ImageWare Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

ImageWare Systems (OTCQB: IWSY) reported its Q4 and full year 2020 financial results, highlighting a 20% revenue decline to $786,000 in Q4. However, annual revenue increased 36% to $4.8 million. Gross profit for Q4 decreased 21% to $647,000, while operating losses improved to $2.5 million. The company appointed new board members and launched innovative biometric solutions. Notably, it closed a $12 million private placement led by Nantahala Capital Management. Management acknowledges ongoing challenges but anticipates improved sales starting in the latter half of 2021.

Positive

• Annual revenue increased by 36% to $4.8 million in 2020.
• Closed over $12 million in private placement funding.
• Improved loss from operations in Q4 to $2.5 million from $3.0 million.

Negative

• Q4 revenue declined by 20% compared to the previous year.
• Q4 gross profit decreased by 21% to $647,000.
• Full-year net loss improved but remained at $(10.9) million.

SAN DIEGO, April 20, 2021 /PRNewswire/ -- ImageWare® Systems, Inc. (OTCQB: IWSY) ("ImageWare" or "the Company"), a leader in biometric identification and authentication, today reported financial results for the fourth quarter and full year ended December 31, 2020.

Recent Operational Highlights

• Appointed former FBI senior executive and security expert Lauren C. Anderson to the Company's Board of Directors. The current Board of Directors consists of four members, three of whom are independent.
• Introduced the first-ever biometric-based Zero Trust Network Access solution in collaboration with Safe-T Data A.R Ltd.
• Launched ImageWare Authenticate, a software solution that enables customers to seamlessly integrate biometric multifactor authentication into existing business and consumer applications.
• Appointed AJ Naddell as Vice President, Go-To-Market and Portfolio Strategy to help ensure ImageWare's delivery of existing mission critical offerings and drive future customer needs.
• Closed over $12 million private placement of Series D Convertible Preferred Stock, led by funds and accounts managed by Nantahala Capital Management with additional participation from both institutional investors and existing accredited investors.

Management Commentary

"While the past twelve months have been nothing short of transformative for our business, we are still in the middle of an ongoing progression that will take some time before we can realize our vision for ImageWare 2.0," said Company Chair, President, and CEO Kristin Taylor. "The fourth quarter presented its own challenges, both from an internal execution standpoint as well as the external economic environment, but I am confident we have and are taking the necessary steps to keep moving in the right direction. Recognizing the many moving parts and long-term initiatives we have in process, our financial results will continue to fluctuate in the near term before translating to sustainable, improved sales. Demand for cybersecurity solutions within the public safety, federal government and enterprise verticals continue to grow, and we are working to build a team, solutions, and strategy to capitalize on this opportunity while addressing an essential need in the modern world."

Sales Strategy Overview   

Taylor added: "While our sales for the quarter were challenged, we did generate meaningful annualized improvements. We are currently implementing proactive changes to support our long-term growth plans and believe we have a solid foundation on which to build going forward. These changes include upgrading our sales force and leadership team, refining our focus to expand market share and product footprint, implementing a business partner program, attending hyperlocal events, having a targeted business development program to senior executives in specific industries and regions, and enhancing our legacy product offerings to support integration into our product strategy. With these initiatives in place, we expect to see improved bookings and sales results beginning in the second half of 2021."

Fourth Quarter 2020 Financial Results

Revenue for the fourth quarter of 2020 decreased 20% to $786,000 compared to $979,000 in the same year-ago period. The decrease in sales was due to primarily to the expiration of a certain royalty arrangement and lower professional service revenue due to the timing of the completion of certain projects, which was offset by higher maintenance revenue.

Gross profit for the fourth quarter of 2020 decreased 21% to $647,000 (82.3% of revenue) compared to $817,000 (83.4% of revenue) in the same year-ago period. The decrease was primarily due to lower revenues of approximately $193,000.

Operating expense for the fourth quarter of 2020 decreased 18% to $3.1 million compared to $3.8 million in the same year-ago period. The decrease in operating expense was primarily due to the revamping of the Company's engineering and sales departments.

Loss from operations for the fourth quarter of 2020 improved to $2.5 million compared to $3.0 million in the same year-ago period. The improvement was primarily due to the reduction in operating expenses previously noted.

Net income (loss) available to common shareholders for the fourth quarter of 2020 improved to $979,000, or $0.01 per share, compared with $4.5 million, or $(0.05) per share in the same year-ago period.

Full Year 2020 Financial Results

Revenue for the full year 2020 increased 36% to $4.8 million compared to $3.5 million in 2019. The increase in sales was primarily due to an increase in product revenue related to the completion of certain projects, partially offset by a slight decline in maintenance revenue.

Gross profit for the full year 2020 increased 24% to $3.5 million (73.9% of revenue) compared to $2.9 million (81.7% of revenue) in 2019. The increase in gross profit was primarily due to the increase in product revenues. The decrease in gross margin was due to an increase in cost of revenue for both product and maintenance.

Operating expense for the full year 2020 decreased 15% to $12.8 million compared to $15.1 million in 2019. The decrease in operating expense was primarily due to a decrease in research and development and sales and marketing expense, offset by an increase in general and administrative expenses.

Loss from operations for the full year 2020 improved to $9.3 million compared to $12.2 million in 2019. The improvement was primarily due to the increase in revenues combined with the reduction in operating expenses previously noted.

Net income (loss) available to common shareholders for the full year 2020 improved to $(10.9) million, or $(0.08) per share, compared with $(17.3) million, or $(0.17) per share in 2019.

