AP NEWS

ImageWare® Systems Reports 2018 Third Quarter and Nine-Month Financial Results

November 14, 2018

Update on Biometric Sales and Marketing

SAN DIEGO, Nov. 14, 2018 (GLOBE NEWSWIRE) -- ImageWare® Systems, Inc. ( OTCQB: IWSY ), a leader in mobile and cloud-based two-factor, multi-factor, and biometric multi-modal authentication and identity management solutions, reported financial results for the third quarter and nine-months ended September 30, 2018.

Q3 Summary of Results

-- Revenue for the third quarter ended September 30, 2018 was $736,000 compared with $1.08 million for Q3 ’17. The decrease was attributable to lower project related revenue and lower royalty revenue. -- Gross profit for the third quarter was $576,000 (78%) compared with $853,000 (79%) for Q3 ’17. -- Net loss was $3.5 million in the third quarter compared with $2.4 million in Q3 ’17. -- Loss per share available to common shareholders was $0.05 in Q3 2018 compared to $0.04 in Q3 2017

Nine Months Summary of Results

-- Revenue for the nine-month period ended September 30, 2018 was $3.3 million compared with $3.1 million in the same nine-month period in 2017. -- Gross profit for the nine months was $2.6 million (79%) compared with $2.3 million (76%) in the same nine-month period in 2017. -- Net loss available to common shareholders was $11.8 million in the nine months compared with $10.5 million in the same nine-month period in 2017. -- Loss per share available to common shareholders was $0.12 for the nine months ended September 30, 2018 compared with $0.11 for the corresponding period in 2017.

Recently Announced Significant Events

-- In July, we extended our reach into the Japanese market opening a sales office in Japan and engaging with our new in country partner, Two-Five. -- In September we closed an $8.9 million Preferred Stock financing and had approximately $6.9 million of debt converted into equity. -- Also in September, IWSY was selected as a participating vendor as part of a team led by IBM Canada Limited to provide identity authentication for employees in all Canadian airports.

Jim Miller, Chairman and CEO of ImageWare Systems said, “It is important to note that in the reporting quarter we took in $4.5 million in new orders but were not able to get those moved to revenue for various reasons including some of them were large projects with extended time frames for performance. More was accomplished than meets the eye. We continue to see progress on all fronts, albeit in some cases at a slow rate, and we also continue to see exciting new opportunities where we can improve revenues.”

Miller continued, “Our recent financing has put us in a position where we have sufficient operating capital as we move forward to our goal of attaining positive cash flow.”

Third Quarter and Nine-Month Results Investor Update CallThe Company will host an investor update call on Wednesday, November 14, 2018 at 1:30pm PT (4:30pm ET).The participant dial-In number for the conference call is 1-631-891-4304 (domestic/international). Participants should dial in to the call at least five minutes before 1:30pm PT (4:30pm ET) on November 14, 2018. The call can also be accessed “live” online at http://public.viavid.com/index.php?id=131433. 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 November 14, 2018, at 7:30pm ET through November 23, 2018 at 11:59 pm ET. Please use PIN Number 10005536.

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

ImageWare’s products support multi-modal biometric authentication including, but not limited to, 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; Tokyo, Japan; 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

-Continued-

SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS In thousands, except share and per share amounts --------------------------------------------------------------- ------------- ------------- ------------- Three Months Ended Nine Months Ended September 30, September 30, -------------------------- ---------------------------- 2018 2017 2018 2017 - ------- - ---------- - ---------- - ---------- Revenues Product $ 78 $ 425 $ 1,357 $ 1,105 Maintenance 658 659 1,980 1,967 Total Revenues 736 1,084 3,337 3,072 Cost of Revenue Product 9 17 175 108 Maintenance 151 214 540 637 - ------- - ---------- - ---------- - ---------- Gross Profit 576 853 2,622 2,327 78% 79% 79% 76% Operating Expenses General & administrative 981 881 3,172 2,815 Sales and marketing 920 656 2,600 2,119 Research and development 1,820 1,583 5,483 4,679 Depreciation and amortization 10 16 34 54 - ------- - ---------- - ---------- - ---------- Total Operating Expenses 3,731 3,136 11,289 9,667 ---------- ------------- ------------- ------------- Loss from operations (3,155) (2,283) (8,667) (7,340) Interest (income) expense, net 141 178 497 443 Change in fair value of derivative liabilities 186 0 186 0 Other (income) expense, net 0 (75) 0 (125) ---------- ------------- ------------- ------------- Income (loss) from continuing operations before (3,482) (2,386) (9,350) (7,658) income taxes Income taxes 0 4 1 10 ---------- ------------- ------------- ------------- Income (loss) from continuing operations (3,482) (2,390) (9,351) (7,668) Net income (loss) $ (3,482) $ (2,390) $ (9,351) $ (7,668) Preferred dividends (949) (553) (2,437) (1,575) Preferred stock exchange 0 (1,245) 0 (1,245) Net income (loss) available to common $ (4,431) $ (4,188) $ (11,788) $ (10,488) shareholders - ------- - ---------- - ---------- - ---------- Per share data - basic Net income (loss) from continuing operations $ (0.04) $ (0.03) $ (0.10) $ (0.08) Preferred dividends (0.01) (0.00) (0.02) (0.02) Preferred stock exchange (0.00) (0.01) (0.00) (0.01) Basic income (loss) per share available to $ (0.05) $ (0.04) $ (0.12) $ (0.11) common shareholders - ------- - ---------- - ---------- - ---------- Basic weighted-average common shares 95,838,813 93,197,689 95,116,862 92,538,582

CONSOLIDATED BALANCE SHEETS ------------ ----------- ------------- ------------- ------------- -------- September 30, December 31, 2018 2017 ------------ ----------- ------------- ------------- ------------- -------- Assets: Cash $ 9,058 $ 7,317 Accounts receivable, net 600 458 Inventories 15 79 Other current assets 246 163 Property and equipment, net 45 43 Other assets 289 35 Intangible assets, net 84 93 Goodwill 3,416 3,416 Total Assets $ 13,753 $ 11,604 - ------ ---- - ------ Liabilities and Shareholders’ Deficit: Current liabilities $ 3,854 $ 8,432 Pension obligation 2,051 2,024 Mezzanine equity 7,966 0 Shareholders’ equity (deficit) (118) 1,148 Total Liabilities and Shareholders’ Equity (Deficit) $ 13,753 $ 11,604 - ------ ---- - ------

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