ImageWare Systems Reports 2001 Second Quarter Results


SAN DIEGO, August 2, 2001 (PRIMEZONE) -- ImageWare Systems, Inc. (AMEX:IW) today reported its financial results for the second quarter ended June 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 second quarter total revenues grew to $3.5 million, compared with $2.7 million in the year ago quarter. Net loss was $2.0 million, or $0.42 per share, compared with a net loss of $273,000, or $0.08 per share, for the same quarter last year. Gross profit was $2.0 million, the same as for the 2000 second quarter. Per share calculations are based on approximately 4.9 million weighted average shares outstanding, compared with 3.8 million shares in the 2000 second quarter.

For the six months ended June 30, 2001, revenues rose to $6.3 million, compared with $5.2 million in the comparable period a year ago. Net loss was $2.9 million, or $0.65 per share, compared with a net loss of $1.6 million, or $0.80 per share, for the six months ended June 30, 2000. Gross profit was $3.6 million, compared with $3.3 million in the corresponding period a year ago.

The backlog of product orders as of June 30, 2001 was approximately $845,000.

Jim Miller, chairman and chief executive officer, said, "Our financial results largely reflect the general market slowdown impacting companies in the technology sector. Despite current economic conditions, we are building a fundamentally sound company with staying power. Our approach is to grow ImageWare by enhancing our product offerings, improving our sales efforts, acquiring companies in complementary markets and keeping our expenses in line with revenues. We are seeing signs that these strategies will have a positive impact during the second half of this year."

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.


 SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS
 In thousands, except per share amounts

                    Three Months Ended          Six Months Ended
                          June 30,                   June 30,
                -------------------------   -------------------------
                    2001          2000         2001          2000
                -----------   -----------   -----------   -----------
 Revenues
  Product       $     2,948   $     2,311   $     5,262   $     4,481
  Maintenance           591           411         1,038           701
                -----------   -----------   -----------   -----------
 Total Revenues       3,539         2,722         6,300         5,182

 Cost of Revenue
  Product             1,209           454         2,129         1,266
  Maintenance           307           312           591           619
                -----------   -----------   -----------   -----------

 Gross Profit         2,023         1,956         3,580         3,297

 Operating,
  gen. & admin        1,788           944         3,004         1,772
 Sales and
  marketing           1,044           493         1,606         1,049
 Research and
  development           590           394         1,048           816
 Depreciation and
  amortization          642           252           915           496
                -----------   -----------   -----------   -----------

 Loss from
  operations         (2,041)         (127)       (2,993)         (836)

 Interest
  (income)
  expense, net           (2)          (67)          (71)        1,010
 Other (income)
  expense, net           (6)          213            (6)          363

                -----------   -----------   -----------   -----------
 Loss before
  extraordinary
  items              (2,033)         (273)       (2,916)       (2,209)

 Extraordinary
  gain on debt
  extinguishments,
  net of tax              0             0             0          (622)

 Income Taxes           (40)            0           (40)            0
                -----------   -----------   -----------   -----------
 
 Net loss       $    (1,993)  $      (273)  $    (2,876)  $    (1,587)
                ===========   ===========   ===========   ===========

 Per share data
  - basic
  Net loss      $     (0.42)  $     (0.08)  $     (0.65)  $     (0.80)

 Weighted
  average shares
  - basic         4,855,662     3,845,989     4,532,347      2,823,346



 CONSOLIDATED BALANCE SHEETS
 In thousands

                                         June 30,       December 31,
                                           2001             2000
                                         ---------        --------
 Assets:
  Cash                                       $ 709         $ 6,900
  restricted cash and cash equivalents     $ 1,058           $ 530
  Accounts receivable, net                   3,552           2,945
  Other current assets                       2,101             467
  Property and equipment, net                  862             535
  Intangible assets, net                     6,756           1,628
                                         ---------        --------
 Total Assets                             $ 15,038        $ 13,005
                                         =========        ========

 Liabilities and Stockholders' Equity:
  Current liabilities                     $  3,867         $ 2,773
  Notes payable                                651             342
  Stockholders' equity                      10,520           9,890
                                         ---------        --------
 Total Liabilities and
   Stockholders' Equity                   $ 15,038        $ 13,005
                                         =========        ========

            

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