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Edited Transcript of IWSY earnings conference call or presentation 10-May-18 8:30pm GMT

Q1 2018 ImageWare Systems Inc Earnings Call

San Diego May 13, 2018 (Thomson StreetEvents) -- Edited Transcript of Imageware Systems Inc earnings conference call or presentation Thursday, May 10, 2018 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* S. James Miller

ImageWare Systems, Inc. - Chairman & CEO

* Wayne G. Wetherell

ImageWare Systems, Inc. - Senior VP of Administration, CFO, Treasurer & Secretary

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Conference Call Participants

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* Harvey R. Kohn

* Michael Fawzy Malouf

Craig-Hallum Capital Group LLC, Research Division - Partner, Senior Research Analyst & Head of Boston Team

* Paul Richard Penney

Northland Capital Markets, Research Division - MD& Senior Research Analyst

* Richard Leahy

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Presentation

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Operator [1]

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Good afternoon, everyone, and thank you for participating in ImageWare Systems First Quarter Financial Results And Corporate Update Call to highlight the company's progress since its last quarterly update in March. Joining us today are ImageWare Systems Chairman and CEO, Mr. Jim Miller; and the company's CFO, Mr. Wayne Wetherell. Following their remarks, we will open the call for your questions.

Any statements made on this call 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, intent, may, plan, project, predict, if, should and will and similar expressions as they relate to ImageWare Systems Incorporated are intended to identify such forward-looking statements. ImageWare may from time to time, update its 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 discussion of such risks and uncertainties, please see risk factors in the ImageWare's annual report on Form 10-K for the fiscal year ended December 31, 2017. Its quarterly report on Form 10-Q for the quarter ended March 31, 2018, and 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 to date on which they are made.

I would like to remind everyone that this call will be available for replay through May 17, 2018, starting at 7:30 p.m. Eastern tonight. A webcast replay will also be available for 90 days on the company's website at www.iwsinc.com. Any redistribution, retransmission or rebroadcast of this call in any way without the expressed written consent of ImageWare Systems Incorporated is strictly prohibited. Now, I'll turn the call over to Wayne Wetherell, CFO of ImageWare Systems. Please go ahead, sir.

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Wayne G. Wetherell, ImageWare Systems, Inc. - Senior VP of Administration, CFO, Treasurer & Secretary [2]

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Thank you, Steve, and welcome to those of you joining our call today. Our quarterly financial results are available in the recently published news release and on Form 10-Q.

Revenue for the first quarter of 2018 totaled $716,000, down 23% from $928,000 for the same quarter of 2017. The decrease was due to lower first quarter government software licensing revenue. As we have stated in the past, our government revenue is subject to significant swings due the nature of government project business, where we did not have any significant projects recognized in the first quarter, we will, however, realize a significant increase in software license revenue in this current quarter. Gross profit for the quarter was $468,000 (sic) [$498,000] as compared to $666,000 in the same quarter of 2017. Gross margins declined to 65% in the first quarter compared to 72% in 2017. The lower software license revenue, which generally carries higher margins contributed to the drop in the profit margins. We expect margins to recover in the second quarter with the anticipated increase in high-margin software licensing revenue. The first quarter net loss from continuing operations was $3.6 million compared with $2.7 million for the same quarter of 2017. Net loss per share for the quarter was $0.04 compared to $0.03 in 2017. We ended the quarter with cash of $4.6 million. This concludes my financial review. I will now turn the call over to Jim for the progress update on our business strategy.

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [3]

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Thanks Wayne, and good afternoon to everyone. I'm pleased to have the opportunity to speak with all of you today, and to provide an update on sales and marketing efforts of ours and those of our partners. For those of you who would like to access of biometric technology overview and learn more about what our game changing, patented multi-modal biometric technology does, how it's different from and superior to other competing technologies and why it's needed? I invite you to either visit our website at www.iwsinc.com or contact our IR team directly to discuss. Last quarter, we talked about how ImageWare's household name partners including Fujitsu, CDW and IBM are initiating their respective sales and marketing programs, and that ImageWare and several of our partners are now outselling. I'll start with the progress report update on our partners since our call in March just about 7 weeks ago. As you saw from our last sales update issued on April 9, we have a good start to the current quarter. We have received over $1 million of new orders from existing customers and from GoVerifyID partner resellers, which represents the first of our sales under our new SaaS model. We've restructured our sales and marketing efforts to optimize our revenues around the global securities space, as well as leverage our existing government customers, who we believe are now ready to adopt cloud-based biometric authentication and identity management.

