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ImageWare® Systems Reports 2018 Second Quarter and Six-Month Financial Results

August 9, 2018

SAN DIEGO, Aug. 09, 2018 (GLOBE NEWSWIRE) -- ImageWare® Systems, Inc. ( OTCQB: IWSY ), a leader in mobile and cloud-based, multi-factor, multi-modal biometric identity management solutions, reported financial results for the second quarter ended June 30, 2018.

Q2 Summary of Results

-- Revenue for the second quarter ended June 30, 2018 increased 78% to $1.9 million from $1.1 million in the second quarter of 2017. The increase reflects increased product revenue from the Veteran’s administration and several of our law enforcement customers. -- Gross profit for the second quarter was $1.6 million (84%) as compared with $810,000 (76%) in the second quarter 2017. The higher gross margins are due to higher software licensing revenue in the quarter. -- Net loss was $2.3 million in the second quarter compared with $2.5 million in the second quarter 2017.

Six Months Summary of Results

-- Revenue for the six-month period ended June 30, 2018 increased 31% to $2.6 million from $2.0 million in the same six-month period in 2017. -- Gross profit for the six months was $2.0 million (79%) as compared with $1.5 million (74%) in the same six-month period in 2017. -- Net loss was $5.9 million in the six months compared with $5.3 million in the same six-month period in 2017.

Recently Announced Significant Events

-- In Q2 we showcased our FDA-cleared pillphone® application for patient engagement and medication adherence using biometric authentication for the healthcare industry. -- In July we signed a distribution and integration partnership (including an initial order) with TwoFive, Inc., a leading Japanese security solutions provider - and opened a sales office in Tokyo. -- Also in July, through two partners, three financial institutions (Canada, New York, and Philadelphia) initiated multi-modal biometric security for their employees. -- Four Points Technology LLC received a multi-year $3.6 million award from the Veteran’s Administration (VA) for biometric licensing and support http://www.fedhealthit.com/2018/06/va-awards-3-6m-imageware-software-maintenance-task/. -- ImageWare had direct sales totaling approximately $280,000 to existing US law enforcement agency customers for new projects.

Jim Miller, Chairman and CEO of ImageWare Systems said, “While all of the pending major sales in our pipeline are taking time, they are all moving forward. Because the migration from pins and passwords to our biometric technology is so significant, all parties are moving deliberately. We are making forward progress and have every reason to remain highly optimistic as we expect more substantive announcements in Q3.”

Second Quarter and Six-Month Results Investor Update Call The Company will host an investor update call on Thursday, August 9, 2018 at 1:30pm PT (4:30pm ET).The Participant Dial-In Number for the conference call is Domestic/International 1-631-891-4304. Participants should dial in to the call at least five minutes before 1:30pm PT (4:30pm ET) on August 9, 2018. The call can also be accessed “live” online at http://public.viavid.com/index.php?id=130864.

A replay of the recorded call will be available for 90 days on the Company’s website ( https://iwsinc.com/about/investors/ ). You can also listen to a replay of the call by dialing toll-free 1-844-512-2921 (international only - 1-412-317-6671) starting August 9, 2018, at 7:30pm ET through August 16, 2018 at 11:59 pm ET. Please use PIN Number 10005361.

About ImageWare® Systems, Inc. ImageWare Systems, Inc. is a leading developer of mobile and cloud-based identity management solutions, providing patented biometric authentication solutions for the enterprise. Biometric technology uses unique physical characteristics to authenticate a person’s identity. The company delivers next-generation biometrics as an interactive and scalable cloud-based solution. ImageWare brings together cloud and mobile technology to offer multi-factor authentication for smartphone users, for the enterprise, and across industries.

ImageWare’s products support multi-factor, multi-modal biometric authentication including, but not limited to, any individual use or combination of face, voice, fingerprint, iris, palm, and more. All the biometrics can be combined with or used as replacements for authentication and access control tools, including tokens, digital certificates, passwords, and PINS, to provide the ultimate level of assurance, accountability, and ease of use for corporate networks, web applications, mobile devices, and PC desktop environments.

