8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):     October 28, 2013      

AWARE, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	000-21129	04-2911026
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

40 Middlesex Turnpike, Bedford, MA, 01730

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (781) 276-4000

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 28, 2013, Aware, Inc. issued the press release, attached to this Form 8-K as Exhibit 99.1, describing the results of operations and financial condition of the company as of and for the quarter ended September 30, 2013.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

No financial statements are required to be filed as part of this Report.  The following exhibits are filed as part of this report:

(d) EXHIBITS.

Number	Description
99.1	Press release issued by Aware, Inc. on October 28, 2013.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AWARE, INC.
Dated: October 28, 2013	By:	/s/Richard P. Moberg
		Richard P. Moberg
		co-Chief Executive Officer and co-President
		Chief Financial Officer

-2-

EXHIBIT INDEX

Number	Description
99.1	Press release issued by Aware, Inc. on October 28, 2013.

-3-

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:

Rick Moberg

Aware, Inc.

781-276-4000

Aware, Inc. Reports Third Quarter 2013

Financial Results

BEDFORD, MASS. – October 28, 2013 – Aware, Inc. (NASDAQ: AWRE), a leading supplier of biometrics software and services, today reported financial results for its third quarter ended September 30, 2013.

Revenue for the third quarter of 2013 was $4.5 million, a decrease of 15% compared to $5.3 million in the same quarter last year. The net loss for the third quarter of 2013 was $1.2 million, or $0.05 per diluted share, which compares to net income of $10.3 million, or $0.46 per diluted share, for the same period a year ago. Net income in the third quarter of 2012 included a gain on the sale of patent assets of $15.2 million.  Operating income before patent related income in the third quarter of 2013 was a loss of $2.2 million compared to income of $1.4 million in the third quarter of 2012.

For the nine months ended September 30, 2013, revenue increased 5% to $14.9 million, compared to $14.2 million in the same period a year ago.  Net income for the nine months ended September 30, 2013 was $1.0 million, or $0.04 per diluted share. These results compared to net income of $66.3 million, or $3.03 per diluted share, for the same period a year ago. Year-to-date net income in 2012 included an $86.4 million gain on the sale of patent assets.  Operating income before patent related income for the first nine months of 2013 was $134,000 compared to $2.6 million for the same period a year ago.

Aware, Inc.  •  40 Middlesex Turnpike  •  Bedford, MA  USA  01730-1432

Tel: (781) 276-4000  •  Fax: (781) 276-4001  •  E-mail: IR@aware.com

Aware, Inc. Reports Third Quarter 2013 Financial Results Page 2

Financial results for the three and nine month periods ended September 30, 2013 were materially affected by the Company’s decision to shut down its DSL service assurance business.  This decision limited our ability to record revenue from our DSL service assurance business in the quarter.  We also incurred $2.8 million of costs to shutdown the business. Notwithstanding the impact on the quarter and year-to-date periods, we believe this action was necessary in light of the lack of historical profitability and the future outlook for this business.

Our biometrics business was and is unaffected by this decision and continues to perform well. We encourage you to read our third quarter Form 10-Q for more details on the financial performance of our company.

Rick Moberg, Aware’s co-chief executive officer and chief financial officer, said, “While shutting down the DSL service assurance business was not an easy decision, we believe this action was in the best interests of the Company and its shareholders.  We are excited to move forward focused on growing our profitable biometrics business.”

About Aware

Aware is a leading software and technology supplier for the biometrics and healthcare industries. Aware’s biometrics software products and services are provided to solution vendors and system integrators for use by government agencies towards applications including border management, secure credentials, law enforcement, and national defense. Aware also provides standards-based medical imaging software products to the healthcare industry.  Aware is a publicly held company (Nasdaq: AWRE) based in Bedford, Massachusetts. 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 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.

