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ImageWare Systems Issues Corporate Update

Companies mentioned in this article: ImageWare Systems, Inc.

SAN DIEGO, CA -- (Marketwired) -- 05/12/14 -- ImageWare Systems, Inc. (OTCQB: IWSY) (ImageWare), a leader in mobile and cloud-based, multi-modal biometric identity management solutions, has issued financial results for the first quarter ended March 31, 2014, as well as provided a corporate update to highlight the company's progress since its last update on March 17, 2014.

Operational Highlights

  • Partnered with IBM to provide ImageWare's cloud-based, multi-modal biometric identity management and user authentication platform on the IBM Cloud Platform, BlueMix.

  • Signed agreement to provide ImageWare's GoMobile Interactive product via Fujitsu's Global Cloud Platform with Maxie Mobile for their mobile wallet offering, initially targeted towards the gaming industry.

  • T-Systems and ImageWare have secured the first customer under the new partnership. The first customer is Deutsche Bahn, the German national rail company. ImageWare expects this implementation to commence and begin producing revenues in the third quarter of 2014.

First Quarter 2014 Financial Results
Total revenues in the first quarter of 2014 increased to $1.1 million from $0.9 million in the first quarter of 2013, primarily due to higher sales of identification software license revenue.

Gross margin in the first quarter of 2014 increased by 410 basis points to 76.4% compared to 72.3% in the first quarter of 2013. The increase was primarily due to the increased software license revenues.

Net loss in the first quarter of 2014 was $1.7 million or ($0.02) per basic share, compared to a net loss of $2.8 million or ($0.04) per basic share in the first quarter of 2013.

At March 31, 2014, cash and cash equivalents totaled $2.2 million compared to $2.4 million at December 31, 2013. The company continues to carry virtually no debt and its $3.5 million line of credit that remains untapped.

Management Commentary
"Our strategy to target large IT service providers and provide security for their cloud customers and applications is gaining traction, as demonstrated by our most recent partnership with IBM," said Jim Miller, chairman and CEO of ImageWare. "IBM marks our third secured agreement with a major cloud partner, and we expect more to come. These large, established partners offer the support, brand name and worldwide cloud platform needed to seamlessly distribute our products. While IBM's BlueMix is in the early stages, we've already received referrals from their customers -- several of which we are in active discussions.

"At the beginning of April, Fujitsu announced the kick-off and worldwide expansion of our partnership model with a dedicated sales team covering the Americas. Since then, Fujitsu has set up proof of concept pilots with three of their major customers, with more expected in the near future.

"By working closely with our technology partners, we continue to build a healthy active pipeline of potential customers. One includes a new partnership with Maxie Mobile, where we will provide our GoMobile Interactive product via Fujitsu's Global Cloud Platform for Maxie's mobile wallet offering, which is initially targeted towards the gaming industry.

"Our partnership with T-Systems continues to progress quickly. In fact, T-Systems has recently secured an agreement with Deutsche Bahn, the German national railroad, who will become the first customer receiving our joint product offering. We expect more to follow and anticipate this agreement will begin producing revenues in the third quarter of 2014.

"We see our relationships with IBM, Fujitsu, T-Systems and others representing just the tip of the iceberg in terms of our opportunities in the commercial and consumer marketplaces. All of these partnerships are progressing well, and although they have not yet produced revenue, there is every indication that the steps we have been taking are building shareholder value and will ultimately provide a steady stream of recurring revenue."

Conference Call
ImageWare will hold a conference call today at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its first quarter 2014 results. The company's Chairman and CEO Jim Miller and CFO Wayne Wetherell will host the conference call, followed by a question and answer period.

Date: Monday, May 12, 2014
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-877-941-1427
International dial-in number: 1-480-629-9664
Conference ID: 4681530

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860.

The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=108991 and via ImageWare's investor relations section at www.iwsinc.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time today through June 12, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 4681530

About ImageWare Systems, Inc.

