ImageWare® Reports Second Quarter and Six-Months Results and Reviews Continued Progress to Build ImageWare 2.0

SAN DIEGO, Aug. 19, 2020 /PRNewswire/ -- ImageWare(®) Systems, Inc. (OTCQB: IWSY), a leader in biometric identification and authentication, today reported financial results for the second quarter and six-months ended June 30, 2020.

Q2 Highlights:

    --  Mark Blackman named VP of Product Management to retune the product
        portfolio, focusing on customer value, ease of use, and cost of
    --  Sudheer Koganti named VP of Engineering has already made early and
        meaningful progress in redefining ImageWare's Engineering organization.
    --  Launched IP licensing monetization program and engaged ipCapital
        Group®, Inc. to co-create an IP monetization model from which ImageWare
        will derive a discrete stream of annual revenue.
    --  Company granted its 24(th) patent - related to its GoVerifyID® product
        and the process of enrolling biometrics from a mobile device for
        Cloud-based biometrics services.
    --  Completed essential reviews of all products, services, divisions and
    --  Biometric Engine modernization completed - enhancing scalability and
        ease of client interface.
    --  Targeted additional cost cutting measures to closer align burn rate with

Kristin A. Taylor, President and CEO, said, "I am proud of the dedication, productivity and progress that each of our hard-working team members continues to deliver while working remotely in the ongoing COVID-19 environment."

Taylor continued, "We are a 'biometric first' security company - and I'm pleased with the substantive progress being made as we continue adding targeted layers upon the new foundation established in Q1. We maintain our laser focus to transform the authentication market by leveraging multimodal biometrics.

"We have spent, and are spending, a significant amount of time and effort to elevate our products and services to the point where:

                  (1)            Existing satisfied
                                  customers see value in our
                                  enhanced, broader service
                                  offerings to facilitate
                                  their biometric journey,

                  (2)            Potential new customers can
                                  see that our innovative
                                  products are now ready to
                                  serve their needs
                                  effectively and

Recent progress includes:

    --  Growing sales pipeline - Q2 added more than 67 net-new opportunities
        (including 45 new opportunities in Law Enforcement) over three products
        lines with an estimated initial value of $5+ million.
    --  Modest GVID sale via our partner, Fujitsu, to a medium-sized bank in
        Latin America...and we anticipate more deals in other parts of the
    --  Early development of IP monetization and broader patent plan
        --  Phase one will establish a new IP business unit in September;
    --  Appointed Chris Dickson, VP of Sales, in early July who brings a vital
        sales edge and immediate important contributions;
    --  Continuing to build and execute on revenue producing Go-to-Market
        strategies in key verticals
        --  Identified and targeting seven largest markets for biometrics and
    --  Continued refresh of the components of the Identity Platform (Cloud and
    --  Nearing completion for GoVerifyID (GVID) enterprise-ready authentication
        product to expand usefulness and Cloud-based biometrics MFA (multifactor
        authentication) to existing infrastructure;
    --  Beginning refresh of the corporate website, along with substantial
        progress in the ongoing creation of our new self-service portal
        (enabling end-users to test, purchase and provision GoVerifyID in an
        automated way).

"Last month, we successfully restructured certain senior securities, paving the way for ImageWare to meaningfully finance our working capital requirements through the issuance of a senior security. We anticipate this proposed financing will take us through to cash flow positive. Overall, we've made important early progress on our path to build ImageWare 2.0 and I look forward to sharing more developments next quarter," concluded Taylor.

Sales Strategy Overview
ImageWare's renewed sales strategy and focus has already begun to yield results. Along with improving opportunities, this quarter we saw improving new sales, incremental sales to existing customers, along with renewals. We also find increased interest from companies seeking to secure their newly remote workforce as a result of the COVID-19 pandemic.

The Company has enjoyed success from its enhanced product messaging and increased out-bound focus, including webinars. As a result of these and other initiatives, our pipeline is growing.

We are attentive to the feedback and needs of our public safety sector customers as the integration work continues in our Identity Platform. We are focused on migrating our legacy law enforcement product from an on-premise only system to the Cloud-based service for use in the field. Our goal is to improve ease of administration and scale to capture, proof, credential and authenticate biometrics...and we have existing customers who seem ready to make these moves.

Looking ahead, we continue to focus our resources on the lucrative enterprise market, including financial services, retail, manufacturing and healthcare.

Second Quarter Results

    --  Revenue for the second quarter ended June 30, 2020 was $733,000 compared
        with $812,000 for the second quarter of 2019.
    --  Gross profit for the second quarter 2020 was $579,000 (or 79%) versus
        $672,000 (83%) in the same period last year. The lower margin in Q2 2020
        is attributable to lower revenue of approximately $79,000 combined with
        higher certain fixed third-party software license costs combined with
        higher sales of hardware and consumables of approximately $14,000.
    --  Net loss was ($2,902,000) for the second quarter 2020 compared with a
        loss of ($2,548,000) in the same period last year.
    --  Net loss per share narrowed to ($0.03) for the second quarter ended 2020
        versus ($0.04) in the same period in 2019.

