Aware, Inc. Reports Record Revenue and Profitability for First Quarter 2000; Royalties Rise to 42 Percent of Total Revenue - Company Financial Information

Cambridge Telcom Report, April 24, 2000

Aware, Inc. (NASDAQ:AWRE), a worldwide leader in DSL (digital subscriber line) technology for high-speed Internet access over existing telephone networks, Tuesday reported record financial results for its first quarter ended March 31, 2000.

First quarter 2000 revenue increased 49 percent to $6.4 million, compared to $4.3 million for the quarter ended March 31, 1999. Net income for the quarter increased 212 percent to $2.1 million, or 9 cents per diluted share, compared to net income of $677,000, or 3 cents per diluted share for the same quarter last year.

Commenting on Aware's financial performance, Michael Tzannes, president and chief executive officer, said: "This was another exceptional quarter for our business. Royalty revenue this quarter was another record, validating our business model and signaling strong momentum of our technology in the market. Based upon this quarter's performance and our visibility into future quarters, we are confident that we can achieve 100 percent earnings growth this year."

Continuing, Tzannes added: "Our business has never been stronger. We are on track to grow our customer base according to plan. We have several new customers that we are excited about, and we look forward to announcing details in the future.

Some highlights from our announced customers this quarter include: ADI stated that:

-- its ADSL chipsets power 8 of the world's top ten PSTN markets;

-- Samsung selected ADI's AD20msp918 chipset for use in its ADSL AceLinksystem being deployed at Korea Telecom, and

-- it is now offering a complete Universal Serial Bus (USB) reference design for customer premises equipment.

Lucent Microelectronics announced:

-- the availability of a three-in-one, "G.everything" modem chipset that enables V.90, full-rate ADSL, and G.Lite functionality, and

-- Samsung Electronics selected its Wildwire chipset, joining Compaq, Dell, Hewlett-Packard, and others that are using Lucent's chipset in personal computers."

Other customers made progress this quarter as well. Infineon made available its multi-port Lite central office chipset, and projects with Intel, NEC and others are progressing according to plans."

Tzannes also said: "Research and development activities at Aware are progressing very well. This quarter we announced and demonstrated our voice-enabled DSL (VeDSL), which is targeted at solving the important problem of using DSL for residential second line voice services. We will continue to announce our innovations, as they become available. Some of the areas we are working on include:

-- Technology that improves the pre-qualification, installation and maintenance of DSL services, and

-- VDSL technology that further increases the data rates that can be achieved on telephone lines."

Concluding, Tzannes stated: "Aware has just completed another outstanding quarter. Our business model is proving successful, our existing customers are executing well, and we are adding new customers and technologies for the future. The outlook for Aware has never been more exciting."

Aware, Inc. designs, develops, licenses and markets DSL technology that enables broadband communications over existing telephone networks. The company licenses its intellectual property and software to semiconductor manufacturers and equipment manufacturers who sell products incorporating Aware technology. Aware also markets to systems companies to encourage them to design its technology into their products, and to service providers to encourage them to deploy new broadband services based on its technology. More information about Aware can be found at http://www.aware.com.

                          AWARE, INC.
                  CONSOLIDATED BALANCE SHEETS

                                         March 31,    December 31,
                                           2000           1999
                          ASSETS
Current assets:
 Cash, cash equivalents and
  short-term investments                $42,318,159    $36,265,577
 Accounts receivable, net                 6,922,239      5,705,914
 Other assets                             1,102,571        891,213
 Total current assets                    50,342,969     42,862,704

 Property  and equipment, net            11,458,697     11,619,761

Total assets                            $61,801,666    $54,482,465

          LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities               $ 1,031,153    $ 1,513,668

Total stockholders' equity               60,770,513     52,968,797

Total liabilities and
 stockholders' equity                   $61,801,666    $54,482,465

                          AWARE, INC.
             CONSOLIDATED STATEMENTS OF OPERATIONS

                                           Three Months Ended
                                                March 31,
                                          2000            1999

Revenue:
 Product sales                         $ 1,191,892     $ 1,224,705
 Contract revenue                        2,551,666       2,561,261
 Royalties                               2,663,250         520,302

  Total revenue                          6,406,808       4,306,268

Costs and expenses:
 Cost of product sales                     142,922         246,007
 Cost of contract revenue                1,971,159       1,759,059
 Research and development                1,413,784         782,729
 Selling and marketing                     667,042         586,796
 General and administrative                671,961         593,135
  Total costs and expenses               4,866,868       3,967,726

Income from operations                   1,539,940         338,542
Other income and expense                      --            18,300
Interest income                            569,963         320,121

Income before provision
 for income taxes                        2,109,903         676,963
Provision for income taxes                    --              --

Net income                             $ 2,109,903     $   676,963

Net income per share - basic           $      0.09     $      0.03
Net income per share - diluted         $      0.09     $      0.03

Weighted average shares - basic         22,229,909      21,097,978
Weighted average shares - diluted       23,879,848      23,372,593