We have also expanded our sales and marketing efforts in the Asia-Pacific region and anticipate results from those efforts in the current quarter.

Turning to specific partners and starting with the Fujitsu macro update. We frequently receive optimistic reports and forecasts from Fujitsu on the sales initiatives they are working on. All of those projects have forward momentum. To painfully illustrate just how long it takes to close these sales, we were informed in early April that a particularly financial services customers with several thousand users was set to close. Last week we were on a call with that customer's management to discuss onboarding and they advised that the sales agreement was with purchasing and soon to issue. As optimistic as all that information is, I'm not able today to be definitive about when this any day now sale will close, but I'm comfortable to say it will close. In March, Fujitsu announced it had expanded its existing marketing and sales agreement and introduced their MedClick platform into the market. MedClick is an OEM version of our FDA approved pillphone product for biometrically secure patient engagement, medical adherence, authentication of e-prescription ordering and clinical trials. This opened a new vertical for our partnership, the mobile healthcare market and marks the second Fujitsu product powered by our technology which Fujitsu is actively marketing and selling. The MedClick solution addresses the multibillion-dollar healthcare market with the ability to serve hundreds of millions of users. We will split revenues with Fujitsu on a per user per-month basis. But in the case of healthcare, Fujitsu and ImageWare expect that per user price points will be higher than any of our other joint offerings. We believe that our share could be in the area of several dollars per customer per month. Fujitsu advises that they are in active and substantive discussions with several companies in the retail pharmacy, healthcare and health record space. These companies are all leaders in their respective markets.

We are also in the process of integration of our GoVerifyID and biometric engine products into Fujitsu's help desk product used by millions of folks to whom Fujitsu supplies help desk services. This will allow help desk users to be biometrically authenticated at the outset of their help desk experience and be routed to help desk personnel without having to go through the hassle of traditional verification methods, social security, birthdate, mother's maiden name et cetera. Instead you will quickly have the attention of the support desk, who will already know your name and have already pulled your records, so they can jump right into what it was you called for in the first place. In the support business, time is money. The time saving will be very attractive to users. In fact, this use case was the first one we explored with Fujitsu, when we entered our partnership, and before the end of this quarter we will be out in the market with this new combined product, which will be sold to users of Fujitsu help desk services. You have undoubtedly heard of the Internet of Things, a group of standalone devices controlled or monitored from a remote location. If you haven't hold it yet, you soon will. As devices become smaller and run by more powerful chips, literally any device can be an IoT device. Today according to Gartner, there are roughly 9 billion of these devices deployed with incredible amounts of data and power associated with them. That power in the wrong hands can result in catastrophe of unimaginable proportions. And therefore, these devices need protection and security. When we developed our patented biometric engine platform, our initial interest was biometric authentication of people, not authorized access to devices. However, as it turns out, that same platform can now be used to provide biometric authentication to these devices as well, and fill a huge hole in security infrastructure by providing authorized and secure access on a global basis. As we move ahead, you will see ImageWare and Fujitsu come together in that space with products that are not only incredibly cool, but timely additions to address critical infrastructure needs, and what Gartner predicts, will be one of the largest market opportunities in the near-term.

Looking further down the road with Fujitsu, you will recall that Fujitsu announced their federated identity system using their Biometrics-as-a-Service product powered by GoVerifyID. The federated identity system is the ultimate vision for the use of ImageWare's technology products. Federated identity management represents a huge and exciting opportunity for us. It requires slow and deliberate process of customer acquisition or enrollment and creation of the databases that will ultimately roll out over a period of a couple of years to tens of millions of users. Federated management provides companies with the ability to access a user's single biometric identity enrollment for subsequent authentications of transaction, data service or any kind of access to a network. For example, if the user enrolls their biometric identity via bank XYZ and if your credit card company ABC is enrolled in the federated management system then with your permission, your already enrolled biometric identity can be readily accessed to identify you when for instance, you log into your credit card account to pay your bill. Fujitsu is finalizing its proof of concept and their updated time line calls for sales deployment in the second half of this year. We continue to anticipate that the federated management opportunity will have a significant positive impact on our company. As in any large project, any of us has ever seen. These wheels turn slowly. And I look forward to providing updates over the course of the year on future calls.