ImageWare Systems, Inc. (OTCQB: IWSY) is a leading developer of mobile and cloud-based identity management solutions, providing biometric, secure credential and law enforcement technologies. Scalable for worldwide deployment, ImageWare's biometric product line includes a multi-biometric engine that is hardware and algorithm independent, enabling the enrollment and management of unlimited population sizes. ImageWare's identification products are used to manage and issue secure credentials, including national IDs, passports, driver's licenses, smart cards and access control credentials. ImageWare's digital booking products provide law enforcement with integrated mug shot, fingerprint livescan and investigative capabilities. ImageWare is headquartered in San Diego, CA, with offices in Portland, OR, Washington, D.C., and Ottawa, Ontario. For more information on ImageWare Systems, Inc., please visit www.iwsinc.com.

Forward Looking Statements

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "if", "should" and "will" and similar expressions as they relate to ImageWare Systems, Inc. ("ImageWare") are intended to identify such forward-looking statements. ImageWare may from time to time update these publicly announced projections, but it is not obligated to do so. Any projections of future results of operations should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. For a discussion of such risks and uncertainties, see "Risk Factors" in ImageWare's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its other reports filed with the Securities and Exchange Commission under the Securities 3 Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.


                           IMAGEWARE SYSTEMS, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
               (In Thousands, except share and per share data)


                                                    March 31,   December 31,
                                                      2014          2013
                                                  ------------  ------------
Assets:
  Cash                                            $      2,159  $      2,363
  Accounts receivable, net                                 491           302
  Inventories                                              568           505
  Other current assets                                     538           148
  Property and equipment, net                              226           245
  Other assets                                              34           395
  Intangible assets, net                                   165           172
  Goodwill                                               3,416         3,416
                                                  ------------  ------------
Total Assets                                      $      7,597  $      7,546
                                                  ============  ============

Liabilities and Shareholders' Equity:
  Current liabilities                             $      2,946  $      3,127
  Derivative liabilities                                     -            57
  Pension obligation                                     1,045         1,031
  Other long-term liabilities                                0             0
  Shareholders' equity                                   3,606         3,331
                                                  ------------  ------------
Total Liabilities and Shareholders' Equity        $      7,597  $      7,546
                                                  ============  ============



                           IMAGEWARE SYSTEMS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (In Thousands, except share and per share amounts)
                                 (Unaudited)


                                                     Three Months Ended
                                                          March 31,
                                                 --------------------------
                                                     2014          2013
                                                 ------------  ------------
Revenues
  Product                                        $        434  $        207
  Maintenance                                             629           649
                                                 ------------  ------------
Total Revenues                                          1,063           856

Cost of Revenue
  Product                                                  70            44
  Maintenance                                             181           193
                                                 ------------  ------------

Gross Profit                                              812           619
                                                           76%           72%
Operating Expenses
  General & administrative                              1,016           898
  Sales and marketing                                     618           475
  Research and development                              1,030           920
  Depreciation and amortization                            42            23
                                                 ------------  ------------
   Total Operating Expenses                             2,706         2,316

                                                 ------------  ------------
Loss from operations                                   (1,894)       (1,697)

Interest (income) expense, net                             79             1
Change in fair value of derivative liabilities              0         1,176
Other (income) expense, net                              (283)         (104)

                                                 ------------  ------------
Income (loss) from continuing operations before
 income taxes                                          (1,690)       (2,770)

Income taxes                                                0             3

                                                 ------------  ------------
Income (loss) from continuing operations               (1,690)       (2,773)

Net income (loss)                                $     (1,690) $     (2,773)
Preferred dividends                                       (13)          (13)
                                                 ------------  ------------
Net income (loss) available to common
 shareholders                                    $     (1,703) $     (2,786)
                                                 ============  ============

Per share data - basic
  Net income (loss) from continuing operations   $      (0.02) $      (0.04)
  Preferred dividends                                       -             -
                                                 ------------  ------------
  Basic income (loss) per share available to
   common shareholders                           $      (0.02) $      (0.04)
                                                 ============  ============

Basic weighted-average common shares               88,604,221    76,846,563


Contact:

Investor Relations:
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Cody Slach or Greg Falesnik
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