ImageWare Systems Reports 2001 Third Quarter Results


SAN DIEGO, Nov. 6, 2001 (PRIMEZONE) -- ImageWare Systems, Inc. (AMEX:IW) today reported its financial results for the third quarter ended September 30, 2001.

The company said results for all periods reported have been restated to reflect the acquisition of Imaging Technology Corporation on August 22, 2000, in a pooling of interest transaction.

For the 2001 third quarter total revenues rose to $4.3 million, compared with $2.1 million in the year ago quarter. Gross profit was $2.3 million, compared with $983,000 for the 2000 third quarter. Net loss was $1.7 million, or $0.35 per share, compared with a net loss of $1.2 million, or $0.31 per share, for the same quarter last year. Financial results for the 2000 third quarter include an extraordinary gain of $547,000, or $0.14 per share, related to debt extinguishments. Per share calculations are based on approximately 5.2 million weighted average shares outstanding, compared with 4.0 million shares in the 2000 third quarter.

For the nine months ended September 30, 2001, revenues grew to $10.6 million, compared with $7.3 million in the comparable period a year ago. Gross profit was $5.9 million, compared with $4.3 million in the corresponding period a year ago. Net loss was $4.6 million, or $1.00 per share, compared with a net loss of $2.8 million, or $0.89 per share, for the nine months ended September 30, 2000. Financial results for the nine months ended September 30, 2000 include an extraordinary gain of $1.2 million, or $0.36 per share related to debt extinguishments. Per share calculations are based on approximately 4.8 million weighted average shares outstanding, compared with 3.2 million shares in the 2000 period.

The backlog of product orders as of September 30, 2001 was approximately $2.3 million.

Jim Miller, chairman and chief executive officer, said, "Our identification and law enforcement divisions reported strong sequential revenue growth in each quarter of 2001, and our recently acquired digital photography business contributed solid topline sales in the 2001 third quarter."

Miller added, "The events of September 11 have focused attention on issues related to safety and security. Our technology addresses many of the needs facing airports, law enforcement agencies and other public and private organizations seeking effective and immediate solutions."

About ImageWare Systems:

ImageWare Systems, Inc. develops and markets software used to create and manage databases of digital images and accompanying text records. Through its ID Group, ImageWare creates software products that allow customers to create secure and smart digital identification documents. Through its C.R.I.M.E.S.(r) product line, ImageWare empowers its customers to quickly capture, archive, search, retrieve and share digital photographs and criminal history records on a stand alone, networked or web-based platform. Through its Digital Photography Systems Group, ImageWare creates software and web-based solutions for professional photographers to capture and modify digital photos for events such as sports or weddings, school photos and studio portraits.


 SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS
 In thousands, except per share amounts

                             Three Months Ended   Nine Months Ended
                               September 30,         September 30,
                            ------------------   -------------------
                             2001       2000       2001       2000
 Revenues                   -------   --------   --------   --------
  Product                   $ 3,753    $ 1,796    $ 9,015    $ 6,305
  Maintenance                   584        335      1,622      1,036
                            -------   --------   --------   --------
 Total Revenues               4,337      2,131     10,637      7,341

 Cost of Revenue
  Product                     1,723        826      3,851      2,093
  Maintenance                   288        322        879        941
                            -------   --------   --------   --------

 Gross Profit                 2,326        983      5,907      4,307
                                54%        46%        56%        59%

 Operating, gen. & admin.     1,638        742      4,644      2,485
 Sales and marketing          1,193        368      2,799      1,417
 Research and development       644        360      1,691      1,175
 Stock-based compensation         0        784          0        784
 Depreciation and
  amortization                  659        249      1,574        744
                            -------   --------   --------   --------
  Total Operating Expenses    4,134      2,503     10,708      6,605
                            -------   --------   --------   --------
 Loss from operations        (1,808)    (1,520)    (4,801)    (2,298)

 Interest (income)
  expense, net                   (9)       (79)       (81)       931
 Other (income)
  expense, net                  (20)       331        (25)       730
                           --------   --------   --------   --------
 Loss before
  extraordinary items        (1,779)    (1,772)    (4,695)    (3,959)

 Extraordinary gain on
  debt extinguishments,
  net of tax                      0        547          0      1,168
                                                             
 Income Taxes                   (41)         0        (82)         0
                           --------   --------   --------   --------
 Net loss                 $  (1,738)   $(1,225)   $(4,613)   $(2,791)
                           ========   ========   ========   ========
 Per share data - basic 
  Net loss per share
   before extraordinary
   item                   $   (0.35)    $(0.45)   $ (1.00)    $(1.25)
  Extraordinary item             --       0.14         --       0.36
                           --------   --------   --------   --------
  Net loss                    (0.35)     (0.31)     (1.00)     (0.89)
                           ========   ========   ========   ========

 Basic and diluted
  common shares           5,194,792  4,001,229  4,755,589  3,219,671


 CONSOLIDATED BALANCE SHEETS
 In thousands
                                          September 30,  December 31,
                                                 2001         2000
                                               -------      -------
 Assets:
  Cash                                         $   659      $ 6,900
  Restricted cash and cash equivalents              60          530
  Accounts receivable, net                       4,465        2,945
  Other current assets                           2,441          467
  Property and equipment, net                    1,218          535
  Other assets                                     199           65
  Intangible assets, net                         7,865        1,563
                                               -------      -------
 Total Assets                                  $16,907      $13,005
                                               =======      =======
                                                           
 Liabilities and Stockholders' Equity:                     
  Current liabilities                          $ 5,636      $ 2,773
  Notes payable                                    474          342
  Stockholders' equity                          10,797        9,890
                                               -------      -------
 Total Liabilities and Stockholders' Equity    $16,907      $13,005
                                               =======      =======

            

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