Last quarter, we talked about IBM and ISAM. ISAM has been the backbone of IBM Security for years and has a huge user base, well into the hundreds of millions. The ISAM opportunity is significant to say the least. Since we achieved certification by IBM, IBM continues to introduce this to several of their larger ISAM customers, who have an interest in introducing multi-modal biometrics to their own employees or their own customers. Since our last update call, we made an IBM facilitated sales presentation to a major accounting firm's IT practice, who is looking to utilize the products for its public-sector clients. And we continue our work with a large telecommunications company on the deployment of biometric authentication on the ISAM platform.

Regarding the status of Hewlett-Packard, we do not have any significant update to report since our last call.

Regarding CDW, since reporting its first order, CDW is working with us on ongoing sales efforts and continues to build an increasing pipeline of interested clients while working to close those deals. It's an important beginning and subsequent orders are expected to be more meaningful.

On the SAP front, we are also working with Fujitsu on an effort that will integrate Fujitsu's Biometrics-as-a-Service into a variety of SAP applications. This exciting new joint effort will debut at the SAP Sapphire show next month and will serve to accelerate sales via our SAP partnership along with Fujitsu. Separately we are optimistic that based on discussions with Fujitsu, they will be successful in meeting internal goal to close 2 targeted sales in particular geographic regions by the end of this calendar quarter, one of which is a new market application which Fujitsu spent time and money developing around our GVID technology. We expect that in addition to Fujitsu selling and marketing this application, they will license it for us to resell. And I will expect to have more details for you next quarter.

We have been in discussions with Fujitsu on certain aspects of our existing agreements, which will now be combined into a single global master service agreement. That process is underway and we will of course, let you know when that agreement is executed. As always, it's important for me to remind all of you that the process we take with each and every partner is unique to that specific partner. Each partner has its own set of objectives, market forces, the processes that they need to navigate internally prior to going to market. Sometimes those processes move at a glacial pace, but I'll remind you that they are all-in fact moving and moving toward very large markets. The issue of financing has been raised by several investors. We believe that we will not need to raise capital, but if that need does arise, we have several plans in place, which will solve that problem quickly and relatively painlessly. And before closing, I'll spend a minute to review how it is that ImageWare generates revenue from the licensing of our high-margin software. Though there are some variations on the structure among different partners. Essentially, we are paid on a per-user per-month basis. Leaving aside the new healthcare market, our net revenue will typically range from a low of $0.25 per user to a high of $1.50 per user depending on volume. Lower volume equals a higher per-user rates. And whether or not we are selling via partnership where we split revenues or directly. With the ultimate potential for tens to hundreds of millions of users, you can see why we are enthusiastic about the enormous opportunity before us. In fact, several of our current projects we are working on represent use cases with hundreds of millions of customers over time. I acknowledge that this long and winding road to meaningful sales continues to try the patience of all, stockholders and management alike. The opportunity in the biometric market continues to grow. We believe we have the right products and right relationships with the right partners, who have the ability to deeply penetrate that market in a way we could not, operating on our own. Once again, I'm comfortable reiterating our prior guidance that we anticipate achieving cash flow positive run rate by the end of this calendar year. Now, I'd like to turn the call back over to Steve, to begin the question-and-answer session. Steve?

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Paul Penney with Northland Capital.

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Paul Richard Penney, Northland Capital Markets, Research Division - MD& Senior Research Analyst [2]

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Can you give us a better feel on Fujitsu. Can you give us a better feel for how many salespeople in Americas are supporting the effort in terms of specialists? And then secondarily, in terms of other regions in Fujitsu, how many are you actively engaged with today in terms of an active part of their sales process? And proactively looking for tangible opportunities?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [3]

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Yes, I don't have the exact number. Fujitsu uses a number of a team approach. So they have a team selling effort. Literally in the Americas, there are an excess of 40 to 50 folks that are involved in a team approach to selling to Fujitsu's existing partners and opening up the market with new partners that they have on their roadmap. So that's just the Americas alone. It is of course one of the several regions. We are active in -- in actually in all the reasons now with Fujitsu although, under contract in 5 of, I believe, the 7. So -- and I mentioned in my comments, we are in the process of collapsing those regional agreements into a single master global agreement, which will, as it implies, cover the entire world. And we expect to have that done here very shortly.

