $ | 15 | |||||||
Cost of contract
revenue
|
135 | 176 | 149 | ||||||||||
Research and
development
|
611 | 483 | 904 | ||||||||||
Selling and
marketing
|
186 | 119 | 289 | ||||||||||
General and
administrative
|
562 | 347 | 580 | ||||||||||
Stock-based
compensation expense
|
$ | 1,505 | $ | 1,138 | $ | 1,937 |
Year Ended
December 31,
2008
|
Year Ended
December 31,
2007
|
Year Ended
December 31,
2006
|
|||||
Expected
term(1)
|
6.70-7.16
years
|
6.25 years
|
3.25-
6.25
years
|
||||
Expected volatility
factor(2)
|
51-54%
|
51-56
%
|
60-67
%
|
||||
Risk-free interest
rate(3)
|
2.17-3.16%
|
3.80-4.73
%
|
4.55-4.99
%
|
||||
Expected annual dividend
yield
|
—
|
—
|
—
|
(1) |
The
expected term for each grant for the year ended December 31, 2008 was
determined based on the historical average term of grants issued over the
past five years. The expected term for each grant for the years ended
December 31, 2007 and 2006 was determined as the midpoint between the
vesting date and the end of the contractual term, also known as the
“simplified method” for estimating the expected term described by Staff
Accounting Bulletin No. 107 (“SAB 107”).
|
|
(2) |
The
expected volatility for each grant is estimated based on an average of
historical volatility over a period of time which we believe to be
representative of our future volatility.
|
|
|
(3) |
The
risk-free interest rate for each grant is based on the U.S. Treasury yield
curve in effect at the time of grant for a period equal to the expected
term of the stock
option.
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
Shares
|
Weighted
Average
Exercise
Price
|
|||||||||||||||||||
Outstanding
at beginning of year
|
6,974,705 | $ | 4.84 | 6,489,812 | $ | 4.80 | 6,284,606 | $ | 4.73 | |||||||||||||||
Granted
|
1,093,200 | 3.57 | 737,000 | 4.79 | 697,000 | 5.24 | ||||||||||||||||||
Exercised
|
(136,158 | ) | 2.64 | (197,853 | ) | 3.21 | (293,394 | ) | 3.01 | |||||||||||||||
Forfeited
or
cancelled
|
(392,754 | ) | 5.13 | (54,254 | ) | 5.87 | (198,400 | ) | 6.66 | |||||||||||||||
Outstanding
at end of year
|
7,538,993 | $ | 4.68 | 6,974,705 | $ | 4.84 | 6,489,812 | $ | 4.80 | |||||||||||||||
Options
exercisable at year end
|
6,059,397 | $ | 4.80 | 5,809,280 | $ | 4.80 | 5,688,735 | $ | 4.72 |
Options
Outstanding
|
Options
Exercisable
|
||||||||||||
Exercise Price
Range
|
Number
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term (in
years)
|
Number
|
Weighted
Average
Exercise
Price
|
||||||||
$0 to $3
|
7
99,036
|
$2.89
|
5.
65
|
793,408
|
$2.90
|
||||||||
$3 to $4
|
3,434,907
|
3.38
|
6.17
|
2,601,117
|
3.31
|
||||||||
$4 to $5
|
443,650
|
4.64
|
8.82
|
150,787
|
4.67
|
||||||||
$5 to $6
|
752,700
|
5.19
|
5.27
|
442,956
|
5.22
|
||||||||
$6 to $7
|
1,976,950
|
6.11
|
5.22
|
1,939,379
|
6.11
|
||||||||
$7 to $10
|
51,500
|
7.76
|
2.47
|
51,500
|
7.76
|
||||||||
$10 to $63
|
80,250
|
36.74
|
0.81
|
80,250
|
36.74
|
||||||||
7,538,993
|
$4.68
|
5.85
|
6,059,397
|
$4.80
|
7.
|
COMMITMENTS
AND CONTINGENT LIABILITIES
|
Year ended December 31,
|
|||||
2009
|
$ | 13 | |||
2010
|
9 | ||||
Total
minimum lease payments
|
$ | 22 |
8.