General factors include, but are not limited to: our quarterly results are unpredictable and may fluctuate significantly; our business is subject to rapid technological change; we face intense competition from a wide range of competitors; our intellectual property is subject to limited protection; our business may be affected by our use of open source software; our business may be affected by government regulations; adverse economic conditions; and our ability to obtain or enforce patents could be affected by new laws, regulations or rules. Biometric factors include, but are not limited to: 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; failures or problems in our biometric software products; delays in the adoption of new industry biometric standards; growth of proprietary biometric systems which do not conform to industry standards; our ability to sell services contracts in a manner that is consistent with our business model; our ability to deliver services contract milestones; and our dependence on third party contractors and consultants to deliver certain services contract milestones.

Aware, Inc. Reports Third Quarter 2013 Financial Results Page 3

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, 2012 and other reports and filings made with the Securities and Exchange Commission.

Aware is a trademark or registered trademark of Aware, Inc.

Any other trademarks appearing herein are the property of their respective owners.

Aware, Inc. Reports Third Quarter 2013 Financial Results Page 4

AWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 (unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue:
Software licenses	$	2,334		$	3,387		$	7,704		$	8,070
Software maintenance		1,023			661			3,187			2,471
Services		943			724			2,179			2,100
Hardware sales		-			-			1,129			-
Royalties		170			484			737			1,599
Total revenue		4,470			5,256			14,936			14,240
Costs and expenses:
Cost of hardware sales		-			-			813			-
Cost of services		494			421			1,075			1,138
Research and development		1,452			1,466			4,504			4,431
Selling and marketing		931			1,069			2,998			3,143
General and administrative		922			854			2,580			2,915
Exit costs		2,832			-			2,832			-
Total costs and expenses		6,631			3,810			14,802			11,627
Operating income (loss) before patent related income		(2,161	)		1,446			134			2,613
Gain on sale of patent assets		-			15,167			-			86,394
Income from patent arrangement		-			-			780			-
Operating income (loss) after patent related income		(2,161	)		16,613			914			89,007
Other income		27			-			27			85
Interest income		80			45			239			137
Income (loss) from continuing operations before income taxes		(2,054	)		16,658			1,180			89,229
Provision for (benefit from) income taxes		(901	)		6,578			169			23,248
Income (loss) from continuing operations		(1,153	)		10,080			1,011			65,981
Income from discontinued operations, net of income taxes		-			217			-			360
Net income (loss)	$	(1,153	)	$	10,297		$	1,011		$	66,341
Basic net income (loss) per share:
Basic net income (loss) per share from continuing operations	$	(0.05	)	$	0.45		$	0.04		$	3.05
Basic net income per share from discontinued operations		0.00			0.01			0.00			0.02
Basic net income (loss) per share	$	(0.05	)	$	0.46		$	0.04		$	3.07
Diluted net income (loss) per share:
Diluted net income (loss) per share from continuing operations	$	(0.05	)	$	0.45		$	0.04		$	3.01
Diluted net income per share from discontinued operations		0.00			0.01			0.00			0.02
Diluted net income (loss) per share	$	(0.05	)	$	0.46		$	0.04		$	3.03
Weighted-average shares – basic		22,571			22,339			22,533			21,609
Weighted-average shares - diluted		22,571			22,501			22,623			21,888
Comprehensive income (loss):
Net income (loss)	$	(1,153	)	$	10,297		$	1,011		$	66,341
Other comprehensive income:
Unrealized gains (losses) on available for sale securities		(26	)		(4	)		(6	)		16
Comprehensive income (loss)	$	(1,179	)	$	10,293		$	1,005		$	66,357

Aware, Inc. Reports Third Quarter 2013 Financial Results Page 5

AWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)

	September 30, 2013		December 31, 2012
ASSETS
Cash and investments	$	78,380	$	73,084
Accounts receivable, net		2,754		4,578
Property and equipment, net		5,644		5,904
Deferred tax assets		1,575		1,760
Other assets, net		1,294		528
Total assets	$	89,647	$	85,854
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total current liabilities	$	6,350	$	3,639
Long-term deferred revenue		40		319
Total stockholders’ equity		83,257		81,896
Total liabilities and stockholders’ equity	$	89,647	$	85,854

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Aware, Inc.  •  40 Middlesex Turnpike  •  Bedford, MA  USA  01730-1432

Tel: (781) 276-4000  •  Fax: (781) 276-4001  •  E-mail: IR@aware.com