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Paul Richard Penney, Northland Capital Markets, Research Division - MD& Senior Research Analyst [4]

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Great. And then on a broader basis, when you -- you talk about your sales partners. Are these all, fair to say, they are all -- that these are all white-labeled products into them or can you talk about your preference for being white label versus selling directly? And then the part B of that question is, what is your new head of sales is getting? What should we grade him on? Is he going to be -- is he focused both on company direct sales and partner sales, and just give us a feel for what's -- what means success for him?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [5]

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Let me do the last question first. He gets graded just like the rest of us do on sales period. We're really don't distinguish direct versus partner sales. To us job one and priority one and priorities two and three are sales period. End of discussion. So that's what he's going to work on. Obviously, you know from your experience and work with us that we are big builders in the partner model for the obvious reasons. The marketing reach, the sales reach, the truly global ability, the credibility, the list goes on. So we have emphasized the partner approach. We do of course, sell directly. We'll continue that effort. We've had some exciting potential customers generated from our direct sales efforts that primarily will continue and with a partner approach to selling and he has 20 years of big experience, long experience, successful experience in the global security market. So with that experience, with the contacts he has amassed in that area, he will continue the company's plan to execute on primarily partner sales. But if the opportunity arises, we will sell direct where that make some sense. So that's how we are doing it. As to white label versus not, actually not really up to us. In the sense that partners have their own very specific ideas about that. Some partners want to take their brand name and sell with that, credibility and ability, which makes tremendous amount of sense to us. We actually like that approach. Other folks either want to step to a process, by that I mean, start with the resale of an ImageWare branded product. You'll see it in app stores, and you will see it offered as a partner sale by some of those folks. On their way to an eventual white label, and I said other folks, Fujitsu being a primarily example, wanted to move right away under their brand. So frankly, we like the partner approach and the labeling approach with the partner. Let's face it. You know the Fujitsu brand has a lot more play as an SAP brand or as a CA brand or as an IBM brand does than ImageWare, bluntly put, and we're happy to work with them on that basis.

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Paul Richard Penney, Northland Capital Markets, Research Division - MD& Senior Research Analyst [6]

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And then in terms when you look at the economic splits with your partners, I think you touched on this, but in terms of the variability you have between royalty split and how you price it, and how you get paid? is there much variability between what you are doing today with Fujitsu and with you other emerging partners? I just want to get the feel for how that's evolving and the major differences between Fujitsu pricing and your other partners pricing?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [7]

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Pretty close. It's all within a very close range. Obviously, you know, as I said, each partner has its own life, and we keep those lives separate. But -- we -- the ranges are pretty much in that -- they don't vary a whole lot with the individual partners. A lot of it also depends on the content. We have some reselling partners that -- we are a piece of their sale. We are not the primary piece of their sale. So in those cases there is only a handful -- small number of those. The splits might be different, more favorable to them. Less percentage to us, but that's indicative of what the product stack look like and how they're going to market with it. But as I said, generally speaking, they are on a pretty close range.

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Paul Richard Penney, Northland Capital Markets, Research Division - MD& Senior Research Analyst [8]

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Okay, last one. Can you give us an update on the competitive landscape? In your opinion, are there any competitors that are moving towards a multi-modal cloud-based storage platform like you guys?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [9]

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There's a lot of, as I said before, there is lot of noise in the space, there continues to be. It's pretty easy for people to say we do the same thing that ImageWare does. When you scrape the paint away, and the noise away, and get right down to it, the fact is they don't. There are a number of companies that are truly professional service companies. They're not product companies. We are a product company. That is, I know, you know, a huge distinction. We've worked long and hard so that we sell the same product over and over again. We are not custom building individual products every time out. That's a big difference and there is a lot of folks who despite what they say, that is in fact what they do. And so they are supporting custom one-offs all the way through. There are other folks that just supply tools. Here you can build your own. That's an idea. It's an approach for sure. I can tell you from having tried that ourselves once upon a time. Even large global companies with very sophisticated capable IT groups do not want to work hard at integration, do not want to work hard at developing a product that they are not as familiar with as you. They prefer to have the product dropped and integrated with little or no time and little or no coding, which we provide. And that -- those things continue to be things that ImageWare does better than anything we have seen in the market today. So again, there is a fair amount of noise that's out there, but in terms of cloud-based platforms, no. We have not seen anything that does what we do.

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Operator [10]

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The next question is from Michael Malouf of Craig-Hallum Capital Group.

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Michael Fawzy Malouf, Craig-Hallum Capital Group LLC, Research Division - Partner, Senior Research Analyst & Head of Boston Team [11]

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Maybe a question for Wayne. It looks like cost were up a little bit across the board, G&A sales and marketing and R&D, and I'm just wondering if you can give us a sense of where those numbers should trend here. I was a little surprised, especially on the R&D side to be up at $1.8 million?