|
BUSINESS
SEGMENTS AND MAJOR CUSTOMERS
|
Year
ended December 31,
|
|||||||||||||
2008
|
2007
|
2006
|
|||||||||||
United
States
|
$ | 24,070 | $ | 15,508 | $ | 12,797 | |||||||
Germany
|
4,881 | 5,759 | 6,630 | ||||||||||
Rest
of world
|
1,566 | 5,170 | 4,629 | ||||||||||
$ | 30,517 | $ | 26,437 | $ | 24,056 |
Year
ended December 31,
|
|||||||||||||
2008
|
2007
|
2006
|
|||||||||||
Customer
A
|
28 | % | - | - | |||||||||
Customer
B
|
12 | % | 19 | % | 26 | % | |||||||
Customer
C
|
10 | % | - | - | |||||||||
Customer
D
|
4 | % | 16 | % | 2 | % | |||||||
Customer
E
|
1 | % | 10 | % | 1 | % | |||||||
Customer
F
|
- | - | 20 | % |
9.
|
EMPLOYEE
BENEFIT PLAN
|
10.
|
NET
INCOME PER SHARE
|
Year
ended December 31,
|
|||||||||||||
2008
|
2007
|
2006
|
|||||||||||
Net
income
|
$ | 1,776 | $ | 160 | $ | 1,034 | |||||||
Weighted
average common shares outstanding
|
23,638 | 23,738 | 23,474 | ||||||||||
Additional
dilutive common stock equivalents
|
59 | 1,346 | 1,491 | ||||||||||
Diluted
shares outstanding
|
23,697 | 25,084 | 24,965 | ||||||||||
Net
income per share –
basic
|
$ | 0.08 | $ | 0.01 | $ | 0.04 | |||||||
Net
income per share –
diluted
|
$ | 0.07 | $ | 0.01 | $ | 0.04 |
11.
|
QUARTERLY
RESULTS OF OPERATIONS - UNAUDITED
|
2008
Quarters Ended
|
|||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
||||||||||||||
Revenue
|
$ | 5,876 | $ | 6,167 | $ | 6,390 | $ | 12,084 | |||||||||
Gross
profit
|
4,034 | 4,414 | 4,497 | 10,803 | |||||||||||||
Income
(loss) from operations
|
(1,656 | ) | (1,568 | ) | (904 | ) | 4,757 | ||||||||||
Net
income (loss)
|
(1,282 | ) | (1,257 | ) | (663 | ) | 4,978 | ||||||||||
Net
income (loss) per share – basic
|
$ | (0.05 | ) | $ | (0.05 | ) | $ | (0.03 | ) | $ | 0.21 | ||||||
Net
income (loss) per share – diluted
|
$ | (0.05 | ) | $ | (0.05 | ) | $ | (0.03 | ) | $ | 0.21 |
2007
Quarters Ended
|
|||||||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
||||||||||||||
Revenue
|
$ | 5,800 | $ | 6,429 | $ | 7,456 | $ | 6,753 | |||||||||
Gross
profit
|
3,952 | 3,329 | 5,002 | 4,732 | |||||||||||||
Income
(loss) from operations
|
(593 | ) | (1,464 | ) | 529 | (300 | ) | ||||||||||
Net
income (loss)
|
(98 | ) | (968 | ) | 1,034 | 193 | |||||||||||
Net
income (loss) per share – basic
|
$ | 0.00 | $ | (0.04 | ) | $ | 0.04 | $ | 0.01 | ||||||||
Net
income (loss) per share – diluted
|
$ | 0.00 | $ | (0.04 | ) | $ | 0.04 | $ | 0.01 |
Col.
A
|
Col.
B
|
Col.
C(1)
|
Col.
C(2)
|
Col.
D
|
Col.
