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ImageWare Systems Issues Corporate Update

Companies mentioned in this article: ImageWare Systems, Inc.

SAN DIEGO, CA -- (Marketwired) -- 08/11/14 -- 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 second quarter ended June 30, 2014, as well as provided a corporate update to highlight the company's progress since its last update on May 12, 2014.

Operational Highlights

  • Awarded $1.0 million contract to implement multi-modal biometric driver license system for state of Baja California, Mexico
  • Reached a three-year agreement in principle with major international retailer to provide multi-modal biometric identity management on the Fujitsu Cloud

Second Quarter 2014 Financial Results
Total revenues in the second quarter of 2014 were $937,000, compared to $1.0 million in the same year-ago quarter.

Gross margin in the second quarter of 2014 increased by 410 basis points to 75.2%, compared to 71.1% the year-ago quarter. The increase was primarily due to a higher percentage of software license revenues as a component of product revenue.

Net loss in the second quarter of 2014 was $2.1 million or ($0.02) per basic share, compared to a net loss of $5.6 million or ($0.07) per basic share in the year-ago quarter. The $5.6 million loss in the second quarter of 2013 included a $4.0 million charge for changes in the fair value of derivative liabilities.

At June 30, 2014, cash and cash equivalents totaled $1.4 million compared to $2.4 million at December 31, 2013. The company had no debt and maintains a $3.5 million line of credit that remains fully available.

Management Commentary
"The second quarter was highlighted by the signing of a $1.0 million contract to implement a multi-modal biometric driver license system for state of Baja California, Mexico," said Jim Miller, chairman and CEO of ImageWare. "This contract represents the introduction of a new breed of turn-key ImageWare products available to governments with features that require very little customization and allow us to secure a significant payment upfront. Using this new approach in pursuing government contracts, the deal flow can proceed more quickly and profitability for ImageWare, while providing a faster ROI for our government customers. It also allows for greater scalability of our product delivery teams.

"Retail remains a fertile market for our solutions, and we remain active with our technology partners to build a healthy pipeline of potential customers. In fact, we recently reached a three-year agreement in principle with a major international retailer to provide our cloud-based, multi-modal biometric identity management product suite, CloudID.

"Our opportunities in the commercial and consumer marketplaces continue to expand, and we continue to gain traction with our IT service providers. We expect a new recurring revenue stream to come on line in third quarter of 2014 from our partnerships with Fujitsu and T-Systems, and believe the steps we are taking to advance our cloud, SaaS and mobile offerings will continue to build shareholder value."

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 second 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, August 11, 2014
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 1-888-708-5689
International dial-in number: 1-913-312-1496
Conference ID: 8562173

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=110318 and via the investor relations section of ImageWare's website at www.iwsinc.com.

A replay of the conference call will be available after 8:00 p.m. Eastern time today through September 11, 2014.

Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay ID: 8562173

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.



SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS
In thousands, except share and per share amounts

                            Three Months Ended     Six Months Ended
                                 June 30,                  June 30,
                         ------------------------  ------------------------
                             2014         2013         2014         2013
                         -----------  -----------  -----------  -----------
Revenues
  Product                $       281  $       364  $       715  $       571
  Maintenance                    656          660        1,285        1,309
                         -----------  -----------  -----------  -----------
Total Revenues                   937        1,024        2,000        1,880

Cost of Revenue
  Product                         48          114          118          158
  Maintenance                    184          182          365          376
                         -----------  -----------  -----------  -----------

Gross Profit                     705          728        1,517        1,346
                                  75%          71%          76%          72%
Operating Expenses
  General &
   administrative                873          775        1,890        1,667
  Sales and marketing            596          510        1,214          985
  Research and
   development                 1,152          995        2,181        1,914
  Depreciation and
   amortization                   46           26           88           55
                         -----------  -----------  -----------  -----------
      Total Operating
       Expenses                2,667        2,306        5,373        4,621

                         -----------  -----------  -----------  -----------
Loss from operations          (1,962)      (1,578)      (3,856)      (3,275)

Interest (income)
 expense, net                    105           73          184           75
Change in fair value of
 derivative liabilities            -        3,973            -        5,148
Other (income) expense,
 net                              (5)          (4)        (289)        (108)

                         -----------  -----------  -----------  -----------
Income (loss) from
 continuing operations
 before income taxes          (2,062)      (5,620)      (3,751)      (8,390)

Income taxes                      12           (1)          12            2

                         -----------  -----------  -----------  -----------
Income (loss) from
 continuing operations        (2,074)      (5,619)      (3,763)      (8,392)

Net income (loss)        $    (2,074) $    (5,619) $    (3,763) $    (8,392)
Preferred dividends              (13)         (13)         (25)         (25)
                         -----------  -----------  -----------  -----------
Net income (loss)
 available to common
 shareholders            $    (2,087) $    (5,632) $    (3,788) $    (8,417)
                         ===========  ===========  ===========  ===========

Per share data - basic
    Net income (loss)
     from continuing
     operations          $     (0.02) $     (0.07) $     (0.04) $     (0.11)
    Preferred dividends            -            -            -            -
                         -----------  -----------  -----------  -----------
    Basic income (loss)
     per share available
     to common
     shareholders        $     (0.02) $     (0.07) $     (0.04) $     (0.11)
                         ===========  ===========  ===========  ===========

Basic weighted-average
 common shares            91,930,400   78,581,502   90,293,758   77,718,825


CONSOLIDATED BALANCE SHEETS

                                                                   December
                                                       June 30,      31,
                                                         2014        2013
                                                     ----------- -----------
Assets:
  Cash                                               $     1,415 $     2,363
  Accounts receivable, net                                   400         302
  Inventories                                                603         505
  Other current assets                                       522         148
  Property and equipment, net                                241         245
  Other assets                                                30         395
  Intangible assets, net                                     158         172
  Goodwill                                                 3,416       3,416
                                                     ----------- -----------
Total Assets                                         $     6,785 $     7,546
                                                     =========== ===========

Liabilities and Shareholders' Equity:
  Current liabilities                                $     2,653 $     3,127
  Derivative liabilities                                       -          57
  Pension obligation                                       1,058       1,031
  Shareholders' equity                                     3,074       3,331
                                                     ----------- -----------
Total Liabilities and Shareholders' Equity           $     6,785 $     7,546
                                                     =========== ===========


Contact:

Investor Relations:
Liolios Group, Inc.
Cody Slach or Greg Falesnik
Tel 1-949-574-3860
Email Contact