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Wayne G. Wetherell, ImageWare Systems, Inc. - Senior VP of Administration, CFO, Treasurer & Secretary [12]

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Yes. First of all, the G&A, some of those costs were a little higher this quarter. We had audit fees that were up for us this quarter, based on new requirements for auditors under the PCAOB for our stocks audit going into a lot more detail on our processes and procedures. We also had more audit fees related to our adoption of 606, which was adopted as of January 1. We did have some increases in headcounts in our R&D area. Those costs will continue on, there are some period costs that won't. We had to use recruiters in order to get the top talent that we needed, and bring those, and we brought those employees on as temp-to-hire in order to make sure that we got the talent that we were looking for. That creates a period cost that will not repeat, but costs will be up a little, if you're comparing to a year ago because the headcounts are higher. We also have some increased -- well, we also have some increase in our cloud hosting fees. We wanted to make sure that we have hosted our products in the cloud worldwide and in order to provide our sales force and Fujitsu's sales force, our partners sales force with in-country or not in-country, but in-region cloud access and that's added some costs probably up as much as $40,000 for a quarter. So that's an additional cost that will continue as we go through the year.

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Michael Fawzy Malouf, Craig-Hallum Capital Group LLC, Research Division - Partner, Senior Research Analyst & Head of Boston Team [13]

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And then just a question on some of these orders they have coming in. What's the recognition for these orders? Is this something that comes in for 1 quarter? Or is it sort of your traditional SaaS business where you're going to get this over the next year or the next several years? How should we think about when you start talking about orders coming in on the SaaS model?

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Wayne G. Wetherell, ImageWare Systems, Inc. - Senior VP of Administration, CFO, Treasurer & Secretary [14]

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Okay, on the SaaS model. The way we are going to recognize revenue is twofold. If we are hosting the service we are providing a service to the customer on a monthly basis, we will amortize the revenue over the period that that service is provided. So that will be a monthly revenue or quarterly revenue even if the order is upfront and paid in advance for a year or 2-year period. We will have to recognize that revenue over the period ratably. If a large customer, say a bank or a financial institution wants to host it on their site in -- within their system behind their firewall, then we will be providing them with the software and the licenses to do that and if it's a 1-year, 2-year program, we will be able to recognize that revenue once it's delivered. So that will be a faster recognition, a recognition upfront. That also impacts the cash flows. We have traditionally been talking about getting into this business, talked about quarterly cash flows coming from our customers. We are realizing or seeing in the marketplace that's especially with larger customers that there is an interest in paying for a year in advance, maybe 2 years in advance, rather than having to account for and pay on a monthly or quarterly basis. So that can accelerate the cash flow. And that's something we are also seeing a lot of interest in especially, with larger customers.

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Michael Fawzy Malouf, Craig-Hallum Capital Group LLC, Research Division - Partner, Senior Research Analyst & Head of Boston Team [15]

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And Jim, when do you think, on an operating basis, sort of given, I know you don't have total visibility right now, but certainly it's improving. And then you a lot of things in the pipeline. Are you still sort of thinking that by the fourth quarter, maybe we can get positive cash flow?

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Wayne G. Wetherell, ImageWare Systems, Inc. - Senior VP of Administration, CFO, Treasurer & Secretary [16]

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Yes. Yes, we are Mike. We like to look at things and we stand by that. Yes.

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Operator [17]

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The next question is from Richard Leahy of KPT Capital.

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Richard Leahy, [18]

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I guess, the first question just in terms of the federated project. I guess, it was November, unless I'm mistaken where they had, Fujitsu had delivered a proof of concept. And I'm just kind of curious what's kind of changed on their end? Or on their end users experience that has had this pushback into the second half of 2018? Is it a problem? No, I was just going to say is it a problem with the front end? Is it just a slow-moving channel partner or what it is really that's driving the delays?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [19]

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Yes. So by definition federated is more than one user and these are large companies on the back end of this thing and very large. And so not, anything done by committee, probably best to put it that way, is a slow process, generally speaking. In any of these major undertakings, nothing like this in the civilian world, has been built by anyone, are going to run into these sorts of peaks and valleys in terms of rolling them out. So no, it's just a question of getting, I think, the users at the end, the ultimate clients to agree to how they want to do it? How the products got to look? And again, you can imagine with 3 fairly large entities being at the user end of this equation, they will all have opinions and they not always will be initially on the same page. So there's a lot of back-and-forth in that space. And that's principally it, it's just what, any of these large products are going to run into this, it's just the way it works whether it's private sector or public sector.