E
|
|||||||||||||||
Additions
|
||||||||||||||||||||
Balance
at
|
Charged
to
|
Charged
|
Deductions
|
Balance
|
||||||||||||||||
Beginning
|
Costs
and
|
to
Other
|
Charged
to
|
at
End
|
||||||||||||||||
of
Period
|
Expenses
|
Accounts
|
Reserves
|
of
Period
|
||||||||||||||||
Allowance
for doubtful
accounts
receivable:
|
||||||||||||||||||||
2008
|
$ | 55 | $ | (25 | ) | $ | - | $ | - | $ | 30 | |||||||||
2007
|
$ | 97 | $ | (20 | ) | - | $ | 22 | $ | 55 | ||||||||||
2006
|
$ | 97 | - | - | - | $ | 97 | |||||||||||||
Inventory
reserves:
|
||||||||||||||||||||
2008
|
$ | 409 | $ | 316 | $ | 13 | $ | - | $ | 738 | ||||||||||
2007
|
$ | 313 | $ | 102 | - | $ | 6 | $ | 409 | |||||||||||
2006
|
$ | 284 | $ | 29 | - | - | $ | 313 | ||||||||||||
Warranty
reserves:
|
||||||||||||||||||||
2008
|
$ | 0 | $ | 118 | $ | - | $ | - | $ | 118 | ||||||||||
2007
|
$ | 0 | - | - | - | $ | 0 | |||||||||||||
2006
|
$ | 0 | - | - | - | $ | 0 | |||||||||||||
Deferred
tax asset
valuation
allowance:
|
||||||||||||||||||||
2008
|
$ | 42,825 | $ | - | $ | (344 | ) | $ | - | $ | 42,481 | |||||||||
2007
|
$ | 43,772 | - | $ | (947 | ) | - | $ | 42,825 | |||||||||||
2006
|
$ | 42,977 | - | $ | 795 | - | $ | 43,772 | ||||||||||||
Page
|
||
(1)
Report of Independent Registered Public Accounting
Firm
|
35
|
|
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
36
|
|
Consolidated
Statements of Operations for each of the three
years
in the period ended December 31,
2008
|
37
|
|
Consolidated
Statements of Cash Flows for each of the
three
years in the period ended December 31, 2008
|
38
|
|
Consolidated
Statements of Stockholders’ Equity for each of
the
three years in the period ended December 31, 2008
|
39
|
|
Notes
to Consolidated Financial Statements
|
40
|
|
(2)
Schedule II - Valuation and Qualifying
Accounts
|
53
|
|
(3) Exhibits: |
10.7*
|
Offer
letter dated December 17, 2007 by and between Richard Moberg and Aware,
Inc. (filed as Exhibit 99.2 to Company’s Form 8-K filed with the
Securities and Exchange Commission on December 18, 2007 and incorporated
herein by reference).
|
10.8*
|
Consultant
Agreement dated December 17, 2007 by and between Richard Moberg and Aware,
Inc. (filed as Exhibit 99.3 to Company’s Form 8-K filed with the
Securities and Exchange Commission on December 18, 2007 and incorporated
herein by reference).
|
21.1
|
Subsidiaries
of Registrant.
|
23.1
|
Consent
of Independent Registered Public Accounting Firm.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
AWARE, INC. | |||
|
By:
|
/s/ Michael A. Tzannes | |
Michael
A. Tzannes, Chief Executive Officer
|
|||
Date: February 13, 2009 |
Signature
|
Title
|
|
/s/
Michael A. Tzannes
|
Chief
Executive Officer and Director
|
|
Michael
A. Tzannes
|
(Principal
Executive Officer)
|
|
/s/
Edmund C. Reiter
|
President
and Director
|
|
Edmund
C. Reiter
|
||
/s/
Richard P. Moberg
|
Chief
Financial Officer
|
|
Richard
P. Moberg
|
(Principal
Financial and Accounting Officer)
|
|
/s/
John K. Kerr
|
Chairman
of the Board of Directors
|
|
John
K. Kerr
|
||
/s/
G. David Forney, Jr.
|
Director
|
|
G.
