Dear Investor,

Your first Pro Trader Today recommendation is Aware Inc. (NASDAQ: AWRE).

The company operates in the biometrics software and services sector — one of the fastest-growing niches in all of high tech — but remains a relatively small player within a field of giants including global brands such as Google, Apple, and NEC.

Company Overview

Aware, Inc.’s business is in developing and marketing software and services for the rapidly expanding biometrics/security industry.

Its products are used in government as well as commercial biometrics systems and are capable of remotely and rapidly determining or verifying an individual’s identity.

The main applications of biometrics technology cover a wide spectrum, including border control, law enforcement, national defense, secure credentialing, access control, and background checks.

The company’s’ product line boasts interoperable, standards-compliant, field-proven biometric software that can be used to capture, verify, format, compress, and decompress biometric images, as well as aggregate, analyze, process, and transport the images within biometric systems and databases.

Aware markets a wide range of software solutions for fingerprint, facial, and iris modalities and offers engineering services related to software customization, integration, and installation, as well as complete systems development as dictated by individual client needs.

The company sells its biometrics software products and services to both government and private customers worldwide.

Aware, Inc. was founded in 1986 and is headquartered in Bedford, Massachusetts.

Key Statistics

Share Value: $4.25
Shares Outstanding: 22.8 million
Market Cap: $97 million
52-Week High: $4.40
52-Week Low: $2.81
Six-Month Target: $6.00

Product Line

Universal Registration Client (URC) is a configurable Windows-based .NET application that can perform a variety of biometric data capture, analysis, matching, formatting, and hardware abstraction functions.

Customers may use URC to either quickly learn how to best implement application programming interfaces of underlying Aware software libraries or, alternatively, as a baseline to develop an application customized for their own requirements and workflow.

URC Mobile is a software application for performing biometric enrollment, identification, and screening on ruggedized mobile biometric devices, such as those used by military personnel in the field.

URC Mobile allows the operator to capture both biographic and biometric data from subjects, cross-referencing the biometric information to onboard watch lists and known mission-encountered individuals.

During enrollment, the operator can select the type of individual to enroll (rapid search, criminal, miscellaneous) and collect the target’s mandatory and optional demographics, fingerprint images, facial images, iris images, document images, and cell phone information.

After collection, the software performs biometric matching on the enrolled iris and fingerprint images. The application supports the uploading of watch lists in the form of EBTS files. Additionally, the application provides the ability to screen subjects (identification without enrollment).

Finally, the application allows an administrator to configure the application to control the overall performance and workflow.

FormScannerSE and FormScannerMB are two independent applications for the scanning and processing of inked fingerprint cards. They are available separately or as a package.

FormScannerSE is designed for one-at-a-time assisted “scan and entry” processing of fingerprint cards, such as for manual data entry of previously scanned card batches.

It can also be used for manual “rework” such as crop region adjustments.

FormScannerMB is designed for “multi-batch” scanning of large volumes of cards in an automated fashion and provides features useful for high-volume processing, such as support for automatic document feeding and real-time image quality feedback.

Both FormScanner applications use a template-driven workflow to support the processing of any card or form type. They automatically identify the finger images present on the form, crop them, and perform quality analysis, segmentation, sequence checking, compression, and required data structuring.

ForensicWorkbench is a software application that utilizes several Aware solutions for the categorization, processing, and standards-compliant formatting of biometric images and demographic data.

ForensicWorkbench can display and process facial and fingerprint imagery, allowing the operator to automatically extract frontal images from an input image or manually identify a face via the markings of the eye centers.

For frontal images, Aware’s PreFace application is used to identify facial features and ensure compliance to an input frontal face specification.

Inputted fingerprint images can be cropped to identify each finger (right and left thumb, index, middle, ring, little).

Each finger can be labeled with its source and impression type (live scan, ink, rolled, plain); its quality is evaluated and reported.

ForensicWorkbench utilizes the following products:

SequenceCheck includes a robust multi-finger and hand segmentation to extract individual fingers or hand sections from multi-finger or full-hand images.

It processes fingers from sets of multi-finger enrollments (two to 10 fingers) to make the following determinations:

• Locates single or multiple fingers within an image or document, segments them (cuts them out), and indicates the location of the prints to an operator through graphical bounding box overlays.
• Notes if the same finger was captured more than once when both rolls and flats are collected.
• Notes if a finger was captured out of sequence.
• Notes if the wrong hand was captured.
• Notes if fingers from a four-finger image are missing.
• PreFace is a facial image analysis software engine that is designed to test and format a facial image so that it is compliant with ANSI/INCITS-385 “Face Recognition Format for Data Interchange.”

It provides ForensicWorkbench with the ability to auto-detect a face within a document or an image.

It identifies the major facial features, analyzing the face for standard compliant quality assurance.

It also provides cropping/sizing, rotational correction, and formatting so that the image can be more appropriately structured for human or automated identification.

SequenceWorkbench is a software application designed to be used by an analyst to identify and repair sequence errors in fingerprint records. SequenceWorkbench will display and analyze the fingerprints in a transaction and report sequence errors to the operator.

Imaging Products

ImageDirect is an imaging edge server that enables health care organizations to securely exchange medical images with patients and unaffiliated colleagues by leveraging the principles of Direct, as required for Meaningful Use Stage 2 (MU2).

AWARE REM Server collects radiation exposure data based on methods specified by IHE’s Radiation Exposure Monitoring (REM) Integration Profile.

SeisPact is designed to assist the oil exploration industry for efficient storage and satellite transmission of seismic data from ships.

These datasets tend to be very large and transmission networks expensive, so compression is valuable.

ArchivePack is designed for use in digital archives to store and distribute large digital imagery, such as those that are found in historical archives.

Growth

April 26, 2016

Revenue for the first quarter of 2016 was $4.8 million, an increase of 17% compared to $4.1 million in the same quarter last year. Operating income in the first quarter of 2016 was $0.9 million compared to $0.4 million in the first quarter of 2015. The increase in revenue and operating income was primarily due to licensing revenue from a 2015 medical imaging software sale.

Net income in the first quarter of 2016 was $0.6 million, or $0.03 per diluted share, which compares to $0.3 million, or $0.01 per diluted share, in the same period a year ago.

Rick Moberg, Aware’s co-chief executive officer and chief financial officer, said, “While revenue and operating income increased in the first quarter, these results did not meet our expectations.  When we released earnings for the fourth quarter of 2015, I mentioned that our sales pipeline going into 2016 looked promising, but predicting when those opportunities might turn into revenue was difficult.  Our pipeline remains strong at the end of the first quarter, but forecasting the timing of revenue continues to be a challenge. We continue to be optimistic about the future of our business.”

Aware also announced today that its Board of Directors has approved a program authorizing the Company to purchase up to $10 million of its common stock. The shares may be purchased from time to time in the open market or through privately negotiated transactions at management’s discretion, depending upon market conditions and other factors. The authorization to repurchase Company stock expires on December 31, 2017.

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Conclusion

Aware Inc. sits at the tip of a rapidly growing industry, spurred on by both advancements in technology and increased security demands for both private and public agencies and entities worldwide.

To take advantage of this trend, PTT recommends initiating a position under $4.50.