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Operator [20]

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The next question is from Harvey R. Kohn of HRK Strategic Advisory.

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Harvey R. Kohn, [21]

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Two of my questions are actually -- were actually answered, but in regard to this kind of like a congratulations and that, we go back 6 months and we didn't have any customers, waiting for the first customer, and now I look down and I see names like Avatier and CDW and Extenua and Fujitsu. And if you look at these companies and know who they are, you see the huge amount of client base that they have and they have them beginning with us is pretty exciting. So congratulations on that. To that end and related to the question that somebody just asked about the SaaS, you know model, my question is, is there some way that we as investors can keep a better track of the thing that is most important here, there is a number of onboarders. Whether it's small number or a large number? And I go back to the one customer that you've talked about starting with a 1,000 employees and going up to 55,000, as an investor, I don't want to lose track of the fact that on a 1-month basis that could be a small number, but if I extrapolate out, I have 55,000 people that are doing this and I go from revenues of next to nothing up to $600,000, $700,000 in revenue, which is almost 25% of what your annualized revenues are. So a long story short, is there some way we can keep a track of onboarding and how that is progressing on a monthly basis?

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [22]

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On your first comment about excitement, we echo that sentiment. There are some pretty exciting things going on here. And so thank you for noticing. We are excited as well. On the onboarding, yes. Obviously, we track it. It depends somewhat on our ability to disclose it, depends on what the agreements with the actual end-users say. So we might be able to provide as we move along a range without the individual names attached to it, if that is sensical. And the reason for that is not our willingness to tell you exactly the number of people in company X, Y or Z it's got more to do with company X, Y or Z's unwillingness to let us talk in any specifics about the number of people and the actual security protocol they employ. Because this is considered a security measure by most of the companies that adopt them. So that's really, probably the best we would be able to do, would be to do those sort of general ranges. Wayne and I have said for quite a while, we fully expect one of the metrics to judge the company would be the number of identities under management, and that hasn't changed. So as long as people appreciated that sort of caveat in it, the total number is something that we could disclose, yes.

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Operator [23]

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We have no more questions at this time. This concludes our question-and-answer session. I would like to turn the call back over to Mr. Miller for closing remarks.

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S. James Miller, ImageWare Systems, Inc. - Chairman & CEO [24]

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Thanks, Steve. Trailblazing new path with disruptive technology is as we and some of you have experienced tough work. Hiking an already paved road and moving along it while perhaps, is occasionally difficult is very straightforward. The path exists, you just need to follow it. Trailblazing a new path of that trail is on the other hand difficult work. And while the excitement of the new trail is incredible, the reality is that bruising, cuts, scratches, occasional broken bone or twisted ankle will happen along the way. And make no mistake, we are pioneering a new way of doing things in a still young and emerging market often times without a trail. Being a smaller company is in many ways like carrying a heavier pack on that trail, and we're going to get exactly where we need to go. It just makes the journey a little more interesting, and certainly, more challenging. Still we can report to you that we are making serious progress. It's no coincidence that one of the world's largest companies selected our GoVerifyID and pillphone products and placed their brand on it. The first 2 and so far as we know, the only 2 products where that has happened throughout our entire industry. It's important to know and to understand that with the initiation of every new sales process, the size of the opportunity in front of ImageWare grows larger. We know that when our shares lose value it can raise doubt in some of you about the ultimate success of our business. However, if you take nothing else away from the conversation today take away this. Day-to-day stock price fluctuation has little to do with what's going on here every day and every week, inside our company, inside our partners. We and they are making continuous business progress in an ever-enlarging market. And frankly, our IWS team is pretty damn excited about where we are going. As anyone who trades in securities knows it is difficult/impossible to time a market. You do your homework and you back to play the space, which can address lucrative markets with existing products and experienced people. IWS is in a lucrative market and IWS can address the market with ready product developed by a team with pioneering experience in the space. If the fundamentals in market, product and people are there, the timing will sync up. Thank you for your continued support. We are as excited as ever. If you look closely and understand the market and its potential, you should be too. (inaudible) and thanks again for your time and attention this afternoon. We look forward to speaking to you on the next call.

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Operator [25]

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That concludes today's conference, and thank you for your participation.