David Forney, Jr.
|
||
/s/
Adrian F. Kruse
|
Director
|
|
Adrian
F. Kruse
|
||
/s/
Mark G. McGrath
|
Director
|
|
Mark
G. McGrath
|
||
/s/
Charles K. Stewart
|
Director
|
|
Charles
K. Stewart
|
WITHOUT
PAR VALUE
|
WITH
PAR VALUE
|
||||||||||
TYPE
|
NUMBER
OF SHARES
|
TYPE
|
NUMBER OF SHARES |
PAR
VALUE
|
|||||||
Common:
|
Common:
|
30,000,000 |
1
¢
|
||||||||
Preferred:
|
Preferred:
|
1,000,000 |
$1.00
|
||||||||
I.
|
Provisions
Generally Applicable to Preferred
Shares
|
IV.
|
Provisions
Applicable to Common Shares
|
III.
|
Provisions
Applicable to Series A through Series E Preferred
Shares.
|
a.
|
The
street address (post office boxes are not acceptable) of the principal
office of the corporation
in
Massachusetts
is:
|
One
Oak Park, Bedford, MA 01730
|
|
b.
|
The
name, residential address and post office address of each director and
officer of the corporation is as
follows:
|
NAME
|
RESIDENTIAL
ADDRESS POST
OFFICE ADDRESS
|
|||||
President:
|
James
C. Bender
|
272
|
Farley
Rd., Hollis, NH 03049
|
|||
Treasurer:
|
Richard
Moberg
|
19
|
Hidden
Brick Road, Hopkinton, MA 01748
|
|||
Clerk:
|
Valerie
L. Pawson
|
196
|
Eliot
St., Natick, MA 01760
|
|||
Directors:
|
James
C. Bender
|
272
|
Farley
Road, Hollis, NH 03049
|
|||
John
Kerr
|
336
|
Essex
Road, Kenilworth, IL 60043
|
||||
John
Stafford
|
60
|
Strawberry
Hill Road, Dover, MA 02030
|
||||
Charles
Stewart
|
7
|
Bristol
Road, Northbrook, IL 60093
|
||||
Gerald
Fishman
|
169
|
Hickory
Road, Weston, MA
|
c.
|
The
fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of: 12/31
|
d.
|
The
name and business address of the resident agent, if any, of the
corporation is:
|
/s/
James C. Bender
|
,
*President,
|
/s/
Valerie L. Pawson
|
,
*Clerk,
|
Effective
Date:
|
Valerie
L. Pawson, Esq.
|
|
Lawson
& Weitzen
|
|
425
Summer Street
|
|
Boston,
MA 02210-1736
|
|
Telephone:
|
(617)
439-4990
|
FEDERAL
IDENTIFICATION
|
||
NO. |
04-2911026
|
VOTED:
|
That,
pursuant to the authority vested in the Board of Directors of the
Corporation in accordance with the provisions of the Amended and Restated
Articles of Organization of the Corporation, the Board of Directors hereby
designates and establishes 50,000 shares of its authorized but unissued
Preferred Stock as its Series A Participating Cumulative Preferred Stock,
$1.00 par value (the “Series A Preferred Stock”); that such Class One
Preferred Stock shall have the terms set forth in their entirety in
Exhibit A to the Rights Agreement presented to this meeting, and such
terms be, and they hereby are, approved; and that the President or any
Vice President and the Clerk or any Assistant Clerk of the Corporation be,
and they hereby are, authorized to execute a Certificate of Vote of
Directors Establishing a Class or Series of Stock (the “Certificate of
Vote of Directors”) setting forth such terms in the name of the
Corporation, and to file the Certificate of Vote of Directors with the
Secretary of State of The Commonwealth of Massachusetts and such other
governmental authorities as may be required by
law.