Conference Call
ImageWare management will hold a conference call today (April 20, 2021) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.

U.S. dial-in: 855-327-6837
International dial-in: 631-891-4304                               

Please call the conference telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 949-574-3860.

A telephonic replay of the conference call will be available after 7:30 p.m. Eastern time on the same day through April 27, 2021.

U.S. replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 10014047

About ImageWare® Systems, Inc.      

Founded in 1987, ImageWare provides defense-grade biometric identification and authentication for access to your data, products, services or facilities. We are experts in biometric authentication and considered a preeminent patent holder of multimodal IP, having many of the most-cited patents in the industry. Our patented IWS Biometric Engine® (BE) is the most accurate and fastest biometrics matching engine in the industry, capable of our patented fusion of multiple biometrics. Part of our heritage is in law enforcement, having built the first state-wide digital booking platform for United States local law enforcement – and more than three decades of experience in the challenging government sector creating biometric smart cards and logical access for millions of individuals. We are a "biometrics first" company, leveraging unique human characteristics to provide unparalleled accuracy for identification while protecting your identity. For more information, please visit www.iwsinc.com.

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.   Factors that may cause the projections to change or differ may include, but are not limited to, the ability to of the Company to continue to grow revenue, the ability to decrease operating expenses and continue to grow profit margins, and the Company's ability to continue to achieve positive cash flow given the Company's existing and anticipated operating and other costs.  For a discussion of additional risks and uncertainties, see "Risk Factors" in ImageWare's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 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
jbelair@iwsinc.com

Investor Contact:
Tom Colton
Gateway Investor Relations
949-574-3860
IWSY@gatewayir.com

ImageWare® Systems, Inc. Consolidated Statements of Operations
SELECTED COMPARATIVE FINANCIAL HIGHLIGHTS
In thousands, except share and per share amounts
	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2020		2019			2020		2019
Revenues
Product	$                           102		$                           331			$              2,231		$                  923
Maintenance	684		648			2,554		2,583
Total Revenues	786		979			4,785		3,506
Cost of Revenue
Product	19		60			800		218
Maintenance	120		102			448		425
Gross Profit	647		817			3,537		2,863
	82%		83%			74%		82%
Operating Expenses
General & administrative	1,227		822			4,102		3,614
Sales and marketing	697		1,013			2,936		3,937
Research and development	1,203		1,974			5,706		7,488
Depreciation and amortization	18		18			72		71
Total Operating Expenses	3,145		3,827			12,816		15,110
Loss from operations	(2,498)		(3,010)			(9,279)		(12,247)
Interest (income) expense, net	(29)		(10)			102		(90)
Change in fair value of derivative liabilities	(1,883)		(251)			(2,252)		(696)
Other components of net periodic pension expense	9		(4)			115		109
Other expense	(2)		-			2		1
Loss from continuing operations before income taxes	(593)		(2,745)			(7,246)		(11,571)
Income taxes	8		9			7		10
Loss from continuing operations	(601)		(2,754)			(7,253)		(11,581)
Net loss	$                         (601)		$                      (2,754)			$             (7,253)		$          (11,581)
Preferred dividends	1,580		(1,703)			(3,695)		(5,670)
Net income (loss) available to common shareholders	$                           979		$                      (4,457)			$          (10,948)		$          (17,251)
Per share data - basic
Basic income (loss) per share available to common shareholders	$                          0.01		$                        (0.05)			$               (0.08)		$               (0.17)
Basic weighted-average common shares	133,341,134		108,946,982			133,346,309		104,372,048

 

ImageWare® Systems, Inc. Consolidated Balance Sheets
	December 31,		December 31,
	2020		2019
Assets:
Cash	$                       8,345		$                       1,030
Accounts receivable, net	577		657
Inventories	40		615
Other current assets	196		243
Property and equipment, net	155		216
Other assets	458		257
Operating lease right-of-use assets	1,557		1,906
Intangible assets, net	58		70
Goodwill	3,416		3,416
Total Assets	$                     14,802		$                       8,410
Liabilities and Shareholders' Deficit:
Current liabilities excluding derivative liabilities	$                       4,379		$                       3,828
Derivative liabilities	24,128		369
Note payable - bank, net of current portion	653		-
Pension obligation	2,531		2,256
Lease liabilities - long term	1,297		1,716
Other long-term liabilities	65		118
Mezzanine equity	1,572		8,884
Shareholders' deficit	(19,823)		(8,761)
Total Liabilities and Shareholders' Deficit	$                     14,802		$                       8,410

 

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SOURCE ImageWare Systems, Inc.

FAQ

What were ImageWare's Q4 2020 financial results for IWSY?

ImageWare reported a 20% revenue decline to $786,000 in Q4 2020 and a gross profit decrease of 21%.

How did ImageWare's annual revenue perform in 2020?

In 2020, ImageWare's annual revenue increased by 36% to $4.8 million.

What significant changes occurred in ImageWare's management recently?

ImageWare appointed Lauren C. Anderson to its Board of Directors and AJ Naddell as VP of Go-To-Market and Portfolio Strategy.

What is the current net loss for ImageWare available to common shareholders?

The net loss available to common shareholders for 2020 improved to $(10.9) million, or $(0.08) per share.

When will ImageWare hold its conference call to discuss results?

ImageWare's management will hold a conference call on April 20, 2021, at 4:30 p.m. Eastern time.