Six-Month Results

    --  Revenue for the six months ended June 30, 2020 was $1,529,000 compared
        with $1,743,000 for the six-month period in 2019.
    --  Gross profit for the six months ended 2020 was $1,259,000 (or 82%)
        versus $1,400,000 (80%) in the same period last year. The higher margin
        in six months ended 2020 is attributable to the 2020 period containing a
        higher percentage of software revenue with corresponding higher gross
        margins than the corresponding period of 2019.
    --  Net loss narrowed to ($6,027,000) for the six months ended 2020 compared
        with a loss of ($6,160,000) in the same period last year.
    --  Net loss per share narrowed to ($0.07) for the six months ended 2020
        versus ($0.09) in the same period in 2019.

Conference Call Details

      Date /Time:   
     Wednesday, August 19th at 1:30 pm PT

      Live Webcast: 
     Please click HERE or use the replay URL below

     Replay:             The replay will be available for at
                                    least 90 days on the Company's website.

About ImageWare® Systems, Inc.
In 1987, ImageWare was founded to innovate imaging. After a bold start evolving silver halide photography into digital images, ImageWare built the first statewide digital booking platform for the United States law enforcement in 1998. Since then, ImageWare has evolved into the largest holder of multimodal biometrics, managing millions of identities daily. With vast experience in the government sector, ImageWare is democratizing biometrics by offering defense-grade identity and authentication solutions to the masses. By identifying the person, not a device, ImageWare is giving populations around the globe access to their important data.

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. are intended to identify such forward-looking statements. ImageWare may from time to time update 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, 2019 and its other reports filed with the Securities and Exchange Commission under the Securities 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.

Media Contact:
Jessica Belair
ImageWare Systems, Inc.
(310) 717-0877

Investor Relations:
Harvey Bibicoff, CEO
Bibicoff + MacInnis, Inc.
(818) 379-8500

                ImageWare(R) Systems, Inc.


                In thousands, except share and per share amounts


                Three Months Ended               
             Six Months Ended

                June 30,                       
          June 30,


                                                       2020                             2019                2020                     2019



       Product                                        $121                             $160                $272                     $438

       Maintenance                                     612                              652               1,257                    1,305

        Total Revenues                                  733                              812               1,529                    1,743

       Cost of Revenue

       Product                                          47                               34                  65                      117

       Maintenance                                     107                              106                 205                      226


        Gross Profit                                    579                              672               1,259                    1,400

                                                        79%                             83%                82%                     80%

       Operating Expenses

        General &
         administrative                                 939                              894               1,922                    2,001

        Sales and marketing                             566                              934               1,624                    1,939

        Research and
         development                                  1,517                            1,840               3,388                    3,614

        Depreciation and
         amortization                                    18                               17                  36                       36


        Total Operating
         Expenses                                     3,040                            3,685               6,970                    7,590

        Loss from operations                        (2,461)                         (3,013)            (5,711)                 (6,190)

        Interest (income)
         expense, net                                    51                             (31)                 75                     (53)

        Change in fair value
         of derivative
         liabilities                                    363                            (481)                166                     (57)

        Other components of
         net periodic pension
         expense                                         27                               45                  75                       78

        Other expense                                                                     1                                           1

        Loss from continuing
         operations before
         income taxes                               (2,902)                         (2,547)            (6,027)                 (6,159)

        Income taxes                                                                      1                   0                        1

        Loss from continuing
         operations                                 (2,902)                         (2,548)            (6,027)                 (6,160)

       Net loss                                   $(2,902)                        $(2,548)           $(6,027)                $(6,160)

        Preferred dividends                         (1,372)                         (1,374)            (2,746)                 (2,668)

        Net loss available to
         common shareholders                       $(4,274)                        $(3,922)           $(8,773)                $(8,828)

       Per share data - basic

        Basic income (loss)
         per share available
         to common
         shareholders                               $(0.03)                         $(0.04)            $(0.07)                 $(0.09)

        Basic weighted-
         average common shares                  127,065,608                      103,431,623         121,630,902              100,928,835

                  ImageWare(R) Systems, Inc.


                                                June 30, December 31,

                                                    2020          2019


       Cash                                         $431        $1,030

       Accounts receivable,
        net                                        578           657

       Inventories                                   697           615

       Other current assets                        148           243

       Property and
        equipment, net                             184           216

        assets                                       557           257

       Operating lease right-of-use
        assets                                  1,738         1,906

       Intangible assets,
        net                                         64            70

       Goodwill                                    3,416         3,416

                   Assets                         $7,813        $8,410

     Liabilities and Shareholders'

        liabilities                               $8,804        $4,198

       Note payable -bank, net of
        current portion                         1,054

       Pension obligation                        2,311         2,256

       Lease liabilities -
        long term                                1,513         1,716

       Other long-term
        liabilities                                118           118

       Mezzanine equity                          9,231         8,884

       Shareholders' deficit                  (15,218)      (8,762)

                  Total Liabilities and
                   Shareholders' Deficit       $7,813        $8,410

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