|
(i) declare
or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
|
|
(ii) declare
or pay dividends on or make any other distributions on any shares of stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all such parity
stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
|
|
(iii) redeem
or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock;
provided
that the
Corporation may at any time redeem, purchase or otherwise acquire shares
of any such parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock;
or
|
|
(iv) purchase
or otherwise acquire for consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
|
SIGNED
UNDER THE PENALTIES OF PERJURY, this
2nd
day of
October
, 20
01
,
|
/s/
Edmund C. Reiter, *President,
|
Edmund
C. Reiter
|
/s/
Kevin Russell, *Clerk,
|
Kevin
Russell
|
I
hereby approve the within Certificate of Vote of Directors and, the filing
fee in the amount of $100 having been paid, said certificate is deemed to
have been filed with me this 2nd day of October, 2001.
|
|
Effective
date:
|
SECRETARY
OF THE
|
|
COMMONWEALTH
|
|
01
OCT - 2 PM 3:18
|
|
CORPORATION
DIVISION
|
William R. Kolb | |
Foley, Hoag & Eliot LLP | |
One Post Office Square | |
Boston, MA 02109 | |
Telephone: |
(617)
832-1209
|
WITHOUT
PAR VALUE STOCKS
|
WITH
PAR VALUE STOCKS
|
||||||||||
TYPE
|
NUMBER
OF SHARES
|
TYPE
|
NUMBER
OF
SHARES |
PAR
VALUE
|
|||||||
Common:
|
Common:
|
30,000,000
|
$
|
.01
|
|||||||
Preferred:
|
Preferred:
|
||||||||||
Series
A Participating
Cumulative
Preferred Stock
|
50,000
|
$
|
1.00
|
||||||||
Undesignated
|
950,000
|
$
|
1.00
|
WITHOUT
PAR VALUE STOCKS
|
WITH
PAR VALUE STOCKS
|
||||||||||
TYPE
|
NUMBER
OF SHARES
|
TYPE
|
NUMBER
OF
SHARES |
PAR
VALUE
|
|||||||
Common:
|
Common:
|
70,000,000
|
$
|
.01
|
|||||||
Preferred:
|
Preferred:
|
||||||||||
Series
A Participating
Cumulative Preferred Stock |
50,000
|
$
|
1.00
|
||||||||
Undesignated
|
950,000
|
$
|
1.00
|
VOTED:
|
To
amend the Corporation’s Restated Articles of Organization to increase the
number of authorized shares of Common Stock, par value $.01 per share,
from 30,000,000 to
70,000,000.
|
Later
effective date:
|
.
|
/s/
Edmund C. Reiter
|
,
*President,
|
Edmund
C. Reiter
|
|
/s/
Kevin Russell
|
,
*Clerk
|
Kevin
Russell
|
SECRETARY
OF THE
COMMONWEALTH |
/s/
WILLIAM FRANCIS GALVIN
|
|
02
JUL - 8 PM 2:43
CORPORATION
DIVISION
|
WILLIAM
FRANCIS GALVIN
|
|
|
Secretary
of the Commonwealth
|
|
|
|
|
|
William R. Kolb, Esq.
|
Foley Hoag LLP
|
155 Seaport Boulevard
|
Boston, Massachusetts
02210
|
Name of Organization
|
Jurisdiction
|
Aware
Security Corporation
|
Massachusetts
|
|
1.
|
I
have reviewed this annual report on Form 10-K of Aware,
Inc.;
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation;
and
|
|
d)
|
disclosed
in this annual report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
February 13, 2009 |
/s/
Michael A. Tzannes
|
||
|
Michael
A. Tzannes
|
|||
|
Chief
Executive Officer
|
|
1.
|
I
have reviewed this annual report on Form 10-K of Aware,
Inc.;
|
|
2.
|
Based
on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
annual report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;
|
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
c)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this annual report based on such evaluation;
and
|
|
d)
|
disclosed
in this annual report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of registrant’s board of
directors (or persons performing the equivalent
function):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
February 13, 2009 |
/s/
Richard P. Moberg
|
||
|
Richard
P. Moberg
|
|||
|
Chief
Financial Officer
|
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
/s/ Michael A. Tzannes |
/s/
Richard P. Moberg
|
||
Chief Executive Officer |
Chief
Financial Officer
|
||
|
|||
Date: February 13, 2009 | Date: February 13, 2009 |