ImageWare is headquartered in San Diego, California, with offices in Portland, Oregon, Ottawa, Ontario, and Mexico City, Mexico. To learn more about ImageWare, visit https://iwsinc.com/ and follow us on Twitter, LinkedIn, YouTube, and Facebook.

Forward-Looking StatementsAny 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, 2017 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.

Investor Relations Contact Harvey Bibicoff, CEO Bibicoff + MacInnis, Inc. 818.379.8500 harvey@bibimac.com

SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS In thousands, except share and per share amounts ----------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended June 30, June 30, --------------------------- ------------------------------- 2018 2017 2018 2017 ---------- -------------- -------------- -------------- Revenues Product $ 1,182 $ 407 $ 1,279 $ 680 Maintenance 703 653 1,322 1,309 Total Revenues 1,885 1,060 2,601 1,989 Cost of Revenue Product 139 36 165 90 Maintenance 167 214 390 423 - ------ - - ---------- - - ---------- - - ---------- - Gross Profit 1,579 810 2,046 1,476 84 % 76 % 79 % 74 % Operating Expenses General & administrative 987 965 2,190 1,934 Sales and marketing 816 702 1,680 1,463 Research and development 1,865 1,556 3,664 3,096 Depreciation and amortization 11 17 24 38 - ------ - - ---------- - - ---------- - - ---------- - Total Operating Expenses 3,679 3,240 7,558 6,531 ---------- -------------- -------------- -------------- Loss from operations (2,100 ) (2,430 ) (5,512 ) (5,055 ) Interest (income) expense, net 184 164 356 264 Other (income) expense, net 0 (50 ) 0 (50 ) ---------- -------------- -------------- -------------- Income (loss) from continuing operations (2,284 ) (2,544 ) (5,868 ) (5,269 ) before income taxes Income taxes 0 3 1 7 ---------- -------------- -------------- -------------- Income (loss) from continuing operations (2,284 ) (2,547 ) (5,869 ) (5,276 ) Net income (loss) $ (2,284 ) $ (2,547 ) $ (5,869 ) $ (5,276 ) Preferred dividends (720 ) (514 ) (1,489 ) (1,021 ) Net income (loss) available to common $ (3,004 ) $ (3,061 ) $ (7,358 ) $ (6,297 ) shareholders - --------- - - ---------- - - ---------- - - ---------- - Per share data - basic Net income (loss) from continuing operations $ (0.02 ) $ (0.03 ) $ (0.06 ) $ (0.06 ) Preferred dividends (0.01 ) (0.00 ) (0.02 ) (0.01 ) Basic income (loss) per share available to $ (0.03 ) $ (0.03 ) $ (0.08 ) $ (0.07 ) common shareholders - --------- - - ---------- - - ---------- - - ---------- - Basic weighted-average common shares 95,161,570 92,539,230 94,749,904 92,203,567

CONSOLIDATED BALANCE SHEETS ----------------------------------------------------------- ---------- ------------ June 30, December 31, 2018 2017 ----------------------------------------------------------- ---------- ------------ Assets: Cash $ 2,213 $ 7,317 Accounts receivable, net 672 458 Inventories 19 79 Other current assets 203 163 Property and equipment, net 31 43 Other assets 35 35 Intangible assets, net 87 93 Goodwill 3,416 3,416 Total Assets $ 6,676 $ 11,604 - ------ - - ------ --- Liabilities and Shareholders’ Deficit: Current liabilities $ 2,514 $ 2,658 Convertible line of credit to related party net of discount 5,871 5,774 Pension obligation 2,039 2,024 Shareholders’ equity (deficit) (3,748 ) 1,148 Total Liabilities and Shareholders’ Equity (Deficit) $ 6,676 $ 11,604 - ------ - - ------ ---

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